By Dhilshan Sandanarajah
Yesterday was full of volatility as the morning saw sources claim that the BOJ would not pursue further monetary easing as it was ‘counter productive’. USD/JPY rapidly fell to below the 119 level, before retracing back to just below the 120 mark. The main focus yesterday was the BOE inflation report, which turned out to be a lot more positive for the UK.
As initially there were fears over continued falling inflation, Carney settled fears as he focused on the good wage outlook to push inflation higher. He also settled fears over the continued fall in oil prices, as he expressed his view that oil had found a price floor and the futures curve shows a drastic turn now.
GBP/USD was able to make large gains breaking well past the 1.53 level as well as momentarily breaking above 1.54. EUR/USD was able to follow this up move, as sources claimed an agreement hadn’t been formed between Greece and Europe due to technicalities in the agreement rather than the actual concept. EUR/USD swiftly moved above the 1.14 mark as uncertainty within the euro is beginning to settle.
This morning began with German GDP figures which were higher than consensus with the quarterly as high as 0.7%. This gave a good basis to suggest that European growth would also be higher, with the annual Eurozone growth at 0.9%. As the large bout of QE nears, business confidence has been a lot higher in recent months allowing for more positive growth. However the focus still remains on the Greek debt agreement and with EUR/USD making a move higher yesterday, higher growth was fairly expected and the currency pair now looks to break to the downside, below the 1.14 handle.
Later will see the release of the consumer sentiment index for the U.S, however more importantly a speech from Fed member Fisher. With Fisher having a very hawkish outlook on the U.S economy and his view of raising interest rates sooner than later, his speech will be closely speculated. After retail sales were once again disappointing yesterday, will he retain his hawkish outlook? If so can he gain support from other Fed members for a rate hike sooner?
Other than that a fairly quiet day in comparison to yesterday, while traders await more important talks between Greece and Europe on Monday, where a decision on the agreement is finally likely to take place.
That’s the wrap for today, Good Luck with your trading endeavours.