Forex Major Currencies Outlook (September 4, 2014)

It showed a 10.5% gain versus the estimated 10.9% increase, although the previous month’s report was upgraded to show a 1.5% rise. Total vehicle sales was stronger than expected at 17.5M versus the projected 16.5M figure. Meanwhile, the Fed Beige Book revealed that most districts saw economic improvements in the past months. For today, Challenger job cuts and ADP non-farm employment change data are due and might provide clues on how the NFP release might turn out.

EUR

The euro recovered a bit to the dollar but edged lower to most of the higher-yielding currencies, as traders continued to price in expectations of easing or dovish remarks from ECB Governor Draghi in today’s rate statement. Data from the euro zone was mixed, with the Spanish services PMI coming in stronger than expected at 58.1 while the Italian services PMI and euro zone overall services PMI fell short of consensus. Euro zone retail sales also fell short as it printed a 0.4% decline instead of the estimated 0.3% dip. For today, the ECB statement should set the tone for euro price action both in the short-term and long-term.

GBP

The pound failed to bounce back despite stronger than expected services PMI from the UK. The report showed a climb from 59.1 to 60.5, reflecting a stronger expansion in the industry. The BOE rate decision is scheduled today and policymakers are not expected to announce any changes in interest rates or asset purchases. Any changes in the actual statement could provide clues on whether or not policymakers are becoming more optimistic about the economy, which might then dictate the pound’s direction.

CHF

The franc advanced to the dollar recently, despite the lack of data from Switzerland. There are still no reports due from the country today, which means that the franc might take its cue from euro price action or from market sentiment.

JPY

The yen had a mixed performance, as it gained ground to the pound but continued weakening against the commodity currencies. Traders are pricing in expectations of dovishness from the BOJ statement today, although profit-taking might take place before the actual event or if Kuroda doesn’t show any inclination to ease at all.

Commodity Currencies (AUD, NZD, CAD)

The Australian dollar was able to hold its ground in recent trading, as Australia reported a stronger than expected GDP reading of 0.5% versus the projected 0.4% expansion. The Loonie was also able to benefit when the BOC stuck to its neutral stance and kept monetary policy unchanged. As for the Kiwi, its gains were limited as the latest dairy auction in New Zealand turned out weaker than expected again.

By Kate Curtis from Trader's Way