U.S. Session Forex Recap – August 17, 2016

  • U.S. headline CPI flat in July as expected
  • U.S. core CPI posted 0.1% uptick vs. projected 0.2% gain
  • U.S. building permits stood at 1.15M as expected
  • U.S. housing starts up from 1.19M to 1.21M vs. 1.18M forecast
  • U.S. industrial production up by 0.7% vs. 0.2% estimate
  • Fed official Dudley: U.S. economy getting closer to another rate hike
  • Fed official Lockhart: Two rate hikes still conceivable for the year
  • Canadian manufacturing sales increased by 0.8% as expected
  • New Zealand GDT dairy index up by 12.7% vs. previous 6.6% rise

What a comeback! After its sharp selloff in the earlier session, the Greenback rebounded against its most of its peers when Fed officials gave rate hike hints and data came in mostly upbeat.

Major Events:

Dudley and Lockhart talk rate hikes Just when most forex junkies seem to be pricing in lower odds of another Fed tightening move before the end of the year, New York Fed President Dudley grabbed the mic and reassured that a September rate hike might still be possible. He explained that the economy is on track towards achieving 2% inflation and that growth could be much better during this second half of the year.

Atlanta Fed President Lockhart echoed this hawkish view in saying that at least one Fed rate hike could be warranted this year, adding that two rate hikes might still even be conceivable. He added that the U.S. is moving closer towards achieving full employment but that weak business investment remains a risk. Keep in mind, however, that Lockhart is not a voting member of the FOMC.

U.S. data dump – The latest numbers turned out mostly in line with expectations, except for the core CPI which printed a 0.1% uptick instead of the estimated 0.2% increase. The headline CPI was flat in July as expected, as fuel costs pulled back from their gains in the earlier month.

Building permits also came in line with expectations at 1.15 million, unchanged from the previous month’s reading, while housing starts posted a stronger than expected climb from 1.19 million to 1.21 million instead of dipping to the estimated 1.18 million figure. Lastly, capacity utilization and industrial production also came in better than expected, with the latter up by 0.7% versus the projected 0.2% increase.

Major Currency Movers:

USD – The U.S. dollar recovered from its previous session heartbreak when a couple of Fed officials revived hopes of a rate hike.

EUR/USD retreated from a high of 1.1323 to close at 1.1278 (-0.40%), USD/JPY bounced off its 99.55 low to 100.27 (+0.72%), and USD/CHF found support at the .9600 handle then moved sideways (+0.03%).

GBP – The pound was able to hold on to its gains after the U.K. CPI release and go for a bit more.

GBP/USD was up from 1.2963 to 1.3044 (+0.62%), GBP/JPY rose from 129.43 to 130.82 (+1.07%), EUR/GBP dropped from .8712 to .8650 (-0.71%), and GBP/AUD rallied from 1.6764 to 1.6945 (+1.08%).

Watch Out For:

  • 10:45 pm GMT: New Zealand employment change q/q (0.6% expected, 1.2% previous)
  • 10:45 pm GMT: New Zealand unemployment rate (5.3% expected, 5.7% previous)
  • 10:45 pm GMT: New Zealand PPI q/q (See Forex Gump’s trading guide here!)
  • 12:30 am GMT: Australia MI leading index
  • 1:30 am GMT: Australia wage price index q/q (0.5% expected, 0.4% previous)

See also:

Asian Session Recap

London Session Recap

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