The Week That Was…
Following the volatility we’ve seen over recent weeks Forex markets were comparatively quieter this week with hardly any tier one data releases. The US Dollar was unable to continue the gains made on the back of the bumper October jobs report and instead corrected slightly lower. Chinese data this week revealed further weakness in the world’s second largest economy with CPI undershooting expectations to print 1.3% ,down from 1.6% prior, accompanied by a fall in PPI data which fell -5.9% in October. This latest batch of data weakness sees increased speculation that the Chinese will be forced into easing before the year end.
Focus now turns ahead to next week’s FOMC minutes release, following comments recently from Fed chair Yellen that a rate rise in December is a “live possibility”. Traders will be looking for further clues in the minutes release as to the likelihood of a December rate rise; CME currently price a 70% probability.
USD USD longs have been increasing over recent weeks taking them back up to high levels last seen around August. Speculation over a December rate hike continues to grow leaving USD open to a squeeze in positioning on any disappointment from the upcoming FOMC minutes release. Retail sales on Friday came in at 0.1%, below expectations of 0.3% however Michigan consumer confidence came in above expectations to print 93.1 vs 91.5 expected.
EUR The single currency was able to stem the losses of recent weeks, remaining range bound at lows as the US Dollar paused in its ascent. Comments from Mario Draghi confirmed the weakening of inflation dynamics and the need for the ECB to reassess its monetary policy at their December meeting.
GBP Sterling was able to sustain a rebound this week, retracing some its recent losses, as the latest unemployment data showed yet a further decline, falling to 5.3%, moving deeper into territory not seen since 2008. Average weekly earnings however grew less than expected, stalling at 3%.
JPY The Japanese Yen was able to regain some of its recent losses this week, benefiting from a softer US Dollar. BOJ board member Harada commented this week that the BOJ doesn’t need to ease currently as the effects on the Japanese economy from low oil prices will eventually dissipate.
AUD Despite softer commodity prices, seen in reaction to yet more data weakness out of China, the Australian Dollar was boosted as the latest employment data showed Australian unemployment to have unexpectedly contracted in October, printing 5.9% against 6.2% expected. Australian unemployment has been steadily decreasing from its summer highs, an encouraging sign for those who feel the RBA will refrain from further easing this year.
CAD The Canadian Dollar was lead lower this week following the latest monthly report from OPEC which noted that Saudi Arabia, the world’s largest exporter of oil, had increased supply by 50k barrels in October. Oil extended losses from last week making its way back under the $42.54 October lows.