Daily FX Trading Update: Draghi Tones Down Dovishness – Sept 24, 2015

Daily FX Trading Update: Draghi Tones Down Dovishness - Sept 24, 2015
The US dollar’s performance was a mixed one, as the currency simply reacted to country-specific events. Data from the US came in line with expectations, as the flash manufacturing PMI held steady at 53.0. Fed member Lockhart reiterated his upbeat tone but this had a minimal effect on the dollar since he already shared the same points in the past. Initial jobless claims and durable goods orders data are lined up today.
The euro enjoyed a bounce in yesterday’s trading sessions after the region’s PMI readings came in mostly in line with expectations. This was followed by a less dovish speech by ECB head Draghi who said that they’re waiting for more time and evidence to decide if further easing is really necessary. For German central bank head Weidmann, the expansive monetary policy cannot be sustained, especially if the temporary effects of the energy slump start to fade. The German Ifo business climate and GfK consumer sentiment data are up for release today.
The pound sold off heavily against most of its forex rivals despite the lack of top-tier UK data. For MPC member Broadbent, monetary policy tightening could be warranted as wage inflation continues to pick up. There are still no major reports due from the UK economy today.
The franc took its cue from the euro to advance against some of its peers even though there were no reports out of Switzerland. The lack of easing bias from the ECB led some franc bears to ease up on their short positions, reducing expectations of easing from the SNB as well. There are no reports due from the Swiss economy today.
The yen gave up some of its recent wins to the euro but was able to gain traction against the commodity currencies. The return of Japanese traders today could pump up the activity during the Asian trading session, especially since the flash manufacturing PMI from Japan came in below expectations at 50.9 versus the projected 51.3 figure.
Commodity Currencies (AUD, NZD, CAD)
The comdolls were in a weak spot yesterday, thanks to worse than expected data from China. Caixin reported a drop in the manufacturing PMI from 47.3 to 47.0 instead of the estimated improvement to 47.6. In addition, Canada’s core retail sales figure showed a flat reading instead of the estimated 0.4% gain while the previous report suffered negative revisions. In New Zealand, the trade balance missed the consensus of a 875 million NZD deficit and printed a larger 1035 million NZD shortfall plus a downgrade in the earlier report.
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.