Daily Forex Fundamentals – November 20, 2013

London Session Recap

  • MPC voted 0-0-9 to keep monetary policy unchanged
  • Swiss ZEW economic expectations up from 24.9 to 31.6
  • U.S. retail sales, CPI data on tap

The pound was one of the more volatile currencies in today’s London session, as GBP/JPY and GBP/USD were affected by the release of the MPC meeting minutes. Policymakers noted that improvements are evident but that plenty of risks are still present.

Meanwhile, the Swiss franc got a boost from a rise in its ZEW economic expectations figure, yet USD/CHF failed to break below the key .9100 handle. German PPI fell short of consensus, as it showed a 0.2% decline instead of the estimated 0.1% uptick.

Up ahead, the U.S. retail sales release could spark strong moves among dollar pairs, with stronger than expected figures likely to support the Greenback and weaker than expected data to trigger a selloff. Both core and headline figures are projected to come in at 0.1%. Headline CPI is likely to stay flat while core CPI could post a 0.1% increase.

Later on, U.S. existing home sales data is due and is expected to slow from 5.29M to 5.17M. A couple of FOMC officials, namely Dudley and Bullard, are set to give testimonies starting 4:00 pm GMT.

Asian Session Recap

  • RBA official Debelle hints at readiness to exit from easy monetary policy
  • Japanese all industry activity index up from 0.3% to 0.5%
  • BOE monetary policy meeting minutes due

The Australian dollar got a boost in today’s Asian trading session when RBA Assistant Governor Debelle mentioned that the central bank is ready to make an exit from its unconventional monetary policy. However, the Aussie’s gains were limited by remarks from Treasury officials who cautioned that the currency’s levels are “unhelpfully high.”

As for Japan, their all industries activity index showed a 0.4% uptick, slightly below the estimated 0.5% increase but higher compared to the previous month’s 0.3% rise. Asian equity markets closed lower, as traders reduced their risk ahead of today’s top-tier events.

In the next few hours, we will see the release of Germany’s PPI figure, along with the minutes of the BOE monetary policy meeting. The latter could contain positive remarks on the U.K. economy, which might push GBP/USD and GBP/JPY to new highs. Also due in today’s London session is Switzerland’s ZEW economic expectations figure.

U.S. Session Recap

  • Fed official Evans says central bank is in no rush to taper
  • ECB member Constancio remarked that quantitative easing is still possible
  • Bernanke talks about Fed’s commitment to stimulus

The U.S. dollar was unable to sustain its rallies against most of its counterparts during the New York session, as Fed official Evans discussed how the total QE program is about to reach 1.5 trillion USD. Although this led many to believe that the limit would force the Fed to taper sooner or later, Evans reiterated that the central bank is in no rush to reduce stimulus for now.

Meanwhile, the euro was undeterred by comments from ECB member Constancion, who said that quantitative easing is still possible but that the details haven’t been discussed yet. EUR/USD managed to edge above the 1.3550 minor psychological level while EUR/JPY jumped to a new 4-year high of 135.71.

A few hours ago, Fed head Bernanke reiterated the central bank’s pledge to keep interest rates low until the economic recovery shows strong momentum. He did not drop any clear hints on whether bond purchases are about to be tapered or not, failing to trigger a huge reaction from dollar pairs.

China’s CB leading index is up for release while Japan will be printing its all industries activity index, which is expected to show an improvement from 0.3% to 0.5%. Earlier today, Japan’s trade balance fell short of expectations as it showed a wider deficit of 1.07 trillion JPY versus the estimated 0.88 trillion JPY shortfall.

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