Forex Major Currencies Outlook (January 16, 2014)

Core producer prices rose by 0.3% instead of the estimated 0.1% uptick while headline producer prices saw a 0.4% increase instead of the projected 0.5% rise. Meanwhile, the manufacturing index jumped from 1.0 to 12.5, outpacing the estimate at 3.2. Up ahead, CPI and jobless claims data are up for release. The headline CPI could show a 0.3% uptick while the core could print a 0.1% increase. Initial jobless claims are expected to be at 327K, lower than the 330K figure seen last week.

EUR

The euro continued to slide lower to the dollar, as it slipped below the 1.3600 major psychological level. There have been no major reports released from the euro zone recently and only the CPI figures are up for release today. Bear in mind though that talks of deflation have been running recently, and weaker than expected inflation reports might renew speculations of further LTRO or negative deposit rates, which would be negative for the euro.

GBP

The pound gave up more ground to the dollar in yesterday’s trading, despite the lack of top-tier data from the UK. BOE Governor Carney’s speech did not contain any surprises but it was enough to spark a little more volatility for the pound pairs. Earlier today, the RICS house price balance came in short of consensus at 56% instead of the estimated 59%. No other reports are due from the UK today.

CHF

The franc lost more gains to the dollar, as USD/CHF edged up to the .9100 major psychological level. Data from Switzerland was actually stronger than expected, with retail sales growing by 4.2% instead of the estimated 2.3% rise. There are no reports due from Switzerland today so risk aversion might keep driving this pair higher.

JPY

The Japanese economy printed mixed data earlier, with core machinery orders surpassing expectations and the tertiary industry activity index falling short of consensus. This might lead to declines in the Nikkei overall and possibly weigh on the yen pairs if risk aversion stays in the market.

Commodity Currencies (AUD, NZD, CAD)

The Australian dollar got another blow in today’s Asian trading session, as the jobs data showed a 22.6K drop in hiring instead of the estimated 10.3K increase. Although the jobless rate held steady at 5.8% and there were no revisions to the previous figure, the dismal report could keep dragging the Aussie lower for the rest of the week. As for Canada and New Zealand, there have been no major reports recently and none are due today.

By Kate Curtis from Trader's Way