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Global Forex Market Report - 16 April 2015

A choppy week in the currency markets as the Dollar looks set to gain on commodity currencies following poor Chinese export data and renewed interest in a 2015 US rate hike from the Fed.
The Dollar looks set to continue its gains against the Majors and commodity based currencies following renewed interest in the timing of the Fed rate hike. The FOMC minutes released last week show a split amongst Fed members as to when US rates will be raised, the market is constantly on alert for further justification of a restrictive policy move. The main focus is the timing of Fed action, a raise is almost entirely priced in for 2015 but will it be within the first half of the year? The size of the action is, at this point, less of a debate due to continued emphasis by the Fed for a gradual implementation of restrictive policy.
A busy data week for USD as it started with Tuesday’s Retail Sales figures. Wednesday saw Industrial Production, the Housing Market Index and the Beige Book report on the US economic situation. Today is a very active day with Housing Data, Jobs numbers and a speech from the Fed’s Stanley Fischer. Friday closes with CPI data.
The Euro has slipped to a month low against the USD on Friday on its monetary policy stance and the US Fed’s expected rate hike. The currency is still facing pressure on the Greek debacle with debt repayments and bailout agreements occurring this week. It’s been a continued deterioration of the Euro and there is a potential for the situation to worsen on the 24th of April upon finance ministers meeting for discussions over further bailout funds. In the meantime the ECB met yesterday which could have indicated some ending to the QE programme prior to September 2016. The Euro had already dropped off this year after it’s unveiling of the trillion euro QE programme. The bank has then started asset purchases in March and pushed the euro bond yields lower. Eurozone Industrial production data was due to be released on Tuesday which could have moved the Euro ahead of ECB’s meeting. Even though the ECB is likely to leave interest rates unchanged at 0.05% after the implementation of QE.
Sterling extends to a 5 year low against the US dollar at 1.4550 on Friday and on Tuesday at 1.46 relating to concerns to the 7th of May British parliamentary elections. The negative industrial production data released from last week continues to put pressure on the pound. We expect to see further volatility this week with last month’s inflation data to be released and later the labour market stats.
It’s not a good picture for the Aussie this week starting at a 6 year low against the US dollar. The weak China export data weighed heavily on the currency because of the trade links between the two countries, China being one of Australia’s biggest export partners. China’s exports fell by 12.7% and led to the 1 % AUD fall to below 0.76 against the USD. There is pressure for AUDUSD resistance level to hold this week at 0.77 with the next support level at 0.7550. Its recovery mode for the currency on Tuesady fluctuated around 0.76 to recuperate from its losses. More volatility for the Aussie will likely be seen today with labour market figures.
The NZD fell to 74.20 against the USD on effects of the China exports along with AUD and ZAR currencies, its lowest level in two weeks. It’s purely an indicative of the sensitivity to China’s economy. The focus on Tuesday was on the business confidence survey from New Zealand Institute of Economic Research with the release of March house sales. On the other hand the Kiwi has reached 71.20 to the euro on the Eurozone’s loose monetary policy and a contrasting positive outlook on New Zealand’s economy. Other than the knock off effects of china the Kiwi still remains one of the firmer currencies.
The rand losing ground this week on China’s trade data and possible ripple effect onto China’s GDP data which was to be released on Wednesday with the USDZAR at 12.12, EURZAR at 12.80 and GBPZAR at 17.7550. Despite the sell-off of emerging markets the domestic bond and equity markets have been fairly robust. Locally, Eskom to be of focus again with stage 2 and stage 3 load shedding experienced this week, which will hold as a major constraint to domestic growth.

Economic Data and Events for this Week

14 April 2015:

08h30 am GMT:  GBP CPI & Core CPI (YoY) (Mar)
12h30 am GMT:  USD Advance Retail Sales (Mar)

15 April 2015:

11h45 am GMT:  European Central Bank Rate Decision & Conference

16 April 2015:

01h00 am GMT:  AUD Consumer Inflation & Unemployment Rate

17 April 2015:

12h30 pm GMT:  USD CPI (YoY) (Mar)

Global Forex Market Report - 25 March 2015
S. America Forex Market Report - 17 April 2015

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