U.S. Session Forex Recap – Jan. 29, 2015

  • FOMC statement not as bearish as markets had expected
  • RBNZ sheds hawkish feathers, relays worry over inflation
  • NZ trade balance shows 159 million NZD deficit vs. 75 million NZD surplus expected, 213 million NZD deficit last month.

The dollar was once again king of the pip streets in yesterday’s U.S. forex trading session, as a less-dovish-than-expected FOMC decision highlighted troubles in other economies.

Yesterday forex traders were expecting the Fed to hold back on its plans to tighten after the ECB had launched its QE program. Luckily for dollar bulls, the Fed still seemed on track to “remain patient” with any interest rate decision. Take note though, that while the central bank had removed “considerable time” in its statements, it also added that it’s considering international developments in its policy decisions.

The Fed’s less-dovish-than-expected statement made way for more losses for EUR/USD, especially since the ECB is set to implement its QE program. The pair lost 63 pips (-56%) to 1.1290 while GBP/USD fell by 41 pips (-0.27%) to 1.5157 and USD/CHF inched 39 pips higher (+0.43%) to .9067.

Oil prices also made headlines when a supply report fueled moves from the Fed’s announcement and dragged it lower by as much as 4%. It also didn’t help that the Fed’s statement highlighted troubles in other economies and inspired overall risk aversion.

This is probably why USD/CAD jumped to a five-year high of 1.2537 before closing at 1.2522 while CAD/JPY dropped by 107 pips (-1.13%) to 93.82 and GBP/CAD went up by 101 pips (+0.54%) to 1.8979.

Yen bulls also took advantage of the risk aversion vibe, as they dragged GBP/JPY by 109 pips (-0.61%) to 178.04, EUR/JPY lower by 190 pips (-0.89%) to 132.63, and AUD/JPY by 111 pips (-1.18%) to 92.86.

As if risk aversion isn’t good enough, Kiwi bears also had a dovish Reserve Bank of New Zealand (RBNZ) statement to consider. If you recall, analysts were expecting the RBNZ to cut its rates and follow the footsteps of the ECB, SNB, and the BOC.

While the central bank didn’t exactly cut its interest rates, it still veered off its hawkish path and said that it expects to “keep the OCR on hold for some time.” Not only that, but thanks to falling oil prices, the RBNZ is now expecting inflation to “fall in to negative territory” before going back to 2% on a more gradual pace than previously anticipated.

The back-to-back hits took its toll on the comdoll, and dragged NZD/USD by 150 pips (-2.00%), with the pair falling by 113 pips (-1.52%) in the hour of the release alone. NZD/JPY also took a 207-pip hit (-2.35%) while GBP/NZD rocketed by a whopping 356 pips (+1.75%) to 2.0663. Yowza!

Asian session forex traders still have a couple of reports to consider today, including Australia’s CB leading index (due at 12:00 am GMT) and quarterly import prices (due at 1:30 am GMT) as well as Japan’s annualized retail sales figures at 12:50 am GMT. Analysts are generally expecting stronger numbers than last month, but keep your eyes peeled for significant surprises that might affect forex price action.

Good luck!

See also:

London Session Recap

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