Forex Week in Review June 19-24

This week has been a massive blow to risk trading, with investors being side swiped from all continents. Europe with is Greek austerity concerns, Australasia being hit by a think tank opining on China that authorities are concerned over growth, their ‘own‘ not just global and the Fed giving no signal of any policy changes soon. They did not even hint towards QE3. The market is concerned about holes in parts of the Greek austerity package that could put their own situation in further jeopardy. Next week, Greece’s governing PASOK party will try and ram through its austerity package through parliament while the country goes on a 48-hour strike. The world will be watching.

Below are some of the highlights of the busy week:


  • Italian industrial orders disappointed for April with a -6.4%, m/m, fall and larger than the -4.0% expected. The softer orders component suggests we could see some further weakening next month.
  • Moody’s warned that it was placing Italy’s long term rating on review for a potential downgrade pointing to structural challenges to growth and high debt levels.
  • German ZEW expectations fell sharply to -9, worse than the -3 expected, and dropped into negative territory for the first time in eight-months. Respondents expect the economic situation to deteriorate further.
  • IMF is diverting investors attention towards Spain, insisting that they must step up efforts to overhaul their Economy, ‘the repair of the economy is incomplete and risks are considerable’.
  • BoE MPC member Fisher expressed concern about deflation risk than temporary above target inflation and said that more QE remains a possibility.
  • Swiss M3 growth moderated to +5.6%, y/y, last month from +7.0%, its lowest level in 12-months. The mortgage growth rate also moderated to +4.5%, y/y, in April from +4.6%, supporting the SNB’s dovish tone.
  • Greek government survived a confidence vote with 155 votes. This does not guarantee complete party discipline in the vote next week on new austerity measures,
  • UK, the minutes of the June MPC meeting showed a 7-2 vote for rates on hold and a still very dovish BoE. Weale and Dale voted for a rate hike while Posen continued to vote for further QE. The new MPC member Ben Broadbent voted with the majority to keep rates on hold (+0.5%)
  • Sweden, the manufacturing confidence was unchanged at 11 this month. The survey showed a slowdown in foreign orders, surprisingly, expectations remained fairly optimistic.
  • Euro-zone manufacturing PMI declined to 52 last month from 54.6, its lowest level in 18-months. The new orders component fell below the 50 threshold level for the first time since July 2009, to 49.6 from 53.3. Exports orders were weak, down to 51.1 from 54.
  • Greece’s opposition leader vowed to vote against the government’s new fiscal austerity measures next week.
  • German Ifo headline beat consensus, rising to 114.5 from 114.2 vs. an expected decline to 113.4. Disappointingly, the expectations component fell to 106.3, the lowest level since the summer slowdown last year, although still consistent with very good growth.
  • IMF/EU teams agreed on Greece’s fiscal plan. The plan is to be voted on next week, followed by negotiations on the 2012 support plan the following weekend.
  • One MP of Greece’s governing PASOK party has indicated he has not decided yet whether to support the fiscal plan. The EU/ IMF continue to signal they want to see broad, cross-party support for the legislation.
  • IEA said its members would release crude from its strategic reserves. They intend to inject +60m barrels of government-held stocks in the global market, immediately increasing world supply by +2.5%. The spike in energy prices is being cited ‘as the reason for the economic slowdown and this is a reaction to that’.


  • US sales of previously occupied homes fell in May to its lowest level in six-months. Sales decreased -3.8% to a seasonally adjusted annual rate of +4.81m, the weakest showing since November
  • The Fed continues to look through weakness and is staying the course by keeping rates on hold. The FOMC statement was largely as expected yesterday, giving no signal of any policy changes soon. Policy makers acknowledges that the US economy is in a soft spot, but advised markets to look through the effects of supply shocks emanating from Japan and the demand destruction caused by previously higher commodity prices.
  • Governor Carney presented the BoC Financial system review this week and concluded that they see overall risks to financial stability has elevated in the last six-months.
  • US weekly claims came in somewhat higher than expected (+429k vs. +415k). Another weak print points to a soft NFP release in July, and another disappointing Chicago Fed index reading (-0.37 vs. -0.05) is signaling ongoing deterioration in US growth.
  • US new home sales fell last month, down -2.1% to +319k units, as weakness in prices and a sluggish economy continues to keep consumers on the sidelines.
  • The details of the durable goods report for May were stronger than expected, +1.9% vs. +1.6%, with capital goods providing the pleasant surprise.
  • US GDP was revised up only minimally to +1.9% vs. expectations of +2.2%. The bulk of the shortfall was in the estimate of investment in software.


  • NZD’s Performance of Services Index rose to 52.8 in May from 52.6, the highest print in nine-months. Growth in manufacturing slowed to +1.9% for 1st Q from an upwardly revised +3.7% in 4th Q, obviously earthquake affected.
  • RBA board minutes for June reaffirm a non-committal. Policy makers cited growing concerns in Europe, downside surprises in US data and deterioration in non-mining related industries as giving them enough reason to remain on hold until further notice.
  • Market now thinks the RBA is unlikely to hike in August unless inflation and employment surprise on the upside, coupled with a powerful rebound in risk appetite.
  • NZD current account deficit narrowed by NZD-$1.1b to-$1.8b for the 2nd Q, driven by the fall in foreign investment income due to losses from foreign-owned insurance companies after the earthquake.
  • HSBC flash China PMI fell from 51.1 to 50.1 in June, with new orders and employment edging just below 50, suggesting that the official PMI will fall at least in line with seasonal patterns, if not more.
  • Singapore CPI inflation was unchanged at +4.5%, y/y, in May, higher than the consensus, who was looking for a moderation to +4.1%.
  • Taiwan industrial output rose to +7.8%, y/y in May from a upwardly revised +7.2%, well above the consensus forecast of +5.9%.
  • Chinese Premier Wen Jiabao wrote an open letter about China’s role in the global economy in FT. He asserts that China’s measures to control inflation have succeeded and that inflation will fall in the second half of this year. This puts pressure on the PBoC to succeed.
  • Korean consumer confidence fell -2 points to 102 in June, implying that domestic demand remains fairly ‘soft’. Market expects the BoK to be gradual in tightening.
  • Malaysia CPI inflation rose to +3.3%, y/y in May, should be sufficient for Bank Negara Malaysia to hike rates +25bp at its July 7th meeting.



  • We get a slew of manufacturing data from JPY, CNY, GBP and the US
  • UK prints its Nationwide and Halifax HPI, releases its Current a/c status and inflation report
  • The Swiss releases their KOF Economic Barometer
  • Canada announces its Inflation and GDP situation
  • US gives us Consumer Confidence, Pending Home Sales and Weekly Claims

  • Finally, the Kiwi’s have Building Consents and Business Confidence to deal with


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell