FX market outlook

FX market outlook

Posted on Wednesday, June 7 2017 at 7:55 am GMT+0000

Aussie jumps on GDP; gold at 1-month high ahead of risk events.

The Australian dollar rallied after GDP data while the greenback steadied after sharp declines this week. Upcoming key risk events tomorrow dampened risk appetite in the markets as investors were cautious ahead of the UK elections, the European Central Bank meeting, and the testimony to a Senate committee by former FBI Director James Comey. This helped support gold near seven-month highs.

The aussie was one of the best performing major currencies against the US dollar in the Asian session as it rose to a one-month high of $0.7543 from $0.7500. Markets were expecting a weaker GDP number but data showed the Australian economy grew 0.3% in the first quarter versus 0.2% anticipated and 1.7% for the year compared to a 1.5% rise that was forecast.

Sterling remained resilient ahead of the UK general election tomorrow and traded in a tight range against the dollar close to the key $1.2900 level.

The euro has been moving sideways all week just below $1.1285. Focus is shifting to the ECB policy meeting tomorrow and expectations are for the central bank to have a more hawkish tone with regards to the Eurozone economy and may even hint that it is exiting from its quantitative easing program.

The dollar stabilized against the yen after a big sell-off yesterday and hovered near six-week lows 109.20 yen. The greenback is being weighed by uncertainty around Thursday’s testimony at a Senate Intelligence Committee hearing by James Comey, the former FBI chief fired by President Donald Trump. He is expected to testify whether Trump asked him to shut down the FBI probe into former national security adviser Michael Flynn.

Gold gained 1% yesterday to reach its highest level since early November at $1295.97 an ounce. Prices steadied in Asian trading today but the safe haven asset remains supported due to risk aversion and a weaker dollar.

WTI oil prices rebounded to test the $48 a barrel level but gains were capped as the commodity is being put under pressure by tensions in the Middle East amongst oil producers due to a diplomatic rift with Qatar.