Forex News

Oct. 14, 2016 (Tempus Inc.) – The U.S. dollar extended its strong week overnight, rallying against almost all of its major rivals. The exception would be the commodity-based currencies that found support following strong Chinese inflation data. The greenback has been buoyed by rising interest rate expectations. The minutes of the last Fed meeting showed that policy makers were warming up to the idea of higher rates “relatively soon.”

Today’s economic data should bolster that narrative. Advanced retails sales met expectations, rising 0.6% in the month of September. The core sales that excludes volatile auto and gas sales, also met expectations of a 0.3% rise. A separate report showed that producer prices are also on the rise in the U.S., which should give added support to the case for higher interest rates. Total PPI rose 0.3% on a month over month basis, higher than the 0.2% expected by economists. All of the core readings either matched or slightly outpaced expectations as well. Later, the University of Michigan consumer sentiment report is slated to cross the wires.

JPY

After rallying yesterday on poor Chinese trade data, the Japanese yen is on the defensive again this morning. China’s factory-gate prices rose for the first time since 2012 indicating the Chinese economy is stronger than initially thought.

Consumer price inflation also rose for the first time in five months. The data sparked a rally in global equities with Japanese Nikkei rising half a percent and the European Stoxx 500 rising nearly 2.0%. The risk rally dampened demand for the safe-haven yen.  However, strong Chinse data cause the Australian dollar to rally nearly 1.0% against the U.S. dollar. China is Australia’s largest trading partner.

GBP

Another day, another sell-off for the British pound. The sterling remains under pressure due to the economic and political uncertainty surrounding the pending Brexit. The President of the European Council, Donald Tusk, had harsh words for the U.K.’s prospects. He said the options on the table were either a “hard Brexit” or “no Brexit” and that the notion that the U.K. would be able to remain a part of the EU’s single market was “pure illusion.”

The sterling has lost nearly 2.0% against the U.S. dollar this week. Overall, the pound is 18% weaker from the Brexit vote in June.


USA 

Oct. 1, 2016 (Tempus Inc.) – The U.S. Dollar rallied overnight after economic figures fell in line with expectations. GDP figures out of the U.S. indicated a steady rate of growth. Personal Income also met its forecast of 0.2% expansion while Personal Spending stayed put at 0.0% for the month of August.

Overall, it is clear that data is painting a positive picture of ongoing improvement in America as the rest of the world struggles. The USD’s current appreciation is also due to its safe-haven status as global equities are feeling the burn of Deutsche Bank’s troubles.

Commercial banks’ shares were having their best quarter in 18 months prior to the scandal at Deutsche and issues at Commerzbank AG. Stock indexes are down all across the board as the happy ambience from the OPEC production-cut agreement faded resulting from growing concerns over instability in European banking. Bonds are gaining popularity as low-risk assets with German yields at their lowest level since July.

Also aiding the “buck’s” appreciation is the Fed’s beloved inflation measurement, the Personal Consumption Expenditures Deflator, which expanded by 1.0% over the estimated 0.9%.

GBP

Sterling fell following underwhelming data for the second quarter of the year, adding to the Pound’s woes. The UK current account deficit increased to GBP 28.7 billion showing that exports are down even as Pound has lost value significantly.
Brexit did not cause the immediate problems to the economy many feared, but political disagreements domestically and with the rest of the EU are fomenting doubt in the business as well as banking sectors. Long-term growth is at a high risk, especially if companies start departing with employment opportunities and physical capital elsewhere. GBP lost 3.6% of its value in September.

EUR

The common currency is dealing with quite a mess. Although countries on the periphery have been known to be trouble-bound for almost a decade, market participants are now worried about Germany. The largest economy in the EU is facing many challenges as some of its marquee companies in banking and auto-manufacturing are heading downward.

What is occurring is a bit of a trickle-down effect, where these large firms are negatively impacting the growth prospects of smaller businesses around the continent. EUR is 1.3% lower from its peak reached around the start of the month.

 

September 16, 2016 (Tempus Inc.) – The U.S. Dollar is mostly improved after a week of risk-aversion throughout global markets and downside risks that are finally manifesting themselves. The Bank of England’s meeting concluded in the major central bank admitting that more will need to be done to spark the economy and signaled to the rest of the world that accommodative measures will remain in place for a long time.

Indicators in the UK, the Euro-zone, and the U.S. revealed a picture of unbalance in the industrialized nations while commodity prices floundering downgraded prospects for everyone else. CPI today showed a better expansion than expected, yet Retail Sales had a very poor showing yesterday. In this environment of global uncertainty, the greenback is thriving as a safety asset to hold on to.

Japan’s lack of direction and speculation over its willingness, or lack thereof, to stimulate the economy further, has not negatively impacted the Yen. JPY, as much of this year, remains strong as a result of dysfunction in resource markets and lost faith in emerging stock indexes.

EUR

The Euro remained in familiar ranges throughout this week after slowly, but surely falling to the dollar in the midst of growing concerns over the overall political and economic health of the European Union. Policy divergence, as compared to the Fed, has played a small role as well since it seems very unlikely the ECB will be able to tighten its policy anytime soon. Since the middles of last week, EUR has dropped by over 1.0% in value.

Today in Bratislava, the European Union is holding its first summit without the presence of the United Kingdom. If the world has forgotten, this meeting serves as a reminder that indeed Britain voted itself out without a tentative plan of action and there are more questions than answers about how negotiations for the full exit will go.

Despite some inflationary growth as CPI was released yesterday, German Chancellor Angela Merkel offered some strong statements about the dire state of the EU and its fragile political environment. “It’s a matter of war and peace,” said the official while adding, “I, for one, will never relent in pushing for a common Europe.”

GBP

The Pound continues to dwindle as traders weigh the chances of the BOE lowering interest rates near 0.1% by the end of the year. Although post-Brexit economic figures have eased fears of an imminent recession, the fact that BOE is openly speaking about cutting borrowing costs is a major policy stance turnaround. Prior to Brexit, the BOE was the only major central bank seen with the ability to hike rates just like the Federal Reserve.

However, the surprising twist of Brexit has thrown policy up in the air and the BOE is on a reactionary approach, carefully determining what needs to be done to avoid a financial disaster. GBP is now 2.3% weaker since September 6th.

September 2, 2016 (Tempus, Inc.) – After falling much of yesterday, the U.S. dollar was unable to retrace its losses and opened this morning mostly flat from yesterday’s close. The greenback fell after two separate manufacturing reports failed to meet market expectations yesterday morning.

The U.S. dollar has recommenced its sell-off this morning after Non-Farm payrolls failed to meet expectations.  Payrolls rose by only 151K I in the month of August, failing to meet expectations of a 180K, according to the Labor Department.  The headline has disappointed market participants and traders will now push back expectations of a September rate hike, weighing on the greenback.

The report was not all negative, however.  Last month’s reading was upwardly revised to 275K jobs created from 255K.  And while the jobless rate (4.9%) and participation rate (62.8) were unchanged, wages gained modesty last month.
The result of today’s major data has solidified our view that the Federal Reserve will not find the scope to raise interest rates until at least December, after the U.S. elections in November.

GBP

A combination of disappointing U.S. data and a strong reading from the U.K.’s Manufacturing Purchasing Managers’ Index caused the British pound to gain 1.5% against the U.S. dollar during yesterday sessions.

The British pound was able to hold its gains overnight ahead of the much-anticipated Non-farm payrolls print in the U.S.  The sterling is set for its third straight weekly advance against the U.S. dollar after touching a multi-decade low on August 15th.

Indeed, the sterling is set to gain against all of its 31 major counterparts this week.

JPY

Despite general dollar weakness this morning, the Japanese yen has been unable to take advantage. The yen is more than 3.0% lower against the U.S. dollar over the past seven trading session as policy divergence remains center stage.

Fundamental data releases from the island nation have continued to disappoint, highlighting the potential need for the Bank of Japan to bolster its monetary stimulus. Meanwhile, the conversation in the U.S. has shifted to “when” not “if” the Federal Reserve will tighten policy in the coming months.

August 19, 2016 (Tempus, Inc.) – The U.S. dollar’s negative momentum from yesterday afternoon continued overnight with the Bloomberg Spot Dollar Index touching a three-month low. The greenback came under slight pressure yesterday as the minutes of the last Federal Reserve meeting showed that voting members were split as to whether rates should be hiked later this year. Policy makers seemed to agree that the labor market is improving but there was disagreement whether the U.S. is reaching full employment. It is widely expected that full employment would push wages higher and pull inflation up as well. However, some members stated that they believe they will have ample time to react if inflation pressures become apparent.

The perceived lack of urgency has lead traders to pare down bets the Fed will act later this year, dragging the greenback lower. Swaps showed a 51.0% change of a Fed rate hike before the minute’s release. They currently sit at 46.0%. Tempus holds our belief that the next rate hike will not take place until 2017.

Fed members William Dudley and John Williams will both speak today and could spark volatility.

GBP

The British pound was the biggest winner overnight, gaining nearly 1.0% against the U.S. dollar before giving up some of its gains. Indeed, the sterling touched a two month high after another report pointed to a rosier outlook in post-Brexit Britain. Retail sales jumped 1.4% in July, the best July reading since 2002, according to the Office for National Statistics. The print beat expectations for a 0.1% rise and follows a dismal 0.9% contraction in June.

The data print is the third this week that has beat expectations, which shows that the British economy may rebound from the Brexit vote better than some had expected. Inflation data impressed on Tuesday which was followed by good labor data yesterday.

JPY

The Japanese yen briefly traded past a large physiological level for the second time this week overnight. The yen remains near its strongest level of the year against the U.S. dollar and within striking distance of levels not seen since the summer of 2014.

Data released overnight shows the pressure a strong yen puts on the export-driven Japanese economy. Japanese exports fell 14.0% in July from the year earlier. This represents the biggest decline since 2009 and is the 10 consecutive month of declines. The Bank of Japan will re-evaluate its monetary policy next month and speculation is growing that the central bank will need to take additional measures to prop up the world’s third biggest economy.

Aug. 13, 2016 (Tempus Inc.) – The U.S. dollar has been able to recoup some of yesterday’s losses overnight, but retail sales and consumer sentiment data disappointed and the Bloomberg Dollar Spot Index remains near a seven-week low. The greenback is benefiting from developments abroad. Poor economic data released in France and in the United Kingdom have provided the catalyst for the dollar’s rebound against its European rivals.

Thursday’s economic docket showed that initial jobless claims were little changed, with 266K requesting new benefits, down from 267K in the week prior. Initial jobless claims continue to hold near a four-decade low for most of this year, highlighting strength for the labor market. Indeed, filings have been below 300K for 75 straight weeks, the longest stretch since 1970.

NZD

The New Zealand dollar has rallied to a one year high against the U.S. dollar after the Reserve Bank of New Zealand took less dovish action than some had expected. In a widely expected move, the RBNZ cut interest rates by 25 basis points to a record low of 2.0%. However, about a quarter of market participants expected the central bank to cut rates by 50 basis points in an effort to boost weak inflation leading to additional gains in the Kiwi. The NZD/USD is now at its strongest level since May of 2015.

While the RBNZ doesn’t target the exchange rate, the longer it stays elevated, the more it damps tradable inflation and makes it harder for the central bank to meet its mandate, Assistant Governor John McDermott said in an interview late yesterday.

GBP

The British pound is back below $1.30 and retraced its gains from yesterday after a report showed that home sales experienced their fastest decline since 2008, further proof that effects of the Brexit vote are making their way into the real economy.

The Royal Institution of Chartered Surveyors’ showed that sales fell the most since the financial crisis.

Prices of properties that did sell continued to rise, but at the slowest pace in three years. British stocks, particularly housing related equities, have fallen sharply after the release.

Aug. 4, 2016 (Tempus Inc.) – The U.S. Dollar was mostly quiet overnight as traders awaited the much anticipated monetary policy decision from the Bank of England. The greenback is gaining in early trading, including a nearly 1.5% boost versus the sterling, after the Bank of England used nearly every arrow in its proverbial quiver to battle the potential economic fallout from the “Brexit” vote.

Yesterday’s American economic docket was fairly strong, which allowed the U.S. dollar to push modestly higher against the majority of its rivals. ADP Private jobs data beat expectations and Markit and ISM reports showed growth in the service sector.

Weekly jobless claims registered slightly worse last week, but has not negatively affected the dollar.  Claims rose by 3K to 269K, according to the Labor Department. Later, factory orders are expected to register a disappointing -1.9% in June, after falling 1.0% in May. Durable goods, orders for items expected to last at least three years, are also expected to drop. Nevertheless, the major risk event for the U.S. dollar this week remains Friday’s Non-farm payrolls and unemployment data.

GBP

The British sterling is falling like a rain on the river Thames this morning after the Bank of England threw the kitchen sink, and then some, at the problems looming after the United Kingdom voted to leave the European Union. As largely expected, the Bank of England cut interest rates for the first time since 2009 to a record low of 0.25%. But the central bank announced it would utilize a number of other monetary tools to bolster the economy. Governor Mark Carney increased the central bank’s asset purchase target for the first time in four years. The increase was 60 billion to 435 billion pounds.

The Monetary Policy Committee said it will buy 60 billion pounds of gilds over the next six months and as much as 10 billion pounds of corporate bonds in the next 18 months. There did appear to be some disagreement among voting members as to whether quantitative easing was appropriate at this point. The central bank also announced a plan that would lend as much as 100 billion pounds to banks to ensure the measures reach the real economy. All told, the Bank of England expanded its balance sheet by 170 billion pounds.

The British pound fell more than 1.5% against the U.S. dollar in the hour after the decision.  At the time of writing, BOE Governor Carney is speaking at a press conference and the sterling as rebounded slightly.

EUR

The Euro remains in fairly unremarkable ranges against the U.S. dollar.  The common currency found support last week after a slew of disappointing American data. However, that modest rally came to an end yesterday as the Euro fell 0.50% against its American counterpart during yesterday’s session. Data out of the Euro-zone has proved decent, albeit soft.  Service data showed the sector is barely growing in the E.U. and retail sales failed to impress.

Tomorrow’s U.S. employment data may spark the EUR/USD out of its sluggish range. However, as many European’s are off of work on holiday, current ranges may prevail in the coming weeks.

July 29, 2016 (Tempus Inc.) – The U.S Dollar is trading in much weaker ranges this morning following the Bank of Japan’s decision to withhold further expansion of its loose monetary policy. More importantly, second-quarter GDP growth for the U.S. registered at 1.2% falling way under the expected 2.5% estimate.

The Bloomberg Dollar Spot Index declined 1.5% in the last two days with a combo of lower chances of a Fed hike for the year, central banks staying put instead of using aggressive easing measures, and domestic indicators failing to show remarkable improvement.

University of Michigan Sentiment survey will be out at 10AM, which could turn out to be another sinking factor for the greenback if less than forecast. Good economic data out of Europe and the BOJ’s hesitation to aid the economy are likely to keep USD down throughout the day.

EUR

The Euro appreciated by 1.8% this week and is trading at its highest level in over a month. Market participants are eagerly waiting for the results of the stress tests currently ongoing on European banks to assess their financial health.
Nevertheless, a mix of poor performance in the U.S. and positive data out of Germany and Spain are pushing the Euro higher, although, there is potential for losses if the tests conclude banks are in a bad situation.

Spain’s unemployment fell to 20.0%, its lowest point in six years while German CPI satisfied expectations of some inflationary growth. The bank-test results will not be made publicly available until 4PM today.

JPY

The BOJ went against most economists’ bets on expanding the current quantitative easing program or cutting rates deeper into negative territory. As a result, the Yen is trading at its strongest level since the beginning of July.

Governor Haruhiko Kuroda decided to increase the bank’s purchase of exchange-traded funds (EFTs), but left government bond buying at JPY 80 trillion per year. Investors were hoping for more, but the BOJ, once again, did not deliver.

The IMF said the Yen happens to be trading at a fair value according to their assessment of currency fluctuations.
Deflationary pressures remain and the economy is struggling. We see a reversal still possible as Brexit issues take effect and intervention is more demanded moving forward.

 

July 26, 2016 (Tempus Inc.) – The U.S. Dollar is holding on to recent gains against its European counterparts, but fell to the Yen and Oceanic currencies with less likelihood of stimulus expansion in Japan. The Asian trading session was a mix of 2.0% losses to the Nikkei Stock Exchange and upticks to the rest of the equity indexes. NZD is up on tremendous growth in home mortgage lending while AUD strengthened off of a major USD selloff after commentary out of the Japanese finance ministry. Both resource-based currencies are up by an average of 4.0% since the end of May.

The “loonie” and Peso continue to slide along with the weakness in oil prices. WTI Crude Oil fell below $43.0/barrel as production keeps increasing in North America and the OPEC members. CAD is trading around its worst levels since the end of March.

Expect some risk-aversion to keep markets from flourishing ahead of the risk events at the end of the week. More economic data out of the U.S. including PMI, Home Sales, and Consumer Confidence will hit the wire at 9:45AM. Expansion is expected and perhaps better-than-expected figures could push the greenback in a positive direction.

GBP

The Pound mounted a comeback overnight after falling by over half a percent overnight on news that Bank of England members will push for aggressive stimulus at the meeting next week. In particular, remarks from BOE policymaker Martin Weale pushed Sterling downward as he considers Brexit led to a “dramatic deterioration” of U.K. economic indicators.

The statements mark a change in sentiment from last week when Mr. Weale cast doubt on the Brexit having enough negative impact to merit additional easing measures. GBP may have recovered, but this highlights its never-ending vulnerability as officials figure out steps to curtail a slowdown that could lead into a recession.

JPY

Finance Minister Taro Aso downplayed the BOJ’s will to expand current stimulus and caused the Yen to have its best day since the Brexit. The Yen’s stubborn run continues as exporters struggle, stocks fall, and the chances of action by central bank officials wane. Aso was believed to agree with coupling monetary efforts with fiscal spending, but it seems like there is no coordination and no detailed plan for government spending to grow. JPY is now 16.0% stronger since the start of 2016.

We still believe there is potential for a reversal in Japan’s fortunes as lack of growth forces the BOJ steady hand and Abe to start working on re-building projects. The export-driven economy will not tolerate such an imbalance in currency fluctuation.

July 21, 2016 (Tempus, Inc.) – The U.S. Dollar remained mostly muted throughout the night with global markets staying quiet ahead of the ECB decision. As expected, the European Central Bank announced that its current interest rates and quantitative easing will stay the same for now. The lack of action in loosening policy follows the same line of thinking adopted by the Bank of England post-Brexit, which is to watch for more indicators signaling negative effects.

Thus far in his press conference, ECB President Mario Draghi commented on the need to couple monetary policy with fiscal spending, echoing the same message to Euro-zone governments that the Bank of Japan has manifested recently. Draghi feels the central bank has acted in a way that provides resilience to market shocks; however, Brexit has downgraded the growth outlook for the region. USD is slightly weaker since the remarks were made.

Initial Jobless Claims came in lower than expected along with a decline in continuing Claims, cementing the labor market’s steady improvement. Existing Home Sales will be out at 9:45PM, we will see if positive domestic numbers can move the needle in the greenback’s favor.

Draghi said the ECB is ready and willing to act in later months if needed, a reversal from his statements back in March when he said further cuts would not be considered.

GBP

Sterling fell after poor sales data and pessimistic outlooks from traders. U.K. Retail Sales declined 0.9% in June, dropping more than forecast and representing the steepest fall in six months. The figure shows that many feared the uncertainty over Brexit and statisticians worry the effect on sales may be worse once post-Brexit numbers are out.
Furthermore, analysts surveyed by Bloomberg predicted that Britain is headed towards its first recession since 2009 as economists foresee loss of investment with the process to break up being delayed. GBP volatility remains at high levels as outlooks continue to tilt downward.

JPY

The Yen climbed by the most in over a month after a BBC Radio interview with BOJ Governor Haruhiko Kuroda revealed that the central bank leader is not willing to look into “helicopter money.” The establishment of bond purchases directly from the government by the BOJ without having to enter the market does not seem to excite the official.

However, there was confusion in Japan after it was pointed out that while the interview was broadcast yesterday, the piece was recorded back in June, before Bernanke and Kuroda met to discuss the monetary strategy. Adding to the Yen’s surge is commentary from Japanese finance experts that the BOJ should start considering curtailing the stimulus program.