FOREX 4 minutes to read

Data dependent, but are the data dodgy?

Michael O’Neill

FX Trader, Loonieviews.net

Summary:  Numbers make the world go around, at least the world of financial markets. But can we really trust the data we're given?


Central bankers have a conundrum. European Central Bank President Mario Draghi, Fed Chair Jerome Powell and Bank of Canada Governor Stephen Powell have taken turns stressing that monetary policy decisions are “data dependent.” But what happens if the data the data they are depending upon are dodgy?

Reuters claims that ECB “sources” say a “significant minority of policymakers do not believe in a second-half recovery because of questionable accuracy within the bank’s models, as evidenced by its long history of downward revisions. EURUSD wobbled on the news but quickly recovered from its small losses.

A common theme running through the policy statements from many major G10 central banks is “downside risks to their outlook,” and if the data inputs are questionable, those downside risk will persist.

Nevertheless, data and surveys are what make the FX markets go around as evidenced by yesterday’s Bank of Canada quarterly Business Outlook Survey. (BOS) The BOS was a tad weaker than expected with a notable drop in capacity pressures which is expected to keep the Bank of Canada on hold for the rest of the year. USDCAD soared on the news and is consolidating those gains in a 1.3350-1.3400 range in New York trading. Today’s Manufacturing Shipments data for February (Actual -0.2% vs January 0.8%) was ignored.

It is a slow news and data day with FX action confined to narrow bands. GBPUSD dropped from 1.3090 to 1.3050 on headlines suggesting that Tory and Labour Brexit talks are not going well is a knee-jerk reaction in a “no-news, no-data” environment.

Wall Street markets are perky. A handful of better-than-expected earnings reports combined with equity market gains in Asia and Europe led to small gains in the three major indices in early trading. Yesterday’s dovish comments from Chicago Fed President Charles Evan’s that rates will remain unchanged into 2020 have helped put the S&P 500 within spitting distance of an all-time peak.
 
GBPUSD 30-minute. Source: Saxo Bank

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)