Forex Afternoon Wrap – 14/09

Markets trading mixed on a quiet start to an important week

Today’s Economic Data:

• Japan revised industrial production m/m -0.8% vs. -0.6%
• Japan tertiary industry activity m/m 0.2% vs. 0.2%
• Switzerland PPI m/m -0.7% vs. -0.4%
• Switzerland retail sales y/y -0.1% vs. 1.5%
• Eurozone industrial production m/m 0.6% vs. 0.3%

The currency markets opened today on a cautious note ahead of what could be a very important week for the markets in nearly a decade as the US Federal Reserve decides whether its time to hike interest rates or not. Over the weekend, China’s industrial production increased 6.1%, below estimates of 6.3%, but softly stronger than 6% growth previously. Fixed asset investment on a year to date basis fell 10.9% against estimates of 11.2% while retail sales posted soft growth at 10.8%. The Asian markets were trading week earlier in the day but settled with the Hang Seng index posting a modest gain of 0.27%, while the Nikkei 225 and the Shanghai index fell -1.63% and -2.67% respectively.

The commodity risk currencies, Aussie and the Kiwi dollars were trading stronger since the start, with the currencies gaining 0.46% and 0.18% respectively. The Canadian dollar followed closely rising 0.03% for the day at the time of writing. There was not much of data from Asian session with the exception from Japan. Industrial production fell more than expected by -0.8% while the tertiary industry activity was steady at 0.2%. The Yen was firm in today’s trading across the board ahead of the Bank of Japan monetary policy meeting due later this week. While no change is expected, recent narrative from various officials from Japan calling for the Central Bank to expand its QQE program has brought upon some uncertainty in the markets in regards to the BoJ’s meeting this September.

USDJPY was down 0.2% after briefly testing the session highs of 120.81 early in the day.

The European trading session was quiet with the equity markets opening higher despite the risks of the rate hikes from the US. The German DAX was up 0.17% while the FTSE100 was up 0.21%. The Euro, which initially surged early in the day gave up its gains after testing highs of 1.135 to trade -0.12% lower at 1.1322 at the time of writing. Eurozone industrial production was stronger, rising 0.6%, beating estimates of 0.3%.

The Swiss data released today showed the producer price index decline -0.7% for the month at a faster pace. Retail sales were also weaker for the month, falling -0.1% below estimates of 1.5%. The Swiss Franc was weaker as the USDCHF gained 0.21%, recovering some of the losses since Friday, but trading was mostly choppy early on.

There were no major releases from the UK. The British Pound initially posted session highs above 1.546 before giving back its gains. Over the weekend, BoE member Martin Weale said that rates in the UK need to rise relatively soon. Martin Weale joins other hawks in the BoE’s MPC such as Ian McCafferty and Kristin Forbes and it is likely that upcoming BoE meetings could see more MPC members voting for a rate hike. The Cable was however seen to be consolidating ahead of the main FOMC event this week.

The US trading is also expected to be a quiet one with no major data releases scheduled for today. The US futures markets were however pointing to a positive open with the Dow, S&P and the NASDAQ futures all gaining ahead of the market open.

The metals market was trading mixed with Gold posting soft gains rising 0.11% for the day but Silver futures were down 0.72%. Copper was down -1.3% for the day. Crude oil prices were also weaker in today’s trading with WTI Crude Oil trading at 44.58 while Brent was down -0.77% trading at 47.77.