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katetrades
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I'm a currency trader with more than 10 years of trading experience. My trading framework involves both fundamental and technical analysis. Currently I'm working as a market analyst at Forex and CFD broker Trader's Way.
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  • Forex Major Currencies Outlook (February 14, 2013) 0 comments
    Feb 14, 2013 11:53 AM

    USD: Neutral
    The U.S. dollar is acting more of a counter-currency these days than actually dictating price action of the dollar pairs. Markets barely reacted to the U.S. retail sales release which came in line with expectations, as the headline figure posted a 0.1% uptick and the core figure showed a 0.2% increase. This is because traders are already accustomed to the Federal Reserve's low interest rates pledge and aren't expecting any changes anytime soon. Only the weekly jobless claims report is due today and this probably won't have a major impact on price action.

    EUR: Bearish
    Latest euro zone GDP data revealed that the region is stuck deeper in a recession for the last quarter of 2012. Euro zone's top three economies all posted negative GDP growth for the quarter with France contracting by 0.2%, Germany showing a 0.6% drop in growth, and Italy printing a -0.9% reading - all weaker than expected. This translated to an overall 0.6% contraction in the region's GDP for Q4 2012, triggering a euro selloff at the start of the London session. With no other major reports due from the region, the selloff could last for the rest of the day as it suggests that the ECB could loosen monetary policy again later on.

    GBP: Bearish
    With the recent speech by Bank of England Governor Mervyn King committing to further monetary policy easing, whether in the form of interest rate cuts or increased asset purchases, the pound kept selling off against its major counterparts. It appears that the central bank is stuck between a rock and a hard place as they have to choose between maintaining price stability and spurring economic growth. King emphasized that they want to prioritize the latter at the moment as they pledged to keep monetary policy loose at the risk of stoking inflationary pressures further. Note that inflation is still way above the central bank's 2% target and additional easing could eventually push the annual CPI beyond the BOE's 3% limit, putting the country at risk of stagflation if growth does not pick up.

    CHF: Neutral
    No economic reports are due from Switzerland until the end of the week, leaving the franc to trade more carefully ahead of the upcoming G20 Summit. While some of the leaders seem to be fine with using monetary policy to keep their local currencies low, criticism for countries that have implemented exchange rate targeting in the past could trigger sharp selloffs for the currencies involved. Remember that the SNB has implemented a EUR/CHF peg in the past year and might also be put under the hot seat for doing so.

    JPY: Neutral
    The BOJ gave a very cautious monetary policy statement during today's Asian session as though keen to avoid anything that has to do with currency manipulation. The bank gave a pretty balanced assessment of their economy as the pointed out both the positive and negative developments so far. The bank also stressed its inflation targets but steered clear of mentioning the threat of deflation so as to not stoke any sharp yen selloffs. Expect the yen to trade carefully prior to the weekend's G20 Summit as traders would be hesitant to take any huge positions prior to the big event.

    AUD: Bearish
    The Australian dollar has been lifted by improved consumer confidence according to Westpac's survey and higher inflation expectations based on the latest Melbourne Institute report. No other reports are due from Australia for the rest of the week. The upbeat reaction to the latest reports could be short-lived as fundamentals in Australia still remain weak, with hiring and spending still muted.

    NZD: Bearish
    Finance Minister English's remarks saying that the recent Kiwi rallies have properly mirrored New Zealand fundamentals sparked a Kiwi run during the Asian session as this shows that their government isn't looking to intervene in the currency market. Besides, English also mentioned the high costs that are incurred just to keep the local currency from rallying and admitted that the New Zealand government isn't equipped with that amount of funds. The New Zealand dollar's recent gains could be erased by a weaker than expected quarterly retail sales report though as the jobs data for the same quarter fell below consensus and showed a drop in participation rate.

    CAD: Neutral
    There were no reports released from Canada lately but the Canadian dollar seems to be benefitting from the rally in oil prices as crude approaches $100/barrel. No reports are due from Canada for the rest of the week but outgoing BOC Head Carney's upbeat comments on the Canadian economy could keep providing support for the Canadian dollar.

    By Kate Curtis from Trader's Way

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