Article Highlights

  • NZ overseas trade index (q/q) up by 5.7% vs. 1.1% decline previous, 4.1% uptick expected
  • U.K. BR shop price index (y/y) down by 1.0% vs. 1.7% decline in January
  • AU AIG manufacturing index rises from 51.2 to 59.3 in February
  • AU GDP (q/q) clocks in at 1.1% vs. 0.7% gain expected, 0.5% decline in Q3 2016
  • AU commodity prices (y/y) slips from 57.1% to 56.0%
  • Japan’s capital spending (q/y) up by 3.8% vs. 0.6% increase expected, 1.3% decline in Q3 2016
  • Japan’s final manufacturing PMI revised lower from 53.5 to 53.3
  • China’s manufacturing PMI up from 51.3 to 51.6 in February vs. 51.2 reading expected
  • China’s non-manufacturing PMI slips from 54.6 to 54.2
  • China’s Caixin manufacturing PMI rises from 51.0 to 51.7 vs. 50.9 expected
  • TRUMP called for Congress to approve $1 trillion investment in infrastructure
  • TRUMP to cut corporate taxes and provide “massive” tax relief to the middle class
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The dollar lost pips after Trump failed to provide details on his infrastructure and tax plans, but soon turned around when forex players focused on the FOMC members’ hawkish statements instead. Also, Australia just avoided a technical recession!

Major Events:

Australia’s GDP release – Australia fired the first salvo of major reports today as it reported its GDP figures for Q4 2016.

As it turns out, the economy had avoided a technical recession by popping up by a cool 1.1% in Q4. This is much better than the expected 0.7% uptick and Q3’s 0.5% contraction. Annualized figures also reflect the economy growing by 2.4% in 2016, faster than Q3’s 1.9% rate and the expected 2.0% reading.

Details from Australia’s Bureau of Statistics showed us that it was higher household spending, investment, and exports that boosted the economy. Household spending rose by 0.9% and contributed 0.5% to the overall GDP, while gross fixed capital formation shot up by 2.6% and chipped in 0.6% to the GDP. Meanwhile, terms of trade (+9.1%), driven by higher coal and iron ore prices, grew by its fastest pace since Q2 2010.

Market players are taking the strong readings with a grain of salt, though. For one thing, Australia’s wage bill dipped by 0.5% during the quarter, which translates to 0.9% decrease in earnings per employee. Not a good sign for the future of consumer spending.

For now, it seems like traders are happy to ride on Australia not getting slapped with a technical recession. The Aussie jumped at the upside surprise in GDP and managed to retain most of its gains for the rest of the session.

China’s PMI dump – Manufacturing in the world’s second largest economy clocked in at 51.6 in February. This is not only faster than January’s 51.3 index reading, but it also marks the fastest pace of expansion in three months. Meanwhile, the official services PMI came in at 54.2, down from 54.6 in January.

A private gauge of smaller manufacturing firms also reflected faster growth as output and new export orders accelerated at its fastest pace in over two years. The Caixin manufacturing PMI came in at 51.7, higher than January’s 51.0 and the expected 50.9 reading. Woot!

Trump’s speech in front of Congress – The biggest story of the hour is the Donald giving his first speech in front of Congress today.

For days, market players had anticipated Trump’s speech on speculations that he’ll finally reveal details on how he will provide for additional infrastructure spending; “massive” tax relief to the middle class, and make America’s companies more competitive in the global markets.

Unfortunately, Trump didn’t offer anything new today. Aside from asking Congress to set aside $1 trillion for infrastructure spending, he failed to give any details on how he’ll use the budget. More importantly, we still don’t have any details on his tax plans.

The dollar dropped on the lack of details, but soon turned around as market players returned their focus on the FOMC members giving hawkish speeches left and right. FOMC voting member William Dudley, in particular, tipped the scales in favor of a March rate hike. In a statement, Dudley shared that the case for a rate hike has become “a lot more compelling.” BFD, especially since Dudley is usually dovish and tends to second the Governor’s decisions.

Market Movers:

USD – The dollar gave up some of its gains during Trump’s speech, but soon recovered after market players realized that his speech wasn’t too bad and focused on the Fed’s hawkish speeches instead.

EUR/USD is down by 32 pips (-0.30%) to 1.0560, USD/JPY popped up by 118 pips (+1.05%) to 113.38, GBP/USD slipped by another 33 pips (-0.27%) to 1.2371, and USD/CHF inched 36 pips higher (+0.36%) to 1.0081.

AUD – The Aussie found support across the board after Australia printed a much stronger GDP report than many had expected.

AUD/USD popped up to a session high of .7701 before dollar domination brought it back down to .7664. Meanwhile, AUD/JPY jumped by 88 pips (+1.02%) to 86.90, AUD/NZD shot up by 84 pips (+0.79%) to 1.0718, and EUR/AUD slipped by another 36 pips (-0.26%) to 1.3779.

Watch Out For:

  • 8:00 am GMT: UBS consumption indicator
  • 8:00 am GMT: U.K. Nationwide house price index expected to remain at 0.2%
  • 9:00 am GMT: Germany’s preliminary CPI (0.6% expected, -0.6% previous)
  • 9:15 am GMT: Spanish manufacturing PMI (55.9 expected, 55.6 previous)
  • 9:30 am GMT: Switzerland’s manufacturing PMI (55.5 expected, 54.6 previous)
  • 9:45 am GMT: Italian manufacturing PMI (53.6 expected, 53.0 previous)
  • 9:50 am GMT: French manufacturing PMI expected to remain at 52.3
  • 9:55 am GMT: German final manufacturing PMI expected to remain at 57.0
  • 9:55 am GMT: German unemployment change (-10K expected, -26K previous)
  • 10:00 am GMT: Euro Zone final manufacturing PMI expected to remain at 55.5
  • 10:30 am GMT: U.K. manufacturing PMI (55.7 expected, 55.9 previous)
  • 10:30 am GMT: U.K. net individual lending (4.0B GBP expected, 4.8B GBP previous)
  • 10:30 am GMT: U.K. mortgage approvals (69K expected, 68K previous)

See also:

U.S. Session Recap
London Session Recap

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