U.S. Session Recap – Sept. 5, 2014

  • ECB flexes its muscles with rate cut and plans of covered buying program and future ABS purchases
  • ECB downgrades growth and inflation forecasts
  • CA trade surplus jumps to 2.6 billion CAD vs. 1.1 billion CAD expected and 1.8 billion CAD previous
  • US initial jobless claims up to 302K vs. 300K expected, 298K previous
  • US trade deficit narrows to 40.5 billion USD vs. 42.4 billion USD expected, 40.8 billion USD expected
  • US ISM non-manufacturing PMI rises to 59.6 vs. 57.5 expected, 58.7 previous
  • US final services PMI revised from 58.5 to 59.5 in August

What a bloodbath! We saw explosive price action in yesterday’s US forex trading session, as investors priced in the European Central Bank (ECB)’s surprising decision to cut its rates and hint at more stimulus in the near future.

The ECB lowered the boom on the euro when it surprisingly cut its benchmark interest rates by 10 basis points to 0.05%. Not only that, but it also revealed its plans to utilize asset-backed securities (ABS) backed by real estate. The ECB is set to reveal more details on this on October 2.

Last but definitely not the least, Mario Draghi and his staff have downgraded their growth and inflation forecasts. The economy is now expected to grow by 0.9% in 2014, down from the ECB’s 1.0% growth forecast in June. Meanwhile, inflation is now expected to rise by 0.6% instead of 0.7%.

Not surprisingly, the euro took hits across the board. EUR/USD plunged by a whopping 101 pips to 1.2949, a low not seen since 2013. EUR/JPY also dropped by 93 pips to 136.17, while EUR/AUD fell by 105 pips to 1.3847.

Dollar bulls were also hard at work across the forex charts. Thanks to Uncle Sam printing yet another set of better-than-expected data and the ECB’s recent decision highlighting the divergence in monetary policies, it was easy for dollar bulls to push the Greenback higher. USD/JPY only inched 10 pips higher to 105.17, but USD/CHF showed a spectacular 77-pip jump to .9317. Meanwhile, the pound caught some of the sell-the-European-currencies vibe when it dropped by 82 pips to 1.6345.

The Loonie also saw some action thanks to Canada posting its largest trade surplus since 2008. Exports grew by 1.4% to a record high of 45.5 billion USD in July after a surge in autos and parts sales. USD/CAD dropped to an intraday low of 1.09821 at the report’s release before Greenback strength dragged it back up to its 1.0875 closing price. CAD/JPY also hit a high of 97.00 before closing at 96.70, but EUR/CAD stayed on its downtrend with a 112-pip drop to 1.4080.

The NFP week isn’t over though, and we still have reports to watch out for! At 5:00 am GMT we’re expecting the BOJ’s monthly report as well as Japan’s leading indicators data. These reports don’t usually affect currency price action for long, but stick around in case traders use them to inspire retracements or extend yesterday’s moves!

See also:

London Session Recap

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