Daily FX Trading Update: Rate Hike Hints Ahead of FOMC Minutes

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USD
The US dollar was off to a weak start but soon made a rebound against most of its peers. Talk of potential rate hikes from Fed officials renewed dollar strength as traders are setting up for the release of the FOMC meeting minutes later today. US data came in mixed, with the headline CPI staying flat as expected and the core CPI coming short of expectations with a 0.1% uptick versus the projected 0.2% gain. Housing starts, industrial production, and capacity utilization beat expectations.
EUR
The euro took advantage of dollar weakness in earlier trading sessions then consolidated afterwards. Data from the euro zone was mixed, as the German ZEW index rose from -6.8 to +0.5, short of the estimated +2.1 figure, while the region’s ZEW was up from -14.7 to +4.6 versus the projected -6.3 reading. There are no reports due from the euro zone today.
GBP
The pound was a big winner for the day, thanks to stronger than expected UK CPI data. The headline reading rose from 0.5% to 0.6% while the core CPI was unchanged at 1.3% as expected. Meanwhile, underlying and leading inflation reports such as the producer price index, HPI, and RPI beat expectations also. UK jobs data is due today, with the July claimant count slated to show a 5.2K rise in joblessness and the June jobless rate to stay unchanged at 4.9%. The average earnings index is expected to rise from 2.3% to 2.5% to reflect stronger wage pressures.
CHF
The franc was also able to take advantage of dollar weakness and hold on to some of its wins. There were no reports out of the Swiss economy yesterday while today has the ZEW economic expectations index. Any improvement from the earlier 5.9 reading could be bullish for the franc.
JPY
The yen chalked up strong gains to the dollar and held its ground against most of its peers, except the pound. There were no reports out of the Japanese economy yesterday and none are lined up today so risk sentiment could push yen pairs around.
Commodity Currencies (AUD, NZD, CAD)
The Aussie and Kiwi posted some gains for the day but the Loonie was still the biggest winner in the bunch, thanks to another pickup in crude oil prices. In New Zealand, the GDT auction yielded an impressive 12.7% gain in dairy prices and traders are still waiting on the quarterly jobs readings. Australia has its MI leading index and quarterly wage price index due next.
To contact the reporter of the story: Samuel Rae at samuel@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.