Weekly Forex Wrap Up: 16th to 20th February

By Orbex Last updated Oct 31, 2021

BoJ keeps monetary policy unchanged for now

Following last week’s announcement that the Bank of Japan would not expand its monetary easing, the Bank of Japan left its monetary policy unchanged in this week’s meeting. The Central Bank gave an optimistic view of the economic outlook and noted that the inflation would reach the central bank’s target of 2%. The bank also gave an optimistic view of the exports sector as well. The Yen was choppy but firm overall against most of its peers. Data this week also saw the revised GDP numbers edge from the brink of recession, but overall weaker economic outlook would see the BoJ looking to expand its monetary stimulus package sometime this year.

Preliminary GDP q/q 0.6% vs. 0.9%
Preliminary GDP price index y/y 2.3% vs. 1.9%
Revised industrial production m/m 0.8% vs. 1%
BoJ monetary policy unchanged
Flash manufacturing PMI 51.5 vs. 42.6

British Sterling turns bullish but weakens towards end of the week

The British sterling managed to turn around gaining against most of its peers but was wobbly towards early Friday session. Although disinflationary pressures continue to persist, the markets took the CPI data in their stride as noted by the BoE last week that short term inflation could weaken with further downside pressures before stabilizing towards the latter part of the year. The BoE’s MPC meeting minutes saw a unanimous decision to keep interest rates unchanged. However, there are voices from the MPC that rates would not fall any further and that there is a possibility for a rate hike towards the second half of the year. The biggest boost to the Pound came from the monthly jobs report which beat estimates across the board.

CPI y/y 0.3% as expected; Core CPI y/y 1.4% vs. 1.3%
PPI input m/m -3.7% vs. -2.5%; PPI output m/m -0.5% vs. -0.2%
Average earnings index 3m/y 2.1% vs. 1.7%
Unemployment rate 5.7% vs. 5.8%; claimant count change -38.6k vs. -25.2k
CBI industrial orders expectations 10 vs. 7
Retail sales m/m -0.3% vs. -0.1%

Euro continues to trade sideways. Greece in focus

The Euro barely moved this week trading within a tight range of 1.14 and 1.13, bouncing back and forth as rumors continued to pour in. With no headway made into the debt negotiations, time is fast running out for Greece although the country’s official seem to be taking a softer stand, currently seeking for a 6 month extension while longer term negotiations continue. With ECB and Germany being the strongest opponents to any plans put forth by Greece, it is starting to get increasingly evident that we could see a last minute deal come through or prepare for a Grexit. This week, the ECB started publishing its monetary policy meeting minutes, which revealed that the ECB members were cautious about inflation which played a major role to decide to launch its QE program earlier in January this year.

German ZEW economic sentiment 53 vs. 55.4
Eurozone ZEW economic sentiment 52.7 vs. 51.3
France CPI m/m -1% vs. -0.9%
Eurozone consumer confidence -7 vs. -8
German PPI m/m -0.6% vs. -0.4%
French flash manufacturing PMI 47.7 vs. 49.7; services PMI 53.4 vs. 49.9
German flash manufacturing PMI 50.9 vs. 51.8; services PMI 55.5 vs. 54.3
Eurozone flash manufacturing PMI 51.1 vs. 51.6; services PMI 53.9 vs. 53.2

FOMC meeting minutes dovish, adds pressure on Greenback

The US dollar looks poised to post fourth week of losses as this week’s FOMC meeting minutes showed that the Fed members were comfortable to keep rates lower for longer periods of time. Economic data from the US was also largely disappointing missing estimates. With the exception of the labor market data, most of the other fundamentals continue to remain weaker. While the Dollar Index sold off on the FOMC minutes, the Greenback managed to trim some of its losses on Thursday.

Empire state manufacturing index 7.8 vs. 8.9
NAHB housing market index 55 vs. 58
Building permits 1.05mn vs. 1.08mn
PPI m/m -0.8% vs. -0.4%; Core PPI m/m -0.1% vs. 0.1%
Capacity utilization rate 79.4% vs. 79.9%
Industrial production m/m 0.2% vs. 0.5%
Unemployment claims 283k vs. 293k
Philly Fed manufacturing index 5.2 vs. 8.8