Top Forex Market Movers of the Week (May 23-27, 2016)

The forex trading week has come and gone. Time to take a look at the currencies and/or currency pairs that were on the move and what moved them. Were you able to profit from any of this week’s top movers?

Top Forex Weekly Movers (May 23-27, 2016)

Top Forex Weekly Movers (May 23-27, 2016)

I guess it’s not very clear from the list of top movers, but the pound was kicking butt while chewing gum this week, just like last time. The Loonie was giving the pound a hard time, though, so it’s pretty much a given that the Loonie was the second best performing currency. The Kiwi, meanwhile, offered the least resistance to the pound’s dominion, so you can bet the farm (and your little doggy, too) that the Kiwi was the weakest currency of the week.

And just to help you out, below are tables on how pound, Loonie, and Kiwi pairs fared during the week.

Pound Pairs Ranked (May 23-27, 2016)

Pound Pairs Ranked (May 23-27, 2016)

Loonie Pairs Ranked (May 23-27, 2016)

Loonie Pairs Ranked (May 23-27, 2016)

Kiwi Pairs Ranked (May 23-27, 2016)

Kiwi Pairs Ranked (May 23-27, 2016)

Okay, time to see what was driving forex price action this week!

GBP: More Brexit Polls

GBP/USD: 1-Hour Forex Chart

GBP/USD: 1-Hour Forex Chart

As you can see on the chart above, the pound’s price action during the week can actually be divided into four phases: (1) the early wobble, (2) the upward push, (3) the last hurrah, and (4) ouch time.

The pound started the week by wobbling while dipping slightly, probably because of  profit-taking after last week’s surge, although the U.K. Treasury’s report on the immediate impact of a Brexit likely softened demand for the pound as well since it warned that the following could potentially occur.

U.K. Treasury Brexit Effects

Source: www.gov.uk

Pretty nasty, yeah? Oh, if you really want the details, you can read the original mind-numbing 90-page document here.

Moving on, demand for the pound finally got resurrected during the Tuesday morning London session’s “upward push”. I have to admit that I initially missed what drove the pound higher back then, but it’s now apparent Brexit-related polls were back in play, specifically The Telegraph’s ORB survey, which showed that pensioners, Conservative Party supporters, and male voters, who are the “leave” camp’s base of support, were defecting en masse to the “remain” camp, so much so that the “remain” camp had a 13-point advantage over these demographic groups. And this, in turn, translated to a 20-point lead for the “remain” camp when the rest of the voting population is taken into account (58% remain vs. 38% leave, 4% undecided).

Pound pairs then calmed down after that, likely because a new poll from ICM revealed that the “leave” and “remain” camps were neck and neck, with 45% each. However, a more recent poll from Survation reported that the “remain” camp was back in the lead (44% remain vs. 38% leave, 18% undecided), which sent the pound higher across the board on Wednesday.

That swing higher was a “last hurrah” for the pound, though, since “ouch time” began shortly after that during Thursday’s morning London session. The pound’s strength eroded initially when a new poll published by BGM Research showed that the “leave” camp now had one percentage point lead over the “remain” camp (45% leave vs. 44% remain, 12% undecided). But it wasn’t until a slew of economic reports were released that the pound was slapped lower across the board, as I detailed in Thursday’s morning London session recap.

There were no new polls or major Brexit-related polls after that, so forex traders seemed to have lost interest on the pound and the performance of pound pairs became more mixed as a result. The pound was able to hold onto its gains, though, which is why it’s the best performing currency of the week.

By the way, if you wanna know where and how to get free and up-to-date information on Brexit-related polls, you can check out Forex Gump’s very helpful write-up here. Enjoy!

CAD: BOC Monetary Policy Decision & Oil

  • Overnight rate maintained at 0.50%
  • Q1 GDP growth still in line with BOC’s projections
  • Q2 GDP growth downgraded but a rebound in Q3 is expected
  • BOC: Loonie “is now close to the level assumed in April”
  • BOC: “Canada’s housing market continues to display strong regional divergences
  • BOC: “household vulnerabilities have moved higher
  • BOC: “the current stance of monetary policy is still appropriate
USD/CAD: 1-Hour Forex Chart

USD/CAD: 1-Hour Forex Chart

As you can clearly see, the bulk of the Loonie’s gains were captured during Wednesday’s U.S. session and Thursday’s Asian and London sessions, and Loonie bulls can thank the BOC’s monetary policy decision for that. Forex Gump already covered this event in his 4 Key Points from the May BOC Statement, so read up on that if you want the juicy details.

The gist of it all, though, is that the BOC had a neutral stance and was even surprisingly optimistic with regard to certain aspects. Specifically, the BOC admitted that the wildfires that raged across oil-rich Alberta inflicted very significant economic damage, so much so that the BOC was forced to slash its growth projections for Q2 by as much as 1.25%. However, the BOC refrained from hinting at further rate cuts to support recovery down the road and even said that it was confident that there will be a rebound in Q3 once reconstruction begins.

Also, the BOC was worried about the Canadian housing market, saying that “Canada’s housing market continues to display strong regional divergences,” so “household vulnerabilities have moved higher.”

This “divergence” refers to the influx of job seekers from energy-rich provinces with deteriorating economies (like Alberta) to provinces that are not as dependent on energy, such as manufacturing-oriented Ontario. This effectively creates an excessive demand for housing in Ontario and other similar provinces but kills the housing market in Alberta and similar provinces–hence the divergence.

Great, but what does all that mean? Well, cutting rates would make borrowing money easier, which would encourage even more housing demand and thereby make this “divergence” worse. It may even cause a housing bubble. This therefore implies that the BOC does not want to cut rates any further, which is another good thing for Loonie bulls.

Another good thing for Loonie bulls was the climb in oil prices during the week.

  • U.S. crude oil up (CLG6) by 3.85% to $49.59 per barrel for the week
  • Brent crude oil up (LCOH6) by 1.54% to $49.47 per barrel for the week

Market analysts attributed the higher oil prices to falling U.S. oil inventory levels, which signals either greater demand for oil or weaker supply. It also probably helped that China announced on Wednesday that its measures meant to curb commodities speculation seem to be taking effect, which implies that China won’t be cracking down as hard on speculators anymore.

NZD: Commodities & Bad News From Fonterra

NZD/USD: 1-Hour Forex Chart

NZD/USD: 1-Hour Forex Chart

The Kiwi noticeably drifted lower across the board on two occasion during the trading week. The first broad-based slide became apparent during Monday’s morning London session. There weren’t any particular catalysts for the Kiwi, but commodities were retreating at the time, as I noted in Monday’s morning London session recap. I also noted in my recap that all the commodity dollars or comdolls (NZD, CAD, AUD) were getting hammered because of the slide in commodity prices, although the Aussie was getting the worst of it at the time.

After that, the Kiwi’s price action became more mixed before sliding lower across the board during Wednesday’s late U.S. session and Thursday’s early Asian session. Market analysts attributed the slide to the Fonterra Cooperative Group’s dismal forecast that the 2016/17 payout would only be $4.25 per kilogram of milk solids, which is way below the expected payout range of $4.60-$4.80.

Fonterra blamed the lower payout forecast to the Kiwi’s strength and global oversupply, among others. This likely fueled rate cut expectations. After all, the RBNZ said in its April statement that “a lower New Zealand dollar is desirable” and that “further policy easing may be required.”

Also, the lower payout means that some dairy farmers won’t be able to break-even, which is more fuel for rate cut expectations since the RBNZ has its eyes on dairy prices. The RBNZ even acknowledged that dairy prices “have improved slightly, but are below break-even levels for most farmers.”

Oh, for the newbies out there, Fonterra is a cooperative involving thousands of dairy farmers from New Zealand. It is one of the largest dairy companies on the planet, accounting for around 30% of total dairy exports in the word. Also, New Zealand’s economy is literally powered by dairy exports. I kid you not. In fact, concentrated milk alone accounts for almost 20% of New Zealand’s exports. It therefore goes without saying that higher dairy prices is good for New Zealand and the Kiwi dollar while falling dairy price is bad.

Do you think these market themes and events were enough to spark longer-term forex trends? Better keep them in mind when planning your trades for next week!


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  • ForExchange

    Great write up! Nowadays I do not have that much time to check the news so on the weekends it is always great to see the pip movements of the currencies and also the main market drivers.

    Thanks,
    FE

    • Pip Diddy

      Hi FE! And thanks for checking out my write-up as well as the positive feedback. Greatly appreciated, buddy.