Weekly Forex Wrap Up
The markets were relatively quiet with the major risk event, being the Greek elections coming off without causing any major shocks to the currency markets. The FOMC was the sole event this week, which saw the Fed continue to remain optimistic about the US economic recovery and thus on the path to raising interest rates later this year.
Yen set to close the month on a positive note
With no major events scheduled out of Japan this week, the Yen continued to gain against the Greenback and most of its peers this week, on the path to closing the month of January on a positive note. The Yen was particularly strong against weaker currencies such as the Aussie and Kiwi dollars this week while remained in a range against the Euro, GBP and the USD. The BoJ’s monetary policy meeting did not hint at any surprises, although the Japanese Central Bank continues to maintain its commitment to achieving the 2% inflation target.
- Retail sales y/y 0.2% vs. 1.1%
- Household spending y/y -3.4% vs. -2.3%
- Tokyo Core CPI y/y 2.2%, unchanged
- National core CPI y/y 2.5% vs. 2.6%
- Preliminary industrial production m/m 1% vs. 1.3%
UK fourth quarter GDP slows as expected
The fourth quarter GDP data from the UK slowed from 0.6% in the third quarter to 0.5% in the fourth quarter of 2014. While the British Pound was initially weaker on the news, the currency managed to regain its foothold against most of the peers, with the exception of the Greenback. Against the weaker Canadian dollar, GBP managed to make new yearly highs while remaining sideways against the US Dollar.
- Preliminary GDP q/q 0.5% vs. 0.6%
- Index of services 3m/3m 0.8% vs. 1%
- Gfk consumer confidence 1 vs. -2
Euro stronger this week
Although the Greece elections saw the anti-austerity Syriza party form the government, the Euro, a single currency remained strong since the start of the week after briefly dipping to a new yearly low of 1.10975. For the most part of the week, EURUSD managed to lift off from the lows, briefly touching the highs of 1.14. Even a hawkish FOMC statement did not help to push the Euro downwards. While CPI data continued to print in the negative, the Euro shrugged off the data, in light of the ECB’s QE program.
- German Ifo business climate 106.7 as expected
- German import prices m/m -1.7%
- German preliminary CPI m/m -1% vs. -1.4%
- German retail sales 0.2% vs. 0.4%
- French consumer spending m/m 1.5% vs. 0.3%
- Spain flash CPI y/y -1.4% vs. -1.5%; Spain GDP q/q 0.7% vs. 0.5%
- Eurozone CPI flash estimates y/y -0.6% vs. -0.5%
- Eurozone unemployment rate 11.4% vs. 11.5%
RBNZ puts interest rates on hold for now
The New Zealand Central Bank left interest rates unchanged at 3.5% while hinting that further changes would be data dependent. The fact that the hawkish statement from the previous month was missing was seen by the markets as the RBNZ expecting weaker inflation to weigh in on the economy. The Central Bank however continued to call the Kiwi’s exchange rate to the Dollar unjustifiably high.
- RBNZ Official cash rate 3.5%
- New Zealand building consents m/m -2.1% vs. 10.5%
Mixed Australian data weighs in on the Aussie dollar
Economic data from Australia was weak, however the Aussie dollar managed to seek out some gains before giving up to reverse and close lower for the week. Headline CPI eased to 0.2%, but the Aussie dollar gained on the trimmed mean CPI which managed to beat estimates. But, for the most part, the economic fundamentals were weaker, reflecting in the declines in Aussie dollar.
- NAB business confidence 2 vs. 1
- CPI q/q 0.2% vs. 0.3%; trimmed mean CPI q/q 0.7% vs. 0.5%
- Import prices q/q 0.9% vs. 1.5%
- PPI q/q 0.1% vs. 0.3%
Greenback mixed as Fed tries to strike a hawkish tone
The US dollar was weaker for the most part in the run up to the FOMC statement. Surprisingly, the FOMC statement was seen as hawkish as the Fed put to rest any doubts of a delay in interest rates. Citing strong growth in the labor markets, the Fed chooses to dismiss the weaker inflationary pressures as being short term, staying on track for a possible interest rate hike any time after April this year. Economic data however continued to remain mixed, largely to the downside.
- Core durable goods orders m/m -0.8% vs. 0.6%
- Flash services PMI 54 vs. 53.9
- CB Consumer Confidence 102.9 vs. 95.3
- New Home Sales 481k vs. 452k
- Weekly unemployment claims 265k vs. 301k
- Pending home sales m/m -3.7% vs. 0.6%
- Advance GDP q/q 2.6% vs. 3%
