The Forex Week In Review

The Forex Week in Review

A slew of key data over the week provided the in focus for traders, headline by the FOMC and ECB July minutes releases. However, despite some positive data surprises, markets were largely contained amidst quite summer trading.

FOMC minutes indicated that the Fed remain open to a move on rates but opinions are split and the decision making process will remain data dependant.  Positive sentiments were tied to weakened risks, with Brexit specifically noted to have had little impact. However, with recent key US data having turned lower and the US elections approaching, it seems unlikely to think the Fed will move on rates ahead of December which now stands as the clear favourite for a Fed hike with market pricing moving above 50% this week for the first time.

ECB minutes were a little more Dovish than expected in terms of the bank’s reference to risks from Brexit which they downplayed in the July statement. ECB members said that the Brexit vote could affect the global economy in unpredictable ways and has created new headwinds for the EuroZone economy and has heightened uncertainty. Although the ECB noted that they stand ready to boost stimulus again if needed, they noted that they felt it was too soon to discuss fresh stimulus. In all the minutes were fairly muted and whilst the prospect of further easing in September is clearly on the table, given recent upticks in both EuroZone inflation and growth, perhaps the ECB will once again choose to remain in “wait and see” mode.


USD July’s FOMC meeting minutes provide little indication of the timing of the next rate hike as members remained divided over whether to raise interest rates soon. Rates was unchanged in July and minutes stated that near term risks have diminished, leaving doors ajar for a hike this year if economic data continued to point to a resilient US economy. On labor market conditions, most committee members “saw relatively low risk that a further gradual strengthening of the labor market would generate an unwanted increase in inflationary pressures,” but they still prefer to “defer another increase until they were more confident that inflation was moving closer to 2% on a sustained basis”. Some fed officials raised concerns on Brexit as it “creates uncertainty about medium to longer run outlook for foreign economies that could affect economic and financial conditions in the United States”.

EUR A weakened USD and lack of commitment to easing by the ECB keep EUR supported currently. Recent data has continued to show positive momentum in the EuroZone and with US inflation expectations remaining subdue, positive US data isn’t having the same effect. Whilst concerns about the Italian banking sector and Brexit negotiations cloud the outlook, for now there is scope for further upside.

GBP Sterling strengthened over the week boosted by positive inflation, employment and earnings data. July CPI, the first inflation reading post-Brexit showed that the inflation rose 0.6% YoY vs an expected 0.5%, marking the highest level since 2014. Core CPI however was a little weaker than expected at 1.3% vs 1.4%.  Wage Growth rose in the 3 months through June to 2.4% from 2.3% previous, marking the highest level since October 2015, whilst the Unemployment rate remained steady at 4.9%.

JPY Japan’s trade surplus narrowed to 513.5 billion yen in July (June: 693.1 billion) amid the steeper decline in exports. On annual terms, exports dropped for 10 straight months and indicate that it may continue to drag overall GDP growth in the third quarter.

AUD The Australian Dollar remains supported in the aftermath of the RBA’s latest easing manoeuvre as firm risk appetite keeps the yield hunt intact. The Australian Unemployment was shown to have moved back down to three year lows of 4.7% in July.

CAD The Canadian Dollar continues to derive support from strength in Oil prices as shorts continue to cover ahead of a scheduled informal OPEC meeting at the end of September which markets speculate might see the group attempt to restart talks concerning the halting of Oil production. Canadian CPI in July was weaker than expected at 1.3% vs 1.4% expected.