Weekly Forex Wrap-Up: January 12th to January 16th
Europe took center stage this week. While the ECJ’s ruling gave the ECB’s bond purchase program a green light, the SNB abandoned its peg of 1.20 Francs to the Euro, which rattled the currency markets, ahead of what would be the most important ECB meeting next Thursday, 22nd January.
Euro confined to the lows
Economic data was mostly in the positive for the Eurozone this week. Yet the markets ignored the data which was clearly overshadowed by the ECJ’s ruling on the European Central Bank’s OMT program that was launched in 2012. Giving the ECB the green light, the European Court of Justice gave a green light to Mario Draghi, paving way for QE announcement as early as next week’s ECB meeting.
Inflation data released this week did not surprise but met expectations. However the Core CPI for the Eurozone declined to 0.7% while overall the inflation in the Eurozone remained subdued.
- Italy industrial production m/m 0.3% vs. 0.1%
- France CPI y/y 0.1% vs. 0%
- Eurozone industrial production m/m 0.2% vs. 0%
- Germany annual GDP growth rate 1.5% as expected
- Germany CPI m/m 0% as expected
- Eurozone CPI m/m -0.1% as expected; CPI y/y -0.2% as expected, Core CPI y/y 0.7% vs. 0.8%
Swiss Franc – Volatile
The sudden announcement by the Swiss National Bank that it was abandoning its EURCHF floor of 1.20 shook the currency markets with liquidity getting sucked out, putting many forex brokerages out of business. The news has given rise to speculations that the SNB is giving up the floor as the ECB prepares its QE announcement next week, which is expected to be massive.
Yen, the safe play
Amidst the volatility, the Japanese Yen was the only consistent performer as investors fled to the safe haven status of the currency. The Yen continued to strengthen across the board, with the exception of CHFJPY as uncertainty surrounding the ECJ’s ruling and the Black Swan event from the SNB led investors to buy the Yen.
Sterling, muted
The British Pound was mostly quiet this trading week, trading based off the volatility of its peers. Inflation data released earlier this week showed the annual CPI dip to 0.5%, while CPI m/m remained flat, largely due to the effects of falling crude oil prices. Besides the CPI data, there were no major market moving events this week from the UK.
- Core CPI y/y 1.3% as expected; CPI m/m 0% vs. 0.1%; CPI y/y 0.5% vs. 0.7%
- PPI input m/m -2.4% vs. -2.6%; PPI output m/m -0.3% as expected
US Dollar, shaky but holding on
The Dollar Index this week remained shaky especially due to the volatility and uncertainty caused by the SNB. Regardless, considering the Greenback is trading at a major resistance level, the buck looked vulnerable. Economic data from the US saw the retail sales for December miss estimates broadly. Overall, economic data continued to be mixed as the markets continue to stay on the hook for an interest rate hike anytime after April.
- Retail sales control core m/m -0.4% vs. 0.4%; Retail sales excl. Auto m/m -1% vs. 0%; Retail sales m/m -0.9% vs. -0.1%
- Weekly jobless claims 316k vs. 290k
- Empire state manufacturing index 9.95 vs. 5
- PPI m/m -0.3% vs. -0.4%; Core PPI m/m 0.3% vs. 0.1%; PPI y/y 1.1% vs. 1%
- US Core CPI m/m 0% vs. 0.1%; Headline CPI m/m -0.4% as expected
- US Headline CPI y/y 0.8% vs. 0.7%
