forex

Dec. 11, 2019 (Allthingsforex.com) – Pressure mounted on the USD today after the Fed decided to keep the benchmark rate in its current 1.50% to 1.75% target range and hinted that it might hold rates steady through 2020.

The EUR managed to climb back above $1.11 and tested resistance at $1.1116. A bullish breakout here would open the door to a move targeting the recent double top around $1.1185.

Below is the FOMC Statement in its entirety as released by the Federal Reserve earlier today.

“Information received since the Federal Open Market Committee met in October indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a strong pace, business fixed investment and exports remain weak. On a 12‑month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee decided to maintain the target range for the federal funds rate at 1‑1/2 to 1-3/4 percent. The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective. The Committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the federal funds rate.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; James Bullard; Richard H. Clarida; Charles L. Evans; Esther L. George; Randal K. Quarles; and Eric S. Rosengren.”

 


USA 

Dec. 6, 2019 (Allthingsforex.com) – A blockbuster U.S. Non-Farm Payrolls report gave a short-lived boost to the greenback, but most dollar bulls seem to be sitting on the sidelines in expectation of the upcoming FOMC meeting on Wed., Dec. 11.

The odds of another rate cut by the Fed next week have diminished as the U.S. economy added 266k jobs in November, higher that the forecast of 180k, and more than doubling the 128k gain in jobs for October. The unemployment rate also saw an improvement with a decline to 3.5% in November from 3.6% in the previous month.

At the moment, the market consensus is for the Fed to hold rates steady within the current 1.5% to 1.75% range at its December meeting. Such decision would move the Fed into more neutral mode following a sequence of three consecutive rate cuts announced at the Fed’s last three meetings.

Dec. 5, 2019 (Allthingsforex.com) – The EUR bulls have been in charge for the last few trading sessions, however, today’s disappointing retail sales data, combined with a weak GDP report from the Euro-area, did little to offer further impetus to the recent euro rally.

October was a very poor month for European retailers with sales falling by 0.6% month over month, while year over year increase came up to only 1.4%, compared with 2.7% y/y in the previous month. That’s almost 50% drop in the annual reading, but it would be interesting to see if shopping for the Holidays would provide a much-needed boost in December’s retails sales figures.

The final GDP reading for Q3 2019 did not impress, either. Economic growth in the Euro-zone was confirmed at 0.2% q/q and held steady at 1.2% y/y.

In the last couple of days, the EUR has been trying to break decisively above $1.11 and the single currency continues to linger around this level at the time of this publication.

It is now up to tomorrow’s U.S. Non-Farm Payrolls report to offer the catalyst for the next more significant move in the EUR/USD exchange rate.

Forecasts point to an upbeat employment data with the U.S. economy expected to add 180k new jobs in November from 128k in October, while the unemployment rate remains unchanged at 3.6%.

Sept. 18, 2019 (Western Union Business Solutions)  – The  U.S. dollar added to its modest gains after the Fed cut interest rates as expected and offered an overall sanguine assessment of the U.S. economy.

 

The Fed shaved another quarter percentage point off the fed funds rate which it lowered to a range of 1.75% to 2.00%. The 7-3 vote in favor of today’s action showed that two officials dissented, preferring to keep policy unchanged, while the other wanted a bolder 50 basis point cut.

 

The Fed is now forecasting slightly quicker growth of around 2.2% this year. The central bank expects unemployment to stick near 50-year lows below 4%, while inflation went unrevised just below the Fed’s 2% goal.

 

Next up: the chairman’s press conference at the bottom of the hour.

 

Barring a material deterioration in U.S. data, the dollar should benefit from the view that the Fed may have fired its last cut for a while, dampening elevated market expectations of action again before year-end.

 

There will be just two more Fed decisions this year, on Oct. 30 and Dec. 11.

 

EUR 1.1038

JPY 108.25

GBP 1.2472
CAD 1.32 94

Sept. 12, 2019 (Western Union Business Solutions)  – The euro dropped then quickly popped after the European Central Bank delivered a strong dose of stimulus to try to revive the bloc’s morbid economy. The euro’s loss was the greenback’s gain as it rose against a basket of rivals. The yen edged up from six-week lows as the ECB’s action pushed down Treasury yields. Sterling and the Canadian dollar were little changed. The ECB deployed a dovish arsenal of measures to revive growth and inflation as it cut a key interest rate to historic lows, restarted QE bond buying and vowed to keep policy at present or lower levels essentially until the cows come home. The ECB cut the deposit rate to fresh all-time lows of -0.5% from -0.4%, and vowed not to increase it until inflation, now at 1%, ‘robustly’ converges toward its near 2% goal. By beefing up policy with an open-ended commitment, the ECB excited euro bears who dumped the single currency.

ECB

The ECB cut a key rate further below zero, while it revived its QE bond buying program and reinforced its forward guidance to indicate that higher rates were off the table until stubbornly low inflation rises ‘robustly’ toward its goal of just below 2%. QE is set to resume at €20 billion a month starting in November and continue indefinitely. The open-ended nature of stimulus was read as decidedly dovish and negative for the euro.

JPY

The yen hit new six-week lows overnight only to stabilize after the ECB delivered a solid jolt of stimulus that put downward pressure on Treasury yields, a key driver of USDJPY. The yen has fallen out of favor amid de-escalating trade tensions between the U.S. and China.

GBP

Sterling kept to a range as the Brexit drama eased a bit with Parliament on a five-week break until mid-October. Nevertheless, the Brexit situation remains fluid after a court this week ruled that Prime Minister Boris Johnson’s decision to suspend Parliament was ‘unlawful.’ The legal battle over Brexit looks set to play out over the coming days and weeks. Sterling continues to hold above multiyear lows as the latest developments suggested a somewhat reduced risk of a disorderly Brexit next month.

AUD

A softening in the U.S.-China trade war allowed the Aussie dollar to climb to six-week peaks. The neighboring kiwi dollar neared a one-month high. In a gesture of goodwill, President Trump delayed by a couple weeks to mid-October the implementation of higher tariffs on China. Australia and New Zealand have a heightened sensitivity to all things China, the destination for a significant portion of their resource exports.

CAD

Canada’s dollar slumped to lows for the week, weighed down by weaker oil markets. The price of oil slipped below $55, the lowest in more than a week. Consequently, USDCAD recovered from six-week lows hit earlier this week. Broad based strength in the greenback has also left the Canadian currency a bit vulnerable. A dovish ECB policy decision today, coupled with signs of a resilient U.S. economy, buoyed the greenback.

 

 

Sept. 5, 2019 (Western Union Business Solutions)  – Easing global political worries shift market to risk on mode

-             USD down 3% versus GBP in 48 hours

-             Big data day ahead for the US

-             Rising oil prices give welcome boost for the Canadian Dollar

Easing global political worries see safe haven sell off, including the US Dollar!

Market sentiment has improved as US-China trade talks look set to resume next month. In addition, easing global political worries from Hong Kong, Italy and the UK helped boost risk appetite. Global equities rallied along with riskier assets, emerging market currencies and oil prices.

Reports that Hong Kong withdrew the extradition bill, that has triggered months of protests and unrest, was cheered by investors. In Italy, a new coalition government was formed which gave a welcome boost to the Euro. While in the UK, MPs successfully passed a draft law to stop a potentially chaotic no-deal Brexit in October. China’s yuan and the closely linked Australian and New Zealand dollars appreciated on the news. The Japanese Yen and Swiss Franc, which draw in safe-haven demand in times of geopolitical stress, depreciated, as traders unwound these safer positions and sought out riskier high yielding assets.

The US Dollar index, which measure the strength of the dollar against a basket of currencies, slid for a second straight session, experiencing its biggest daily fall in two weeks.

GBP

In the last 48 hours, Sterling has recovered almost 3% against the Dollar. This rally occurred after law makers voted to force the Prime Minister to seek a three-month delay to Brexit if, he fails to secure a transition agreement with the EU.

Although a no-deal Brexit is still on the table, the likelihood of that has reduced dramatically. Combined with USD weakness, the British Pound has managed to record its biggest 1-day gain since March. A delay to Brexit until 2020 and a subsequent October 19 election could see more gains for GBP although further upside past 1.30 could be limited given the uncertainty that elections can create.

Big U.S. Data Day Ahead

We have a multitude of data out tomorrow for the US. Starting with Jobs data at 8:30am (EST) the market will be keeping a close eye these for any hint towards Friday’s official jobs report. Later this morning we then have non-manufacturing PMI.

US stocks recovered over night thanks to the fact US China talks are now set to resume in October. As mentioned earlier this has seen a sell off safe haven assets including the US Dollar and subsequently the Dollar begins the day from behind. Any surprise to the downside for todays data releases could accelerate losses for the day, especially against the emerging market currencies.

Aug. 2, 2019 (Western Union Business Solutions)  – The U.S. dollar kept below multiyear peaks as solid jobs data wasn’t enough to allay concerns about the amped up trade war. Making good on the Fed chairman’s generally rosy outlook for U.S. growth, America’s jobs report met forecasts with a gain of 164,000 in July, a healthy amount that kept unemployment at a low 3.7%. Wages surprised to the upside with a 3.2% annual increase. If not for the trade troubles, a print like today’s would be consistent with a stronger dollar and only minor interest rate adjustments by the Fed.

EUR

The euro stabilized above 26-month lows thanks to the dollar’s trade war-induced decline. It also helped at the margin that euro zone retail sales surprised to the upside with a 1.1% jump in June, which easily cleared forecasts of a modest uptick. Still, the data shouldn’t offer meaningful support to the euro, particularly after the previous number got downgraded, underscoring the bloc’s poor prospects.

JPY

Safer bets like the yen and Swiss franc were the initial winners of the surprise escalation in the U.S.-China trade war. The yen turned the tables on the dollar, as USDJPY plunged by 2 ½ yen to late June lows. The ongoing trade feud has been credited with slowing global growth and the latest round only increases the headwinds. Treasury yields collapsed, weighing on the dollar and suggesting a higher likelihood of the Fed cutting rates again in September.

AUD

The Aussie dollar crashed to seven-month lows after the latest salvo in the U.S.-China trade war added to the dim outlook for Australian growth, a scenario that suggests a low bar for the Reserve Bank to lower lending rates from 1%. The RBA could take action as soon as its Aug. 6 meeting.

CAD

The loonie lurched to new six-week lows despite good news on the Canadian economy. Canada logged a surprise trade surplus of C$136 million in June, its second surplus in as many months. However, the size of the surplus moderated from a downwardly revised C$556 million in May. Sustaining a trade surplus appears tougher for Canada after the latest intensification of the U.S.-China trade war. The loonie also appears a bit hungover after oil’s biggest single-day swan dive in more than four years, when it shed more than $4 and closed Thursday below $54.

 

 

 

 

Aug 1, 2019 (Econoday) – The August BoE MPC meeting again lived up to market expectations and left policy on hold. Bank Rate remains pegged at 0.75 percent and the ceiling on QE at £445 billion (of which gilts, £435 billion). The vote was another unanimous 9-0.

Sterling resumed a slide against the greenback that knocked it to 2 ½ year lows.

The MPC also opted to retain a tightening bias under which the Bank believes that ‘‘..increases in interest rates, at a gradual pace and to a limited extent, would be appropriate to return inflation sustainably to the 2 percent target..”. However, compared with June, the bias has been modified slightly and higher rates now require both a smooth Brexit and some recovery in the global economy. In line with the Fed and a number of other central banks, the UK monetary authority would seem to be attaching increasing weight on international developments.

Under its central case scenario (smooth Brexit), CPI inflation is expected to climb on the back of excess demand and stand at 2.4 percent at the end of the 3-year forecast horizon. In other words, the current stance of policy and market pricing for borrowing costs in the future remain too accommodative to meet the medium-term inflation target. Interestingly, the Bank still sees excess demand even in the event of sterling appreciating by as much as 10 percent.

Brexit uncertainty again ruled out any policy shift today but the new Quarterly Inflation Report (QIR) still shows no quantitative analysis of what a no-deal outcome might mean for GDP and consumer prices. In line with previous meetings, the August minutes adhere to the official line that any monetary policy response to whatever shape Brexit finally takes will not be automatic and could be in either direction.

Apart from the amendment to the policy bias, there is little here for financial markets to chew on. The next move in official rates could be up or down but, in either eventuality, the chances are that it will not be for some time.

July 31, 2019 (Western Union Business Solutions)  – If this week’s Fed meeting was a test of dollar strength, the U.S. unit passed with high marks. The dollar cruised to new highs after the Fed fired its first rate cut in a decade. The greenback clocked May and June highs against the yen and Canadian dollar, respectively, and motored to its strongest in over two years against the euro and sterling. The dollar took comfort from the Fed maintaining an upbeat outlook for the world’s biggest economy. Dollar bulls were particularly emboldened by the Fed ruling out a “lengthy” rate cutting cycle, dubbing its action as a mere “mid-cycle” rate adjustment. Markets responded by scaling back expectations of lower U.S. interest rates, thereby assigning a brighter outlook for the greenback. The dollar faces more tests of strength in U.S. data today on manufacturing and tomorrow on the job market.

EUR

A hawkish rate cut from the Fed this week drove the euro through a key floor to its weakest level in 26 months against the greenback. Meanwhile, data Thursday confirmed the weak state of Europe’s manufacturing sector, a key growth engine for the export-driven economy. European numbers this week showing lower inflation and a sputtering factory sector intensified pressure on the ECB to deliver stronger stimulus at its next meeting in September.

GBP

Sterling resumed a slide against the greenback that knocked it to 2 ½ year lows. No Bank of England rescue for the pound, as all nine officials voted to keep interest rates at a low 0.75%. Britain’s central bank also downgraded its outlook for U.K. growth this year in the face of turn for the uncertain Brexit has taken. The world’s No. 5 economy, meanwhile, remained stuck in a soft patch as data confirmed British factory activity contracted from the third time in as many months in July.

CAD

Canada’s dollar tumbled to six-week lows against the greenback after the Fed cut rates but played down prospects of a “lengthy” easing cycle. USDCAD’s buoyancy will face scrutiny in U.S. and Canadian data Friday on trade. However, the main focus tomorrow will be on America’s employment report for July. Solid job growth would weaken the case for the Fed to follow up this week’s rate cut with another anytime soon, a scenario that could push USDCAD higher.

America’s dollar reigned as it rolled to new highs for the year against a wide swath of rivals. Any rate cuts by the Fed appear to be modest instead of the bolder cuts that market had priced in. The Fed cut rates this week for the first time in years but it signaled the move was more insurance to safeguard the economy from global headwinds. The Fed upended market expectations of three or more rate cuts by year-end, resulting in a brighter outlook for the greenback. How high the bar is actually set for rate cuts should hinge on U.S. data. That puts the focus on today’s ISM manufacturing index and tomorrow’s influential nonfarm payrolls report. Prints that back the Fed’s favorable baseline outlook for the U.S. economy would bode well for sustainable dollar gains.

 

July 25, 2019 (Western Union Business Solutions)  – The euro slumped to two-year lows after the ECB all but eased policy at its latest meeting. The ECB left its main interest rate at zero and the deposit rate at minus 0.40%. The ECB affirmed its low rate pledge, vowing to keep rates low for at least another year or for as long as it takes to boost growth and inflation. Barring a surprise brightening in the outlook for Europe’s economy, the stage appears set for rate cuts or other action at the next ECB meeting on Sept. 12. The euro’s tenacity so far to hold above key support triggered a short-covering rally in its favor.

GBP

The U.K. pound held its chin above 27-month lows as the market digested the cabinet makeup of Britain’s newly installed prime minister, Boris Johnson. Britain’s new leader appeared to assemble a team of mostly Brexiteers, or those who favor the U.K. leaving the EU. Underlying sentiment remains bearish for sterling after weak U.K. data offered more evidence of a decelerating economy. A gauge of consumer spending fell for the third month in a row in July, a sign that an expected slowdown in the second quarter may have bled into the third quarter.

CAD

Canada’s dollar found some footing as the price of oil rose toward $57. USDCAD largely kept to a range as traders monitored the ECB’s policy announcement and hunkered down for critical U.S. data on growth and inflation that will offer the last meaningful looks at the world’s biggest economy before next week’s Fed meeting.

USD

The U.S. Dollar Index climbed to late May highs on the back of bullish U.S. data and a dovish policy decision from the ECB. Weekly jobless claims and durable goods both surprised to the upside with the former back around half-century lows. The strong data suggested any rate cuts by the Fed would be the modest insurance variety and not the start of a full blown easing cycle. Look for America’s rate debate to be stirred by second quarter growth Friday and numbers next week on consumer spending and inflation.