Forex Afternoon Wrap – 09/09

Sep 09, 12:32 pm

UK Manufacturing and industrial production slows. British Pound halts rally.

Key Notes:

  • UK BRC Shop price index y/y -1.4% vs. -1.4% previously
  • Australia Westpac consumer sentiment -5.6% vs. 7.% previously
  • Australia home loans m/m 0.3% vs. 0.8%
  • Japan consumer confidence 41.7 vs. 40.6
  • Japan preliminary machine tool orders y/y -16.5% vs. 1.7% previously
  • UK Manufacturing production m/m -0.8% vs. 0.2%; industrial production m/m -0.4% vs. 0.1%
  • Canada housing starts 217k vs. 194k
  • Canada building permits m/m -0.6% vs. -4.7%

Later

  • Bank of Canada interest rate decision
  • UK NIESR GDP estimates

The Asian trading session today saw a strong rally in the Nikkei 225 index, gaining close to 7.7% for the day and posting one of the largest single day rally since 2008. The gains in the Japan’s equity markets were fueled by bets of policy easing either from China or Japan soon. The Yen was understandably weaker in today’s session as the USDJPY surged 0.86% for the day as the currency tested the highs to 121.

The Aussie and the Kiwi managed to keep up their winning streak with the Kiwi outperforming its peers, gaining 0.57% for the day while the Aussie managed to rise 0.07%. There were no major releases from Australia. Home loans for the month grew at a slower pace of 0.3% coming below expectations of 0.8% and signaling a potential cooling down of the housing market sector which the RBA has been battling since cutting interest rates this year.

Data from Japan included the preliminary machine tools orders which declined -16.5% below estimates of 1.7% while consumer confidence was soft at 41.7.

The European trading session saw the UK manufacturing and industrial production data, both disappointing. Manufacturing production fell -0.8% while industrial production was down -0.4% falling below estimates. The British Pound retreated from the highs, declining after two straight days of posting solid gains across the board. The Pound is expected to trade sideways as the Bank of England meets tomorrow for its monetary policy. While no change is expected as far as interest rates are concerned, the markets are expecting to see a hawkish tone from the BoE. The GBP thus remains supported to the upside into the event.

The Euro, single currency was the second weakest currency today, losing -0.54% to the US Dollar. There were no major releases from the Eurozone today and the EURUSD is likely to tread sideways until next week’s FOMC event. EURUSD surged higher initially towards 1.1211 before giving up its gains and was seen trading near daily lows of 1.1135.

The US trading session saw the Canadian housing starts data beat estimates of 194k to rise 217k for the month, while building permits declined -0.6% from 14.8% last month. The declines in building permits was above the median consensus, which was expecting to see the building permits fall -14.8%

Later in the evening, the Bank of Canada is due to release its monetary policy state. No change to interest rates is expected which leaves much of the risk to the tone of the BoC’s rate statement.

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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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