U.S. Session Forex Recap – July 16, 2015

  • BOC cuts interest rates from 0.75% to 0.50%
  • BOC cuts 2015 GDP estimates from 1.9% to 1.1%
  • CA manufacturing sales: 0.1% vs. 0.3% expected, -2.2% previous
  • US PPI: 0.4% vs. 0.2% expected, 0.5% previous
  • US core PPI: 0.3% vs. 0.1% expected and previous
  • US industrial production: 0.3% vs. 0.2% expected, -0.2% previous
  • US NY manufacturing PMI: 3.9 vs. 3.4 expected, -2.0 previous
  • US Beige Book report reflects “moderate to modest pace”
  • Fed’s Yellen optimistic on jobs and economic growth
  • NZ Fonterra publishes 10.7% decline in dairy prices vs. 5.9% decline previous
  • Greek Parliament votes YES, passes EU’s negotiation conditions
  • AU MI inflation expectations on tap

The dollar was once again king of pips in yesterday’s U.S. session, as forex traders priced in Yellen’s hawkishness and bearish news from the other major economies.

There were tons of data to process yesterday, but the one that forex traders paid most attention to was Janet Yellen’s testimony before the Congress. In her speech, Yellen repeated that we’re likely to see a rate hike this year. And, coupled with her optimism on the labor market and the economy, it was easy for rate hike junkies to put a September rate hike back on the table. Of course, it also didn’t hurt that Uncle Sam’s PPI, industrial production, and Beige Book reports all printed better-than-expected and supported Yellen’s hawkishness.

The dollar gained against its low-yielding counterparts with USD/JPY popping up by another 26 pips (+0.21%) to 123.79 while USD/CHF inched another 25 pips (+0.26%) to .9515.

The Greenback might not have gained as many pips as it had if Yellen’s statements hadn’t presented such stark contrast against the other major economies. For starters, the euro had trouble making headway when the Greek Parliament vote on the latest conditions had been delayed and inspired uncertainties in the markets.

EUR/USD fell by 51 pips (+0.46%) to 1.0954, EUR/JPY dropped by 35 pips (-0.26%) to 135.59, and EUR/GBP plunged by 41 pips (-0.58%) to .7003.

Last but not the least are the comdolls, which made their own waves in the markets and attracted a lot of forex bears.

The Loonie fell across the board after the Bank of Canada (BOC) cut its interest rates from 0.75% to 0.50% AND significantly lowered its 2015 growth forecasts from 1.9% to 1.1%. According to the central bank, lower oil prices, weaker-than-expected exports numbers, and weak business investment plans in the energy sector had something to do with the decision. To add insult to injury, crude oil prices also fell by $1.68 to $51.36. Yipes!

Not surprisingly, the divergence in monetary policies boosted USD/CAD by a whopping 179 pips (+1.41%) to 1.2920 while CAD/JPY saw a 117-pip drop (-1.21%) to 95.79.

The Aussie and Kiwi are not without their headaches as the former got dragged down by the underperformance of the Chinese equities market despite the release of positive Chinese reports while the Kiwi fell sharply on the back of a fast decline in oil prices and rumors of an RBNZ rate cut next week.

AUD/USD fell by 80 pips (-1.07%) to .7379 while NZD/USD dropped by 97 pips (-1.45%) to .6579 and NZD/JPY declined by 102 pips (-1.23%) to 81.66

Will risk aversion extend to the Asian session forex traders? Only Australia’s MI inflation report is scheduled for release today, so keep an eye out for other news that might affect risk sentiment. For example, the Greek Parliament has just approved the latest set of conditions that would enable Greece to continue its negotiations with its creditors.

Will this translate to investor confidence and gains for higher-yielding currencies? Keep your eyes glued to the tube for market-moving updates, folks!

See also:

London Session Recap

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