U.S. Session Recap – Sept. 18, 2014

  • Fed tapers by another $10B, retains “considerable time” bias on low rates
  • US Q2 2014 current account shows 98.5 billion USD deficit vs. 113.4 billion deficit expected
  • US CPI down by 0.2% in August vs. 0.1% uptick expected (1.7% vs. 1.9% expected y/y)
  • US core CPI flat at 0.0% vs. 0.2% uptick expected
  • US NAHB house price index clocks in at 59 vs. 56 expected, 55 previous

The Greenback was king of pip streets during the US forex trading session, as the Fed’s latest monetary policy decisions spurred currency bulls on.

The dollar had a rough start with Uncle Sam printing a disappointing inflation report. Consumer prices fell by 0.2% in August, its first drop since November 2013. USD/JPY dropped to a session low of 107.14 while EUR/USD spiked to 1.2982 on the idea that the Fed would have more ammunition to keep its interest rates low.

Luckily for Greenback bulls, most forex traders had their eyes on the Fed’s monetary policy decisions. And boy, the Fed sure didn’t disappoint volatility hunters!

The Fed had tapered off another $10 billion from its bond-buying program, and announced that it would remove the remaining $15 billion in October.

What caught more attention was the Fed’s decision to keep its interest rates low for a “considerable time.” Recall that market players had been expecting the Fed to hint at future rate hikes. Apparently, a longer period of low interest rates is still appropriate for the Fed’s latest assessment of the labor market, inflation, and financial developments.

In her speech, Janet Yellen also specified that the “considerable time” part of their decision is not calendar-based, but is data-dependent. In other words, we can only expect rate hikes when we see consistently good economic data.

The Fed’s cautious approach to relaying its decisions was popular among forex traders. EUR/USD saw an 81-pip drop to 1.2876 throughout the session, while USD/JPY jumped to 108.22, a high not seen since 2008. USD/CHF also popped up by 66 pips to .9406, while GBP/USD, which benefited from a positive UK jobs report, only dipped by 43 pips to 1.6278.

Our forex calendar is pretty light for Asian session traders today. New Zealand had printed a positive quarterly GDP report a couple of hours ago, and so far it looks like it’s boosting the Kiwi. Japan also released a positive trade balance data, which provided a short-term boost for the yen crosses.

We only have the RBA bulletin at 1:30 am GMT to look forward to, so keep your eyes peeled for possible continuation or a bit of profit-taking from the previous session’s moves. Good luck and good trading!

See also:

London Session Recap

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