Forex Major Currencies Outlook (Oct 23, 2014)

Data from the US economy came in mixed, with the core CPI coming in short of expectations with a 0.1% uptick instead of the projected 0.2% gain and the headline CPI beating the consensus of a flat reading and showing a 0.1% increase. US initial jobless claims and flash manufacturing PMI are due today, both of which could drive short-term dollar price action. Risk sentiment remains in the driver’s seat and continues to keep the safe-haven currencies strong.

EUR 

The euro gave up more ground to the dollar in recent trading sessions, even though there were no weak reports printed from the euro zone. For today, the German and French PMI readings could determine whether or not the shared currency has a shot at recovering. However, analysts predict that the manufacturing and services sectors of these top two euro zone economies might continue to show more weakness and sharper contractions. Lower than expected results could remind traders of the looming euro zone recession and push the currency down. 

GBP

The pound also weakened in recent trading when risk aversion set in. As expected, the BOE minutes indicated why policymakers appeared less hawkish than usual, as most members of the committee became more concerned about the impact of a euro zone recession on the UK economy. Two policymakers still voted to hike rates this month while the decision to keep asset purchases unchanged was unanimous. UK retail sales, BBA mortgage approvals, and CBI industrial order expectations are up for release today. 

CHF

The franc took its cue from the euro and gave back its recent gains to its counterparts, as there were no major reports from Switzerland to give the franc direction yesterday. There are still no reports due from the country today so the franc could react strongly to euro zone PMI releases, with weak data likely to weigh on the Swiss currency as well. 

JPY

The yen took advantage of the run in risk aversion recently, as the lower-yielding currency recovered to the euro and the pound. Japan’s flash manufacturing PMI came in stronger than expected at 52.8 versus the projected 52.1 figure and up from the previous 51.7 reading. No other reports are due from Japan, with risk sentiment likely to give yen pairs direction. 

Commodity Currencies (AUD, NZD, CAD)

The comdolls gave up ground on risk aversion, as the Loonie saw a little more volatility due to Canadian economic releases. The retail sales report churned out weaker than expected readings yet the Loonie drew support from the BOC’s decision to drop their “neutral” wording in their rate statement. This was interpreted to be a hawkish sign, although their actual statement still contained hints of caution. Earlier today, New Zealand reported a weaker than expected quarterly CPI of 0.3% versus 0.5%, causing a massive Kiwi selloff. BOC Governor Poloz is set to testify today while New Zealand will release its trade balance later on. 

By Kate Curtis from Trader's Way