Daily Forex Review: BOC Turns Dovish – July 17, 2014

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Daily Forex Review: BOC Turns Dovish - July 17, 2014

The US dollar continued its climb in recent forex trading as risk aversion extended its stay in the currency markets. Data from the US economy was actually weaker than expected, with industrial production and capacity utilization posting below consensus figures. TIC long-term purchases was also weaker than expected while PPI figures showed mixed results. The headline figure marked a 0.4% gain while the core figure showed a mere 0.2% uptick. Building permits, housing starts, initial jobless claims, and Philly Fed index are up for release today.

The euro had a deeper forex selloff when the region’s trade balance fell short of expectations. The trade surplus landed at 15.3 billion EUR versus the estimated 16.3 billion EUR while the previous figure was revised down to 15.2 billion EUR. Euro zone CPI figures are up for release today and the headline figure is slated to show a 0.5% increase while the core figure might print a 0.8% gain. Weaker than expected results might lead to more losses for the euro though.

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Forex Fundamental Analysis

The pound managed to hold on to some of its recent forex wins and go for more as the claimant count change showed a larger than expected reduction in joblessness. The figure came in at -36.3K versus the estimated -27.1K reading, enough to bring the jobless rate down from 6.6% to 6.5% as expected. However, wage growth was weak as the average hourly earnings report printed a 0.3% gain instead of the estimated 0.5% increase. There are no reports due from the UK today.

The franc lost ground as the ZEW economic expectations report for Switzerland proved to be a disappointment. The figure fell from 4.8 to 0.1, reflecting a drop in confidence for the economy. There are no reports due from Switzerland today, leaving the franc at the mercy of risk sentiment.

The yen recovered against some of its major counterparts, except for the pound and Loonie, as risk aversion weighed on higher-yielding currencies recently. There have been no reports released from Japan yesterday while today also has an empty economic schedule.

The Kiwi continued its descent from the weak dairy auction in New Zealand and the downbeat quarterly CPI release. Earlier today, Australia showed a 0.2% rebound in its CB leading index, although the previous figure was downgraded to -0.2%. The NAB quarterly business confidence reading dipped from 7 to 6, reflecting a slight drop in optimism. The Loonie had a volatile time during the BOC announcement, which showed a shift to a more dovish stance for Poloz and his men. Although they kept monetary policy unchanged, Poloz mentioned that there were downside risks to both growth and inflation, as the pickup in CPI wasn’t really caused by economic improvement. No other reports are due from the comdoll economies today.

To contact the reporter of the story: James Brennan at james@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.