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GBP: Going against normal convention, the Bank of England issued a statement after last month’s meeting and it’s probably safe to assume another one today. Volatility on sterling not likely to be as strong as last month, when reference was made to the fact that the market was wrong to start pricing in rate increases.

EUR: The big surprise last month was the fact that the ECB President said that rates were going “to remain at present or lower levels for an extended period of time”.   This was a big break of the previous practise of not “pre-committing”, so the euro was understandably weaker as a result (by 2 big figures). Today’s meeting still brings volatility risks (see below).

USD:  ISM data the main data focus, with the market looking for gain to 52.0 (from 50.9). Yesterday showed the extent to which the dollar is sensitive to data right now, although month end was no doubt exaggerating flows.

See how to trade the ISM Manufacturing PMI with USD/JPY

Idea of the Day

A month ago, this day proved to be a very wild one for FX, with bombshells dropped from both the ECB and Bank of England after their rate meetings, even though both didn’t actually change policy. A timely illustration, if needed, of the power central bankers have on markets right now.

Sterling moved by more than 1% and the euro by around 0.75% on the initial announcements designed to temper market expectations of future policy moving higher (especially for the UK).   We’ve only seen more than a 1% range on cable on 4% of trading days over the past year. It’s unlikely we are going to get a repeat of the price volatility again today, but there are risks to both. On sterling, it’s that the new Governor chooses to reveal more of the Bank’s thinking on the economy and possible hint at more forward guidance (although this will officially be revealed later this month).

For the ECB, it’s still worth noting that ECB decision days have on average seen 30% wider ranges than non-ECB days, so the potential for volatility remains, even despite last month’s ‘guidance’ from Draghi.

Latest FX News

USD: The FOMC meeting and subsequent statement did little to inspire a Dollar move. As largely expected the tone of the statement was slightly dovish with only minor changes in the wording. After the initial flurry the Dollar settled back nicely into the weeks range.

AUD: The Aussie was the biggest victim in the volatility that was month end on Wednesday, making new lows for the year at 0.8927. The market is now fully convinced that the RBA will cut rates again next week to 2.50%.

EUR: The single currency has proven frustrating for those looking for a move lower, although plenty of offers have capped the upside just below the 1.33 level.

JPY:  The yen weakness story is holding less water at the moment. The yen crosses saw GBPJPY at 6 week lows yesterday (148.30 low), whilst EURJPY is still grappling for a break below the 130 level on a sustained basis, which remains the key focus for now.

More:  EUR/USD: Trading the US Non-Farm Employment Change