FX market outlook

FX market outlook

Posted on Wednesday, June 28 2017 at 8:39 am GMT+0000

Euro maintains strong momentum; dollar pressured on healthcare bill

In a quiet data day for many Asian countries, the forex market continued to ride on yesterday’s wave of several key events and speeches during the Asian trading session. The euro continued to build on its positive momentum against the dollar, following European Central Bank President’s bullish take on the eurozone economy. The dollar had a setback against the yen amid the postponed voting on the healthcare bill in the US Senate.

The euro maintained its upward trend against the dollar, rising to the highest level in 10 months on the speech by ECB President Mario Draghi. His view that “Deflationary forces have been replaced by reflationary ones” has helped euro/dollar rise 0.40%, to last trade at 1.1383. Stronger than expected French consumer confidence might have also helped the euro. At a 108, the confidence in June rose above the estimated level of 103 and above May’s 103. In early European session, the markets will be monitoring the release of Italian core inflation for June.

As the euro was consolidating gains, the dollar index, which measures the greenback against a basket of peers, was down 0.18%, at one point hitting 96.165, its lowest intraday-quote since the pre-election period in November of last year.

Federal Reserve Chair Janet Yallen offered little support for the dollar during her speech last night. She said, “it will be appropriate to raise interest rates very gradually”, though she tried to sidestep the topic of US monetary policy. Additionally, the dollar weakened against the yen during the Asian session following the news that the voting on the US healthcare bill was postponed in the Senate. Dollar/yen was last flat on the day, trading at 112.33. US pending home sales for May will be released later in the day.

Sterling has retraced some of yesterday’s gains against the dollar during the Asian trading session. Pound/dollar last traded at 1.2796.

Looking at commodities, WTI oil futures (August 2017 contract) is up slightly today, last trading at $43.87 a barrel. However, it has been pressured after a report of rising US inventories, underpinning a major concern that a three-year supply glut is far from over.

Gold has continued to rise during the Asian session, last trading at $1250.43 an ounce.

The European and the US sessions will also be dominated by another set of monetary policy speeches. ECB President and the governors of Bank of England, Bank of Canada and Bank of Japan are all expected to speak later in the day during a central bank conference in Portugal.