Solforex.com - Weekly/Daily Forex Market Analysis

[limyeeshin]

Edition 55｜May 23, 2016​

The U.S. dollar was strengthened against other major currencies, hitting three-week highs against Japanese yen. The dollar boosted after Wednesdays’ FOMC April meeting minutes, growing expectations of the Federal Reserve could raise rates as early as next month. Fed officials said if economic reports indicated that second quarter growth is picking up and firm employment and inflation, the June rate hike would be appropriate. The dollar gained further from the hawkish comments by officials. New York Fed President William Dudley mentioned that the U.S. economy could be strong enough to warrant a rate hike in June or July. The dollar was up almost 0.8% for the week, against major currencies.

Japanese yen rebounded from slight drop after trade data showed wider surplus with a sharp drop in imports on Monday. The trade balance for April came in at ¥430 billion surplus, much above ¥270 billion expected. Imports decreased 23.2%, more than 19% drop seen and exports slightly eased by 10.1%, near 10% fall expected. Finance policymakers at the G7 meeting agreed to avoid competitive devaluation. They passed up a call by Japan for stimulating economies with fiscal measures while seeking balanced fiscal, monetary and structural reform policies to support global growth. USD/JPY fetched to 110.16 from a three-week highs of 110.59 on Friday. EUR/JPY was at 123.60.

The euro rose further against the U.S. dollar on Friday, recovering from seven-week lows in Thursday session as investors advanced profits in the wake of recent rally in the greenback. EUR/USD pair rose 0.19% to 1.1223 in late trade, but the euro still ended the week down 0.84%. British pound held lower amid uncertainty over the June 23 referendum on Brexit from European Union membership. GBP/USD fell 0.66% to 1.4513, off two-week highs of 1.4663 on Thursday.

Commodity linked currencies held firm as the dollar take resurgence. But the Australian dollar was weakened amid expectations of rate cuts by RBA. AUD/USD was last at 0.7229, hitting 0.7175 last week a trough last seen more than two months ago. USD/CAD was at 1.3110, down 0.04% and NZD/USD was last seen 0.6780, up 0.36%.

In the week ahead, investors will pay attention to euro zone’s survey data on private sector activity Monday and ZEW report from Germany following day for indicating health of euro zone’s economy. Also, the U.S. revised estimate of first quarter GDP is to be closely watched.

Weekly Events and Forecasts
Ahead of the coming week, Solforex has compiled a list of these and other significant events likely to affect the markets.

Monday, May 23
Markets in Canada will be closed for the Victoria Day holiday.
The euro zone is to publish survey data on private sector business activity.

Tuesday, May 24
Reserve Bank of Australia Governor Glenn Stevens is to speak at an event in Sydney.
The ZEW Institute is to report on German economic sentiment.
The Eurogroup finance ministers are to hold meeting in Brussels.
The U.S. is to release data on new home sales.

Wednesday, May 25
New Zealand is to release its trade balance.
The Ifo Institute is to report on German business climate.
The Bank of Canada is to announce its benchmark rate and publish its rate statement.

Thursday, May 26
Australia is to release data on private capital expenditure.
The U.K. is to publish revised economic growth on first quarter.
The U.S. is to release data on durable goods orders, pending home sales and weekly initial jobless claims.

Friday, May 27
Japan is to publish data on consumer inflation.
The U.S. is to produce revised data on estimate of first quarter growth and consumer sentiment.

The above schedule may change*

(Mia Chung)
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[limyeeshin]

Thursday 26 May 2016​

Dollar hits two-month highs against others

The U.S. dollar held steady at two month peak against other major currencies as increased expectations for a June rate hike by Federal Reserve boosted demand for the greenback. On Tuesday, the U.S. new home sales rose by 16.6% to an annual unite rate of 619,000 in April which is the highest level since 2008. The upbeat data grew investors’ expectations that the Federal Reserve could raise interest rates sooner in addition to last week’s Fed meeting minutes with optimistic views on rate hike in next month. The dollar was steady at 95.59 against other major currencies.

Euro gains after Greece reached a deal

The euro gained ground after the agreement between Greece and its creditors on Wednesday to unlock €10 billion in bailout funds. The deal eased concerns over the euro zone debt crisis. Also the German Ifo research institute reported that the Business Climate Index rose to a five-month high of 107.7 in May from 106.6 in April, above 106.8 seen. EUR/USD was at 1.1133, off the previous session’s two-month’s lows. British pound found some support with easing in uncertainty over referendum on Brexit from EU membership. GBP/USD gained 0.46% at 1.4703.

Yen and Aussie gains further in Asia

Japanese yen rose further in Asia on Thursday after the corporate service price index came in at 0.2% rise year-on-year as expected. USD/JPY changed hands at 109.62, down 0.51%. In Australia, building capital expenditure dropped 7.9%, far below 3.0% fall expected. Plant and machinery capital expenditure fell 0.5%, less than 2.0% quarterly decline seen. Private capital expenditure fell 5.2%, more than 3.0% decline expected. Despite the drop in capex in first quarter, the outlook for 2016-17 capex was better than expected. AUD/USD traded at 0.7211, up 0.18%.

Commodity currencies remain supported

The commodity linked currencies remained supported as oil prices boosted after the American Petroleum Institute reported that U.S. crude stocks dropped by 5.1 million barrels to 536.8 million. The Bank of Canada also kept the overnight cash rate unchanged at 0.50%. USD/CAD slid 0.34% at 1.3082. NZD/USD also rose 0.21% at 0.6751.

Major pairs (Thursday update)

USD/JPY ↓0.37% 109.77
EUR/USD ↑0.23% 1.1180
EUR/JPY ↓0.17% 122.70
USD/CAD ↓0.31% 1.2980
GBP/USD ↓0.11% 1.4711
USD/CHF ↓0.31% 0.9889
AUD/USD ↑0.36% 0.7211
NZD/USD ↓0.33% 0.6718

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[limyeeshin]

Thursday 2 June 2016​

Dollar remains lower after mixed data

The U.S. dollar stayed lower against the other major currencies after the release of mixed U.S. economic reports that added uncertainty over the rate hike in June. The Institute of Supply Management reported that the manufacturing purchasing manager’s index rose to 51.3 from 60.8 in previous month, better than expected drop to 50.4. The new orders index however fell to 55.7, and the employment index was flat at 49.2. The other report from Markit showed slowest activity in manufacturing since 2009. The U.S. construction spending also fell 1.8% in April with the largest drop since 2011, disappointing expected 0.6% rise. The mixed figures raised doubts over whether the Federal Reserve is to raise the interest rate in June. The dollar declined 0.4% against other major currencies at 95.45.

Yen strengthens after a big drop in Tokyo stocks

Japanese yen surged overnight as a big price drop in Tokyo stocks fueled bids for increased safe-haven preference. Earlier in Japan, the Prime Minister Shinzo Abe announced he was planning to delay a scheduled sales tax hike by 2.5 years. However, investors found disappointment over lack of clear stimulus plans. USD/JPY pair was steady at 109.48, EUR/JPY dropped 0.6% at 122.50 and AUD/JPY retreated 0.7% overnight.

Euro hits three-week high against greenback

The euro rose sharply against the dollar, hitting its strongest move in three weeks after the release of mixed manufacturing data in both area. EUR/USD rose to 1.1185, the currency pair still closed under 1.12 in last seven sessions but it gained more than 2.5% since the year started. Sterling remained under pressure with uncertainty over Brexit referendum on June 23. GBP/USD fell 0.44% to 1.4417. The market will be attentive to the European Central Bank’s policy meeting later in the session, amid investors widely expecting ECB to stand pat on monetary policy.

Aussie falls lower after mixed economic reports

The Australian dollar held lower against the dollar after the release of mixed reports. The Australian Bureau of Statistics reported that retail sales rose by 0.2% in April, slightly below 0.3% gain seen. The trade balance showed that the trade deficit narrowed to A$1.56 billion in April compared to A$1.97 billion in March. Economic analysts expected the deficit would be widened to A$2billion in April. AUD/USD slid 0.33%, traded at 0.7236. NZD/USD pair was steady at 0.6812.

Events in remaining week

Thursday: ECB Monetary policy statement, conference with President Mario Draghi
Euro zone producer price inflation
UK construction activity
US nonfarm payrolls report, initial jobless claims
Friday: China Caixin service sector index
Euro zone PMI service sector
UK service activity
Canada and US trade balance
US employment reports and ISM service sector activity

Major pairs (Thursday update)

USD/JPY ↓0.47% 109.05
EUR/USD ↑0.15% 1.1206
EUR/JPY ↓0.29% 122.20
USD/CAD ↑0.02% 1.3081
GBP/USD ↑0.12% 1.4428
USD/CHF ↓0.12% 0.9871
AUD/USD ↓0.50% 0.7222
NZD/USD ↓0.28% 0.6799

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[limyeeshin]

Thursday 9 June 2016​

Euro gains further after ECB meeting

The euro extended its recent gains against the U.S. counterpart, trading above 1.14 for the first time in three weeks. On Wednesday, the European Central Bank launched a comprehensive corporate bond buying program in its latest attempt to hold off deflation. The bonds will be limited to investment grade securities that are euro denominated and issued in the euro area. The estimated market for bonds is between €500 and €600 billion. Also, ECB Governing member Francois Villeroy de Galhau mentioned about the possible ramifications for lowering interest rates further into negative territory. The EBC held its benchmark rate at a lowest in record of 0.00%. EUR/USD traded between 1.1355 and 1.1410 and settled at 1.1396, up 0.33%.

Dollar falls as lowered expectations of rate hike

The U.S. dollar slumped against other major currencies as uncertainty over next rate hike continued to slow demand for the greenback. On Monday, the Federal Reserve Chair Janet Yellen indicated that the central bank will not be raising rates until the uncertainty over the economy is resolved. According to CME Group’s FedWatch tool, the current probability of rate hike in June fell further to 1.9% and the July stood at 24.8%. The U.S. Labor Department reported its monthly job openings and labor turnover survey (JOLTs) with hiring rate falling to 3.5%, slowest level since 2014. But nationwide job openings increased by 118,000 to 5.79 million, with rate of 3.9%. The dollar fell more than 0.35% and traded at 93.59.

Pound gains with upbeat data

The British pound strengthened against the dollar after the release of upbeat economic reports. The U.K. Office for National Statistics reported that industrial production rose 2.0% in April from 0.3% in March, which is the largest monthly scaling since 2012. Manufacturing output also rose by 2.3% from 0.3% in March, also the fastest monthly increase since 2012. Sterling’s gain was yet limited amid ongoing uncertainty over Brexit referendum on June 23. GBP/USD gained 0.13% at 1.4562.

Kiwi rises after RBNZ keeps its rates

New Zealand dollar rebounded after the Reserve Bank of New Zealand held the official cash rate still. The RBNZ announced to keep the overnight official cash rate steady at 2.25% and signaled room for easing. NZD/USD rose 0.58%, traded at 0.7134. AUD/USD pair also rose together by 0.11% at 0.7497. Ahead in China, CPI data for May is expected to fall 0.2% month on month for a pace of 2.3% gain year on year. Japanese yen also gained despite downbeat core machinery orders, plunging 11.0%. USD/JPY traded at 106.80, down 0.18%.

Events in remaining week

Thursday: Markets in China are closed for a holiday.
China is to publish inflation data.
The U.K. is to release its trade balance.
ECB Governor Mario Draghi is to speak at an event in Brussels.
The U.S. is to report weekly jobless claims.

Friday: Markets in China are remained closed for a holiday.
Canada is to report on monthly employment.
The U.S. is to release data on consumer sentiment.

Major pairs (Thursday update)

USD/JPY ↓0.32% 106.65
EUR/USD ↑0.16% 1.1413
EUR/JPY ↓0.18% 121.72
USD/CAD ↓0.10% 1.2681
GBP/USD ↓0.01% 1.4503
USD/CHF ↓0.13% 0.9579
AUD/USD ↓0.15% 0.7478
NZD/USD ↑0.41% 0.7122

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[limyeeshin]

Edition 56｜June 13, 2016​

The U.S. dollar ended last week stronger against the other major currencies despite reduced expectations for June rate hike by the Federal Reserve. The Fed Chair Janet Yellen indicated earlier that interest rates won’t be raised until the economic outlook is certain. The CME Group’s Fed Watch tool also reported that there is only 1.9% chance the FOMC will raise the rates in June. The U.S. employment report for May also showed dismal increase, with only 38,000 jobs added, the smallest rise since 2010. It is widely expected that FOMC will keep the interest rate at 0.25-0.50% due to the employment slump and Brexit concerns. The dollar still gained 0.65% in late Friday against other currencies, with weekly gains of 0.56%. USD/JPY traded at 106.98, with 0.42% weekly gains. EUR/USD fell 0.57% for the day, with week’s losses of 1.02%.

The British pound and the euro fell to the lowest level since 2013 against Japanese yen as seek for safe haven increased due to rising concerns on U.K. referendum for Brexit in the European Union. GBP/JPY fell as low as 151.50 and EUR/JPY hit 119.87, both lowest trade levels since 2013. GBP/USD also tumbled 1.39% on Friday at 1.4258, with weekly losses of 1.8%. The yen also gained against the U.S. counterpart, with USD/JPY trading at 106.68, down 0.30%. The yen strengthened as investors geared up for a busy week of central bank policy reviews. The Bank of Japan is to announce its monetary policy meeting statement on this Thursday.

The commodity linked currencies were generally weakened. AUD/USD fell 0.79% at 0.7372 and NZD/USD also slumped 0.65% to 0.7059. USD/CAD gained 0.50%, traded at 1.2752. China, where commodity related currencies get more impact from its economy, is due for bundle of reports on Monday. The industrial production for May is expected to go up 5.9% annually and retail sales are seen up 10.1% year-on-year. Fixed asset investment is expected with 10.5% gain in May.

In the week ahead, investors will pay attention to Wednesday FOMC monetary policy announcement for more clues on future pace of U.S. rate hike. There will be also central bank meetings in Japan, the U.K., and Switzerland.

Weekly Events and Forecasts
Ahead of the coming week, Solforex has compiled a list of these and other significant events likely to affect the markets.

Monday, June 13
Markets in Australia will be closed for national holiday.
Japan is to release data on second quarter BSI manufacturing.
China is to publish data on industrial production, retail sales, and fixed asset investment for May.

Tuesday, June 14
In Australia, NAB is to report on business confidence.
Euro zone is to release data on industrial production and employment.
The U.K. is to publish data on consumer and producer price inflation, and retail prices.
The U.S. is to release figures on import and export prices followed by retail sales data with core retail sales in May.

Wednesday, June 15
Australia is to release private sector data on consumer sentiments.
Euro zone is to release the trade balance.
The U.K. is to publish its monthly employment report.
In the U.S., the Federal Reserve is to announce its monetary policy reviews with rate statements followed by press conference by Fed Chair Janet Yellen.
The U.S. is to release bundle of reports on producer prices, industrial production, capacity utilization and New York state manufacturing.

Thursday, June 16
New Zealand is to publish data on first quarter economic growth.
Australia is to release monthly employment report.
Bank of Japan is to announce its monetary policy reviews with benchmark interest rate statement.
Euro zone is to release ECB monetary policy meeting minutes.
The U.K. and the euro zone are to publish data on retail sales and core retail sales.
Bank of England is to announce its latest monetary policy decisions at the end of its monthly meeting.
The U.S. is to publish string of data on its initial jobless claims, consumer price inflation, housing market index, and Philadelphia state manufacturing.

Friday, June 17
Euro zone is to release data on current account.
Canada is to publish its latest inflation report.
The U.S. is to report figures on building permits and housing starts.

The above schedule may change*

(Mia Chung)
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[limyeeshin]

Edition 57｜June 20, 2016​

The British pound rose against other major currencies and around 1% against the U.S. dollar and Japanese yen on Friday as campaigning for the Brexit referendum was suspended following the killing of a pro-EU British lawmaker. On June 16th, a Labour Party member and supporter of EU membership Jo Fox was shot and killed at the regional meeting in Birstall. Therefore it delayed the campaign for the Brexit and eased fears over the upcoming U.K. referendum for EU membership was subsided and recovered tumbles in the earlier week. Earlier, Sterling had weakened sharply amid high percentage supporters for Brexit which brought fears would cause turmoil in global financial markets. GBP/USD rose 1.09% to 1.4352 on late Friday. GBP/JPY also was up 0.95% to 149.51, recovering from Thursday’s three-year trough of 145.37. EUR/GBP was down 0.65% at 0.7852.

Japanese yen weakened against other major currencies as safe haven demand was reduced after Japanese Finance Minister Taro Aso hinted possible yen-selling market intervention. On Friday, Aso said that Tokyo would respond urgently against one-sided, sharp and speculation driven gains in the yen. USD/JPY climbed 0.6% to 104.68, while EUR/JPY gained 1.1% to 118.72. AUD/JPY gained 0.9% to 77.67. A separate report in Japan for the adjusted trade balance came in at ¥270 billion, wider than a surplus of ¥130 billion expected for May. However exports dropped 11.3%, more than the 10.4% year-on-year fall seen and the overall trade balance came in at a drop of ¥41 billion, the first deficit in four months.

The U.S. dollar was broadly weakened against major currencies after FOMC decided to keep current interest rates unchanged at the latest meeting. The Federal Reserve also reaffirmed the gradual and cautious rate hike and lowered forecasts for how much they expect to hike interest rates in the next few years. Meanwhile, separate reports showed that housing starts declined 0.3% to 1.164 million units and building permits increased to 1.138 unites, slightly below 1.150 expected. Earlier, the U.S. consumer prices came in with less than expected increase last month. The dollar was down 0.4% against other major currencies at 94.30 with weekly loss of 0.23%.

In the week ahead, investors will pay close attention to the outcome of Thursday’s U.K. referendum on Brexit. Opinion polls were published Saturday showing support for the ‘Remain’ in EU regained its lead over Brexit. Investors will also be looking ahead to monetary policy statement by Federal Reserve Chair Janet Yellen.


Weekly Events and Forecasts
Ahead of the coming week, Solforex has compiled a list of these and other significant events likely to affect the markets.

Monday, June 20
Japan is to publish data on trade balance.
Euro zone is to report on construction production.
Germany is to release data on producer price inflation.
U.K. is to publish data on housing prices.
Canada is to release data on wholesale sales.

Tuesday, June 21
Japan is to release data on industrial activity.
Reserve Bank of Australia is to release its recent monetary policy meeting minutes followed by data on house price index for the first quarter.
In the Euro zone, ZEW institute is to report on German economic sentiment.
Fed Chair Janet Yellen is to testify on monetary policy at the Senate Banking Committee in Washington.

Wednesday, June 22
Euro zone is to release data on consumer sentiment.
In the U.S., Fed Chair Janet Yellen is to testify on monetary policy at the House Financial Services Committee.
The U.S. is also to report on existing home sales and mortgage applications.
Canada is to publish data on retail sales.

Thursday, June 23
In the U.K., national referendum for EU membership is to take place.
Japan is to release data on manufacturing.
Eurozone is to publish data on manufacturing and service activities.
The U.S. is to report on its weekly initial jobless claims followed by data on manufacturing and new home sales.

Friday, June 24
Japan is to publish data on service producer prices.
Ifo Institute is to report on German business climate.
In the U.S., data on durable goods orders and revised consumer sentiment are due.


The above schedule may change*

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[limyeeshin]

Edition 58｜June 27, 2016​

The British pound crashed on Friday, suffering from its largest one day selloff in decades. The U.K. voted by 52% to 48% on Thursday for the Brexit and reverberated in global financial markets. Sterling tumbled badly with the fears that the decision could hit investment in the U.K. economy. British Prime Minister David Cameron, who was standing for the Remain campaign, stepped down after the final referendum announcement. Analysts warned that it may downgrade the U.K.’s credit rating by the vote with negative outlook with a prolonged period of uncertainty. The pound found some support after BoE announced that it would take all necessary steps to ensure financial stability. GSB/USD hit 1.3228 and settled at 1.3616 on Friday and fell further to 1.3401 on Monday. It was the biggest drop since mid-1985 Plaza accord. EUR/USD pair also fell 2.3%, traded at 1.1120 late Friday.

The U.S. dollar and Japanese yen soared with increased demand in safe-haven currencies after a shock of Brexit votes. Especially, the yen surged against the dollar and USD/JPY pair hit lows of 99.03, before settling back to 102.22. The yen gained slightly further in Asia on Monday after the policymakers in Japan assessed the next steps in financial markets. Policymakers in Japan and China announced to support for the upcoming tumbles in financial markets. Other safe asset gold also soared by 4.7% in the day and traded at 1,322.40 per ounce.

On Monday, the trade balance in New Zealand showed a NZD 358 million surplus in May month on month, much higher than NZD 164 million expected. The year on year figure came in at a deficit of NZD 3.63 billion, similar to the previous month. NZD/USD was down 0.67% after the data, traded at 0.7084. AUD/USD traded at 0.7425, down 0.51%.

In the week ahead, investors will continue to digest the fallout from the Brexit vote. On Wednesday, Federal Reserve Chair Janet Yellen is to speak at an ECB central bank conference and investors would closely watch for indication on how Brexit will alter the outlook for the interest rate path in the U.S.

Weekly Events and Forecasts
Ahead of the coming week, Solforex has compiled a list of these and other significant events likely to affect the markets.


Monday, June 27
New Zealand is to release the trade balance.
China is to release data on the industrial profit.
The U.S. is to report on PMI service sector.


Tuesday, June 28
Germany is to release data on import prices.
The U.S. is to publish final data on first quarter GDP followed by the data on consumer confidence.


Wednesday, June 29
Japan is to release data on retail sales for May.
Australia is to report on new home sales.
Euro zone is to publish data on business and consumer sentiment.
Germany is to release data on producer prices.
The U.K. is to publish hosing prices index and data on net lending.
The U.S. is to release reports on personal income and expenses and PCE prices.
Federal Reserve Chair Janet Yellen is to speak at the ECB central bank conference in Portugal.


Thursday, June 30
Japan is to publish data on new starts and construction orders.
Euro zone is to release data on producer prices.
ECB is to publish its latest monetary policy meeting minutes.
Germany is to report on changed in employment and retail sales.
The U.K. is to release data on its final first quarter GDP and current account.
The U.S. is to publish its weekly initial jobless claims.


Friday, July 1
Japan is to publish data on unemployment rate and consumer price inflation.
China is to release data on PMI manufacturing.
Euro zone is to publish data on PMI manufacturing and unemployment rate.
The U.S. is to release bundle of reports on PMI and ISM manufacturing, purchasing prices and construction expenses.

The above schedule may change*


(Mia Chung)
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[limyeeshin]

Thursday 30 June 2016​

Dollar weakens with eased Brexit concerns


The U.S. dollar weakened against other major currencies as the euro and sterling rebounded with reduced Brexit anxiety. Meanwhile in the U.S., the pending home sales declined by 3.7% which was lower than the expectation of 1.1% drop. Another report from the U.S. Commerce Department reported that personal spending increased by 0.4% as expected while April’s figure was revised up to 1.1% gain which is the largest increase in seven years. Personal income also rose 0.2%, slight below 0.3% gain seen. PCE prices also rose 0.9% year on year and the core PCE prices rose by 1.6% year on year. Overall data showed some stability which seemed to support investors’ risk on moves. The dollar fell 0.5% against other major currencies and traded at 95.91.

Sterling and euro rebounds as Brexit worries ease


The British pound rebounded after suffering from its biggest one-day drop in recent history on Friday by hitting its lowest level in 31 years. On Wednesday, the U.K. net lending to individuals rose by £4.3 billion, following the £1.6 billion rise in the previous month and above £2.9 billion expected. The pound came under selling pressure with fears over Brexit that could affect investment in the U.K economy and threaten London as a global financial capital. The European Union leaders, excluding Britain, met Wednesday in Brussels following Tuesday’s summit to discuss how to respond to the Brexit vote. GBP/USD rose 0.08% to 1.3441. The euro also rebounded as worries eased, and EUR/USD pair traded at 1.1105.

Yen gains further despite weak data


Japanese yen gained in Asia on Thursday despite the downbeat industrial output as investors are increasingly focused on the central bank’s further easing measures. In Japan, preliminary industrial production for May fell by 2.3%, compared to 0.1% fall expected. USD/JPY changed hands at 102.69, down 0.14%.

Commodity currencies gain with eased trades


The riskier commodity-linked currencies gained Thursday after investors were eased with concerns over Brexit. In Australia, housing credit for May rose 0.5%, following previous month gains of 0.4% and private sector credit also rose 0.4%, slight below expected 0.5% rise month-on-month. AUD/USD gained 0.7% at 0.7440 and NZD/USD gained 1.1% to 0.7119 in early trades.

Major pairs (Thursday update)

USD/JPY ↓0.18% 102.63
EUR/USD ↓0.21% 1.1101
EUR/JPY ↓0.43% 113.93
USD/CAD ↑0.22% 1.2965
GBP/USD ↓0.25% 1.3397
USD/CHF ↑0.07% 0.9804
AUD/USD ↓0.28% 0.7430
NZD/USD ↓0.45% 0.7081

(Mia Chung)
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[limyeeshin]

Solforex Edition 59｜July 4, 2016​

The U.S. dollar eased against other major currencies on Friday as investors’ expectations are faded for rate hike by the dovish stance of the Federal Reserve. Market players ruled out further rate hikes this year due to the impact of Brexit votes. Future markets are even envisaging a chance that the Fed could actually cut rates in this year. CME Fed Watch tool reported that there is currently 0% probability that the Fed would raise the rates and 3% probability of a rate cut. The dollar fell 0.25% for the day to 95.72. USD/JPY pair fell 0.7% with continued demand for safe-haven from the Brexit.

The British pound fell against the U.S. counterpart as investors continued to digest the political and economic after math of Brexit. Bank of England Governor, Mark Carney said on Thursday that more stimulus may be needed over the summer, spurring expectations for a rate cut. Meanwhile in the U.K., London Mayor Boris Johnson took off the race to Britain’s next prime minister on Thursday, while Justice Gove, one of main Brexit campaigner, announced he would run for the prime minister. Interior Minister Theresa May, an EU remain-campaigner, also indicated her willingness to lead the party. GBP/USD fell 0.33% to 1.3266, still close to 31 year low of 1.3122.

The euro rebounded from a sharp drop after a report said that the European Central Bank was not considering buying government debt out of proportion to euro zone countries’ shareholding in the bank. On Thursday, Blomberg reported that the ECB had been considering giving up the capital key because of a shortage in German paper. EUR/USD pair traded at 1.1136, up 0.17%.

The Australian dollar fluctuated on early Monday with heightened political uncertainty. Australia’s general election on Saturday produced no clear winner after more than two thirds of the votes were counted and causing chaos for political certainty among investors. Most economists expected the Reserve Bank of Australia would keep the cash rate unchanged at a record low 1.75%. There are expectations that the RBA will take dovish stance at Tuesday meeting in the aftermath of Brexit and low inflation. AUD/USD slid down to 0.7410 and rebounded to 0.7468.

In the week ahead, investors will pay more attention to economic fundamentals and U.S. monetary policy. The U.S. nonfarm payroll for June and FOMC minutes will be in focus. Also, market players will pay close attention to the Bank of England’s financial stability report.


Weekly Events and Forecasts
Ahead of the coming week, Solforex has compiled a list of these and other significant events likely to affect the markets.


Monday, July 4
U.S. financial markets are closed for the Independence Day.
Australia is to release data on MI inflation and building permits.
The U.K. is to release data on construction activity.
Eurozone is to publish data on produce price inflation.
Also in the euro zone, Sentix is to report on investors’ sentiment.

Tuesday, July 5
Japan is to release Nikkei PMI service sector index.
China is to publish the Caixin service sector index.
Australia is to release data on trade balance and retail sales.
The Reserve Bank of Australia is to hold monetary policy meeting and announce its rate decision.
Euro zone is to publish data on PMI service sector and retail sales.
The Bank of England is to release the financial stability report.
The U.S. is to publish data on ISM New York region manufacturing, factory orders, and durable goods orders.

Wednesday, July 6
Euro zone is to release PMI retail sales index.
Germany is to publish data on factory orders.
The U.S. is to release bundle of data on trade balance, PMI service sector, ISM non-manufacturing, new orders, and employment index.
The FOMC is to release its recent monetary policy meeting minutes.

Thursday, July 7
Australia is to release data on construction activity.
The European Central Bank is to release its June meeting minutes.
Germany is to publish data on industrial production.
The U.K. is to report on housing index and manufacturing.
The U.S. is to release ADP nonfarm payrolls report and weekly initial jobless claims.

Friday, July 8
Japan, Germany and the U.K. are to release data trade balances.
The U.S. is to closely report on employment with unemployment rates and average earnings.

The above schedule may change*

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[limyeeshin]

Thursday 7 July 2016​

Sterling continues to weaken with ongoing Brexit concerns

The British pound remained weaker as Britain’s shock decision on Brexit vote continued to bring uncertainty over the country’s economy. The Bank of England warned challenging risks to financial stability following the Brexit vote and eased some regulatory requirements in the banking sector. BoE Governor Mark Carney also implied major change which would help the economy to bear with the Brexit consequences. Meanwhile, the European stocks fell sharply, some hitting lowest level since 2011. The property funds in the U.K. halt redemptions as ongoing liquidity pressures in the wake of the Brexit vote. The Italian bank sector tumbled as fears on uncertainty of the banks increased. GBP/USD fell as far as 1.2797, below 1.28 for the first time since 1985. The pair settled at 1.2961, down 0.25%.

Dollar weakens after the FOMC minutes

The U.S. held weaker after the Federal Reserve’s June meeting minutes showed caution on the path of rate hikes in near future. Overnight, the dollar moved higher after the release of upbeat U.S. service sector data and ongoing demand for safer assets. The ISM non-manufacturing index came in at 56.5, the highest level in eight months and above the expectations at 53.3. Earlier, the trade balance came in at $41.14 billion deficit, which was widened from $37.38 in previous month and more than $40 billion expected. Later the day, the cautious stance of the Federal Reserve from the FOMC minutes and the Fed member Danial Tarullo mentioning that the financial market is well prepared for the Brexit shock, lowered the dollar. The dollar fell 0.15% against other major currencies at 96.13.

Safe-haven yen remains higher while euro struggles

Japanese yen remained higher with ongoing demand on safe assets in the wake of Brexit shock. The yen soared to a three and a half year high against the pound with GBP/JPY pair falling 1.8% for the day. The dollar also fell 1.2% against the yen with USD/JPY pair trading at 100.49. The euro retreated by falling below 111 yen as growing fears in European market instability with Italian banks suffocating under a pile of non-performing loans. EUR/USD also fell 0.15% at 1.1058.

Aussie goes lower despite upbeat data

The Australian dollar held lower in Asia despite upbeat construction activity as investors eyed on upcoming final word on last week’s federal election. The AIG construction index for June jumped to 53.2 compared to 46.7 in the previous month. In Australia, HIA chief economist Harley Dale said the results serve as a reminder that new residential construction remains the powerhouse of the domestic Australian economy. "At the same time, non-residential construction has some spark to it, but the breadth of recovery is still proving elusive," Dale said. AUD/USD fell 0.12% at 0.7512 in early trade Thursday.

Major pairs (Thursday update)

USD/JPY ↓0.30% 101.03
EUR/USD ↑0.04% 1.1103
EUR/JPY ↓0.30% 112.13
USD/CAD ↓0.05% 1.2957
GBP/USD ↑0.43% 1.2988
USD/CHF ↓0.06% 0.9743
AUD/USD ↓0.03% 0.7518
NZD/USD ↑0.27% 0.7150

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