FX market outlook

FX market outlook

Posted on Thursday, July 6 2017 at 8:17 am GMT+0000

Fed split opinions weaken dollar short-term; euro under pressure

The US dollar had weakened against the yen during the early Asian trading session on the mixed tone from the minutes of the Fed’s latest meeting. However, the greenback gathered strength as the yen gave up gains ahead of the European open. Australia’s trade surplus lent some short-lived gains to the aussie.

Minutes from the Fed’s latest meeting in June, at which the US central bank voted to raise interest rates, showed an absence of consensus about when to start the process of Fed’s balance sheet reduction. In a time of low inflation, some of the officials wanted to wait until later in the year to start the balance sheet reduction. Looking at forex markets, the greenback weakened against the yen following the release. However, the dollar regained some ground against the yen near the close of Asian trading, last trading at 113.33 yen. Several key US data will be released later in the day, including the ADP employment report, ISM non-manufacturing PMI and the initial jobless claims. All of these could have a significant impact on the greenback.

The Australian dollar rose against the greenback after stronger than expected trade data. Australia’s trade surplus in May was A$2.47 billion, coming in well above the expected A$1.1 billion. Aussie/dollar went from 0.7595 to 0.7610 as the data was released, but the gains were short-lived.  The pair was last trading at 0.7600 ahead of the European open.

The euro was under pressure against the dollar during the early Asian session, but managed to recover some of the losses as the session was ending. Euro/dollar opened at 1.1351 and fell to 1.1338 ahead of the European open.

Disappointing May industrial orders out of Germany added to the euro pressure in the late Asian trading session. Markets were expecting industrial orders to had grown 2% month-on-month in May, but the number came at only half of that growth, after a decline of 2.1% in April. However, currency traders didn’t attribute much significance to it as euro/dollar bounced up shortly after the release.  The release of the European Central Bank minutes from the bank’s latest meeting might be closely watched later in the day.

Sterling rose modestly against the greenback, last trading at $1.2933, ahead of some UK key data releases tomorrow.

Oil retraced some of yesterday’s heavy losses, on a report that showed a decline in US crude and gasoline stockpiles. WTI was last trading at $45.61 a barrel, up from yesterday’s heavy plunge when it reached a low of $44.51.

Looking at gold, the precious metal was under pressure today after two days of gains. The commodity’s price fell to $1,223.60 as the Asian markets were closing for the day.