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Forex Analysis
by ForexNewsNow Team on February 17th, 2011

ForexNewsNow Daily Market Outlook for February 17th, 2011

NEW YORK (Forex News Now) – Daily Market Overview – The U.S. Dollar turned in a mixed performance against the other major currencies on Wednesday, according to the daily forex news. The Greenback gained against Sterling and the New Zealand Dollar, but declined versus the Euro, Yen, Loonie and Aussie.

Sterling returned to the forex spotlight on Wednesday, as it gave back all of its gains made on Tuesday after the GBPUSD news reports focused on dovish comments and forecasts contained in the U.K. Inflation Report. The key quarterly report revised growth estimates for the U.K. economy downward in spite of higher anticipated inflation, which was expected to peak at 4.4% by mid 2012. Cable was trading as high as 1.6184 before the news, but lost two big figures after the release as it fell to a low of 1.5884.

Conversely, a fundamental EURUSD analysis indicates that the rise seen in the Euro was due in part to positive results from a Portuguese Treasury Bill Auction. The auction of 12 month bills raised €1.0B. While the auction met with weaker demand than the previous auction, yields rose to only 3.987% that was significantly lower than the expected yield of 4.3%.

In other forex news, the Kiwi weakened after a lower than expected PPI Output rise, while the Australian Dollar pared back its initial gains made Wednesday against the U.S. Dollar after Moody’s placed four of the country’s largest banks on review with the possibility of a downgrade. The four banks — Westpac, ANZ, NAB and Commonwealth — currently hold Moody’s second highest rating of Aa1.

February 16th Important Economic Developments:

  1. U.K. Employment Report Disappoints – Britain released its monthly employment report, with the key Claimant Count Change unexpectedly rising by 2.4K versus the market call of a -3.2K fall and the previous -3.4K drop that was revised significantly downward from -4.1K. Nevertheless, the Unemployment Rate stayed steady at 7.9% and the Average Earnings Index rose by only 1.8% 3m/y compared with the expected 2.0% and with its former 2.1% gain. These important economic numbers disappointed the market, with the GBPUSD rate considerably upon its release, with a lower Claimant number usually favorably affecting Sterling. A limited risk strategy to profit from the anticipate rate swings could involve purchasing a binary forex option straddle or strangle on the GBPUSD exchange rate ahead of the numbers.
  2. BOE Inflation Report and Press Conference Dovish – The U.K. central bank released its key report containing its forecasts for inflation and economic growth for the upcoming two years that was interpreted as dovish on balance by the market. U.K. growth forecasts were revised lower due to a higher interest rate assumption based on continued excessive inflation numbers. BOE Governor King also held an associated press conference to comment upon the report’s contents.
  3. U.S. FOMC Meeting Minutes – The U.S. Fed’s policymaking committee released the minutes from its last interest rate decision meeting. This detailed record showed that U.S. monetary policymakers are expecting gains in economic growth, without much improvement in the ongoing employment crisis that the Fed is increasingly viewing as structural in nature.
  4. U.S. Building Permits and PPI Numbers – These important indicators of housing market health and inflation for the U.S. economy showed mixed results. Building Permits came out a touch lower at 0.56M versus the expected 0.57M result and the previous 0.63M outcome that went unrevised. Also, PPI was only up by +0.8% m/m versus the consensus of a rise of +0.9% and the former +0.9% result that was revised lower from +1.1%. Nevertheless, Core PPI was the big surprise, rising by +0.5% compared with the +0.2% result expected. The Greenback strengthened initially versus the Euro, as EURUSD hit a low of 1.3462 after these releases, but the r ate then made back all of its losses to trade as high as 1.3587 before the session’s close.
  5. New Zealand PPI Input Rise Steady but Output Gain Sharply Lower – The important PPI economic inflation indicator is released quarterly by New Zealand. The more significant PPI Input number came out in line with expectations at +0.9% that was a touch higher than the previous result of +0.7%. Nevertheless, the PPI Output indicator was only up by +0.2% compared with the expected +0.9% rise and the number’s former +1.2% gain. This result saw the Kiwi soften to a low of 0.7536 versus the Greenback after its release.

February 17th Forex Events for Traders to Watch

  1. Eurozone Current Account – The ECB will release its monthly EZ Current Account data that measures the difference between the value of imported and exported goods, services, unilateral transfers and income flows seen during the month. The important indicator is expected to narrow significantly to -5.2B versus its previous -11.2B result. A narrower deficit tends to affect the EURUSD rate positively.
  2. U.S. Initial Jobless Claims and CPI Numbers – These are important indicators of job market health and inflation for the U.S. economy. Weekly Initial Jobless Claims are currently expected to rise to 403K from the previous 383K outcome. Also, the consensus for Core CPI is a rise of +0.1% m/m versus the former +0.1% result, and expectations for CPI currently center on +0.3% m/m compared with its previous +0.5% outcome. Higher inflation numbers than expected will usually favorably affect the U.S. Dollar, while higher than anticipated jobless claims will tend to put pressure on the Greenback. A limited risk strategy to profit from the anticipate exchange rate swings could involve purchasing a binary forex option straddle or strangle on the often more volatile USDCHF exchange rate ahead of the numbers’ release.
  3. Fed Chair Ben Bernanke Due to Testify – The Chairman of the U.S. Federal Reserve Bank will testify in Washington D.C. on the implementation of the Dodd-Frank Act before the Senate’s Banking Committee. Bernanke’s testimony generally includes a prepared statement that can be reviewed on the Fed’s website, in addition to an unscripted question and answer session. Hawkish comments will tend to boost the value of the U.S. Dollar versus other currencies.
  4. Philly Fed Manufacturing Index – This diffusion index released by the Philadelphia Federal Reserve Bank is based on a survey of manufacturers in the Philadelphia area and is considered an important leading indicator of economic health. The market forecast is currently centered on a small rise to the 20.8 level compared with the previous month’s 19.3 result. A higher than expected result is usually good for the U.S. Dollar.
  5. BOJ Monetary Policy Meeting Minutes – The Japanese central bank will release the minutes from its Policy Board’s last interest rate decision meeting. This detailed record provides traders with insight into the economic and financial conditions that influenced the Board’s last vote on the level of the BOJ’s benchmark Overnight Call Rate. More hawkish comments in the closely watched minutes will tend to boost the value of the Yen against other currencies.

By ForexNewsNow Team

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