Forex Major Currencies Outlook (July 31, 2014)

This was much higher than the estimated 3.1% increase. However, the currency returned some of its recent gains when the FOMC made its interest rate statement and stopped short of switching to a more hawkish bias. The Fed acknowledged the pickup in hiring and inflation but made a few cautionary remarks while dissenter Charles Plosser failed to draw enough support in tweaking the forward guidance to show clearer clues on when the central bank might hike rates.

EUR

The euro had a volatile day, as it bounced around during the U.S. trading session. Data from the euro zone was mixed, as the German preliminary CPI came in higher than expected at 0.3% while the Spanish flash CPI posted a 0.3% decline instead of the estimated 0.2% uptick. Spanish flash GDP came in slightly better than expected at 0.6% versus the consensus at 0.5%. German retail sales and unemployment change, along with French consumer spending data, are up for release today but the bigger movers might be the euro zone CPI estimates.

GBP

The pound continued its slide lower as there were no reports from the UK to give it any support yesterday. Earlier today, GfK consumer confidence came in weaker than expected as it dropped from 1 to -2 instead of improving to 2. Later on, the Nationwide HPI is up for release and might show a 0.6% increase in house prices, weaker compared to the previous 1.0% gain.

CHF

The franc weakened to the dollar in recent trading, as Swiss economic data mostly came in weaker than expected. The KOF economic barometer slipped from 100.5 to 98.1 instead of improving to 101.1 while the UBS consumption indicator came in at 2.06, which was still an improvement from the previous 1.80 reading. There are no reports due from Switzerland today as the franc could take its cue from euro movement.

JPY

The yen gave up ground to most of its major counterparts after Japan’s preliminary industrial production report showed a worse than expected 3.3% decline. Average cash earnings and housing starts are due for today and another set of weak figures might lead to more yen weakness.

Commodity Currencies (AUD, NZD, CAD)

The Aussie got hit by a set of weak figures earlier in the day, as building approvals marked a 5.0% drop while import prices declined by 3.0% Canadian GDP is up for release later on and might show a 0.3% monthly economic expansion. No other reports are due from the comdoll economies today.

By Kate Curtis from Trader's Way