U.S. Session Forex Recap – Oct. 27, 2016

  • U.S. flash services PMI up from 52.3 to 54.8 vs. 52.4 forecast
  • U.S. new home sales up from 575K to 593K, short of 601K consensus
  • U.S. crude oil inventories down by 0.6 million barrels
  • U.S. preliminary wholesale inventories up 0.2% vs. 0.1% forecast
  • U.S. goods trade deficit narrowed to 56.1 billion USD
  • New Zealand trade deficit widened to 1.43B NZD vs. 1.12B NZD forecast

Upbeat medium-tier reports were enough to lift the Greenback against its peers since there were no other major movers on deck.

Major Events:

Mostly upbeat U.S. data – Uncle Sam printed stronger than expected economic data, enough to keep hawkish Fed expectations in play. The flash services PMI for October jumped from an upgraded 52.3 reading to 54.8 to reflect a much faster pace of industry expansion compared to the estimated rise to 52.4.

New home sales rose from 575K to 593K, which is short of the 601K consensus but still an increase nonetheless. Preliminary wholesale inventories rose 0.2% versus the 0.1% forecast, which reflects a larger buildup in goods kept in stockpiles, thereby suggesting slower demand. The goods trade balance showed a smaller deficit, hinting at a positive contribution to the Q3 GDP due later this week.

More ECB chatter – Market watchers have been paying extra close attention to clues regarding the ECB bond-buying program ever since rumors circulated that the central bank was looking to taper QE. Draghi already dismissed these speculations during the ECB statement, and more sources recently confirmed that the bond-buying program would likely carry on past the March 2017 end-date.

In addition, the ECB could also relax constraints when it comes to purchasing these bonds and would decide on any adjustments once policymakers get their hands on updated economic projections in December. In particular, these tweaks could cover changes to capital key, issue limit, and yield floor, which would ease the pressure on the ECB to lower deposit rates deeper into negative territory.

Major Market Movers:

EUR – The euro had a mild bearish reaction to all that talk about how the ECB could adjust its QE program.

EUR/USD fell from a high of 1.0947 to a low of 1.0898 (-0.45%), EUR/JPY retreated from 114.20 to the nearby support at 114.00 (-0.18%), EUR/GBP is down from .8942 to .8920 (-0.25%), EUR/AUD slid from a high of 1.4292 to 1.4280 (-0.08%), and EUR/NZD is down to 1.5236 (-0.25%).

Watch Out For:

  • 12:30 am GMT: Australia import prices q/q (-0.7% expected, -1.0% previous)

See also:

London Session Recap

Asian Session Recap

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