June 18th, 2014
There was little evidence of fresh direction during the Asian session on Wednesday with USD/JPY holding above the 102.00 level after the inflation-linked boost seen on Tuesday while EUR/USD suffered paralysis near 1.3550.
The seasonally-adjusted Japanese trade deficit narrowed slightly to JPY0.86trn for May from JPY0.88trn previously with an decline in both exports and imports. A drop in exports will maintain concerns surrounding growth prospects and there will be concerns surrounding the impact of rising energy imports, both factors which will tend to be yen negative over the medium term.
The Bank of England MPC minutes were broadly in line with expectations following Carney’s comments last week with unanimous votes for interest rates and quantitative easing to be left on hold. The minutes expressed surprise that markets had not priced in a greater probability of rate hikes in 2014 and several members of the committee stated that the debate over interest rates was becoming more balanced. There was uncertainty surrounding the amount of spare capacity in the economy and the MPC also pointed to a moderation in inflation and effectively stated that rates would not need to increase if inflation pressures stayed low.
GBP/USD dipped and then spiked higher in immediate reaction to the headlines. After the rate briefly touched 1.7000, there was more sustained selling pressure given that hawkish elements had already been priced in. GBP/USD dipped below 1.6940 as EUR/GBP also looked to regain the 0.8000 level.
Thereafter, markets were generally locked in narrow ranges ahead of the key Federal Reserve policy statement and Yellen press conference later in the day. EUR/USD was able to find support above the 1.3530 area and moved towards the 1.3580 resistance area early in the US session. Under the weight of position adjustment, the dollar overall was unable to gain further traction despite some expectations of hawkish elements to the Fed statement. USD/JPY edged back towards 102.00 while USD/CHF dipped to the 0.8970 area.
June 17th, 2014
The Australian dollar was the main move in overnight trading Tuesday following the latest Reserve Bank policy minutes. The overall tone was slightly more dovish than expected with the bank less confident that stimulus measures already in place would be sufficient to support the economy. AUD/USD dipped lower in response as it lost its hold on 0.9400 with lows below 0.9350.
There was a busy data schedule during the day which certainly sparked significant market movement. First up was the UK consumer inflation data, very closely watched given monetary-policy implications and heightened alert over a potential rate hike. The headline inflation rate dipped to 1.5% for May from 1.8% previously and this was the lowest reading since Autumn 2009. Read the rest of this entry »
June 16th, 2014
The latest CFTC data recorded a further increase in speculative long dollar positions to the highest level for four months which will limit the potential for further US currency buying with funds already over-extended. The Euro should also be protected to some extent by the net increase in short contracts to over 50,000.
Early European action on Monday was dominated by Sterling as GBP/USD pushed higher to test the critical 1.7000 level. Sentiment was buoyed by Standard & Poor’s removing the negative outlook on the UK AAA rating late on Friday and further weekend media speculation over an early increase in interest rates with a slightly weaker reading for the Rightmove house-price index shrugged off. GBP/USD did spiabove 1.7000 and triggered stops above, but couldn’t hold the gains and dipped back to the 1.6960 area. Read the rest of this entry »
June 13th, 2014
Overnight price action was dominated by Sterling following a much more aggressive than expected speech from Bank of England Governor Carney. He indicated that an interest rate increase might come sooner than expected by the markets with the decision whether to raise rates becoming more balanced while macro-prudential measures were no substitute for monetary policy. Read the rest of this entry »
June 12th, 2014
The New Zealand dollar pushed sharply higher overnight following a third successive Reserve Bank interest rate hike. Despite warnings that the currency was over-valued from Governor Wheeler, there was generally hawkish rhetoric which pushed NZD/USD sharply higher to a peak around 0.8680 from 0.8540.
There was a significant spill-over effect on the Australian dollar as AUD/USD spiked above the 0.9400 level with a peak just above 0.9410. There was a spike lower following weaker than expected headline jobs data as employment fell over the month, but there was strong support on approach to 0.9350 with a fresh move higher to above 0.9400. Read the rest of this entry »