Dollar ends mixed against major currencies in subdued New York session: Oct 22, 2015

Market Review – 21/10/2015 23:36GMT 
 
Dollar ends mixed against major currencies in subdued New York session

The greenback held steady against the other major currencies in quiet trade on Wednesday, as the previous session’s upbeat housing sector data continued to lend mild support to the usd.

The single currency went through a mini roller-coaster session on Wednesday. Despite retreating to 1.1339 in European morning after early brief rise to 1.1368 in Asia, price ratcheted higher to a fresh session high of 1.1378 but only to fall to 1.1334 before moving in a choppy fashion inside 1.1340-1.1380 in New York morning.

Versus the Japanese yen, despite the knee-jerk retreat from a fresh 1-week high of 120.07 to 119.81 in early European trading due to the late selloff in Chinese stocks, price edged higher ahead of New York open and rose briefly to a fresh session high of 120.09 before retreating due to some profit-taking.

Reuters news reported on Wednesday, Japan’s annual export growth slowed to a crawl in September as shrinking sales to China hurt the volume of shipments, raising fears that weak overseas demand may have pushed the economy into recession. Ministry of Finance data showed exports rose just 0.6 percent in the year to September, against a 3.4 percent gain expected by economists in a Reuters poll.
That was the slowest growth since August last year, following the prior month’s 3.1 percent gain. The weak yen helped increase the value of exports, but volume fell 3.9 percent, the third straight month recording an annual decline.

The British pound pared all its early losses versus the greenback on Wednesday. During the day, although cable moved sideways inside a relatively narrow range of 1.5437-1.5448 in Asia and then tanked to a session low of 1.5415 in European morning, unwinding in sterling cross lifted price to 1.5462 ahead of European midday. Later, price briefly retreated to 1.5434 in New York morning and then rose to a fresh session high of 1.5479.

The usd/cad pair jumped above 1.3100 level to a session high of 1.3116 after Bank of Canada announced the unchanged rate decision and lowered Canadian growth forecasts for 2016, 2017.

Bank of Canada said, ‘sees Canadian economy returning to full capacity around mid-2017, later than July estimate of first half 2017; Canadian economy has rebounded as projected, signs of strength more evident in non-resource sectors; raises Q3 growth forecast to annualized 2.5% from 1.5%, lowers Q4 to 1.5% from 2.5%; cuts 2016 to 2.0%, 2017 2.5% (previous 2.3%, 2.6%); underlying inflation trend continues to be about 1.5-1.7%; core inflation seeing transitory effects of C$ weakness offsetting disinflationary pressures from economic slack; holds total inflation forecast at 1.2% Q3, 1.4% Q4; core inflation forecast 2.2% Q3, 2.1% Q4 (previous 2.1%, 2.0%); weaker business investment profile suggests near-term growth in potential output more likely to be at lower end of bank’s estimates; lower oil, commodity prices are dampening business investment and exports in resource sector; global economic growth weaker than expected this year, uncertainty about China has contributed to downward pressure on oil, commodity prices; positive effects of cheaper energy, accommodative financial conditions will lift global growth to 3.4% 2016, 3.6% 2017 (previous 3.7% for both) from 3.0% in 2015; U.S. economy expected to continue growing at solid pace with strength in private domestic demand, which is important for Canadian exports; household spending underpinning Canadian economy, is expected to grow at moderate pace; financial vulnerabilities in household sector continue to edge higher but risks to financial stability evolving as expected.’

Later, Bank of Canada stated in a statement, ‘China is transitioning to lower, more sustainable long-term growth path; should continue to be solid source of growing demand for commodities; if uncertainty fades about prospects for china, emerging markets, there is some upside risk to our commodity price assumptions; categories of exports that were expected to lead Canadian recovery have grown strongly in recent months; we know that accommodative policy has implications for financial vulnerabilities in household sector; in current context, getting economy back to full capacity with inflation on target is central to supporting financial stability.’

Data to be released on Thursday:

France Business Climate, Italy trade balance, UK retail sales, euro zone ECB rate decision, ECB’s press conference, consumer confidence. Canada retail sales, U.S. jobless claims, monthly home price, existing home sales, Leading Index.

Dollar ends mixed against major currencies in subdued New York session: Oct 22, 2015