Daily FX Trading Review: BOE Minutes Show Split Rate Hike Vote – Oct 22, 2014

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Daily FX Trading Review: BOE Minutes Show Split Rate Hike Vote - Oct 22, 2014

The US dollar was able to bounce back against most of its FX trading counterparts in recent trading sessions, as US existing home sales printed stronger than expected results and risk aversion started to creep back in the markets. Existing home sales climbed from 5.05M to 5.17M, outpacing the consensus at 5.11M. For today, US CPI reports are up for release and weak data might be seen, given the recent trend in global inflation readings. The headline CPI might print a flat reading while the core CPI could see a mere 0.2% uptick.

The euro gave back most of its recent FX trading gains to the dollar and yen, as traders continued to worry about the prospect of another recession and further ECB easing. There were no reports released from the euro zone then while today also has an empty economic schedule. With that, euro pairs might be a little more sensitive to risk sentiment.

FX Trading Fundamentals

The pound was in a weak spot recently, as traders started to price in expectations of a downbeat BOE minutes. Recall that their latest policy statement was less upbeat than usual, as policymakers cited concerns about the negative impact of a euro zone recession on the UK economy. The minutes contained more details on their worries and has been received negatively by the pound, although two policymakers still voted to hike rates.

The franc also looked weak to the dollar in recent FX trading, as the currency was unable to hold on to its current gains without much support from Swiss data. The trade balance came in close to expectations, although the previous month’s reading suffered a downgrade and led to franc selling. There are no major reports lined up from Switzerland today, leaving the franc vulnerable to risk flows.

The yen was able to hold steady in recent FX trading, as risk aversion supported the lower-yielding currency. The Japanese all industries activity index marked a smaller than expected 0.1% dip instead of the projected 0.3% decline, although the previous figure was downgraded to -0.4%. Japan’s trade balance also came in weaker than expected today, which might keep risk-taking in check.

The comdolls drew a bit of FX trading support as Chinese GDP came in slightly better than expected at 7.3% versus the projected 7.2% growth figure. However, this is still a weaker pace of expansion compared to the previous 7.5% reading. Industrial production was stronger than expected at 8.0% versus the 7.5% forecast, lending brighter prospects for commodity exports. Australia’s CPI came in line with expectations while New Zealand is set to release its own inflation reports in the late US session. The BOC statement could move the Loonie pairs today, as a dovish announcement might push the currency much lower. Canadian retail sales are also up for release today, with the headline figure likely to print a 0.1% uptick and the core figure to show a 0.2% increase.

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.