Forex Major Currencies Outlook (Nov 3, 2014)

Data from the US economy was mixed, with the personal spending and income figures coming short of expectations and the employment cost index and Chicago PMI beating expectations. For today, the ISM manufacturing PMI is due and it might show a dip from 56.6 to 56.5, reflecting a slightly slower pace of expansion in the industry. Strong data could add another boost for the dollar though, as it might set the tone for a strong NFP release later in the week. 

EUR

The euro gave up ground to the dollar but was able to take advantage of yen weakness at the end of the week. Data from the euro zone was much weaker than expected, with Germany printing a 3.2% decline in retail sales and France marking a 0.8% drop in consumer spending. The headline CPI flash estimate for the region showed a 0.4% uptick as expected while the core CPI flash estimate fell short of estimates and posted a 0.7% gain. Spanish and Italian manufacturing PMI are up for release today and weak figures could inspire more losses for the shared currency. 

GBP

The pound consolidated to the dollar and rallied to the yen on Friday, as there were no major reports released from the UK. For today, only the manufacturing PMI is up for release but this might spark a strong reaction from the currency. The reading is slated to drop from 51.6 to 51.5, reflecting a slower pace of industry expansion. However, a stronger than expected reading might lead to a bounce for the pound.

CHF

The franc simply followed the euro’s footsteps on Friday since there were no reports from Switzerland to give it direction. Unfortunately for the Swiss currency, data from the euro region came in weaker than expected and revived fears of deflation and a recession. Swiss SVME PMI is up for release today and it might show an improvement from 50.4 to 51.3, which would mean that the manufacturing industry saw a stronger expansion. 

JPY 

The yen gave up a lot of ground on Friday when the BOJ surprised the markets with its decision to ramp up its easing efforts. The central bank decided to expand its monetary base with higher asset purchases in order to ward off the threat of deflation in the country. BOJ Governor Kuroda also mentioned that they are gearing up for another sales tax hike, which might hurt spending and manufacturing again. Japanese banks are on holiday today, which means that there are no reports lined up, but the yen might lose further ground after this easing decision. 

Commodity Currencies (AUD, NZD, CAD)

The comdolls took advantage of yen weakness but were no match to the dollar’s strength on Friday. Canadian GDP was weaker than expected at -0.1% while Australia’s building approvals report released today showed a massive 11.0% decline. ANZ job advertisements marked a mere 0.2% uptick, setting the tone for a potential disappointment in Australia’s jobs report due later this week. Chinese non-manufacturing PMI dipped from 54.0 to 53.8, reflecting a slight slowdown in the services industry. 

By Kate Curtis from Trader's Way