Forex Major Currencies Outlook (September 5, 2013)

In particular, EUR/USD bounced back to the 1.3200 handle while GBP/USD rallied above the 1.5600 mark. There were no major releases from the US yesterday, except for the Beige Book report which revealed that the economic expanded at a “modest to moderate” pace recently. For today, ADP jobs data and ISM non-manufacturing PMI are up for release. After rising by 200K in July, a 175K increase in ADP hiring is expected for August. Meanwhile, the ISM non-manufacturing PMI is projected to dip from 56.0 to 55.2. 

EUR

The euro recovered against most of its major counterparts yesterday, as traders booked profits ahead of today’s ECB rate decision. No monetary policy changes are expected but it will be interesting to see whether Draghi acknowledges the recent improvements in euro zone’s large nations or not. Upbeat remarks could keep the euro afloat while words of caution could force it to retreat. Euro zone retail sales was weaker than expected at 0.1% for July while the GDP report showed no revisions for the 0.3% growth figure in Q2 2013. 

GBP

The pound extended its gains in yesterday’s trading, as the services PMI turned out better than expected. The figure climbed from 60.2 to 60.5 instead of dipping to 59.3. Services comprises a majority of overall UK economic activity so it’s understandable why the pound jumped after the strong release. Today the BOE will make its interest rate decision and no changes are expected since Carney already adopted forward guidance and said that no hikes should be expected for the near term. 

CHF

The franc was stuck in choppy trading against the US dollar yesterday while EUR/CHF managed to make headway. There were no reports released from Switzerland yesterday and none are due today, which suggests that more choppy trading could be seen unless US or euro zone events provide direction. 

JPY

The yen was still under heavy selling pressure yesterday as traders continued to price in their expectations regarding the proposed sales tax. The BOJ will be making its rate decision within the day and market participants will hear of whether the central bank is planning on making any stimulus adjustments to make up for the potential impact of the sales tax on growth. 

Commodity Currencies (AUD, NZD, CAD)

The Aussie was on a roll yesterday, as the GDP came in line with consensus at 0.6%. For now, both AUD and NZD are rallying on the heels of strong Chinese reports earlier this week while the Loonie is stuck in consolidation against the US dollar. No reports are due from these economies today so comdoll trading could depend on US data or risk sentiment. 

By Kate Curtis from Trader's Way