Forex Afternoon Wrap – 10/12

Dec 10, 1:32 pm
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SNB, BoE hold monetary policy steady!

  • Japan BSI Manufacturing index 3.8 vs. 12.1
  • Japan PPI y/y -3.6% vs. -3.8%
  • Australia MI inflation expectations 4.0% vs. 3.5% previously
  • UK RICS House price balance 49% vs. 47%
  • RBNZ Gov. Wheeler speech
  • Australia employment change 71.4k vs. -10.0k
  • Australia unemployment rate 5.8% vs. 6.0%
  • France CPI m/m -0.2% vs. 0.0%
  • France industrial production m/m 0.5% vs. -0.1%
  • SNB’s Libor rate -0.75% vs. -0.75%
  • SNB press conference
  • BoE Bank rate 0.50% vs. 0.50%
  • MPC Bank rate votes 1-0-8 vs. 1-0-8
  • Canada NHPI m/m 0.3% vs. 0.1%
  • Canada capacity utilization rate 0.3% vs. 82.1%
  • US Weekly unemployment claims 282k vs. 266k
  • US Import prices m/m -0.4% vs. -0.8%

After a strong bout of selling yesterday the US Dollar managed to stabilize late into the evening, but remained at monthly lows. The RBNZ’s monetary policy decision saw the Central Bank deliver a 25bps rate cut, bringing the New Zealand overnight cash rate to 2.50%. RBNZ Governor Wheeler struck a dovish tone in the markets noting that the Central Bank could look into further rate cuts if the economy turns for the worse, but remained confident that the 25bps rate cut would help inflation creep back into the 1.0% – 3.0% inflation target range by mid-2016. However, attempts to talk down the Kiwi failed as the NZDUSD spiked lower but closed the day on a high. At the time of writing, NZDUSD is up 0.49% for the day.

Data from the Asian session included Japan’s Producer Price Index which declined less than expected by -3.60%, while the manufacturing index fell to 3.8 against estimates of 12.1. The Yen, which was trading stronger yesterday remained flat in today’s trading but USDJPY, is looking to recover some of the losses from yesterday. The Greenback touched a low of 121076 yesterday before bouncing back to post a session high to 121.84 in early trading today but soon gave back the gains.

From Australia, the inflation expectations continued to rise to 4.0% from 3.5% previously. However, the main focus was the Australian jobs report which posted yet another month of strong gains. Australian unemployment rate fell for the second month in a row, to 5.8% against estimates calling for a 6.0% increase. On the monthly jobs change, the economy added 71.4k jobs. The Aussie surged on the news and managed to reverse most of yesterday’s losses. At the time of writing, AUDUSD was up 0.83% for the day after briefly posting a session high to 0.727 in early trading.

The European trading session kicked off with French inflation falling -0.20% for the month while industrial production managed to rise 0.50%. The Euro remained weak in today’s trading after yesterday’s strong rally which saw the EURUSD test the highs of 1.10 before giving back some of the gains. At the time of writing, EURUSD is down -0.79% but remains supported above yesterday’s low.

The Swiss National Bank’s quarterly monetary policy review saw the Central Bank keeping policy unchanged with the Libor rates at -0.75%. In the press conference, SNB Chief, Thomas Jordan said that weak inflation was partly due to falling Oil prices and in part due to a stronger Swiss Franc. He did not rule out further intervention if the need arise. USDCHF is up 0.32% for the day and did not react much to the SNB’s decision albeit posting a session high to 0.99 briefly.

The UK’s Bank of England was the next main event, which saw UK’s benchmark interest rates staying unchanged at 0.50% with the MPC vote rate count remaining at 1-8. The British Pound which surged to 1.52 in today’s session failed to keep up the gains and fell back. GBPUSD is down -0.27% at the time of writing.

The US trading session got underway on a nervous start with the US Dollar hoping to recover some lost ground. Weekly unemployment claims in the US rose 282k, more than the expected 266k, while import prices fell less than expected at -0.4%.

From Canada, the National House Price index rose 0.3%, above estimates of 0.1%. USDCAD , which was trading lower was seen attempting to push higher but remains -0.19% lower for the day.

The remainder of the evening is quiet with no major releases scheduled but the markets could yet again turn volatile as witnessed yesterday evening.

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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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