Forex Major Currencies Outlook (March 12, 2014)

Risk sentiment is shifty, with the tension in Ukraine still present and with investigators unable to identify what caused the Malaysian Airline plane’s disappearance. Data on US crude oil inventories is due today along with the US 10-year bond auction, both of which aren’t expected to cause a huge impact on dollar behavior.

EUR

The euro gave up some of its recent gains to the dollar in yesterday’s trading sessions, as data from Germany came in weak. The trade balance fell short of expectations, with the surplus at 17.2 billion EUR instead of the estimated 19.3 billion EUR. This is also lower compared to the previous month’s 18.3 billion EUR surplus. French final non-farm payrolls and euro zone industrial production data are up for release today but these aren’t likely to spur the euro in a particular direction, unless actual results come in way above or below expectations.

GBP

The pound lost a lot of ground in recent trading because of downbeat comments from BOE officials. Carney emphasized that the UK central bank isn’t looking to hike rates anytime soon since there is a lot of spare capacity in the economy and both inflation and employment have room to improve. This was followed by remarks from MPC member Bean who said that further appreciation for the pound could hurt the country’s exports and overall economic performance. No reports are due from the UK today so this change in rate hike expectations might keep hurting the pound.

CHF

The franc consolidated to the dollar in yesterday’s trading sessions, as both Switzerland and the US had no reports released. These two economies have virtually no major reports lined up for today so more sideways movement for USD/CHF might be in the cards.

JPY

The yen posted gains against most of its major counterparts, including the US dollar, when the BOJ refrained from easing monetary policy. The central bank also made no changes to its growth and inflation forecasts, despite the potential weakness from the upcoming sales tax increase. The BOJ also highlighted the recent weakness in exports but explained that this might just be due to temporary factors. No major reports are due from Japan in the next few hours.

Commodity Currencies (AUD, NZD, CAD)

The comdolls weakened to their lower-yielding counterparts yesterday when risk appetite waned. Data from Australia reflected weakness, with the NAB business confidence figure falling from 9 to 7 and the Westpac consumer sentiment report showing a 0.7% decline. Earlier today, the Australian home loans report showed a flat reading and a downward revision in the previous month’s figure. The RBNZ is set to make its interest rate decision in the next Asian trading session and rate hike expectations could keep NZD/USD afloat. However, a disappointment in the monetary policy statement could lead to a massive selloff.

By Kate Curtis from Trader's Way