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US Dollar Looking to Fed-speak for QE Reduction Clues

By , Currency Strategist
06 August 2013 09:17 GMT

The US Dollar is looking to comments from Chicago Fed President Charles Evans to shape expectations for a September move to “taper” stimulus efforts.

Talking Points

  • US Dollar Looking to Comments from Chicago Fed’s Evans for Direction
  • Japanese Yen Sold as Nikkei Rallies on Pension Fund’s Portfolio Shuffle
  • Aussie Dollar Rallies as RBA Offers No Clear Signal on Future Rate Cuts

A relatively quiet economic calendar in European trading hours shifts the spotlight to the US docket, where the focus will be on Chicago Fed President Charles Evans. The vocally dovish policymaker is a voting member of the rate-setting FOMC committee this year. A prepared speech is not scheduled; rather, Evans will be answering reporters’ questions, who will no doubt grill him on the likelihood of a reduction in the Fed’s monthly asset purchases at the September policy meeting. If Evans is perceived to be in favor of “tapering” the size of the QE effort, this is likely to broadly boost the US Dollar, and vice versa.

The Japanese Yen underperformed in overnight trade, falling as much as 0.4 percent on average against its leading counterparts. The move tracked an advance in the Nikkei 225 benchmark stock index, suggesting a sentiment-driven unwinding of carry trades funded in terms of the perennially low-yielding currency was the catalyst behind the move. The news-wires chalked up the Nikkei rally to a Reuters report suggesting Japan’s civil servants’ pension fund is weighing investing more of its capital in shares versus domestic bonds.

The Australian Dollar rallied as expected after the RBA delivered a widely expected 25bps interest rate cut without offering explicit guidance pointing to continued easing at upcoming meetings. The tone of the policy statement turned nominally less dovish, with the punch-line proclaiming policymakers will “continue to assess the outlook and adjust policy as needed,” which stands in contrast to last month’s assertion that the “the inflation outlook… may provide some scope for further easing.” Going forward, this is likely to make for a data-sensitive environment, putting the spotlight on July’s Employment data. Chinese Exports and CPI releases may likewise prove important considering the Aussie’s sensitivity to growth trends in the East Asian powerhouse.

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Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

23:01

GBP

BRC Sales Like-For-Like (Y/Y) (JUL)

2.2%

2.0%

1.4%

1:30

AUD

Trade Balance (A$) (JUN)

602M

804M

507M

1:30

AUD

House Price Index (QoQ) (2Q)

2.4%

1.0%

0.8%

1:30

AUD

House Price Index (Y/Y) (2Q)

5.1%

3.0%

3.3%

1:30

AUD

ANZ Job Advertisements (M/M) (JUL)

-1.1%

-1.6%

4:30

AUD

Reserve Bank of Australia Rate Decision

2.50%

2.50%

2.75%

5:00

JPY

Leading Index (JUN P)

107.0

107.3

110.7

5:00

JPY

Coincident Index (JUN P)

105.2

105.1

106

Euro Session:

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

7:00

GBP

Halifax House Prices s.a. (M/M) (JUL)

0.9% (A)

0.7%

Low

7:00

GBP

Halifax House Price (3M/Y) (JUL)

4.6% (A)

3.7%

Low

8:30

GBP

Industrial Production (M/M) (JUN)

1.1% (A)

0.0%

Medium

8:30

GBP

Industrial Production (Y/Y) (JUN)

1.2% (A)

-2.3%

Medium

8:30

GBP

Manufacturing Production (M/M) (JUN)

1.9% (A)

-0.8%

Low

8:30

GBP

Manufacturing Production (Y/Y) (JUN)

2.0% (A)

-2.9%

Low

9:00

EUR

Italian GDP s.a. and w.d.a. (QoQ) (2Q P)

-0.2% (A)

-0.6%

Medium

9:00

EUR

Italian GDP s.a. and w.d.a. (Y/Y) (2Q P)

-2.0% (A)

-2.4%

Medium

10:00

EUR

German Factory Orders s.a. (M/M) (JUN)

1.0%

-1.3%

Medium

10:00

EUR

German Factory Orders n.s.a. (Y/Y) (JUN)

-0.3%

-2.0%

Medium

Critical Levels:

CCY

SUPPORT

RESISTANCE

EURUSD

1.3228

1.3331

GBPUSD

1.5284

1.5450

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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06 August 2013 09:17 GMT