U.S. Session Forex Recap – Feb. 16, 2016

  • ECB Gov Draghi: QE has worked, ECB will not hesitate to act
  • BOE MPC member McCafferty mentioned negative rates
  • Russia to meet with OPEC members today
  • New Zealand headline retail sales up 1.2% q/q vs. 1.4% expected
  • New Zealand core retail sales up 1.4% q/q vs. 1.1% expected

U.S. traders were off enjoying the President’s Day holiday yesterday and there were no major reports from Uncle Sam, but that didn’t stop the major currencies from partying in the forex arena.

Major Events:

Dovish Draghi’s testimony – The ECB head honcho stepped up to the podium to testify on monetary policy in front of the European Parliament’s Economic and Monetary Affairs committee, and he shared his assessment and outlook for the central bank’s QE program.

Draghi pointed out that QE has worked for the euro zone economy and that policymakers will not hesitate to act if further stimulus is needed. When it comes to their next policy meeting, he shared that they will focus on the impact of falling commodity prices on domestic inflation and wages. He also said that they will consider the impact of the recent market turmoil on their financial system, as this could also entail downward risks to price stability.

Lone hawk McCafferty talks negative rates – Remember that one MPC member who used to insist on voting to hike BOE interest rates? Well, he just said that negative rates are something that the BOE might use, citing that inflationary pressures have significantly receded in the U.K. economy.

While he said that the U.K. economy is still broadly healthy and that he expects consumer spending to stay solid, he pointed out that an interest rate hike isn’t as immediate as it used to be. I guess we’ll have to wait and see how this week’s top-tier releases from the U.K. turn out!

Russia sets a date with OPEC nations  – A bit late for Valentine’s Day but Russia has been able to set a date for its meeting with some OPEC member nations, namely Venezuela, Qatar, and Saudi Arabia. Crude oil traders are hopeful that these oil-producing nations can come up with an agreement to trim production levels in order to boost prices so make sure you keep tabs on how the huddle turns out.

New Zealand retail sales data – A few hours ago, New Zealand printed its latest quarterly retail sales report and showed mixed results. The headline figure missed expectations of a 1.4% increase and indicated a 1.2% gain for Q4 while the core version of the report churned out a stronger than expected 1.4% rise versus the projected 1.1% climb.

Major Currency Movers:

EUR – The euro went on a dive upon hearing Draghi’s comments but quickly pulled up for air. EUR/USD dipped to a low of 1.1128 then bounced back to 1.1172, EUR/JPY advanced past the 128.00 handle, and EUR/GBP tested support at the .7700 handle then recovered to .7740.

GBP – The British currency also dropped like a rock on talk of negative interest rates from no less than the BOE’s most hawkish member. GBP/USD broke below the 1.4500 handle to test support at 1.4450, GBP/JPY is still struggling to stay above 165.00, and GBP/AUD breached support at the 2.0200 mark.

CAD – Thanks to speculations of a positive outcome from the Russia-OPEC meetings, crude oil prices managed to squeeze out some gains and lift the positively correlated Loonie in the process.

USD/CAD fell to a low of 1.3774 after consolidating around 1.3800, CAD/JPY popped higher to trade above the 84.00 handle, EUR/CAD dipped to a low of 1.5374, and GBP/CAD is testing the 1.9900 major psychological support once more.

Watch Out For:

  • 12:30 am GMT: RBA monetary policy meeting minutes
  • 2:00 am GMT: New Zealand inflation expectations q/q

See more:

Asian Session Recap

London Session Recap

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