U.S. Session Forex Recap – May 13, 2016

  • BOE Governor Carney highlighted U.K. jobs market strength
  • BOE Gov Carney: Growth is slowing again, Brexit could mean technical recession
  • BOE upgraded inflation forecasts contingent on EU membership
  • U.S. initial jobless claims at 294K vs. 277K expected, 274K previous
  • U.S. import prices up by 0.3% vs. 0.6% forecast
  • FOMC member Mester: Inflation expectations relatively stable
  • FOMC member George: U.S. doesn’t need negative interest rates
  • FOMC member Rosengren: Likelihood of rate hike is higher than what markets expect
  • New Zealand headline retail sales increased 0.8% in Q1 vs. 1.0% forecast
  • New Zealand core retail sales up 1.0% in Q1 vs. 1.1% forecast

The Greenback showed the major currencies who’s boss, as it rose across the forex charts for most of the New York session.

Major Events:

BOE press conference – The BOE was still hogging the spotlight at the start of the U.S. trading session, as traders turned their attention to Governor Carney’s press conference. The BOE head honcho admitted that economic growth is slowing again but he did highlight the strength in the U.K. labor market.

Carney also reiterated that a potential Brexit would bring a lot of uncertainty to the table, possibly even leading to a technical recession, adding that monetary policy alone cannot immediately offset the shocks from such event.

Weak U.S. economic reports – Medium-tier data from the U.S. came in weaker than expected, reminding traders that a June rate hike ain’t set in stone just yet. Initial jobless claims rose to 294K, much higher than the projected 277K figure and the earlier 274K reading, indicating a possible slowdown in jobs growth. Meanwhile, import prices posted a 0.3% uptick instead of the estimated 0.6% gain, putting downside pressure on consumer inflation.

Upbeat FOMC rhetoric – Fed policymakers still sounded optimistic in their recent testimonies, deciding to shine the spotlight on improvements rather than focus on weaknesses.

For FOMC member Loretta Mester, inflation expectations have been relatively stable, keeping the economy on track towards achieving its targets. Fed official Rosengren noted that the markets seem to be too pessimistic about the U.S. economy, and that the likelihood of a rate hike is much higher than what’s priced in. Meanwhile, FOMC member George pointed out that the U.S. economy doesn’t really need negative interest rates.

Major Currency Movers:

USD – The U.S. dollar got back on its feet after sliding lower against its forex peers during the earlier sessions.

EUR/USD turned upon hitting a high of 1.1447 then fell back to the 1.1375 area, GBP/USD reached a high of 1.4531 then slid back to the 1.4450 minor psychological support, USD/JPY bounced off a low of 108.63 to a high of 109.10, and USD/CHF hit a low of .9664 then rallied back above the .9700 handle.

GBP – The pound was unable to hold on to its post-BOE gains, as traders booked profits pretty quickly.

GBP/JPY fell from a high of 158.49 to a low of 157.23, EUR/GBP bounced off support at .7850 to the .7875 area, GBP/AUD is still hovering around the 1.9750 minor psychological level, and GBP/NZD is back down to 2.1200.

Watch Out For:

  • 4:30 am GMT: Japanese tertiary industry index (-0.2% expected, -0.1% previous)

See also:

Asian Session Recap

London Session Recap

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