Forex Afternoon Wrap – 19/11

Bank of Japan leaves policy unchanged

• Japan Merchandise Trade exports y/y -2.1% vs. -2.0%
• Japan Merchandise Trade imports y/y -13.4% vs. -8.6%
• BoJ keeps policy unchanged
• Swiss Exports m/m 5.4% vs. 0.2% previously; imports m/m 3.5% vs. 2.6% previously
• ECB’s Coeure speech
• ECB’s Weidmann speech
• ECB’s Praet speech
• UK retail sales m/m -0.6% vs. -0.5%; core retail sales m/m -0.9% vs. -0.6%
• UK retail sales y/y 3.8% vs. 4.5%
• ECB releases monetary policy meeting minutes
• US weekly jobless claims 271k vs. 270k
• US Philly Fed manufacturing index 1.9 vs. -0.3
• Canada wholesale trade m/m -0.1% vs. 0.2%

Later

• US Leading Indicators
• Fed’s Lockhart speech

The Asian markets saw a short rally after the release of the Fed’s October meeting minutes. While calling the December meeting a ‘Live event’ the minutes showed that some Fed members still believed that inflation might not hit the 2.0% target rate. The US Dollar eased back post the minutes release as the commodity risk currencies rallied at large.

The Kiwi dollar surged nearly 0.71% today boosted by a weaker US Dollar and the producer price index released late yesterday, which showed a rise of 1.6% on the PPI input and a rise of 1.3% on the PPI output on a quarterly basis, with both prints beating the previous negative prints. NZDUSD was seen testing the day’s highs near 0.6542 multiple times before easing back lower.

The Aussie Dollar also surged since yesterday, with AUDUSD currently up 0.70% for the day after posting a session highs to 0.7177.

The Japanese Yen was trading firmer today after failing to break above the 123.6 handle on the FOMC minutes. USDJPY fell to session lows of 123 to find a short term support with the currency pair down -0.35% for the day. The declines in the dollar yen came as the Bank of Japan left its monetary policy unchanged. The BoJ stuck to the narrative of remaining optimistic that the 2.0% inflation target would be hit. The BoJ’s inaction comes just after recent GDP numbers showed the Japanese economy slipping into recession.

The European session saw the release of the ECB’s meeting minutes which showed that the ECB officials were concerned with the inflation outlook. The minutes highlighted that any downward revision in inflation outlook could be worrisome and that the current policy measures were insufficient to gain traction for inflation to pick up.

The Euro, which rallied since late yesterday continued to keep its gains with EURUSD up 0.14% trading at 1.0715 a session high before easing back lower to trade near 1.0675. The European session was also marked by speeches from various ECB officials but the markets did not react much to the news.

In the UK, retail sales numbers declined -0.6% and -0.9% on the core while on an annualized basis, retail sales grew 3.8%, below estimates of 4.5%. The weak retail sales were largely anticipated and the British Pound did not react adversely to the news. GBPUSD gained 0.18% for the day as the currency eased back off the daily highs near 1.529.

The US trading session saw the weekly unemployment claims rising 271k, slightly above the 270k estimates, while the Philly Fed manufacturing index gained 1.9, rising above estimates calling for a decline of -0.3. The US Dollar managed to strengthen on the news in a bid to pare back some of the losses from earlier today. The USDCAD was trading flat after the release of the wholesales data which declined -0.1%. USDCAD touched daily lows of 1.324 before managing to reverse its losses.