Forex Major Currencies Outlook (Sept 17, 2014)

While the Fed is expected to carry on with its taper of $10 billion and acknowledge the recent improvements in the economy, Chairperson Yellen might adopt a cautious stance in reiterating that rates will not be hiked until the recovery is sustained. Data from the US economy was weak yesterday, with the headline PPI staying flat instead of posting the estimated 0.1% gain and TIC long-term purchases posting a surprise negative reading.

EUR

The euro edged slightly higher to the dollar but was unable to break past the 1.3000 handle, as sentiment for the shared currency remained mostly bearish. German ZEW economic sentiment came in stronger than expected at 6.9, but this still marks a considerable decline from the previous 8.6 reading. Meanwhile, the euro zone ZEW slipped from 23.7 to 14.2, worse than the estimated 21.3 figure. Euro zone final CPI readings are due today and no changes are expected.

GBP

The pound had a volatile day as it broke below 1.6200 to the dollar only to recover to 1.6300 later on. CPI readings came in mostly in line with expectations, as the headline figure fell from 1.6% to 1.5% while the core figure improved to 1.9%. PPI input prices marked a 0.6% decline while the retail price index showed a weaker than expected 2.4% reading, suggesting that price pressures are still weak in the country. BOE minutes and the UK jobs release could add volatility to pound movement today, with an expected 2-7 vote to hike rates and a potential 29.7K drop in joblessness.

CHF

The franc continued to move carefully against its counterparts as traders start to price in potential easing or intervention from the SNB tomorrow. There have been no reports released from Switzerland yesterday, but SNB officials have been hinting at the possibility of negative deposit rates.

JPY

The yen was back in its weak state yesterday, as it sold off to most of its major counterparts except for the US dollar. BOJ Governor Kuroda refrained from announcing big policy changes, as he stressed that the economy could recover and that no easing measures are needed for now. There are no reports due from Japan today, which leaves yen pairs sensitive to risk sentiment.

Commodity Currencies (AUD, NZD, CAD)

The comdolls recovered slightly in recent trading, with AUDUSD and AUDJPY edging higher. The RBA minutes stressed that policymakers are not looking to cut rates soon as they are getting concerned about stronger house price inflation. In Canada, manufacturing sales came in better than expected at a 2.5% increase and an upward revision in the previous figure. New Zealand’s current account balance came in as expected at a deficit of 1.07 billion NZD, lower than the previous 1.47 billion NZD shortfall. The country will release its quarterly GDP report in the next Asian trading session.

By Kate Curtis from Trader's Way