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January 2017

US Dollar heading for a weekly loss

Published: Friday 13 January 2017

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  • US Dollar heading for a weekly loss 
  • China’s worst fall in exports ahead of US trade war 
  • European Central Bank (ECB) releases monetary policy meeting minutes
Overnight, we saw the US Dollar recover mildly due to comments from Federal Reserve officials. Fed Chair, Janet Yellen, stated that the economy is "doing quite well" and there are no serious short term obstacles. Yellen noted "unemployment has now reached a low level, the labor market is generally strong and wage growth is beginning to pick up." Chicago Fed President, Charles Evans, added that he expected that President Elect Donald Trump's stimulus policies to "increase growth by a couple of tenths over the next two years." And policymakers "look forward to refining that when we actually see proposals that are moving forward and likely to be implemented." 

Philadelphia Fed President, Patrick Harker, said that the US economy is "starting 2017 off on a good foot". He said that "the labor market is strong, and we're creating jobs at a good pace." Besides, "inflation is moving back up to our 2% goal and growth is solid." And Harker believed that "three modest rate hikes" are "appropriate for the coming year" if the economy stays on track.
 
Overnight, we saw China post its worst export fall since 2009. China’s trade surplus narrowed much more than expected in December, as global trade remained sluggish, while the growth in imports also cooled.  Looking to today, there are no tier one data releases in the Eurozone calendar, therefore the attention will shift to the US Retail Sales Producer Price Index (PPI) results and business inventories.

The Governing Council of the ECB released their monetary policy minutes on Thursday, stating that euro area recovery was “continuing at a moderate but firming pace”, with real Gross Domestic Product (GDP) growth quarter on quarter of 0.3%. Combined with other data, this showed signs of broad economic expansion and slightly stronger growth at the end of 2016 and start of 2017. At the same time, the committee pointed out that European growth prospects were “dampened by political and economic uncertainty, as well as a sluggish pace of implementation of structural reforms and remaining balance sheet adjustments in a number of sectors.”
 
Taking all this into account, they recommended a “steady-hand approach to financial conditions in the euro area over the period ahead to allow the recovery to mature and strengthen.”
It will be interesting to see how the Euro responds to this cautious approach in the coming days and weeks.

 

Broken vase

 
A boy breaks on old vase at a rich uncle‘s house.
 
The uncle gets extremely angry and yells, “Do you even know how old the vase was? It was from the 17th Century!”
 
The boy sagged in relief, “Oh, good that it wasn’t new”.

 

Today's Major Economic Releases
 

Market BST Data/Event Previous Expected
USD 13:30 US: Core Retail Sales month-on-month 0.2% 0.5%
USD 13:30 US: Retail Sales month-on-month 0.1% 0.5%
USD 13:30 US: Core Producer Price Index month-on-month 0.3% 0.3%
USD 13:30 US: Producer Price Index month-on-month 0.4% 0.1%
 
Daily Currency Analysis by Alex Field
 
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