Daily Forex Currency Outlook (Oct 31, 2014)

The economy grew 3.5% in Q3, better than the estimated 3.1% growth figure but weaker compared to the previous 4.6% expansion. Components of the report showed that most of the gains were spurred by government spending, although there were notable improvements in export activity as well. Medium-tier data (personal spending and income, core PCE price index, and Chicago PMI) are up for release today, with strong data likely to spur more dollar gains.

EUR

The euro got hit by a wave of mixed data, as Germany showed a strong employment figure while inflation reports fell short of expectations. The German preliminary CPI marked a 0.3% decline while Spain’s flash CPI showed a 0.1% dip, reminding traders of the possibility of deflation in the euro region. The unemployment change figure came in at -22K for Germany while Spanish GDP came in line with consensus at 0.5%. For today, German and French retail sales reports are due, along with the region-wide CPI estimates. Weak data could once again spark euro weakness.

GBP

The pound bounced back in yesterday’s trading sessions even though there were no major releases from the UK economy. Nationwide HPI marked a 0.5% gain in house prices as expected. There are no reports up for release from the UK economy today, suggesting that consolidation might be seen for pound pairs or profit-taking might drive price action.

CHF

The franc was able to recover to the dollar, thanks to upbeat data from Switzerland. The KOF economic barometer showed a higher than expected reading of 99.8, up from an upgraded 99.3 figure and outpacing the 99.2 consensus. The UBS consumption indicator improved to 1.46, although the previous figure was downgraded to 1.28. There are no major reports due from Switzerland today as the franc might take its cue from euro zone data once more.

JPY

The yen continued to give up ground to its forex counterparts, as traders kept pricing in the possibility of further BOJ easing. Earlier today, Japan’s reports came in mostly in line with expectations, with the exception of the household spending report. This showed a 5.6% decline, worse than the estimated -4.0% figure and the previous -4.7% reading. Tokyo core CPI and the national core CPI both posted weaker readings compared to the previous period, confirming BOJ Governor Kuroda’s weak inflation concerns. The BOJ statement could further spark volatility for yen pairs today.

Commodity Currencies (AUD, NZD, CAD)

The comdolls got back on their feet yesterday, after selling off during the FOMC statement the other day. New Zealand showed a 12.2% decline in building consents while Australian producer prices marked a 0.2% gain as expected. Canadian GDP is up for release later and a flat figure is eyed, which might lead to weakness for the Loonie if the actual figure comes in weak.

By Kate Curtis from Trader's Way