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Forex Analysis
by ForexNewsNow Team on February 18th, 2011

ForexNewsNow Daily Market Outlook for February 18th, 2011

NEW YORK (Forex News Now) – Daily Market Overview – The U.S. Dollar lost considerable ground against all of the other major currencies on Thursday according to the daily forex news.

The Greenback began Thursday’s session firm after word that two Iranian warships were heading towards the Suez Canal with the intention of navigating through the Egyptian controlled waterway. Nevertheless, the Suez Canal Authority was later notified of the “cancellation” of the crossing with no new date set.

USD news showed the U.S. Dollar declined largely on risk appetite and despite positive economic numbers out of the United States. Higher commodity prices also contributed to the Greenback’s weakness, with the price of gold trading above key resistance at $1,375.00 to an intraday high of 1386.10.

Furthermore, crude oil was still holding above $86 per barrel. That fact, combined with expectations of coming BOC rate hikes, supported the Canadian Dollar in making a three year high at 0.9815 against the Greenback in realtime forex trading on Thursday. Nevertheless, the Loonie then fell to end Thursday’s session almost unchanged.

February 17th Important Economic Developments:

  1. EURUSD Gains Despite Wider Eurozone Current Account Deficit – EURUSD analysis showed the Euro gained somewhat against the Greenback despite the Eurozone Current Account showing a deficit of -13.3B, which was significantly wider than the -5.1B deficit the market anticipated. Nevertheless, the previous number was revised upward from -11.2B to -10.5B that slightly neutralized the headline number’s effect.
  2. U.S. Initial Jobless Claims and CPI Numbers – Initial Jobless Claims rose to 410K versus an expected rise to 401K from a revised number of claims last month of 385K, revised upward from 383K. Nevertheless, U.S. CPI rose by +0.4% month on month, edging the consensus of a +0.3% increase, while Core CPI rose by +0.2% month on month, versus +0.1% that was expected. Energy costs rose the most in January, gaining +2.1% month on month, while food prices increased by +0.5% month on month.
  1. Fed Chair Ben Bernanke Testifies – Fed Chairman Ben Bernanke testified on the implementation of the Dodd-Frank Act before the Senate’s Banking Committee. Bernanke noted that smaller banks currently exempt from new limits on interchange fees may have to lower their rates in order to compete, stating that, “It is possible that exemption may not be effective in the marketplace”. The rules proposed in December would limit banks to charging seven to 12 cents per transaction, compared to the current average of 44 cents per transaction.
  2. Philly Fed Manufacturing Index – This diffusion index was released by the Philadelphia Federal Reserve Bank based on a survey of manufacturers in the Philadelphia area and is considered an important leading indicator of economic health. The survey was surprisingly positive, coming out at 35.9 compared with the 20.8 level anticipated and the previous month’s 19.3 result. The Greenback initially improved to 1.3576 versus the Euro after the rate had traded as high as 1.3608 prior to the survey’s release.
  3. BOJ Monetary Policy Meeting MinutesThe Japanese central bank released the minutes from its Policy Board’s last interest rate decision meeting. This detailed record gave traders insight into the economic and financial conditions that influenced the Board’s last vote to keep the level of the BOJ’s benchmark Overnight Call Rate steady at <0.10%. The BOJ’s policymakers noted that “financial conditions had continued to ease further”, largely in response to “stimulative effects from low interest rates” and “improved corporate profits.” The Yen seemed to take these fairly neutral policy comments in stride.

February 18-19th Forex Events for Traders to Watch

  1. G20 Meetings – Attended by finance ministers and central bankers from twenty industrialized nations, the G20 is scheduled to meet in Paris on Friday and Saturday about a range of global economic issues. These include food prices, speculative capital flows and global trade imbalances. A possible highlight involves U.S. Treasury Secretary Geithner speaking at the Eurofi think tank’s G20 High Level Seminar 2011 in Paris on Friday, and he will also hold a press conference at the G20 gathering’s conclusion on Saturday. More hawkish comments from finance officials will tend to boost the value of the affected currency against others.
  2. German PPI Data – This important leading indicator of consumer inflation measures the change in the price of goods sold by German manufacturers over the month. The market consensus for German PPI is presently centered on +0.6% m/m — a slightly lower rise than last month’s +0.7% gain. A higher number will tend to see the Euro appreciate.
  3. U.K. Retail Sales – A closely watched indicator of U.K. consumer spending, Retail Sales data measures the change in the total value of inflation adjusted sales at the retail level. U.K. Retail Sales are currently expected to rise by +0.6% m/m compared with the previous month’s -0.8% drop. A higher number usually favorably affects Sterling.
  4. Canadian CPI Numbers – These important inflation indicators for the Canadian economy are closely watched by the forex market. The consensus for Core CPI is a rise of +0.2% m/m versus the former -0.3% result, and expectations for CPI currently center on +0.3% m/m compared with its previous 0.0% outcome. Higher inflation numbers than expected will usually favorably affect the Canadian Dollar. A limited risk strategy to profit from anticipated exchange rate swings could involve purchasing a binary forex option straddle or strangle on the USDCAD exchange rate ahead of the CPI numbers’ release.
  5. Fed Chair Bernanke and BOE Governor King Speak in Paris – Both U.S. Federal Reserve Chairman Ben Bernanke and Bank of England Governor Mervyn King will be taking part in a panel discussion entitled, “Global Imbalances and Financial Stability” to be held in Paris at the Banque de France Financial Stability Review. The text of King’s speech will be released before the event, and audience questions are anticipated that may result in forex market volatility.

By ForexNewsNow Team

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