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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 (Nov. 2-6)
Top Forex Weekly Movers (Nov. 2-6)

As y’all can see on that there list, the theme for this trading week was US Dollar domination and Kiwi obliteration (with some pound weakness on the side). So, what drove forex price action?

GDT Price Index Drops

  • -7.4% current vs. -3.1% previous

Fonterra’s Global Dairy Trade (GDT) price index dropped for the second consecutive auction. Even worse, the volume of total dairy products sold was only 33,997 tons, which is a 1.5% drop from the previous auction two weeks ago.

Most Kiwi pairs sold off immediately after the auction’s outcome was announced, but gradually recovered. But if we look at the Kiwi’s price action before the auction, we can see that forex traders were probably speculating that the auction would print another disappointing result since the Kiwi started sliding during the Asian session, which means that the gradual recovery could have been due to profit-taking. The recovery was short-lived, however, because of…

New Zealand’s Disappointing Jobs Report

  • employment change: -0.4% vs. +0.4% expected, 0.1% previous
  • unemployment rate: 6.0% as expected vs. 5.9% previous
  • labor force participation rate: 68.6% vs. 69.3% previous

New Zealand’s disappointing jobs report was a real blow to confidence in New Zealand’s economy and the Kiwi since employment change contracted by 0.4% instead of increasing by 0.4%. This is the first time in three years that the number of employed people fell, and forex traders responded to the bad news by dumping the Kiwi long and hard, only taking a break when NFP Friday began to loom on the horizon.

Forex traders were probably so dismayed with the jobs report because the decrease in the GDT price index was still weighing-in on the minds of forex traders and the recent jobs data goes against the RBNZ’s earlier statement in their annual report that New Zealand’s economy “has performed much better than many advanced economies in recent years.” Plus, there’s also the fact that the RBNZ is still open to further rate cuts, according to the latest RBNZ statement.

NZD/USD 1-Hour Forex Chart
NZD/USD 1-Hour Forex Chart

Dovish MPC Meeting Minutes

  • as expected, 8-1 vote to hold main rate
  • 9-0 vote to hold asset purchases at £375B/month

In last week’s Top Forex Market Movers, I mentioned that the BOE was the only other central bank that’s open to a rate hike aside from the US Fed. I also noted that forex traders were probably expecting the BOE to be more hawkish now that the US Fed is perceived to be more hawkish because the historical records show that the BOE has been following the US Fed’s lead most of the time.

Well, the MPC meeting minutes and the press conference that followed revealed that the BOE was not marching in step with the US Fed since the “The path for Bank Rate implied by market yields, on which the MPC’s projections are conditioned, has fallen and now embodies an even more gradual pace of tightening than at the time of the previous Report.”

The BOE’s unexpected heel-face turn naturally sent forex traders into a selling frenzy. And it didn’t help that both the MPC meeting minutes and the BOE Inflation Report tried to jawbone the pound by stating that the “dampening influence of sterling’s past appreciation on inflation is expected to be persistent, diminishing only slowly over the MPC’s forecast period.”

GBP/USD 1-Hour Forex Chart
GBP/USD 1-Hour Forex Chart

Upbeat US NFP Report

  • non-farm employment change: 271K vs. 181K expected, 137K previous
  • unemployment rate: 5.0% as expected, 5.1% previous
  • average hourly earnings: 0.4% vs. 0.2% expected, 0.0% previous

Forex traders rejoiced (well, US dollar bulls anyway) when the NFP report came out and showed further tightening in the US labor market. This was apparently taken as a green light for a highly-anticipated December rate hike.

The reaction to the NFP report was as overwhelming as a cannon shot, but that’s to be expected, I suppose. The US Fed already primed forex traders with a rather hawkish FOMC statement, which I highlighted in last week’s Top Forex Market Movers of the Week and which Forex Gump wrote about in more detail here.

Another powder keg was US Fed Head Janet Yellen’s comment that a December rate hike was a “live possibility” during her testimony before the House Financial Services Committee on Wednesday. And the NFP report merely served as the fuse that lit all that stockpiled gunpowder. BOOM!

Do you think these catalysts were enough to spark longer-term forex trends or did they just cause a knee-jerk reaction? Better keep these market themes in mind when planning your trades for next week!