Forex Afternoon Wrap for January 28th

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Key Forex Afternoon Notes:

  • Australia CPI q/q 0.2% vs. 0.3%; trimmed mean CPI q/q 0.7% vs. 0.5%
  • Switzerland UBS consumption indicator 1.42 vs. 1.29 previously
  • Gfk German consumer climate 9.3 vs. 9.2
  • German import prices m/m -1.7% vs. -1.4%

Later:

  • FOMC Monetary policy decision & statement
  • RBNZ Monetary policy decision & statement

The currency markets opened today on a cautious note ahead of the key FOMC statement and monetary policy decision today. Yesterday’s US data was quite mixed with durable goods orders declining below forecasts while previous month’s reading saw sharp downward revisions. While the weaker data managed to send the Greenback lower, Consumer Confidence and New Home sales data managed to contain some of the weakness. The Greenback however remained weaker, closing lower at 94.21 for the second consecutive day.

The Japanese Yen, albeit trading within a range has managed to continue to strengthen against most of its peers. Against the Greenback, USDJPY managed to drop back towards 117 levels, ahead of today’s key risk event. The Yen remained strong across the board since the start of this week, mostly due to a flight to safety on account of the uncertainty looming with the weekend Greece elections and negotiations for government formation.

The only major event today from the Asian session was the CPI numbers from Australia. Although the CPI readings overall were weaker than expected, the Aussie managed to rally on the trimmed mean CPI, making an intraday high to 0.8024 before giving back the gains.

The Kiwi dollar was seen to be trading in a tight range ahead of tonight’s RBNZ interest rate decision and monetary policy statement, which comes just an hour after the FOMC’s event.

The European session was largely quiet with no major events on the tap. German Gfk consumer climate and import prices were largely ignored and the trend is likely to continue until the FOMC statement today. The single currency, Euro however managed to continue rising steadily against the Greenback, currently trading at 1.13, while the Cable was also seen lifted higher trading near 1.52, despite yesterday’s disappointing GDP data for the fourth quarter.

Gold futures were also seen easing from their QE induced highs while equity futures in Europe and the US were seen weaker. The recent economic data from the US which has largely disappointed to the downside is starting to raise questions on the timetable for the Fed’s interest rate hikes, which based on previous statements is currently expected to lift off in June 2015. However, some analysts have pushed out the interest rate hikes to as far January 2016, which, if true could see a strong sell off in the US Dollar, which has been so far struggling within a major multiyear resistance zone. Later in the week, the US fourth quarter advance GDP numbers will be released, which is slightly tilted to the downside after enjoying a stellar 5% growth in the third quarter.

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