Forex Afternoon Wrap – 14/07

Jul 14, 12:35 pm
uk inflation

Iran reaches agreement on Nuclear Deal. BoE’s Carney “moving closer to UK rate hikes”

Key Notes:

  • UK BRC Retail sales monitor y/y 1.8% vs. 0.0% previously
  • Germany final CPI m/m -0.1% vs. -0.1%
  • Switzerland PPI m/m -0.1% vs. 0.2%
  • UK CPI y/y 0.0% vs. 0.0%; Core CPI y/y 0.8% vs. 0.9%
  • UK PPI input m/m -1.3% vs. -0.7%l PPI output m/m 0.0% vs. 0.1%
  • German ZEW economic sentiment 29.7 vs. 20.6
  • Eurozone ZEW economic sentiment 42.7 vs. 51.1
  • Eurozone industrial production m/m -0.4% vs. 0.2%
  • US NFIB small business index 94.1 vs. 98.6
  • BoE Carney speech at Treasury select committee hearing
  • US retail sales m/m -0.3% vs. 0.2%; Core retail sales m/m -0.1% vs. 0.7%
  • US Import prices m/m -0.1% vs. 0.1%

With the European Greece crisis having subsided somewhat, the markets shifted focus to the other headlines. The economic calendar was light yesterday and the currency markets opened with the US Dollar leading the front. The Asian trading session saw the Aussie initially fall from the open to post session lows to 0.7387 before reversing the losses and trading above 0.744 into the US trading session. The Kiwi also posted gains for the day, trading at 0.67 and remains well supported after hitting new yearly lows below 0.663 five weeks ago.

USDJPY was relatively subdued today after the currency attempted to post gains above 123.64 before losing ground as the Yen was starting to strengthen against the Greenback.

The European trading session saw some economic data including Germany’s final CPI which fell -0.1%, but as expected. Switzerland’s PPI was also weaker at -0.1%, falling below estimates of 0.2%.

The Euro was weaker after yesterday’s news of Greece reaching a deal with the Eurogroup. However a lot is left to be seen as the ruling SYRIZA is starting to face dissent within its party as the Greece parliament needs to approve legislation to put up the 50 billion Euros in a separate fund.

EURUSD initially tested daily lows near 1.09835 before managing to turn higher, trading at 1.103 at the time of writing. From the UK, inflation figures were dismal but that Pound Sterling clearly ignored a weaker print and continued to push higher. GBPUSD tested highs of 1.56 and was boosted by comments from BoE’s Mark Carney who noted that the UK was edging closer to rate hikes. The markets currently expect a UK rate hike in early 2016.

News that Iran reached a deal with the international community also saw the Crude Oil prices fall on the news. With the new developments, the sanctions on Iran are to be lifted as well as opening the country to the Global oil market as well. Crude Oil futures posted lows to $50.33 before pulling back to trade near $52.

The US trading session saw the retail sales data disappoint across the board. Core retail sales for the month shrank -0.1%, below estimates of 0.7%, while the headline retail sales also fell -0.3%, missing estimates of 0.3%. USDCAD, which had initially weakened on falling oil prices managed to strengthen as the resistance at 1.28 proved too hard to be broken at this time.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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