The Forex Week In Review
Forex markets this week took a breather from the recent volatility that we’ve seen as they settled into their regular post-NFP lull. The lack of action however was not linked to a lack of data as we had some key events on deck this week with both the Bank of Canada and Bank of England delivering their April rate decisions. These meetings however were seen as non-events with both banks largely expected to keep rates on hold and maintain the tone of their recent meetings. Key developments ahead of these meetings were the continued upside in Oil, as Crude broke back above the $40 mark, and a surprise uptick in UK CPI , with core jumping the most since 2014. Alongside these events we also had US CPI, which printed slightly below expectations, and Australian Unemployment which showed a further strengthening of the domestic labour market.
Markets now look ahead to key data next week with the ECB Rate Decision on Thursday the headline event alongside a raft of earnings and employment data from the UK.
- USD The US Dollar made its way higher this week, despite yet further disappointing data, supported by comments from a raft of Fed members who continue to argue the case for continuing the path to normalisation amidst growing inflation and a stronger economy. Data however si still failing to support this view with March Retail Sales printing well below expectations and March CPI missing the mark also.
- EUR The Euro softened this week on light flows ahead of next week’s ECB meeting. A disappointing EuroZone Industrial Production print for March weighed on rate though a better than expected March CPI print stemmed the flow. Traders not expecting too much from the ECB’s first meeting since the the introduction of a second TLTRO package , but will be keen to hear the banks assessment of developments since .
- GBP In their April rates meeting the Bank Of England voting unanimously to keep rates on hold at current 0.50% levels citing potential risk to Q1 growth from the forthcoming EU referendum which they also say is making data harder to interpret and as such will be reacting more cautiously than normal. On the plus side the bank did note that the combination of stronger Oil and weaker Sterling is likely to stoke inflation and that disappointing US GDP is mitigated by a shrinking Chinese risk.
- JPY The Japanese Yen was broadly weaker this week experiencing diminished safe-haven demand as risk-appetite recovered over the week with the Nikkei seeing its biggest weekly gain since October 2014. Focus remains on the BOJ’s upcoming April meeting with markets gauging the likelihood of further easing from the bank in the wake of a raft of official commentary recently.
- AUD A recovery in risk appetite this week added support for the Australian Dollar which was also bolstered by strong domestic jobs data. Australian Unemployment rate in March ticked down to 5.7% against expectations of 5.9% showing continued resilience in the domestic labour market. Despite continued strength, traders are wary of potential RBA intervention into these higher levels.
- CAD A return to strength in Oil prices this week has added continued support for the Canadian Dollar. The BOC kept rates on-hold at their April meeting though the accompanying statement was less neutral than last time with the bank saying weaker global growth, a less favourable US outlook and shrinking business investment would drive the economic outlook lower if not for the boost from the government’s fiscal stimulus.