Forex Major Currencies Outlook (May 21, 2014)

There were no reports released from the US economy but a few Fed officials gave speeches, providing a preview of how the upcoming FOMC minutes release might turn out. So far, the views have been mixed, with some supporting an earlier than expected rate hike and others suggesting that stimulus must be maintained. The FOMC minutes might contain nothing new, but traders are waiting for the actual speech by Fed head Yellen to see what the Fed has planned.

EUR

The euro erased some of its recent gains when German PPI printed weaker than expected results. Producer prices are down 0.1% in the euro zone’s largest economy, reviving fears of deflation in the region and leading to more calls of further easing next month. Only the euro zone current account and consumer confidence data are up for release today and these aren’t expected to have a huge impact on euro movement.

GBP

The pound recovered to its counterparts when UK CPI churned out stronger than expected results. The headline figure climbed from 1.6% to 1.8%, outpacing the consensus at 1.7%, while the core figure showed a 2.0% gain versus the estimated 1.8% increase in price levels. Today, the BOE will release the minutes of its latest monetary policy meeting and reveal whether they are still holding on to their rate hike bias or not. Recall that the BOE inflation report turned out to be a bit dovish and the minutes of their latest policy meeting might have the same tone.

CHF

The franc struggled to hold on to its recent gains but managed to chalk up a few losses to the dollar. There were no reports released from Switzerland then and none are due today, which suggests that further consolidation or risk off moves might be seen among franc pairs.

JPY

The yen advanced against most of its major counterparts when risk aversion returned to the markets in yesterday’s trading sessions. Traders don’t expect the BOJ to make any actual monetary policy changes today since Japan’s economic reports have been mostly strong so far. Of course this excludes the effect of the recent sales tax hike and data including this change might have more impact on yen direction.

Commodity Currencies (AUD, NZD, CAD)

Risk aversion got the better of the comdolls in recent trading, causing the Aussie, Kiwi, and Loonie to break below key technical levels against the dollar and the yen. Dovish RBA minutes and the Australian budget cuts weighed on the Aussie the most, pushing AUD/USD below the .9300 mark. Westpac consumer sentiment showed a 6.8% decline in Australia, leading to more losses for the currency. No other reports are lined up from the comdoll economies today.

By Kate Curtis from Trader's Way