The Forex Week In Review:
The Week That Was…
A pivotal week for forex markets has come to an interesting conclusion.The US Dollar stepped out of the spotlight this week ahead of the upcoming October FOMC meeting and instead all attention turned to the European Central Bank.
With consensus so vehemently bearish heading into the meeting it felt as though risks were skewed to the upside. However the decidedly Dovish tone to the meeting saw EURUSD sharply sold on news that the ECB will consider cutting interest rates further from current levels as well as expanding QE. This news took the market by surprise with most players seemingly only positioned for Dovish ECB rhetoric regarding likely increased stimulus in the coming months, not necessarily further rate cuts.
USD Sharply higher in the wake of the extremely Dovish October ECB meeting. Market otherwise quiet ahead of the upcoming FOMC meeting though a rate hike is priced only with the slimmest of chances.
EUR It seems as though markets were taken aback by the heavily Dovish tone of the ECB meeting with EURUSD tanking by over 300 pips as retail markets bought increasingly into the decline. News that the ECB is once again considering negative interest rates.
GBP Data flow was positive for Sterling this week as Public Sector Borrowing unexpectedly contracted to £8.6bln from £9.6bln and retail sales for September displayed a convincing beat of 5.9% vs 4.7% expected. Despite the positive data sets GBPUSD drifted lower over the week as the US Dollar strengthened.
JPY Japanese manufacturing PMIs for September were unexpectedly stronger at 52.5 vs 50.5 expected. Despite this better data, JPY traded lower over the week with investor expectations growing for further BOJ easing at their upcoming meeting.
AUD A much quieter week for the Australian Dollar which remains range-bound at recent highs. Risk sentiment has been tentative this week with commodities reamaining soft. An absence of domestic data saw price mainly driven by USD flows.
CAD The Canadian Dollar was lower following the Bank Of Canada’s downward revision to growth. Canadian CPI on Friday came in just below expectations at 1.00% leading the CAD lower into the week-end.