Forex Major Currencies Outlook (December 5, 2013)

The ADP report showed a 215K rise in private payrolls, spelling good prospects for Friday’s NFP release and possibly the Fed’s decision to taper. Trade balance came in somewhat in line with consensus at a deficit of 40.6 billion USD. However, the ISM non-manufacturing PMI was weaker than expected at 53.9 versus the estimate at 55.4. For today, US preliminary GDP and initial jobless claims data are due and another round of strong data might lift the Greenback. 

EUR

The euro bounced back and forth against the dollar yesterday. It was first weighed down by weak data from the euro zone, as Italian services PMI showed a contraction while region-wide retail sales chalked up a 0.2% decline. The ECB is set to make its interest rate decision today and traders are interested to find out whether negative deposit rates were discussed or not. Downbeat remarks from Draghi might push EUR/USD below 1.3400 while reassuring comments could trigger another test of 1.3600. 

GBP

The pound retreated to the dollar in yesterday’s trading when the UK services PMI turned out to be a disappointment. The figure fell to 60.0 when analysts were expecting to see a small decline from 62.5 to 62.1. However, the losses were limited as traders hesitated to take any huge positions ahead of today’s BOE interest rate decision. No monetary policy changes are expected but we might hear of Carney’s assessment and outlook for the economy, which might be the major driving factor for pound pairs today. 

CHF

The franc was able to regain ground against the dollar yesterday and extend its rally against the Australian dollar. There were no major reports released from Switzerland then and there is no report due today, which means that the franc might benefit from risk-off trades. 

JPY

The yen was still in recovery mode yesterday when the Nikkei stock index posted another day in declines. The selloff in the yen pairs could also be attributed to profit-taking at significant levels and reducing exposure ahead of this week’s NFP release. There were no reports released from Japan yesterday and there are none due today so the yen’s movement might depend on risk sentiment again. 

Commodity Currencies (AUD, NZD, CAD)

The Aussie and Kiwi were heavily beaten up yesterday, as Australia printed a weaker than expected GDP reading of 0.6% versus the 0.7% estimate. Meanwhile, the Loonie also lost ground because of the BOC’s hints that they’re considering further stimulus. For today, only the Canadian building permits is due from the comdoll economies and this isn’t likely to spark huge extended moves. 

By Kate Curtis from Trader's Way