Here is an overview of the major events that forex traders took note of yesterday, January 18th, and those to look out for today, January 19th.
January 18th Events of Note
- Euro Continues Higher After ECOFIN Meeting and Positive Spanish Bond Auction – The daily forex news continued highlighting the last day of the ECOFIN Meetings in Brussels with positive results. The larger nations pledged their support and agreed if necessary to expand the European Financial Stability Facility or EFSF to safeguard the EU against further debt problems. EUR/USD was also supported by the results of a Spanish debt auction, which successfully completed the sale of €5.5B in Treasury Bills, €1B in 18-month bills averaging a yield of 3.36%, compared to 3.72% in the previous auction and €4.5B in 12-month bills averaging a yield of 2.94% versus a previous yield of 3.45%. In Eurozone economic releases, both the EZ and German ZEW Economic Sentiment Surveys rose sharply, with the German number at 15.4 significantly higher than the expected reading of only 6.5, while the EZ ZEW Economic Sentiment Survey came out at 25.4, also considerably better than the 17.3 reading expected. In U.S. numbers, the Empire State Manufacturing Index came out with a reading of 11.9 versus an expected 12.6 and TIC Long Term Purchases were up sharply to 85.1B versus 43.4B expected. EUR/USD traded as low as 1.3252 before rallying to 1.3465, the rate is currently trading at 1.3452 in early trading on Wednesday.
- GBP/USD Higher on Better Than Expected CPI – Intraday analysis showed Cable traded sharply higher on Monday after news that U.K. Headline CPI rose by +3.7% year on year, much better than the +3.3% consensus, also, Core CPI rose by +2.9% year on year, versus an expected rise of +2.6%. The strong inflation numbers will likely continue with the current state of commodity prices and the results of the increase in the VAT hike in January. The numbers came out on the heels of a positive RICS House Price Balance. These indicators suggest the Bank of England may be pressured into raising rates to contain inflation. All eyes will be on the next MPC Rate Statement and MPC Meeting Minutes to see if any other MPC member joins dissenter Andrew Sentance in supporting an Official Bank Rate increase.
- Japanese Yen Sharply Higher on Tertiary Industry Activity – USD/JPY lost considerable ground, dropping from 82.60 to 82.13 in currency market trading after news the Japanese Tertiary Index rose a seasonally adjusted +0.6% edging the consensus of a +0.5% rise and better than the +0.3% gain made in October. USD/JPY is currently trading at the 82.25 level in early Wednesday trading.
- Australian Dollar Trades Higher Tracking Gold – AUD/USD traded over parity yesterday and held steady after the price of gold rallied 17 dollars an ounce. The Aussie is correcting after several days of declines due to flooding in Queensland and a slowdown in China. In early trading this morning, AUD/USD is trading above parity at 1.0030.
- Bank of Canada Leaves Rates Unchanged Sparking Sell Off – The Canadian Dollar was sharply lower yesterday after the BOC left the benchmark Overnight Rate at 1.0%. While the bank raised its growth estimates for 2011 and 2012, the bank gave indications it had no intention of raising rates in the near term. USD/CAD went from 0.9839 before the announcement to 0.9929 after the release. The rate is currently trading at the 0.9905 level in trading early Wednesday.
January 19th Events of Note
- Eurozone Current Account and U.S. Treasury Currency Report – Two significant economic releases today that will affect the Euro. The EZ Current Account is expected to be a deficit of -10.2B, while the release of the U.S. Report is still tentative. Nevertheless, any developments on the sovereign debt front or any other unexpected event could further or cut short the rally in EUR/USD.
- U.K. Unemployment Numbers – In addition to the Unemployment Rate —expected to remain at 7.9% — the U.K. will also release the Claimant Count Change, with -0.3 expected, and the Average Earnings Index for the quarter, expected to be +2.2%.
- U.S. Building Permits and Housing Starts – These numbers generally affect the entire forex market. Building Permits are expected to be +0.56M while Housing Starts are expected to be +0.55M.
- The Price of Gold – The price of gold is currently at the $1,372 per ounce level, a breakout to the upside could bring the metal to test its highs. This would spark a rally in the Aussie, Kiwi and Loonie. Conversely, a sudden strengthening of the U.S. Dollar could adversely affect the price of gold and consequently the commodity currencies.
- Canadian Manufacturing Sales and BOC Monetary Policy Report – Two significant numbers which will certainly affect the USD/CAD rate. Canadian Manufacturing Sales is expected to rise by +0.8%. The monetary policy report will add light to the recent dovish comments made after yesterday’s rate statement.