Daily Forex Review: BOE Minutes and RBNZ Statement Drag GBP and NZD Down – July 24, 2014

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Daily Forex Review: BOE Minutes and RBNZ Statement Drag GBP and NZD Down - July 24, 2014

The US dollar continued to rake in gains against most of its forex review counterparts, as risk aversion still lingered in the markets. There were no major reports released from the US economy in recent trading, leaving market sentiment as the main driver of price action. For today, US jobless claims and new home sales are up for release. Initial jobless claims might show a 310K reading, higher compared to the previous 302K figure, while new home sales could decline from 504K to 485K.

The euro was still in selloff mode against most of its major currency counterparts, as the euro zone consumer confidence figure slipped to -8 instead of improving to -6. The previous figure was also downgraded to show stronger pessimism in the region. Euro zone PMI figures are up for release today and another set of weak data could lead to more declines for the shared currency. Germany is slated to show small improvements in its manufacturing and services sectors while France might report slower contractions.

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The pound returned some of its recent gains when the BOE minutes turned out to be less hawkish than expected. The report showed that policymakers were very concerned about the weak wage growth, which isn’t keeping in pace with hiring gains. In addition, MPC members also emphasized that mortgages and house prices fell recently, indicating that there is still enough slack to absorb before hiking rates. UK retail sales data is due today and a 0.2% rebound is eyed, but if the actual figure comes in weak, the pound might end up losing further ground.

The franc edged lower to the dollar and most of its forex counterparts, although there were no major reports released from Switzerland yesterday. There are still no reports due from the country today, indicating that the franc might take its cue from the euro or risk sentiment once again.

The yen seemed to gain ground in recent trading, taking further advantage of the flight to safety. Japan’s trade balance showed a smaller than expected deficit of 1.08 trillion JPY versus the estimated 1.11 trillion JPY shortfall, although this is wider than the previous 0.86 trillion JPY deficit. The flash manufacturing PMI for July came in at 50.8, lower than the estimated 51.9 reading. No other reports are due from Japan for the rest of the day.

The comdolls had a mixed performance, with the Kiwi giving up a lot of ground on the less hawkish RBNZ statement. Even though the central bank hiked rates by 0.25% as expected, thy hinted that they would pause from their tightening and assess how it’s affecting the economy so far. Meanwhile, the Aussie has enjoyed a bit of support from the recent pickup in inflationary pressures while the Loonie consolidated on mixed retail sales data. Core consumer spending saw a 0.1% uptick while headline consumer spending picked up by 0.7%. Earlier today, the HSBC flash manufacturing PMI showed strong results, adding another boost for the Australian dollar.

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.