The Latest in Forex News & Analysis.

CAD CPI

By AG | September 22, 2017 10:57 am | 0 Comments

CAD Core CPI for August came out at 0% compared with previous reading of -0.1%. Core CPI YoY stays stable at 0.9%. CPI YoY at 1.4% vs 1.5% forecast.

Disappointment on Core Retail Sales MoM, 0.2% vs 0.4% forecast with previous number revised down to 0.4% from 0.7%. Retail Sales MoM 0.4% vs 0.1% forecast.

Next Interest Rate decision for Bank of Canada is on October 25th, with current market expectation split almost 50/50.

BoC already raised Interest Rates twice this year surprising the market so far. Volatility on USD/CAD is expected to raise as we get closer to the IR decision.

 

UK Retail Sales

By AG | September 20, 2017 9:14 am | 0 Comments

Uk Retail Sales YoY at 2.8% vs 1.4% forecast. Also, prior reading revised up to 1.7% from 1.5%.

The number for the month of August is even more impressive: 1% vs 0.2% forecast.

This reading (2.8%) makes clear that consumption in the UK is coming back. It is bouncing from a year low of 0.6%, but it is still far from last year 6.2% recorded always in September.

Next week, UK GDP (Q2) should make things more clear, considering that now the market is pricing a rate hike during November MPC meeting at 64.6%.

US CPI and Jobless claims

By AG | September 14, 2017 12:51 pm | 0 Comments

US Core CPI YoY came out higher than expected at 1.7% vs 1.6% forecast. Core CPI MoM August 0.2%.

Initial Jobless Claims at 284k vs 300k forecast. Bad news for real earnings at -0.6% vs -0.2% forecast.

It might seems a step in the right direction towards the 2% inflation target that the FED tries to achieve. The discussion for another rate hike by year end remains open for debate.

 

BoE Interest Rate Decision

By AG | 9:16 am | 0 Comments

BoE leaves rates unchanged at 0.25%, confirming the stimulus package currently in place. The internal vote within the MPC came out as expected 7-2.

The British Pound went higher on the back of a more hawkish tone in the minutes. Officials confirmed that, under the right circumstances, it might be needed a reduction of the expansionary measures. Inflation is growing and now there is a risk of overshooting that BoE wants to avoid.

 

 

UK Average Earning Index

By AG | September 13, 2017 12:31 pm | 0 Comments

UK average earnings Index stays stable at 2.1% confirming the previous reading even if it falls short on expectations of 2.3%.

With the unemployment rate slightly coming off (4.3% vs 4.4%), this reading shows a mixed but stable situation in the UK.

Tomorrow the BoE will announce its Interest Rate decision, but all the eyes will be on the meeting minutes.

UK CPI

By AG | September 12, 2017 10:38 am | 0 Comments

UK CPI for the month of August came out at 2.9% vs 2.8% forecast and 2.6% previous reading.

Inflation in UK is clearly rising on the back of a weaker Pound, which is still extremely far from pre-Brexit levels. Last time that inflation was so high in the UK, Interest rates were at 0.5% (July 2013).

This represents a challenge for BoE since inflation is picking up on the back of weaker currency, but wages (even if growing at 2.1%) are not able to keep up with inflation growth rate.

Tomorrow BoE will release its Average Earnings Index which at this point is a key indicator to predict the next move for BoE. A rate increase by year end is now priced with 34.7% chance compared with 24.5% we had yesterday.

Bank of Canada, What next?

By AG | September 8, 2017 12:51 pm | 0 Comments

Bank of Canada surprised the market by raising rates last Wednesday to 1%.

The economic scenario improved significantly in 2017 and brought the Central Bank to act accordingly. The only indicator lacking a bit behind is Inflation. As today’s reading shows, the labor condition is improving and, as many expects, should support inflation in Canada. With participation rate stable, the unemployment rate came off to 6.2% and 22.2k jobs were added in the month of August.

Another rate hike chance in October is currently price with 41.9% chance.

ECB IR decision and press conference

By AG | September 7, 2017 10:11 am | 0 Comments

ECB leaves rates unchanged as expected at 0%.

All eyes on the press conference to understand, and eventually anticipate, the next Central Bank move that should be announced in October.

Uncertainty raised on conflicting messages from the President Draghi. On one hand GDP was revised up for the years 2017-2018-2019. On the other anyway, Inflation was revised down for the same period. One of the main causes of this is the EUR/USD exchange rate that has been strengthening for the past few months. The Central Bank anyway remains confident on inflation because of the improving scenario in the labor market across the EU.

October meeting will clarify what will be the monetary policy adopted in 2018. All options are on the table, from tapering to QE extension in 2018.

BOC Rate Announcement

By AG | September 6, 2017 11:00 am | 0 Comments

BOC caught market by surprise, rising rates from 0.75% to 1%.

Before the announcement, expectations for the outcome were split 50/50, a typical situation in which, generally, central banks opt for the status quo rather than a big surprise in order to keep price stability on the affected asset classes.

USD/CAD dropped more than 2 big figures on the announcement, from 1.2406 to 1.2140. The reason of the hike was stronger than expected growth. GDP is surging at record levels, 3.7%, a number that is even more impressing if we consider that initial expectations for 2017 were set at 2%.

On the other hand anyway, Governor Poloz has to deal with a still weak inflation (around 1.2%) and subdued wage pressures. The market will be extremely keen in this Q4 in evaluating and pricing every single word from BOC as expectations for another hike in 2017 are split again at around 50%.

 

US NFP and ECB Statement

By AG | September 1, 2017 10:22 am | 0 Comments

US NFP were disappointing for the month of August. The reading was 156k vs 180k forecast. Also the prior number was revised down to 189k from 209k. The average hourly earnings were also weaker than expected, 0.1% vs 0.2 forecast, down from the 0.3% of the previous month. Participation rate stayed the same and unemployment up 4.4% from 4.3%. Not a good news for the USD bulls apparently.

After a first USD selling against all the other major Currency pairs anyway, news regarding ECB policy came out reversing the price action. The ECB said that the monetary policy for 2018 is not set yet and it might be communicated few weeks before the December meeting.

With the market currently looking at any hints of tapering from the ECB, this news pushed expectations a bit further fueling uncertainty over the 2018 ECB monetary policy.

 

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