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Pockets of currency volatility pop up and settle down again…

Published: Thursday 11 January 2018

  • Ups and downs for the US Dollar 
  • All eyes on Eurozone today
  • UK manufacturing remains strong
  • Australian Dollar finally gets some good news
By  Mike Mistretta

There was still a general lack of volatility in the currency markets yesterday, which seems to be the trend for the start of the year. The US Dollar did take a bit of a dive on the news that China is considering diversifying its foreign exchange reserves away from US Dollars. Chinese officials are recommending the government to slow or even halt purchase of US Treasuries. China's State Administration of Foreign Exchange has yet to provide a response to press queries, nevertheless, it had traders worried, due to the huge amount of debt China purchases. A broad US Dollar sell off occurred and the Sterling-US Dollar exchange rate reached as high as 1.3561 after starting the day below 1.35.

The US import prices data didn’t help the US currency missing expectations. The US Dollar has firmed up this morning and we are now below 1.35 once again. Later today, the US will release Producer Price Index (PPI) and Jobless Claims data – both important indicators of the strength of the US economy – which could provoke more movement for the US Dollar exchange rate against its major currency counterparts.

UK manufacturing remains strong

Across the Pond, the UK reported further positive growth in manufacturing production, although the trade balance deficit widened by £1 billion more than forecast.

Australian Dollar finally gets some good news

Overnight, the Australian Dollar was lifted by  stronger than expected retail sales data. Retail sales grew 1.2% month on month in November 2017, triple the expectation of 0.4% month on month. There are also talks that the Reserve Bank of Australia (RBA) could finally join some other global central banks in tightening their monetary policy this year. The Aussie Dollar reacted positively to the news.  The RBA could raise the official cash rate by 25 basis points in August. This will likely only be the case if wage growth picks up and the housing market stops its recent cooling.

Whispers of America withdrawing from the North Atlantic Free Trade Agreement (NAFTA) have resurfaced. The next talk between the US, Canada and Mexico will start on 23rd January in Quebec, Canada. There is talk that officials are already scheduling to meet again in Mexico the following month, but there has been no formal announcement yet. The Canadian Dollar is mildly lower after the news and awaits today’s release of the new housing price index.

Today, most of the markets’ focus will be on the release of the December European Central Bank (ECB) monetary policy meeting minutes. Industrial production figures for the Eurozone will also be released..

Costco loco

We were astounded to hear yesterday about the woman who tried to return her old Christmas tree to Costco on 4th January “because it was dead”. And she did get a refund, apparently not happily. You have to admire the sheer guts it took to do that. Well, it’s one way of recycling…
#ThursdayThoughts - #BeBrave

“I love those who can smile in trouble, who can gather strength from distress, and grow brave by reflection.” – Leonardo da Vinci

“The brave man is not he who does not feel afraid, but he who conquers that fear.” – Nelson Mandela

“Neither a wise man nor a brave man lies down on the tracks of history to wait for the train of the future to run over him.” – Dwight D. Eisenhower

Today's Major Economic Releases

Market BST Data/Event Previous Expected
GBP 09:30 Bank of England Credit Conditions Survey    
EUR 10:00 EU: Industrial Production 0.2% 0.8%
EUR 12:30 European Central Bank Monetary Policy Meeting Accounts    
CAD 13:30 Canada: New Housing Price Index 0.1% 0.2%
USD 13:30 US: Producer Price Index 0.4% 0.2%
USD 13:30 US: Core Producer Price Index 0.3% 0.2%
USD 13:30 US: Unemployment Claims 250k 246k

For more information, infographics and the latest currency insights, visit www.halofinancial.com/news