Daily Forex Trading Review: RBNZ Jawboning Leads to NZD Selloff – July 25, 2014

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Daily Forex Trading Review: RBNZ Jawboning Leads to NZD Selloff - July 25, 2014

The US dollar showed signs of strength in recent forex trading, despite mixed data from the US economy. Initial jobless claims was stronger than expected at 284K versus the estimated 310K reading and the previous 303K figure, indicating a pickup in hiring. The US flash manufacturing PMI fell short of expectations and showed a drop from 57.3 to 56.3 instead of improving to the estimated 57.5 figure. New home sales was also weaker than expected at 406K instead of 485K while the previous month’s reading was downgraded to 442K. For today, US headline and core durable goods orders data are up for release. The headline figure might show a 0.4% rebound while the core figure could print a 0.6% gain.

The euro regained ground in yesterday’s London forex trading session as German and French PMIs came in mostly stronger than expected. The German flash manufacturing PMI climbed from 52.0 to 52.9 while the flash services PMI improved from 54.6 to 56.6. French flash services PMI increased from 48.2 to 50.4 yet the manufacturing PMI slipped from 48.2 to 47.6. Overall, the euro zone flash manufacturing PMI came in at 51.9 while the services PMI landed at 54.4, reflecting stronger expansion in the industries. GfK German consumer climate and German IFO business climate data are up for release today, and another round of improvements could lead to more gains for the euro.

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The pound retreated again in yesterday’s forex trading sessions, as the UK retail sales fell short of expectations. The report showed a mere 0.1% uptick instead of the projected 0.2% gain, barely enough to rebound from the previous 0.5% decline. This added support to the BOE’s less upbeat outlook for the economy, convincing more traders that the central bank might not hike rates this year. UK preliminary GDP data is due today and it might show another 0.8% reading.

The franc consolidated for the most part as it drew a bit of support from the euro zone PMI readings yet had no data from Switzerland to give it an extra boost. There are still no reports due from Switzerland today, which suggests that the franc might be in for a bit of consolidation or might be vulnerable to euro movements once more.

The yen had a mixed performance recently, as it functioned more as a counter currency. It lost ground to the dollar and euro then gained against the Kiwi and the pound, as Japan’s flash manufacturing PMI came in weaker than expected at 50.8. Earlier today, the Tokyo core CPI release showed a stronger than expected increase of 2.8% versus the estimated 2.7% rise while the national core CPI came in line with expectations of a 3.3% gain.

The Kiwi suffered a sharp selloff in recent forex trading, as the RBNZ signaled that it is pausing from its rate hikes to assess the impact on the economy. Wheeler also jawboned the currency in saying that its exchange rate levels are unjustified and unsustainable. Earlier today, the ANZ business confidence index marked a drop from 42.8 to 39.7, reflecting a downturn in sentiment. No other reports are due from the comdoll economies for the rest of the day.

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