Here are the Top Forex Developments for the trading week between 01/19/15 and 01/23/15:
Number One: European Central Bank Interest Rate Announcement & Economic Stimulus
As widely expected the ECB left interest rate on hold at 0.05%. The deposit facility rate and marginal lending facility rate also remained unchanged at 0.30% and -0.20% respectively. The biggest shock was the €1.1 trillion bond buying stimulus the ECB announced which will buy €60 billion each month starting in March. The Euro plunged after the announcement, but could bounce sharply higher due to the large short positions in the Euro.
Number Two: Bank of Canada Interest Rate Announcement
On Wednesday the Bank of Canada surprised forex traders with a cut in interest rates to 0.75%. This has sent the Canadian Dollar into a deep plunge which was accelerated by other data out of Canada pointing to a weaker economy. The stimulus which was announced has also increased selling in the Canadian Dollar. The USDCAD could reach the 1.2500 mark this month.
Number Three: Eurozone PMI
The Eurozone PMI came in better than expected for January, largely driven by the service sector. The Eurozone Composite PMI was reported at 52.2, The Eurozone Manufacturing PMI came in at 51.0 and the Eurozone Services PMI rose to 52.3. Economists expected a level of 51.7, 51.0 and 52.0 which compares to December’s data of 51.4, 50.6 and 51.6 respectively. The Euro was unable to take advantage of this end dropped below 1.1100 before rebounding.
Number Four: UK Retail Sales
Retail sales in the UK came in much better than expected for December, but the British Pound remained in extreme oversold territory. Retail sales rose 0.2% month-over-month and 4.2% year-over-year. Retail sales including auto sales rose 0.4% month-over-month and 4.3% year-over-year. Economists expected a contraction of 0.7% and increase of 3.4% in retail sales. Forex traders largely ignored the much better than expected data.
Number Five: Chinese Industrial Production
Industrial production in China rose 7.9% in December year-over-year which beat expectations calling for an increase of only 7.4% and is far above the 7.2% reported in November. This provided little support to commodity currencies which remained in their overall negative stance and reached multi-month lows. Commodity markets also remained depressed.