General Commentary
Last Week’s Currency Trading Review:
The EUR: TheEUR/USD tumbled from 1.3994 to close the week at 1.3767 after Mr. Draghi talked down the euro after the ECB held rates and policy. Mario Draghi more or less promised stimulus in June if growth had not accelerated along with inflation. The dollar reacted to strong data from the US and a promise from Fed Chief Yellen that interest rates would remain low for a long time forward. Preliminary first-quarter GDP results for the major euro area economies will be released next week (Spain already reported 0.4% q/q gain in the January-March period). The recovery gained some momentum at the start of 2014, thanks in part to mild winter weather conditions. Traders can expect that real GDP advanced by 0.4% q/q in the region as a whole, marking the fastest quarterly pace since the first quarter of 2011. Although exports remain the driving force behind the upturn, domestic demand conditions have also begun to improve, helped by lower inflation, higher confidence and gradually recuperating labour markets. The unemployment report for March showed the jobless rate at 11.8% for the last four months, down from a peak of 12% through most of 2013. Meanwhile, credit and money dynamics — particularly for businesses — remain weak, limiting the potential for the recovery to pick up speed in the coming quarters
The Yen: TheUSD/JPY ended the week on a strong note at 101.77 as safe haven trading keeps pushing up the Japanese currency along with words from the BoJ as they decline to add additional stimulus. “At present the Bank of Japan sees no need for further action. As a result USD/JPY will remain at current levels longer than we had previously expected”. “However, medium term many factors still point towards a notably weaker yen, as the BoJ will step up its measures in the autumn if it looks as if the inflation target will be missed”. “Moreover market attention might begin focusing again on another issue on Monday: the stubborn current account deficit. This too will put medium term pressure on the yen”.
The AUD: TheAUD/USD climbed this week after strong data releases supported the currency and lackluster Chinese data had little effect. The Australian dollar flirted with the US94c mark for the first time in three weeks overnight as investors cheered better-than expected local jobs numbers and improved trade figures out of China.
The Forex Trading Week Preview:
The States: Monday FOMC member speaks. Tuesday Core Retail Sales, Retail Slaes, Import pric. Wednesday PPI. Thursday, CPI and unemployment claims. Friday Philly Fed Manufacturing index and Yellen speaks.
The EZ: Tuesday, German ZEW Economic Sentiment, Thursday, GDP, CPI. Friday, French prelim Non farm payrolls.
The BOE: Wednesday, Unemployment, Claimant Count Change, BOE Carney speaks and Inflation Report.
The BOJ:Monday, Current Account. Thursday Prelim GDP, Tertiary Industry, BOJ Kuroda speaks.
