Daily FX Trading Update: Risk Aversion Returns Ahead of FOMC Minutes

The US dollar gave back some of its recent gains as traders probably booked profits ahead of the FOMC minutes release later today. Economic data from the US was weaker than expected but these were just low-tier reports such as the NFIB small business index and the labor market conditions index. Hawkish remarks from Fed officials could renew rate hike expectations for later this year, possibly leading to more gains for the dollar.
The euro was in a weak spot against its peers despite stronger than expected euro zone data. The German ZEW index was up from 0.5 to 6.2, higher than the 4.2 consensus, while the region’s figure jumped from 5.4 to 12.3 to show a pickup in optimism. Only the euro zone industrial production and French final CPI data are due today.
The pound resumed its slide against most of its forex peers before making a sharp correction during the Asian session. There were no major reports out of the UK, leaving Brexit concerns to weigh on the British currency. BOE MPC member Cunliffe has a testimony lined up today.
The franc had a mixed performance as it consolidated to the dollar, regained ground to the euro, and slid against the pound. There were no major reports out of the Swiss economy yesterday while today has the ZEW economic expectations index lined up. A higher reading compared to the earlier 2.7 figure could revive gains for the franc.
The Japanese yen was mostly stronger as traders moved their safe-haven holdings away from the dollar and towards the yen. The Economy Watchers sentiment index was weaker than expected at 44.8, down from the earlier 45.6 figure. Japan’s core machinery orders report showed a smaller than expected 2.2% decline and the preliminary machine tool orders report is due next.
Commodity Currencies (AUD, NZD, CAD)
The comdolls tossed and turned against the dollar and the yen but were mostly stronger against the European currencies. Australia’s Westpac consumer sentiment index posted a 1.1% gain while a report from Moody’s indicated upbeat prospects for the economy. An informal OPEC gathering is set in Istanbul today but no output deal is eyed yet.
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.