Daily FX Trading Update: FOMC Reverts to Hawkish Stance – Oct 30, 2014

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Daily FX Trading Update: FOMC Reverts to Hawkish Stance - Oct 30, 2014

The US dollar made strong FX trading rallies after the FOMC statement, as the committee sounded more hawkish compared to their previous month’s announcement. Fed officials acknowledged the strong improvements in the labor sector, changing their wording to say that the under-utilization of resources has been gradually diminishing. The Fed also decided to end its QE program as expected while maintaining their pledge to keep rates low for a considerable time after easing ends. The US advanced GDP reading is up for release today and it might show a 3.1% expansion, slower compared to the previous 4.6% growth.

The euro gave up ground to the dollar but managed to hold on to its FX trading wins to the yen. There were no major reports released from the euro zone yesterday, leaving the shared currency sensitive to other economic events. For today, German and Spanish flash CPI readings are due, along with the Spanish flash GDP reading. Stronger than expected data could keep the euro afloat while weak readings might remind traders that another recession is likely.

FX Trading Fundamentals

The pound was in a weak spot to the dollar in recent FX trading while consolidating to most of its other counterparts. UK data was mostly weaker than expected, as mortgage approvals and net lending to individuals fell short of consensus. For today, only the UK Nationwide HPI is up for release and a 0.4% rebound in house prices is expected.

The franc return its recent FX trading wins to the dollar when the FOMC statement indicated that the Fed might still be ready to hike rates next year. There were no reports to keep the franc supported yesterday while today has the UBS consumption indicator and KOF economic barometer on tap. Both reports are expected to show improvements which might allow the franc to recover slightly.

The yen lost ground to most of its major FX trading counterparts, spurred mostly by the strong rally for USDJPY after the Fed statement. There have been no reports released from Japan then but the divergence in policy bias for the Fed and the BOJ supports an anti-yen bias. There are still no reports lined up from Japan today, as traders might price in expectations for Friday’s major reports.

The comdolls were no match to dollar strength in yesterday’s US session, as the higher-yielders returned their recent FX trading wins and more. Canada’s underlying inflation reports came in weaker than expected, casting doubts on whether the BOC can maintain its upbeat assessment or not. The RBNZ decided to keep rates on hold at 3.50% as expected while Aussie import prices marked a 0.8% quarterly decline, both resulting to weakness for their respective currencies. There are no other reports due from the comdoll economies for the rest of the day.

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.