I have taken a look through the reactions that the price of EUR/USD has had ever since the latest FOMC meeting in which Janet Yellen alluded to the fact that the Federal Reserve would be data dependent on its monetary policy now the word “patient” had been removed from the statement. The results are interesting.
Looking first at tier one economic data (the most important data releases). this includes the key Non-farm Payrolls, growth data, retail sales and inflation. The results showed that EUR/USD did indeed move significantly on the data and that we should certainly be watching these numbers in the coming months. As a rough guide I have looked at the number of pips seen in the original move and the time that the move took to play out.There is an argument to say that moves would have been distorted by the Good Friday public holiday for Easter (for Non-farm Payrolls) and Easter Monday (for the ISM Non-Manufacturing).
In 5 of the 7 releases there was a strong reaction in line with the data surprise. The only times that there was very little reaction came with a slight miss on ISM Non-Manufacturing and also the final reading of GDP. All of the other tier one data releases resulted in a move of between 45 to 130 pips and mostly within one hour. The list works backwards in chronological order with the latest first:
- Retail Sales MISSED expectations +120 pips in around 1 hour
- FOMC minutes HAWKISH surprise -60 pips in 10 minutes
- ISM Non-Manufacturing slight MISS no real initial reaction
- Non-farm Payrolls big MISS +130 pips in 40 minutes
- ISM Manufacturing MISSED expectations +45 pips in 30 minutes
- GDP a well touted slight miss no real reaction
- CPI a slight BEAT on the core data -50 pips in 1 hour
The chart below shows the move on EUR/USD on the release of US Retail Sales yesterday. The data missed expectations and the price shot higher. The move lasted for around an hour before starting to consolidate.
I find this data very interesting as it suggests that playing the data release can be fruitful at the moment. I also found it equally interesting that analysis of the movement of non-tier one data was less conclusive. I looked at Consumer Confidence, ADP Employment, Personal Consumption Expenditure, Michigan Sentiment (admittedly the final reading), Durable Goods, New Home Sales and Existing Home Sales. Most had erratic movements on EUR/USD on the data release. There were only significant moves on the big surprises of the ADP Employment (a big miss leading to a 40 pip rally on EUR/USD in 20 minutes) and New Home Sales (a big beat of expectations which led to a 50 pip decline on EUR/USD in 30 minutes).
I also looked at the four readings of Weekly Jobless Claims. All four weeks had a beat of expectations, with two weeks around 2 or 3 thousand different to the original expectation and leading to no real reaction from EUR/USD. The other two were a 9,000 beat which resulted in a 50 pip fall on EUR/USD and an 18,000 beat which meant a 35 pip fall.
This rather crude and dirty look at the movement on EUR/USD would suggest that the importance of the data is key (ie. tier one data) but also the size of the data surprise.