Forex Week In Review

Forex Week In Review: The Week That Was…

All eyes were on the FOMC meeting this week with only the very slightest of outside chances that the Fed would move on rates, the main concern was the press conference and the Fed’s guidance on the lift-off date along with it’s view on economic improvement since the last meeting. On both counts the Fed was found dovish and markets were quick to unwind any USD longs held into the meeting. The USD picture becomes wuite mixed now as although a rate hike is still seen in 2015 it’s no longer clear that September is an obvious candidate and we could see continued USD weakness in the interim. Elsewhere the Greek debacle continued to muddy the waters with a failure to reach a deal on Thursday and indeed the only shining success story of the week is that of GBP which navigated a week of tricky data, without flaw and came out on top heading into the weekend.

Overview

  • USD Well USD bulls didn’t have much hope going into the June rate decision but were at-least expecting to have some positive guidance on a lift-off date given recent improvements in US economic data. However, this was not the case and the FOMC saw the Fed strike a decidedly more dovish tone, lowering their 2015 GDP forecast and stating that they need more “decisive evidence” of economic growth to conside rate hikes whilst also downplaying the importance of the first rate hike. Markets immediately began pricing out a September rate hike, but we could still see a September liftoff if data is supportive between now and then. Further reductions of USD longs amidst low liquidity saw some initial spikes which have mostly been reversed.
  • EUR The situation in Greece has muted the EUR positive effects of the dovish FOMC. A deal was not reached on Thursday as had been hoped and reports around the situation have remained sensational and alarmist. However, EUR has held up pretty well with market participants choosing to try and ignore thee reports or remaining mostly sidelines until the situation is clearer.
  • GBP Enjoyed another strong week supported by better UK data and then of course the dovish FOMC. UK CPI came back out of deflation (as the BOE anticipated) printing inline with 0.1% expectations. We then saw the BOE MPC minute strike a much more hawkish tone citing an expectation for inflation to pick up considerably toward the back end of 2015 with BOE’s Forbes forecasting UK rate hikes in the “not too distant future”. Strong average earnings and better retail sales encouraged bulls further with GBP printing new year-to-date highs of 1.5930 against USD.
  • JPY The main focus of this week was the BOJ’s Monetary Policy Statement. Following Kuroda’s comments recently that further JPY weakness was unlikely and the consequent fall in USDJPY, traders were waiting for clarification on these comments. Dissapointingly, Kuroda explained that he had never said “anything specific abour currency levels or the pace of moves” and finally the BOJ maintained it’s record stimulus. FOMC saw USDJPY unwind continue whilst GBP strengthened considerably against JPY this week.
  • AUD Having continued to contract within it’s recent range the Australian currency made a break for the upside following the dovish FOMC meeting however, this surge was short-lived and AUD found heavy selling as it tested the the .7850 area. Expectations around the RBA are increasingly dovish as Chinese growth continues to weaken and any further advancement higher is likely to present better selling levels
  • CAD The FOMC inspired strength in the Canadian Dollar was reversed this week as a big miss on Canadian retail sales submerged any positivity stemming from the CPI beat. Oil sellinng off on Friday added to this downside pressure with USD moving up from its weekly low to back into the middle of the previous week’s range

Key Views

EURUSD Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Neutral
GBPUSD: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Neutral
USDJPY: Short Term (1-3 Days): Bearish  – Medium Term (1-3 Weeks) Neutral

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