Date : 28th January 2016.
CURRENCY MOVERS OF 28th January 2016.
Main Macro Events This Week
FX News Today
FOMC obviously left the funds rate range unchanged at 0.25% to 0.50%. It down****ed the outlook on growth and inflation slightly, tacitly acknowledging the various risks that have cropped up since the last meeting. But the statement wasnt necessarily as dovish as the markets had hoped. The statement did repeat that global economic and financial developments are being closely monitored. The labor market continues to improve though net exports and inventory investment slowed. Of note, the Fed dropped the phrase that it is reasonably confident that inflation will reach the 2% target over the medium term. And it left out the balance of risks. The tone of the statement did not take a March hike off the table (that wasnt really going to be the case) and it gives policymakers leeway to hike again in March. The vote was a unanimous 10-0.
Reserve Bank of New Zealand held rates at 2.50%, matching widespread expectations. However, they took a dovish tact, saying Some further policy easing may be required over the coming year to ensure that future average inflation settles near the middle of the target range. The evolution of the economic data is key, with the bank concluding We will continue to watch closely the emerging flow of economic data. Recall that in December, when the rate was cut 25 bps, Wheeler was more balanced, saying the banks inflation objective could accomplished at the current (2.50% ) rate setting, while also assuring the bank will reduce rates further if needed. As for the New Zealand dollar, he opines that A further depreciation in the exchange rate is appropriate given the ongoing weakness in export prices.
Possible Russian coordination with OPEC was discussed at a meeting with Russian oil companies, according to a Reuters report citing the Russian Energy Ministry, which was related to unfavorable oil prices. There were similar noises yesterday about Iraq and Russia, but this seems to be adding amplitude to the oil rebound now and helping putting a bid in equities and dollar-yen.
Main Macro Events Today
German Prel Jan HICP is seen rising to 0.4% y/y from 0.2% y/y, mainly due to base effects. This is likely to be mirrored by a similar rise to 0.4% y/y in the overall Eurozone number tomorrow. Still very low levels and far below the ECBs definition of price stability.
EMU ESI: We had been looking for a modest decline in the European Commissions ESI Economic Sentiment reading for the Eurozone to 106.6 (med 106.5) from 106.8, but after the weaker than expected Ifo earlier in the week and the weak Italian business confidence numbers yesterday the risk clearly is to the downside.
UK Domestic Product: the UK GDP numbers are out today and are expected to come in at 0.5% (previous 0.4%) QoQ and 1.9% (previous 2.1%) YoY.
US Initial Jobless Claims: are expected to be 280k in the week-ended January 23. Continuing claims are expected to fall to 2,195k for the week-ended January 16.
USDJPY UPDATE
USDJPY, Daily
The outflow of funds from China and into safe haven currencies like the JPY has helped to strengthen the Japanese Yen in recent weeks. However, JPY traders may now be beginning to shift attention to market speculation that the Bank of Japan may be potentially seeking further stimulus measures that may add some weakness to the JPY.
Technically, a fibonacci retracement (December High 123.55 January 20th low 115.90) trade could be in play for projected targets at 119.70 and 120.70. My strategy for short term traders is as long as price can stay above the 118.00 support line to hold long positions for the above fibonacci retracement targets 119.70 (Target 1) and 120.70 (Target 2).
Please note that times displayed based on local time zone and are from time of writing this report.
Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work.
Janne Muta
Chief Market Analyst
&
John Knobel
Senior Currency Strategist
Hot-Forex
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.