Forex Major Currencies Outlook (February 19, 2014)

US data all came in weaker than expected, as the Empire State index showed a sharper than expected decline from 12.5 to 4.5 instead of just falling to 9.9. The TIC long-term purchases report showed a surprise negative reading as China reportedly trimmed its US Treasury debt holdings. Meanwhile, the NAHB housing market index slipped from 56 to 46 instead of holding steady as analysts predicted. US building permits and PPI are up for release today but the star of the show could be the FOMC meeting minutes, which could shed light on how many policymakers agree that the Fed should continue tapering.

EUR

The euro continued its rally against the dollar and the yen in yesterday’s trading sessions, despite weaker than expected data from the euro zone. The German ZEW economic sentiment figure fell from 61.7 to 55.7 instead of just dipping to the estimated 61.3 reading while the region’s ZEW reading fell from 73.3 to 68.5. There are no reports set for released from the euro zone today so much of the euro’s price action could depend on overall market sentiment.

GBP

The pound retreated to its counterparts yesterday when the UK CPI came in weaker than expected. The consensus was a 2.0% reading, same as in the previous month, but the actual figure ticked down to 1.9%. This throws shade on Carney’s recent inflation upgrade, forcing some to rethink the BOE’s hawkish stance. BOE meeting minutes are up for release today and another round of upbeat remarks might push the pound back up.

CHF
The franc carried on with its rally against the dollar although the gains were made at a slower pace. There were no reports released from Switzerland yesterday while today has the ZEW economic expectations report on tap. An improvement from the previous 36.4 reading might be enough to push USD/CHF lower while a decline could trigger a bounce.

JPY

The yen slipped against its counterparts in yesterday’s Asian trading session when the BOJ expressed its bias to ease further. However, the gains were quickly erased as yen pairs tested significant resistance levels. No major reports are lined up for today but BOJ Governor Kuroda is set to testify in front of Parliament, which suggests that more easing remarks could be in the cards.

Commodity Currencies (AUD, NZD, CAD)
The Aussie and Kiwi lost ground to the dollar in recent trading while the Loonie fought to hold on to its recent gains despite weaker than expected Canadian foreign securities purchases. The report showed a 4.28 billion CAD deficit instead of the expected 9.97 billion CAD surplus. Earlier today, Australia reported a 0.8% uptick in its CB leading index and a 0.2% decline for its MI version. Wage price index showed a quarterly 0.7% increase, stronger than the previous 0.5% rise. Canadian wholesale sales data is due today and a 0.5% drop is eyed.

By Kate Curtis from Trader's Way