Forex Major Currencies Outlook (Nov 19, 2014)

Data from the US economy was better than expected, as the headline PPI marked a 0.2% increase in producer price levels versus the estimated 0.1% dip while the core CPI showed a 0.4% increase versus the projected 0.2% uptick. This indicates that inflationary pressures could continue to pick up and that the Fed might be able to move closer to hiking rates without worrying about deflation. The FOMC meeting minutes are up for release later and hawkish remarks could renew traders’ demand for the dollar.

EUR

The euro had a strong bounce in yesterday’s sessions, as ZEW figures beat expectations. The German ZEW improved from -3.6 to 11.5, reflecting a return in optimism. Meanwhile, the euro zone ZEW climbed from 4.1 to 11.0, outpacing the consensus at 4.3. For today, only the euro zone current account balance is due and it might not have such a huge impact on the shared currency’s price action.

GBP

The pound consolidated to the dollar but showed signs of heading further south, as UK inflation figures came in mixed. The headline CPI came in stronger than expected as it improved from 1.2% to 1.3% while the core CPI came in weak as it held steady at 1.5% instead of improving to the projected 1.6% figure. BOE minutes are up for release today and any shift to a more dovish stance among policymakers could lead to pound selling.

CHF

The franc was stuck in a very tight range to the euro as the EURCHF pair is inching very close to SNB intervention levels. While there have been no major updates on the gold initiative, rumors that the central bank is waiting with an order to sell francs at the 1.2000 mark was enough to keep the pair afloat so far. Swiss ZEW economic expectations data is due today and a strong improvement could lead to a franc rally.

JPY

The yen resumed its slide to the dollar and most of its counterparts as Prime Minister Abe confirmed that the snap election will take place in December and that the tax hike might be delayed. Traders are gearing up for another BOJ decision today and more dovish remarks are expected, as the Japanese economy slumped into recession in Q3.

Commodity Currencies (AUD, NZD, CAD)

The comdolls returned some of their recent gains, as New Zealand’s dairy auction revealed another sharp drop in milk prices. This could mean more downside inflationary biases in the next few months, which could weigh on export revenues. New Zealand PPI figures are up for release in the next Asian trading session and there are no other major reports lined up from Australia and Canada.

By Kate Curtis from Trader's Way