U.S. Session Forex Recap – Jan. 15, 2016

  • FOMC member Bullard: May take longer to reach inflation target
  • U.S. initial jobless claims at 284K vs. 275K expected, 277K previous
  • U.S. import prices down by 1.2% vs. estimated 1.4% drop
  • U.S. natural gas storage down by 168B cubic feet
  • WTI crude oil recovered above $31/barrel

Risk appetite made a strong comeback comeback with equity indices rallying close to 2% at the open, but mixed data from the U.S. economy kept the dollar’s forex gains limited.

Major Events:

FOMC member Bullard’s remarks – Not really the first FOMC member to say that the inflation outlook ain’t so bright but his comments still had a pretty big effect on market sentiment just the same. Bullard highlighted the recent trends in oil prices and shared his views on how this could affect medium-term inflation, reiterating that it may take longer for the U.S. economy to achieve its 2% target than initially expected.

With the FOMC minutes and Fed Beige Book suggesting that policymakers might pay closer attention to inflation rather than employment this time around, several forex market watchers couldn’t help but wonder if this cautious outlook could prevent the U.S. central bank from hiking again in March. Stay tuned.

Crude oil bounce – After days of slipping and sliding across the charts, crude oil finally made a decent reboundand landed above $31/barrel. This was partly spurred by reports showing that U.S. natural gas storage fell by 168 billion cubic feet, easing fears of a supply glut in the energy sector. Other commodity analysts say that this bounce was spurred by a severely oversold market and that a larger short squeeze might be in order.

Mixed U.S. economic data – You win some, you lose some. U.S. initial jobless claims came in weaker than expected, showing a 284K increase in claimants versus the estimated 277K figure and the previous 272K reading.

On the other hand, U.S. import prices indicated a 1.2% decline, which isn’t so bad compared to the projected 1.4% drop. Of course that’s December data, which means that the recent drop in oil hasn’t been factored in yet.

Major Currency Movers:

USD – Even with mixed data and a few cautious remarks from an FOMC official, the U.S. currency managed to end mostly higher for the day.

EUR/USD found resistance around 1.0940 before slipping to a low of 1.0835, USD/JPY made a slow climb back above the 118.00 handle, USD/CHF bounced off a low of 1.0010 to a high of 1.0090, and USD/CAD consolidated around 1.4350.

JPY – The lower-yielding Japanese yen returned a handful of its recent wins when risk sentiment appeared to improve in yesterday’s trading sessions.

EUR/JPY climbed gradually throughout the day and reached a high of 128.77, GBP/JPY was generally weaker after the BOE statement but popped up from its 168.82 low, AUD/JPY rallied from the 81.30 area to a high of 82.79, and NZD/JPY fell to a low of 75.51 before recovering to the 76.00 levels.

Watch Out For:

  • 12:30 am GMT: Australian home loans (-0.4% expected, -0.3% previous)

See more:

Asian Session Recap

London Session Recap

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