FX market outlook

FX market outlook

Posted on Friday, June 23 2017 at 8:38 am GMT+0000

Oil-linked currencies gain with the commodity’s rise; dollar retreats.

As the Asian trading session is coming to a close, the dollar is modestly down while commodity-linked currencies, such as the loonie, are gaining ground versus the greenback on the back of oil rising.

The dollar index, a broader gauge of the US currency’s strength, was last down two-tenths of a percent on the day. Dollar/yen was slightly down at 111.25. If it closes the day lower, it would be the fourth consecutive day of declines for the pair. The retreat in the previous three days was only minor in nature though, failing to erase the greenback’s gains versus the yen on Monday. Euro/dollar was up at 1.1177, more than making up for yesterday’s fall by 0.1%.

Among others, the final core PCE figure for the first quarter of the year, which is the Federal Reserve’s preferred inflation measure, will be released next week. It will be closely watched given recent weak inflation numbers out of the US. Should the measure disappoint, market participants might fear it would postpone the Fed’s plans on hiking rates.

Sterling faced added volatility this week on conflicting signaling by Monetary Policy Committee (MPC) members, including the Bank of England Governor, Mark Carney. The last member to contrast Carney’s dovishness through her comments was Kristin Forbes, who voted for a rate hike in the previous two BoE rate-setting meetings and who will be stepping down from the MPC by the end of the month. Sterling maintains yesterday’s momentum following her comments and was last trading at $1.2738 versus the greenback after commencing trading at $1.2681. The pound’s gains extend relative to the euro as well with euro/pound at 0.8771, down from the day’s open of 0.8793.

The Canadian dollar was helped by stronger-than-expected retail sales numbers and the rebound in oil to gain by 0.75% versus its US counterpart in yesterday’s trading and trade below the C$1.33 handle. In today’s trading, dollar/loonie is slightly down on the day at 1.3223.

The commodity-linked aussie was up four-tenths of a percent versus the greenback at $0.7568 after declining for four straight days, while the kiwi, a strong performer yesterday following the New Zealand central bank’s meeting, extended gains today to rise to a four day high of $0.7289.

In commodities, gold last marginally exceeded the $1253 an ounce mark, gaining on dollar weakness. The precious metal is on its third day of advances following a downtrend starting in the first week of June that pushed it to the one-month low of $1240.74. WTI and Brent crude oil were last trading at $42.83 and $45.34 a barrel respectively, both up two-tenths of a percent, maintaining yesterday’s momentum for the time being.

Regarding the rest of the day, the economic releases that are expected to attract most attention are the preliminary PMI estimates out of the eurozone and the US for the manufacturing and services sectors, as well as Canadian inflation figures and US new home sales data. Numerous speeches by FOMC members, including voting member Jerome Powell, will also be watched by forex market participants.