Forex Major Currencies Outlook (Oct 18, 2017)

FOMC member Harker highlighted the tight labor market while Kaplan wrote about waiting to see if 2% inflation is achieved in the medium term or not. FOMC members Dudley and Kaplan have testimonies scheduled today, ahead of the release of US building permits and housing starts. 

CAD 

The Loonie was off to a rough start but later on staged a strong rally after Mexico and Canada rejected the latest set of NAFTA proposals from the US. Another round of talks is scheduled next month but many think that this could go on until after the end of the year, which means that Canada can stick with the current trade agreements for longer. Canadian manufacturing sales is due next and a smaller 0.1% dip is eyed. 

EUR 

The euro held its ground even though economic data turned out mostly weaker than expected. The German ZEW economic sentiment index rose from 17.0 to 17.6 but this was way short of the 20.1 consensus while the region's index fell from 31.7 to 26.7 instead of improving to 34.2. There were no changes in the final core and headline CPI readings. ECB head Draghi has a speech lined up next. 

GBP 

The pound was weighed down heavily by downbeat BOE rhetoric, causing traders to shrug off positive inflation data. The headline CPI rose to 3.0% as expected while the core figure held steady at 2.7%. Officials Carney, Tenreyo, and Ramsden shared the view that Brexit could complicate economic performance so they weren't so convinced that a rate hike is needed just yet. Jobs data is due next and an increase of 1.3K in claimants is eyed, but the average earnings index could draw more attention. 

JPY 

The Japanese currency was mostly weaker against its peers as dollar demand persisted. There were no major reports from Japan so traders were more fixated on the potential outcome of the upcoming elections. Stronger support for PM Abe would be a vote in favor of easy monetary policy, which could continue to keep a lid on yen gains. There are no reports due from Japan today. 

Commodity Currencies 

The Kiwi took some hits after the GDT auction revealed a 1% drop in dairy prices, following the earlier 2.4% slump. This could prompt downgrades from Fonterra in terms of milk payout forecasts, which could give the RBNZ reason to stick to its neutral stance for much longer. Earlier today, Australia's MI leading index showed a 0.1% rebound from the earlier 0.1% drop. 

By Kate Curtis from Trader's Way