Key Notes for December 17th
- UK average earnings index 3m/y 1.4% vs. 1.3%, claimant count change -26.9k vs. -19.8k; unemployment rate 6% vs. 5.9%
- Eurozone CPI y/y 0.3%, unchanged; core CPI y/y 0.7% unchanged
- Canada wholesale sales m/m 0.1% vs. 0.2%
- US CPI m/m -0.3% vs. -0.1%; core CPI m/m 0.1% vs. 0.1%
The forex markets were relatively quiet with lack of fundamentals from the Asian trading session. Most of the currency pairs were trading based off yesterday’s themes, with the Yen mixed, weakening against the Greenback but still firm on other currencies. USDJPY managed to make an intraday high to 117.5 levels but eased back some of the gains. The pair is still trading below the major resistance at 117.61 which is yet to be tested after the pair broke down from this previous support level, now turned resistance.
The European session also was subdued, with the exception of the UK unemployment report which came out better than expected, with the exception of the unemployment rate which remained unchanged at 6% vs. 5.9% expectations. The uptick in the average earnings index and a better than expected claimant count change did see much reaction from the Cable which was trading within a tight range but near the upper end of the consolidation range of 1.572 levels.
The BoE’s bank rate vote was a non event with the vote count continuing with two dissenters. The cable largely ignored the outcome of the MPC minutes reiterating that a majority of the MPC want to see stable growth in real wages before calling for interest rate hikes.
Eurozone CPI data released later showed inflation firm near 0.3% with the core CPI stuck at 0.7%. The Euro eased off the highs from today’s daily pivot level at 1.25 and continued its descent. Major support now comes in at 1.24335 which is most likely to help support EURUSD higher ahead of the US trading session open.
US CPI data released during the US trading session showed that the core CPI m/m was at 0.1% as expected but headline CPI m/m declined -0.3%. On a yearly basis CPI excluding food and energy was soft at 1.7% against expectations of 1.8%. The Greenback was unchanged on the release in what could possibly be a shift in the markets looking ahead to tonight’s FOMC statement.
Gold futures have been trading a few points above and below the 1200 handle and tonight’s outcome is most likely to give the future direction of the precious metal at least in the near term. The markets are expecting the Fed to drop its ‘considerable time’ phrase from its statement and instead replace it with something on the lines of telling the markets to be patient for the rate hikes, which is inevitably going to be linked to economic data.
Consensus is heavily inclined towards a change of stance in the statement considering that the Fed chair, Janet Yellen will be hosting the press conference later in the day.
Besides the FOMC statement, New Zealand GDP data will be released late night with expectations for the quarterly GDP to remain steady at 0.7% on a quarterly basis and 0.3% on a yearly basis.