Forex Afternoon Wrap for February 17th

Key Forex Afternoon Notes:

• RBA monetary policy minutes
• Italy trade balance 5.76bn
• UK CPI y/y 0.3% vs. 0.3%
• UK PPI Input m/m -3.7% vs. -2.5%
• UK HPI y/y 9.8% vs. 10.3%
• German ZEW economic sentiment 53 vs. 55.4
• Eurozone ZEW economic sentiment 52.7 vs. 51.3
• US Empire state manufacturing index 7.78 vs. 8.9

Later

• New Zealand Global dairy price index
• US NAHB housing market index
• SNB Chairman Jordan speech
• US TIC long term purchases

The Asian market started off on a quiet note with the markets tuned in to the RBA meeting minutes. While the minutes did not give more clues into future rate cuts, the most important aspect that stood out was the fact that the RBA board wanted to cut rates in March but decided for a February rate cut as it would make sense for the RBA to give more clear communication in its quarterly bulletin. The lack of urgency in the minutes was considered hawkish for the Australian dollar, which managed to reverse from its early Asian session lows near 0.774 to push higher to 0.78 ahead of the US trading session open.

Economists now expect a possible rate cut towards later in May while a few expect a further back to back rate cut in March. But considering that there won’t be much of economic data from Australia by then, the March RBA meeting would see the policy on hold.

The New Zealand Dollar was also bullish since today’s start after a brief dip to 0.748 and trading near highs of 0.753 ahead of the Global Dairy Index data due later this evening.

The Japanese Yen continued to remain on the sidelines trading broadly mixed across the board ahead of tomorrow’s BoJ press conference.

The European session got underway with the UK CPI data on schedule. While inflation dipped to its lowest levels, the British Pound was resilient as the GBP currency crosses managed to stay in the red, despite the weakness seen since the start of this week. The steady rise in the housing markets could see interest rate hike bets coming back on the table ahead of tomorrow’ UK’s unemployment data which is currently expected to remain steady. A further pick up in the average earnings index could however spark talks of a possible rate hike later this year.

With the Eurozone members and Greece still making no headway in their debt negotiations, the Euro was seen largely trading directionless. EURUSD managed to lift off from intraday lows of 1.13 to trade as high as 1.14 ahead of the US trading session.

ZEW economic sentiment was mixed but broadly positive for both Germany and the Eurozone as a whole, but the Euro continues to shrug off all economic data staying solely focused on the debt talks.

The US markets will open today after being closed on account of President’s day bank holiday yesterday. Empire state manufacturing index was modestly lower at 7.78 vs. estimates of 8.5. Other economic data includes the US NAHB housing data later in the day.

Towards late in the evening, SNB chairman Thomas Jordan will be speaking at a conference, although it is hard to pinpoint if there will be any references to the recent SNB’s monetary policy actions.