Daily FX Trading Update: Expect Rate Hike Delay from BOE – Nov 13, 2014

Daily FX Trading Update: Expect Rate Hike Delay from BOE - Nov 13, 2014

The US dollar had a mixed FX trading performance as it gained ground to the European currencies and the yen while giving up gains to the commodity currencies. There were no reports released from the US economy yesterday, as Fed tightening expectations were mostly responsible for keeping the dollar afloat against most of its rivals. Only the initial jobless claims report is up for release today and analysts are expecting to see 282K in first-time claimants, higher than the previous 278K.

The euro moved mostly sideways to the dollar but ended lower, as data from the euro zone disappointed. Germany reported a 0.6% decline in its wholesale price index instead of the estimated 0.2% gain, reminding traders that deflation is a possibility in the region. Euro zone industrial production came in line with expectations of a 0.6% uptick. For today, German and French CPI readings are due, with negative readings expected. Worse than expected results could drive the euro much lower in FX trading.

FX Trading Fundamentals

The pound suffered a sharp selloff in recent FX trading, as the UK jobs report disappointed and the BOE Inflation Report confirmed that a rate hike will be pushed back. Governor Carney cited further declines in inflation and threats to growth could delay tightening. Hiring picked up by 20.4K, lower than the estimated 24.9K increase, while the jobless rate was unchanged at 6.0%. Wage inflation picked up by 1.0% in the past three months though, higher than the projected 0.9% gain. There are no major reports out from the UK today.

The franc consolidated to most of its FX trading counterparts but managed to edge a bit higher to the euro on expectations regarding the gold initiative. This move might curtail the SNB’s ability to intervene in the currency market and keep the franc weak. There were no reports released from Switzerland yesterday while today has the PPI due. A figure weaker than the estimated 0.2% decline could lead to more franc weakness.

The yen resumed its slide to its FX trading counterparts as fresh uncertainties stemmed from Japan. News that Abe would dissolve parliament and call for a snap election next month led to yen volatility while his announcement regarding delaying the next sales tax hike gave the currency a bit of support. Data from Japan was mixed today, as the core machinery orders report marked a strong 2.9% gain while PPI missed the mark.

The Kiwi seemed immune to RBNZ Governor Wheeler’s remarks regarding the overvalued currency, as traders focused on the relatively upbeat RBNZ Financial Stability Report. This indicated that lending restrictions won’t be relaxed just yet, which shows that the central bank is still confident in the housing recovery. Australia’s MI inflation expectations saw an improvement from 3.8% to 4.1%, adding to Aussie support. Later on, Chinese data on industrial production and retail sales might also have a strong effect on the comdolls.

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.