Daily Forex Commentary

04 January 2017 - US dollar continues its march higher

By Joel Holmes

New Zealand Dollar:

 

 

A relatively quiet day for the markets yesterday as bank holidays proceeded on both sides of the Pacific in New Zealand and the United States. Opening yesterday at 0.6927 against the Greenback, the Kiwi saw an intraday high of 0.6975. A negative reading overnight of the Global Dairy Trade index of -3.9% was the second consecutive slide in auctions as limited buyers could not absorb the increase in volume on offer by Fonterra. Whilst there was not a large move on the NZD/USD after the announcement it helped the continued slide in overnight trading to an eventual low of 0.6890. The US dollar strengthened across the board as the manufacturing sector expanded at its fastest pace in two years.

 

We expect a range today of 0.6880 – 0.6970

 

Australian Dollar:

The Australian Dollar edged higher on Monday during Asian trade after a report showed China’s factory activity picked up much quicker than had anticipated. The PMI index rose to 51.9 compared with forecasts of 50.7 showing activity levels have held steady for the past several months. The local unit touched 0.7235 early afternoon before US data releases overnight proved to outweigh the Aussie pulling it back down again. ISM manufacturing data rose to a two-year high along with US construction spending reaching near eleven-year highs. Aussie currently changing hands at 0.7215 with no local data due out today, the currency will look to offshore with the FOMC minutes due to be released.

 

We expect a range today of 0.7140 – 0.7240

 

Great British Pound:

The Great British Pound finished lower against the USD overnight despite a better than expected result in Manufacturing PMI for the month of December, which read at 56.1 beating the 53.3 forecast by economists. This result saw manufacturing activity pick up at its fastest rate since December 2013. This confirms that sellers remain in control and the Sterling remains a currency ultimately dictated to by sentiment, specifically Brexit sentiment. On Wednesday, the UK will release Construction PMI, with a forecast of 52.6 points. However all eyes will be on the Federal Reserve which will release the minutes of its last policy meeting in December. The Pound is currently trading at 1.2237 against the USD, providing support at 1.2111 and weekly resistance at 1.2350.

 

We expect a range today of 1.7580 – 1.7780

 

Majors:

The U.S Dollar touched fresh 14 year highs through the first full day of trading in 2017, surging higher on stronger than expected manufacturing growth and increased construction spending. U.S factory activity grew at its fastest pace in two years through December while construction spending increased to its highest level in over 10 years stimulating demand for the USD on expectations of continued economic improvement. A string of upbeat labour market and macroeconomic indicators in combination with ever increasing expectations of renewed fiscal stimulus have prompted investors to raise expectations surrounding a tighter Fed and FOMC monetary policy program through 2017 driving the dollar higher. The Dollar index moved through 103.82, its highest level since December 2002, while the Euro moved through 1.0350 touching intraday lows at 1.0342. Profit taking saw moves somewhat checked as attentions now turn to the Fed’s December meeting minutes for direction through trade on Wednesday. 

 

Data Releases

AUD:

No data today.

NZD: No data today.

JPY:

 Final Manufacturing PMI.

GBP:

Construction PMI, Net Lending to Individuals. 

EUR:

Spanish Unemployment Change, Spanish & French Services PMI, CPI Flash Estimate. 

USD:

FOMC Minutes 

 

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