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

  • U.S. building permits up from 1.14M to 1.15M as expected
  • U.S. housing starts climbed to 1.19M vs. 1.17M forecast
  • IMF cut U.K. growth forecast from 1.9% to 1.7% for 2016
  • IMF lowered U.K. growth forecast from 2.2% to 1.3% next year
  • IMF: Global economy to grow by 3.1% in 2016, from previous 3.2% estimate
  • WTI crude oil down to $44.59/barrel
  • New Zealand GDT auction showed no change in dairy prices

Risk aversion peeked back in the financial markets as commodity prices looked weaker and the IMF cut its growth forecasts once more.

Major Events:

IMF downgraded growth forecasts – The IMF was all about the gloom and doom when it announced another batch of downgrades for global growth forecasts. The agency predicts that the global economy will expand by only 3.1% this year versus previous estimates of 3.2% growth. It also lowered its global GDP forecast by 0.1% to just 3.4% for next year, citing that they would’ve actually upgraded this estimate if it weren’t for the Brexit.

Speaking of Brexit, the IMF cut its U.K. growth forecast for 2016 to 1.7% and for 2017 to 1.3% from previous estimates at 1.9% and 2.2%. On a less downbeat note, it upgraded its GDP forecast for China from 6.5% to 6.6% this year but projected that next year’s growth could slow to just 6.2%.

Another commodity price slump? – Commodities seem to have had trouble holding on to their recent gains, as fears of an oil market glut have returned. After all, production in energy-rich Alberta and among U.S. shale oil companies has resumed while the short-lived military coup in Turkey failed to put a significant dent in output.

WTI crude oil slumped to $44.59/barrel while Brent crude oil is down to $46.75/barrel. Over in New Zealand, the latest Global Dairy Trade auction showed that dairy prices were unchanged after chalking up a 0.4% decline in the previous auction.

Major Currency Movers:

CAD – The Loonie gave up more ground against its forex peers as oil prices seem ready for another large drop.

USD/CAD advanced from the 1.3000 area to a high of 1.3054, CAD/JPY is down from 81.60 to a low of 81.46, EUR/CAD found support around 1.4430 and is back to 1.4450, and AUD/CAD rallied close to the .9800 handle.

GBP – The British pound took a hit from the downgraded IMF growth forecasts, weighing on the brief rise in optimism after the U.K. leadership change.

GBP/USD is back to testing support at the 1.3100 handle, GBP/JPY fell back below its week open price to 138.70, EUR/GBP rallied back to the .8400 area, GBP/AUD slumped from a session high of 1.7555 to a low of 1.7424, and GBP/NZD is down to the 1.8650 mark.

Watch Out For:

  • 12:30 am GMT: Australia MI leading index

See also:

Asian Session Recap

London Session Recap

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