U.S. Session Forex Recap – Oct. 31, 2014

  • US advance Q3 2014 GDP clocks in at 3.5% vs. 3.0% expected, 4.6% previous
  • US core PCE price index at 1.4% as expected vs. 2.0% growth last month
  • US initial jobless claims down up to 287K vs. 285K expected, 284K previous
  • Japan data dump and the BOJ’s policy decision scheduled today

Not so fast, dollar bulls! U.S. session forex traders saw the dollar erase most of its session gains after investors read the fine print on Uncle Sam’s GDP report.

Investors initially brought the dollar when the first reading of the U.S. Q3 2014 GDP printed at 3.5%, higher than the expected 3.0% growth. At first glance, the 3.5% uptick combined with Q2 2014’s 4.6% growth marks the best 6-month performance in a decade and supports the Fed’s decision to end its QE3 program this week.

The story turned once traders finally read the report’s fine print. The most glaring was government spending rising by its fastest pace since Q2 2009 and making up 0.83% of the whole 3.5% uptick. A narrower trade deficit also helped, with exports getting a boost from car and industrial supplies sales but imports dropping due to declines in oil and consumer goods shipments.

EUR/USD fell to an intraday low of 1.2547 before climbing back up to its 1.2605 closing price. GBP/USD saw a similar story by hitting intraday lows at 1.5951 before closing at 1.5996. Meanwhile, USD/CHF popped up to a high of .9611 before settling down to .9569.

The comdolls also got their share of dollar weakness. AUD/USD fell to a low of .8759 before closing at .8832, NZD/USD recovered from a low of .7766 and closed at .7842 while USD/CAD remained in a tight range just below 1.1200 despite a decline in oil prices.

Another story of the hour was Japan’s Government Pension Investment Fund (GPIF), the world’s largest public pension fund, possibly increasing its allocation for domestic and foreign stocks to 25% each and cut its Japanese government bond holdings from 60% to about 35%. Investors were all over the rumors, as it could mean that the $1.1 trillion-fund could indirectly help the Japanese economy.

USD/JPY jumped by 47 pips at the news, at the same time when EUR/JPY rose by 49 pips to 137.97, GBP/USD saw a 38-pip pop to 175.02, and AUD/JPY shot up by 32 pips to 95.56.

Will the yen continue to weaken today? Our Asian session forex calendar is peppered with Japanese reports like inflation, unemployment, and household spending numbers. The reports mostly came inline if not slightly below expectations, which is probably why we’re seeing slight weaknesses in JPY crosses.

The day’s not over yet for Japan though. The Bank of Japan (BOJ) is scheduled to release its monetary policy decision some time today. Market players aren’t expecting big changes to the central bank’s policies, but keep your eyes peeled for anything that might affect the yen’s direction.

Good luck!

See also:

London Session Recap

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