Forex Major Currencies Outlook (Sept 5, 2014)

Data from the US economy was mostly stronger than expected, adding to the appeal of the dollar. The trade balance showed a smaller than expected deficit while initial jobless claims came close to estimates at 302K. Revised non-farm productivity and the ISM non-manufacturing PMI both came in stronger than expected. For today, the NFP could be crucial in setting the tone for dollar behavior, as market analysts expect to see a 226K gain in hiring versus the previous 209K figure.

EUR

The euro suffered a bloodbath in yesterday’s trading when the ECB decided to cut several interest rates again and announce their plans for purchases of asset-backed securities. The central bank pushed deposit rates deeper into the negative territory, an unprecedented move for a major central bank. Draghi mentioned that the decision was not unanimous, with some policymakers lobbying for more aggressive stimulus efforts. German industrial production and euro zone revised GDP data are due today and might not have much of an impact on the euro’s selloff.

GBP

The pound was also heavily sold off as risk aversion kicked in after the ECB easing announcement. It didn’t help that the looming possibility of Scottish independence could hurt the U.K. economy with instability and higher debt burden later on. As for the BOE, they decided to keep monetary policy unchanged for the time being. Only the consumer inflation expectations report is due today and it might not have a strong impact on pound movement.

CHF

The franc also sold off to its counterparts after the ECB decided to ease, as the possibility of currency intervention from the SNB dawned on traders. EUR/CHF has tumbled to the 1.2050 area, dangerously close to the SNB floor. Data on foreign currency reserves is due today and this might provide an idea of whether or not the Swiss central bank has room to intervene.

JPY

The yen was weaker to most of its counterparts, except for the euro and the pound, as traders also anticipated more easing from the BOJ to take place sooner or later. Their actual monetary policy statement contained no changes, although Kuroda acknowledged some signs of weakness in the economy. There are no reports due from Japan today.

Commodity Currencies (AUD, NZD, CAD)

The comdolls sold off to the dollar but were able to advance to the euro in recent trading, as data from Australia was mostly stronger than expected. The trade balance noted a smaller deficit while retail sales came in line with expectations of a 0.4% uptick. In Canada, the employment report is due along with the Ivey PMI, which might climb from 54.1 to 55.7.s

By Kate Curtis from Trader's Way