BNP Paribas about post-FOMC: 'The Fed’s June statement and press conference failed to provide a catalyst for renewed USD gains'

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Press review

Sergey Golubev, 2015.06.19 17:19

Forex Weekly Outlook June 22-26 (based on forexcrunch article)

US Existing Home Sales, Jerome Powell’s speech, US Durable Goods Orders, German Ifo Business Climate, US Final GDP, US Unemployment Claims are the highlights of this week. Here is an outlook on the main market movers coming our way.

Last week U.S. Federal Reserve two-day policy meeting concluded with a decision to maintain current monetary policy. However, Fed Chair Yellen stated the Federal Reserve may increase rates by as much as 2% until the end of next year, with gradual hikes in between, if “more decisive evidence” arrives from the US labor market. At the same time, the Fed lowered their projections of growth this year, to a range between 1.8% and 2.0%, from the 2.3% to 2.7% rise they predicted in March. Will we see stronger US data in the coming months?

1. US Existing Home Sales: Monday, 14:00. The number of previously owned home sales declined to 5.04 million annualized rate in April, following strong reading of 5.21 million in March. Analysts expected home sales to reach 5.23 million. Prices jumped since the start of 2014 and the housing inventory contracted at same time last year. However, economists estimate the housing market will continue its progress in the coming months due to higher wages and low mortgage rates. Existing home sales are expected to reach 5.29 million this time.
2. Jerome Powell speaks: Tuesday, 12:00. Federal Reserve Governor Jerome Powel will speak in Washington DC and talk about the recent monetary policy meeting and its decisions. Market volatility is expected.
3. US Durable Goods Orders: Tuesday, 12:30. The capital goods rebounded in April despite the sharp decline in aircraft-related orders. Excluding transportation core orders edged up 0.5% following a 0.6 gain in the previous month, indicating growth in business investment. A sharp decline of 3.6% in civilian aircraft orders caused the negative reading of -0.5%. Analysts expected a slightly better reading of -0.4%. However, other sectors showed a positive increase. Durable goods orders are expected to reach -0.5% while core orders are forecasted to rise 0.6%.
4. Eurozone German Ifo Business Climate: Wednesday, 8:00. German Ifo business confidence fell for the first time in seven months in May, to 108.5 compared following 108.6 in April. However, the reading was better than the 108.3 forecasted by analysts. The drop in sentiment was due to uncertainty over Greece’s place in the euro-area and the negative effect of a Greek default on the 19-nation currency bloc. German business sentiment is expected to reach 108.2.
5. US Final GDP: Wednesday, 12:30. U.S. GDP growth expanded by 2.2% annual rate in the fourth quarter of 2014, unrevised from the February forecast. Business investment declined but strong domestic demand balanced the slowdown. Corporate profits fell 1.6% while increasing 4.7% in the third quarter. Furthermore, imports outweighed exports, resulting in a trade deficit that slowed GDP growth. Economists forecasted 2.4% growth in the fourth quarter. GDP in the first quarter is expected to contract 0.2%.
6. US Unemployment Claims: Thursday, 12:30. The number of Americans filing initial claims for unemployment benefits fell by 12,000 claims last week to a seasonally adjusted 267,000. The reading was well below forecasts, pushing the four-week moving average down by 2,000 to 276,750. Continuing jobless claims fell by 50,000 to a seasonally adjusted 2.22 million, indicating US labor market continues to improve. The number of jobless claims is expected to reach 271,000 this week.

Forum on trading, automated trading systems and testing trading strategies

Press review

Sergey Golubev, 2015.06.20 18:18

BNP Paribas -  'We remain USD bulls', or 'fade EUR/USD rally on any Greek resolution' (based on efxnews article)

"Despite a dovish market reaction to this week’s FOMC statement, the Fed’s message remains focused on data dependency, and our economists continue to believe that conditions will be met for policy tightening to start in September. Accordingly, markets should remain focused on upcoming US economic releases.

In the week ahead, a rebound in May core durable goods orders would be encouraging after a downward revision to April data, while the personal income and spending report should echo the improvement in retail sales data. We remain USD bulls but recommend positioning through option structures with limited upside potential given the Fed’s sensitivity to dollar strength.

The coming days may be the final opportunity for some sort of Greek deal to be agreed ahead of the end-June deadline. Reading EUR moves around Greek headlines remains complicated by the EUR’s funding currency status. Our preference is still to fade any rallies on a Greek ‘resolution’ as we believe it would ultimately lead to investors regaining appetite for shorting the EUR against pro-risk currencies."