The Week That Was…
Following on from the volatility we saw last week on the back of the ECB’s October meeting, forex markets were once again on high alert as we headed into the FOMC’s October meeting. Although the meeting passed as expected without a rate increase, the decidedly less Dovish tone of the accompanying statement saw firm USD buying with traders interpreting the statement as signalling the strong likelihood of a December rate hike with CME December pricing increasing to 47% following the meeting.
In line with the Fed’s assessment of economic conditions it seems that if the Unemployment rate continues to fall and factors affecting inflation can continue to stabilise and recover then conditions will likely be met. As ever, the Fed is remaining “data dependent” and so upcoming economic data releases between now and then will be of high importance with Thursday’s GDP print striking the first disappointing blow to USD bulls. Focus now turns to next week’s October jobs report.
- USD The Dollar strengthened sharply on the release of the October FOMC statement only to concede gains following the lacklustre 3Q GDP print which came in below expectations at 1.5% with PCE data similarly disappointing at 1.3% against expectations of 1.4%, capping a week of poor data flow for the US with consumer confidence falling below expectations also.
- EUR The single currency continued its post-ECB slide this week, driven lower by the market’s reaction to the October FOMC meeting. German unemployment rate remained unchanged this month at 6.4% whilst German CPI made its way our of negative territory to print 0% as did EuroZone CPI which was also bolstered by a beat in core CPI at 1.0% against expectations of 0.9%. USD weakness into the end of the week saw EUR recovering lost ground to end the week around the middle of its range.
- GBP Sterling was initially weaker following the release of 3Q GDP which undershot expectations of 2.4% to print 2.3%. Data weakness extended throughout the week with Mortgage Approvals dropping sharply alongside CBI reported sales, though the UK currency was able to recover higher levels due to USD weakness.
- JPY Main focus this week was the BOJ’s October meeting which saw investor expectations heavily skewed towards further easing. The meeting however saw the BOJ refrain from further easing though growth forecasts were lowered alongside the pushing out of the Bank’s inflation target into the latter half of fiscal 2016.
- AUD The Australian Dollar traded sharply lower over the week with 3Q CPI accelerating the decline as the figure came in below expectations and previous of 0.7% at 0.5%, fuelling speculation of further RBA easing at their upcoming meeting. Commodities were also softer over the week adding weight to the Aussie’s descent.
- CAD The Canadian Dollar managed to stem recent losses against the Dollar this week recovering amidst US data weakness. The mid-week USD spike was contained by weak US GDP though ultimately CAD itself was contained on Friday by the release of weaker than expected domestic GDP.