U.S. Session Forex Recap – Oct. 17, 2014

  • US initial jobless claims down to 264K vs. 290K expected, 287K previous
  • US industrial production up by 1.0% vs. 0.4% growth expected, 0.2% decline last month
  • US Philly Fed manufacturing index: 20.7 in October vs. 19.8 expected, 22.5 previous
  • US NAHB house price index prints at 54 vs. 59 expected and previous
  • CA manufacturing sales declines by 3.3% vs. 2% downtick expected, 2.9% growth last month
  • CA foreign securities purchase: 10.3B CAD vs. 4.3B CAD expected, 5.2B CAD previous

It’s on like Donkey Kong! Forex junkies got their kicks during the U.S. trading session thanks to U.S. data and a surprising remark from a Fed hawk.

After seeing risk aversion moves during the Asian and London trading sessions, forex bulls were relieved to see Uncle Sam’s better-than-expected initial jobless claims, industrial production, and Philly Fed manufacturing numbers. The reports hinted that the economy is still doing well despite fears of global growth slowdown and the Fed’s withdrawal of stimulus.

What really fired up the markets though, was Fed member James Bullard saying in a live TV interview that the Fed should consider extending its bond-buying program beyond what was scheduled. He cited the weakness in inflation and inflation expectations as reasons for his bias. This was surprising not only because Bullard was a known hawk, but also because the option was never really on the table.

Not surprisingly, the idea that the Fed might continue supporting the economy did wonders for risk sentiment. S&P 500 jumped from a 0.9% intraday drop to end the day with a 0.01% gain, the DJIA capped the day with only a 0.15% decline, and 10-year Treasury yields jumped back up to 2.174%.

Risk appetite was also evident in the forex markets, with low-yielding currencies like the dollar and yen taking hits. EUR/USD jumped by 64 pips to 1.2805, GBP/USD rocketed to the 1.6100 area, and AUD/USD rose by 46pips to .8757, and NZD/USD shot up by 26 pips to .7940. Meanwhile, USD/JPY shot up by 56 pips to 106.37, GBP/JPY rocketed by a ridiculous 203 pips to 171.19, and EUR/JPY saw a 140-pip rally to 136.21.

We don’t have a lot of economic data lined up in the next couple of hours, so watch out for continuation of the previous session’s trends. If you’re really into news trading though, then you can check out our forex calendar for events you can trade today.

Good luck!

See also:

London Session Recap

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