U.S. Session Forex Recap – Feb. 29, 2016

  • U.S. preliminary GDP upgraded from 0.7% to 1.0% vs. 0.4% forecast
  • U.S. core PCE price index rose from 0.1% to 0.3% vs. 0.1% estimate
  • U.S. personal income and spending up by 0.5%
  • G20 leaders agree to warn each other about devaluation
  • New Zealand ANZ business confidence index down from 23.0 to 7.1
  • New Zealand building consents fell by 8.2% in Jan

Dollar bulls, unite! Stronger than expected data, combined with a bit of risk aversion, pushed the U.S. currency higher against its forex rivals at the end of the week.

Major Events:

 

Upbeat U.S. economic data – All green! Despite seeing downbeat data for the most part of the week, Friday’s batch of reports all beat expectations, led by the preliminary GDP reading.

The U.S. GDP reading for Q4 2015 was upgraded from 0.7% to 1.0% instead of being lowered to the projected 0.4% figure, indicating that the economy expanded at a much faster pace than initially reported. However, much of the upward revision can be attributed to a higher value of business inventories, which suggests that more products are actually being left in stockpiles while consumer spending was downgraded. Yikes.

Still, both the personal spending and income figures showed 0.5% gains while the core PCE price index advanced from 0.1% to 0.3% versus the 0.1% estimate. Do I hear March rate hike fans placing their bullish USD forex bets again?

G20 leaders discuss currency wars – Over the weekend, heads of the G20 nations discussed the current concerns affecting the global economy such as a potential Brexit and whether or not Leo should win an Oscar.

One of the biggest issues on the table was a potential currency war in which central bankers might wind up using monetary policy for devaluation, which could benefit the local economy but hurt the rest of its peers. At the end of the day, the head honchos agreed to refrain from competitive devaluations or at least warn each other if they’re about to employ such tactic.

Downbeat New Zealand data – New Zealand also printed a few reports over the weekend and both showed weaker than expected results. The ANZ business confidence index fell from 23.0 to 7.1 in February, indicating much weaker optimism, while the building consents report showed a sharp 8.9% drop for January.

Major Currency Movers:

USD – Renewed March rate hike hopes on strong U.S. reports allowed the Greenback to regain ground against most of its forex counterparts.

EUR/USD broke below support at the 1.1000 handle to close at 1.0927, GBP/USD fell below its intraweek low to close at 1.3863, USD/CHF popped up close to parity before consolidating, and USD/JPY rallied to retest the 114.00 mark.

AUD & NZD – The Aussie and the Kiwi were among the biggest losers for the day, retreating mostly on risk-off flows and profit-taking. Meanwhile, the Loonie managed to stay afloat despite a dip in crude oil prices.

AUD/USD crashed from the .7220 area to a low of .7119, NZD/USD fell from the .6750 area to a low of .6580, AUD/JPY found resistance at 82.00 then closed at 80.96, and NZD/JPY failed to break past the 76.50 resistance then tumbled to a low of 75.29.

Watch Out For:

  • 12:00 am GMT: Japanese retail sales y/y (0.2% expected, -1.1% previous)
  • 12:00 am GMT: Japanese prelim industrial production m/m (3.2% expected, -1.7% previous)
  • 12:00 am GMT: Australia MI inflation gauge (0.4% previous)
  • 12:30 am GMT: Australian company operating profits q/q (-1.7% expected, +1.3% previous)
  • 12:30 am GMT: Australian private sector credit m/m (0.5% expected, 0.5% previous)
  • 5:00 am GMT: Japanese housing starts y/y (-0.2% expected, -1.3% previous)

See also:

Asian Session Recap

London Session Recap

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