The Forex Week In Review
This week was much quieter for Forex markets on the back of the huge Sterling volatility we saw last week. Data points were light and the key focus was on the release of the September FOMC Meeting Minutes.
The minutes were largely Hawkish and confirmed market’s expectation for a 2016 rate, most likely in December, with many members noting that their unchanged decision at this meeting was a “close call”. This suggests that members are moving closer to a point where a consensus is achieved in support of a hike.
US Dollar derived further support from the minutes release having traded stronger over the week initially over the week on the back of another debate win for Democrat candidate Clinton which is seen as a positive for the US Dollar and supportive of a Fed rate hike in 2016.
Elsewhere, WTI Crude pushed back above $50 per barrel this week on comments from Russian President Putin in support of the proposed OPEC production cut agreement. The Russian leader even suggested that Russian could be open to a freeze. The news has helped assuage fears that certain countries might block the deal and comes after comments from Iran last week who called on non-OPEC members to support the deal.
USD The US Dollar traded higher over the week supported by another debate win Hilary Clinton on Sunday night. These moved were then furthered by the release of the September FOMC meeting minutes which revealed that many members judged the decision to remain on hold in September as a “close call”. The minutes confirmed markets expectation of a December rate hike
EUR A stronger USD weighed on the Euro which broke down to three month lows on reports that the ECB is to consider extending its QE program beyond March 2017 at the upcoming monetary policy meeting next week. On the data front Eurozone’s industrial output increased 1.60% MOM in August, reversing the revised 0.70% MOM fall in July. There was a broad based pick up in factory production from July to August, spanning from energy to capital goods output, soothing slowdown concern.
GBP Sterling was initially stronger on the week following reports of a turnaround by UK PM May which would allow members of parliament o debate her Brexit plan and possibly vote on. This suggested that the UK could avoid a Hard Brexit afterall. However, gains were reversed when, speaking on Wednesday, PM May promised lawmakers would get to debate her negotiating strategy, but refused to say whether they would also get a vote
JPY Japan’s machine tool orders fell 6.30% YOY in September, moderating from the 8.40% YOY pace in August. The headline number was helped by softer pace of decline in domestic orders but extended contractions suggested that overall demand was weak. Japan‘s tertiary industry index indicated that growth in the services sector was flat in August after a revised 0.20% MoM acceleration in July. Finance and insurance companies, business related services and retail trade firms were the main drag to the headline number.
AUD Despite initial weakness as the Us Dollar soared, the Aussie recovered into the end of the week driven by better China inflation data which offset poor trade data and felled Aussie demand. The moves in Oil markets have kept risk sentiment firm this week adding further support.
CAD The Canadian Dollar strengthened over the week driven by higher Oil prices with Crude breaking back above the $50 mark this week. Traders now look ahead to domestic CPI data next week for September.