Forex Afternoon Wrap for 14th January

Key Forex Afternoon Notes:

• French CPI m/m 0.1% vs. 0$ forecasts
• ECJ ruling calls ECB’s OMT legal
• Eurozone industrial production m/m 0.2% vs. 0%
• US Core retail sales m/m -0.4% vs. 0.4%; retail sales m/m -0.9% vs. -0.1%
• US import prices m/m -2.5% vs. -2.7%; import prices y/y -5.5% vs. -5.2%

Markets opened on a quiet note today as lack of any fundamentals from Asia kept the markets subdued, albeit falling commodity prices took their toll on the Aussie and Kiwi dollars, both of which declined early into the Asian trading session. The Japanese Yen was the only Asian currency which managed to keep its gains as market sentiment turned to uncertainty ahead of the ECJ’s ruling on the OMT program and its implications for the proposed bond purchases program.

Commodity prices plummeted today with Copper futures shedding close to 6% as investors concluded that falling crude oil prices would give way to increased production.  Crude oil futures, which dipped to a fresh low to 44.78, continued to stay above the low and was seen trading near 46.12 levels at the time of writing. Gold futures eased from yesterday’s highs of 1244 level trading near the 1230 handle today in a bid to pare back the losses earlier today.

The Dollar Index continues to trade within a range near the highs but the bullish momentum seems to be fading as it struggles near the 92.65 – 02.05 levels.

The European trading session started off volatile in lieu of the ECJ’s ruling. The verdict was that the ECB’s OMT program was in line with the EU treaty, thus giving a clean chit to Draghi and team. The EURUSD was understandably trading choppy during the news event, briefly trading above the 1.18 handle only to dip lower. Into the US trading session, the Euro managed to pare its losses after hitting new 9-year lows to 1.17625 as other fundamental data including industrial production and France CPI managed to beat estimates.

The British Pound was subdued due to lack of any news. Later today, the BoE will present its financial stability report to the UK’s Treasury select committee, but is expected not to influence prices that much. Against the Euro, the British Pound continued to gain as the pair dipped to intraday lows of 0.77328 levels as the Pound was seen to be fundamentally stronger than the Euro.

The US session saw the release of headline and core retail sales data, both of which disappointed across the board, falling well below forecasts. The US Dollar saw a quick sell off on the news with EURUSD completely erasing its gains lifting off from the multi-year lows to trade back near the 1.18 handle.

The selloff comes from the fact that retail sales have shown a general uptrend across most economies, especially driven by lower fuel prices which tend to put more money in the hands of consumers. Secondly the fact that the retail sales reflect December’s sales, a month usually marked with holiday sales, the lower than expected numbers were seen as a major disappointment.