Monday started with comparatively quiet price action as investors were expecting the Federal Reserve’s meeting later this past week, and the economic calendar was not full enough to shake out the binary options market. In Europe, Labour cost index suddenly dropped in the first quarter for 2019 (2.4% versus 2.6% predicted), but the impact on EUR/USD and EUR/GBP was rather small. Geopolitical headlines were silent in terms of news about trade talks between the U.S. and China, the Brexit story did not have any significant development. In the Americas, the NY Empire State Manufacturing Index fell below zero after printing rather strong reading in the previous month. Stock indices were stuck in tight ranges, the greenback was hovering around the same level. Canadian Foreign Securities Purchases went negative in April, lifting the USD/CAD currency pair toward 1.34 resistance. ECB President Mario Draghi gave a speech late Monday stating the need for softer monetary policy and supportive measures in the Eurozone. However, binary options traders did not take into account his efforts to weaken the single European currency.
Tuesday picked the volatility up in Asia as the Reserve Bank of Australia published recent meeting minutes. The regulator’s rhetoric was rather dovish as RBA officials expressed concerns over falling employment and exports volume, as well as tight pressure from overseas in terms of trade wars. The Aussie was pressured again, and AUD/USD fell another 50 points early Tuesday. German ZEW economic sentiment index dropped to the lowest value in 10 months (-21.1 points versus -5.7 expected and -2.1 previously). Eurozone consumer price index came in at the same level as economists expected thus no volatility was noticed for EUR cross-rates. In the United States, the housing sector data was mixed as Building Permits slightly worsened in May, while Housing Starts improved. Canadian Manufacturing Sales were in the red (-0.6%) but the previous reading was revised up to +2.6%.
Low trading volume and limited volatility continued on Wednesday as binary options traders were expecting the U.S. Federal Reserve to announce the interest rate decision, publish the economic statement and host Chairman Powell’s press conference. Therefore, quite a tight schedule of economic events did not have the usual impact on currency pairs. The exception was the New Zealand dollar and Japanese yen after both countries released financial data - current account and adjusted trade balance, respectively. Both reports were mostly mixed, however, NZD/JPY was trading in the put mode. British Consumer Price Index was reportedly flat, while the Producer Price Index increased the inflationary pressure in the country, supporting the British Pound versus the Japanese Yen and Euro. GBP/USD was stuck in a tight trading range. In contrast, Canada released much stronger-than-expected CPI figures, and traders rushed to buy put options for GBP/CAD and USD/CAD. U.S. Crude Oil inventories dropped to -3.6 million barrels and WTI Crude oil price edged higher after good news from the largest consumption market. But the main event happened later. Although the Federal Open Market Committee left interest rates unchanged as it was widely anticipated, the economic statement was a real shock for USD bulls. Eight out of seventeen FOMC members voted for a rate cut after three months of staying pat and talking about the need of a rate hike. What’s more, binary options traders started pricing in two rate cuts this year. As a result, the market players rushed to buy call options for stocks, gold and oil, and put options for the U.S. dollar index.
Thursday’s price action was noticed in the same direction as Asian and European traders were absorbing news from the United States. The greenback was under heavy selling pressure on the back of anti-dollar flows as binary options traders were buying put options for the world’s reserve currency, taking into account enormous liquidity levels. The economic data was in favour of that scenario. New Zealand’s Gross Domestic Product showed robust growth in the second quarter of 2019, the Bank of Japan left interest rates unchanged, promising not to intervene in the nearest future, British Core Retail Sales improved in May. Another central bank surprised binary options traders this past week. The Bank of England stayed pat on the financial conditions with a unanimous vote, but the following rhetoric was quite hawkish as BoE Monetary Policy Committee underlined the need for a rate hike. The only concern holding the regulator from tightening is still the Brexit story, and once cleared, the regulator could start moving much faster than most analysts expect. Traders were buying call options for Sterling in a volatile trading session in London. U.S. Philadelphia Manufacturing Index worsened in May, confirming the Fed’s suggestion of slowing economy, and the greenback accelerated the bearish trade across the board.
Friday was nothing but a logical continuation of the events that took place earlier in the week. European, French and German Manufacturing PMI jumped in May, supporting the demand for call options for EUR/USD, while the U.S. Manufacturing PMI dropped to almost 50 points, the level which divides the growth from stagnation. Gold price continued climbing to $1400 per ounce, the USD/CAD currency pair tested 1.3200 support, the U.S. dollar index fell another 0.46%. Rumours about a possible war between the U.S. and Iran lifted the price for WTI and Brent Crude, resulting in the bullish rally for almost 10% on a weekly basis.