U.S. Session Forex Recap – July 12, 2016

  • Andrea Leadsom withdrew from U.K. PM race
  • U.S. labor market conditions index up from -3.6 to -1.9
  • Canadian housing starts increased from 187K to 218K
  • FOMC member George expecting a rebound in Q2 GDP
  • FOMC member George: Strong dollar and weak global growth dampen exports
  • FOMC member George: U.S. close to full employment, gradual rate hikes needed

U.S. session traders reacted to news of additional economic stimulus in Japan and moved some funds back to the safe-haven U.S. dollar.

Major Events:

U.K. Prime Minister race updates – It’s official! David Cameron will be tendering his resignation as U.K. Prime Minister this Wednesday as he steps down to let a new leader take charge of the Brexit negotiations. One of the frontrunners, Andrea Leadsom, announced that she is withdrawing from the race since she doesn’t believe that she has enough support to lead a strong and stable government.

This leaves Theresa May as the main contender, with Leadsom assuring that May could be in the best position to march to Brussels and have a showdown with the EU officials. May reiterated that they must make a success out of the Brexit, taking this as a chance to unite their country and give people more control over their lives.

FOMC member George’s testimony – Fed official Esther George is one of the known hawks in the FOMC gang, usually dissenting to call for rate hikes in previous policy meetings. However, she explained that she refrained from voting to tighten in the latest FOMC meeting mainly because of the downbeat May NFP reading and the looming EU referendum.

This time around, she’s back to her usual hawkish self, citing that a rebound for the Q2 GDP figure could be in the cards. She added that the U.S. is nearing full employment, which warrants a gradual tightening of monetary policy. Still, George cautioned that a strong dollar combined with slow global growth could weigh on U.S. export activity and that business investment has been relatively weak.

Major Currency Movers:

JPY – The yen carried on with its selloff from the earlier trading sessions, as U.S. traders woke up to the news that the Japanese government is preparing a stimulus package.

USD/JPY climbed from the 102.50 area to a high of 102.89 before pulling back, EUR/JPY rallied from 113.35 to a high of 113.73 then slumped back to 113.50, GBP/JPY barely made it to the 134.00 handle before slightly retreating, and AUD/JPY moved mostly sideways below the 77.50 minor psychological mark.

USD – The Greenback took advantage of yen weakness to regain its dominance as the safe-haven currency of choice.

EUR/USD fell from a high of 1.1074 to consolidate at 1.1050, GBP/USD is treading carefully below the 1.3000 major psychological level, USD/CHF bounced from .9815 to a high of .9842, and AUD/USD fell from .7566 to a low of .7522.

Watch Out For:

  • 12:50 am GMT: Japanese PPI y/y (-4.1% expected, -4.3% previous)
  • 2:30 am GMT: Australia NAB business confidence index
  • 2:30 am GMT: FOMC member Mester’s testimony
  • 5:30 am GMT: Japan’s tertiary industry activity m/m (-0.7% expected, +1.4% previous)

See also:

Asian Session Recap

London Session Recap

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