Forex Afternoon Wrap – 16/07

Jul 16, 12:36 pm
Weekly Forex Wrap Up

ECB maintains minimum bid rate at 0.05%, Kiwi slips as inflation misses estimates

Key Notes:

  • New Zealand business NZ manufacturing index 55.2 vs. 52 previously
  • New Zealand CPI q/q 0.4% vs. 0.5%
  • Australia MI inflation expectations 3.4% vs. 3% previously
  • Swiss retail sales y/y -1.8% vs. 1.9%
  • Eurozone final CPI y/y 0.2% vs. 0.2%; final core CPI y/y 0.8% vs. 0.8%
  • ECB maintains minimum bid rate at 0.05%
  • Weekly US unemployment claims 281k vs. 284k

Later

  • US Philly Fed manufacturing index
  • NSHB Housing market index
  • Fed Chair Yellen testifies

The Greek parliament, late midnight finally got around to passing the legislative bill approving the reforms for the bailout terms needed to unlock the next round of funding for the debt-ridden country. The Greek parliament managed to pass the votes amidst anti-austerity protests across the country. The ECB is expected to take a decision regards the ELA funding which was frozen at 89 billion Euros for close to two weeks leading to capital control restrictions being imposed on Greece. The markets have by and far digested the Greece crisis, which for now seems to be abating.

The Asian markets opened on a cautious note with the Kiwi susceptible to the New Zealand inflation data. The Kiwi quarterly inflation rose 0.4%, missing estimates of 0.5%. However the quarterly inflation showed a modest rise after declining close to -0.3% previous quarter. The Kiwi weakened since the open falling from the session highs of 0.66 to trade near 0.6515 as the economic outlook for the country remains bleak, warranting another RBNZ rate cut. The Aussie was a little more positive as the currency managed to trim its losses after dropping to session lows of 0.736 to trade near 0.738.

The Yen remained weak across the board as the US Dollar continued to surge on account of an upbeat economic view from Janet Yellen in her testimony to the Senate Congress yesterday evening. Ms. Yellen kept up the optimistic view that the Fed was on course for hiking interest rates this year while maintaining that the Fed’s policy would remain accommodative for the time being.

USDJPY was trading above the 124 handle and remains tipped for further gains.

The European trading session saw a return to the fundamentals as the Euro started to weaken considerably. With the risks of a Grexit now being reduced, the Euro remained weaker against the backdrop of a stronger Greenback. EURUSD broke below the support at 1.095 and looks poised for a test down to 1.0815 support, which if fails to hold, could see the Euro potentially test the lows of April around 1.04.

The ECB left the minimum bid rate unchanged at 0.05% as the markets gear up for the press conference. Mario Draghi is expected to shed light on the Central Bank’s bond purchase programs, but the Q&A session is most likely to focus around the Greek crisis.

The UK economic calendar was quiet today with no major news releases. The British Pound looked weaker since the start today as the currency turned lower after rallying towards 1.566 yesterday. At the time of writing, GBPUSD was trading lower at 1.556.

The US economic calendar will see the Philly Fed manufacturing Index and day 2 of Janet Yellen’s testimony to the Congress. The weekly unemployment claims rose to 281k, less than the forecasted 284k. The US Dollar Index was muted to the news as the Greenback remains on a firm footing.

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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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