U.S. Session Forex Recap – Jan. 20, 2016

  • IMF lowered global growth forecast from 3.6% to 3.4% this year
  • BOE Governor Carney spoke against hiking rates
  • Canadian foreign securities purchases fell from 19.08B to 2.58B CAD
  • New Zealand dairy auction yielded 1.4% drop in prices
  • New Zealand quarterly CPI down by 0.5% vs. projected 0.2% drop
  • Australian Westpac consumer sentiment slid by 3.5%

Geronimo! Just after the riskier currencies staged a solid forex rebound during the earlier trading sessions, downgraded growth forecasts from the IMF turned smiles upside down.

Major Events:

BOE Governor Carney’s testimony – Not even the upbeat U.K. inflation readings were enough to keep the pound afloat throughout the day, as the BOE head honcho himself clarified that they’re not likely to hike interest rates anytime soon.

In an unusually cautious testimony, Carney noted that the slowdown in China is bound to hurt global growth and inflation, adding that they have no timetable for policy tightening just yet. Better keep close tabs on the upcoming top-tier releases from the U.K. since these might underscore Carney’s gloomy view!

IMF World Economic Outlook report – What a way to ruin the risk-on mood! According to the IMF, the global economy is set to expand at only 3.4% this year, lower than their initial 3.6% estimate. The agency pointed out that the slowdown in China and the slump in commodity prices are likely to hurt emerging economies, weighing on global growth prospects in the process.

In addition, the IMF lowered its world growth forecast for next year from 3.8% to 3.6% but maintained its previous GDP estimates for China of 6.3% for 2016 and 6.0% in 2017. The IMF also noted that the downturn in demand from China is most likely to hurt commodity exporters. *cough, Australia, cough*

Falling price levels in New Zealand – Just as U.S. traders were about to call it a night, New Zealand held its bi-weekly Global Dairy Trade auction, which yielded yet another decline in prices. The index fell by 1.4% in the latest auction, following the previous 1.6% drop. This suggests that the worst ain’t over for the dairy industry and that Fonterra milk payout forecasts may be downgraded again soon.

To make things worse, the country’s quarterly CPI release also turned out much weaker than expected, as consumer price levels tumbled by 0.5% in Q4 versus the projected 0.2% decline. Keep in mind that this took place when crude oil prices were still trading comfortably above the $30/barrel levels.

Major Currency Movers:

GBP – The British pound had a bit of reprieve upon seeing upbeat inflation readings during the London trading session, but it returned these forex wins and more when BOE Governor Carney grabbed the mic.

GBP/USD retreated from an intraday high of 1.4340 to a low of 1.4130, GBP/JPY found resistance around the 169.00 major psychological level before slipping back to its week open price at 166.52, EUR/GBP resumed its climb upon finding support at .7600, and GBP/AUD broke below 2.0600 and dipped to a low of 2.0406.

NZD – The Kiwi had its wings clipped around the time of the dairy auction and the release of downbeat quarterly CPI results.

NZD/USD had a brief stay above the .6500 handle before plummeting to .6370, NZD/JPY turned upon coming close to the 76.00 mark onto a low of 74.95, EUR/NZD found support at 1.6669 then bounced to the 1.7100 levels, and GBP/NZD made a quick turnaround from a low of 2.1784 back to the 2.2200 area.

See more:

Asian Session Recap

London Session Recap

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