The Forex Week In Review

The Week That Was…

The headline story in Forex markets this week was the continued USD weakness following the release of Dovish FOMC minutes last week and the subsequent further pushing out of rate-hike expectations. With US Retail Sales adding doubt also, CME now price only a 31% chance of a December lift-off. Thursday’s CPI data was able to add support for the Dollar as some core strength was seen, despite the headline figure showing a decline.

Risk sentiment was impaired this week following data weakness out of China which showed a huge slump in imports compounded by a miss on the Chinese CPI at 1.6% vs 1.8% expected leading commodities lower over the week.

Overview

  • USD was initially lower this week, extending losses from the release of the Dovish FOMC minutes release, but was able to recover better ground into the week-end. Data was mixed with Retail Sales missing with a print of 0.1% vs 0.2% expected and a CPI falling also printing -0.2% MoM. However, stickiness in core CPI, which surpassed expectations printing 0.2% MoM and 1.9% YoY led the Dollar recovery which was supported by Friday’s US Consumer Confidence survey beat of 92.5 vs 89 expected.
  • EUR The single currency benefited from USD weakness to challenge the key 1.1460 level resistance before reversing sharply. Comments from ECB’s Nowotny regarding the need for further measure to boost ECB spurred the sell-off. EuroZone September CPI was confirmed at -0.1% with the German ZEW survey showing weakness printing 1.9 vs 6.5 expected. Expectations for further intervention by the ECB are growing ahead of their upcoming meeting,
  • GBP A Week of wild volatility for Sterling. Having sold off sharply following the September CPI data, which showed another dip into deflation at -0.1%, price reversed sharply higher with the recovery boosted further by the latest UK employment data showing that Unemployment has hit a seven year low at 5.4% and wage growth continues to increase rising to 3.0% from 2.9% previous.
  • JPY The Japanese Yen was stronger this week as weakness in Chinese imports and CPI spurred safe haven flows. BOJ minutes release showed that the BOJ remain content with the effects of the current QE program with members remaining upbeat over the inflationary path and economic recovery.
  • AUD The Australian Dollar remained resilient this week fighting to retain gains made over the previous fortnight. Commodity weakness early in the week ,spurred by the data weakness in China, saw the Aussie losing ground before price was able to recover on USD weakness following weak Retail Sales figures, only to be led lower on post US-CPI Dollar strength, ending below last week’s highs.
  • CAD Despite the decline in Oil this week, falling back from the $50 per barrel level, the Canadian Dollar was able to retain gains made against the US Dollar amidst USD weakness. Traders now look ahead to the Bank Of Canada rate decision this upcoming Thursday.
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