FX market outlook

FX market outlook

Posted on Monday, July 10 2017 at 8:40 am GMT+0000

Dollar continues to strengthen; euro steady; commodities pressured

As the Asian markets were coming to a close, the dollar continued gaining against the yen following a strong boost on Friday. In the meantime, the yen was also weakened by soft data releases, reaching a near two-month low against the dollar. The euro was steady against the dollar while the pound gained ground, to ease some of the Friday’s weakness.

The dollar continued building on Friday’s gains against the yen during today’s Asian session. Today’s speech by Bank of Japan Governor Haruhiko Kuroda reiterated the bank’s policy to maintain its current accommodating monetary policy. This along with worse-than-expected data releases out of Japan further weakened the yen, pushing it to a near two-month low. Both Japanese current account and machinery orders came in well below expectations. Dollar/yen opened at 113.88 and continued trending higher to last trade at 114.22 as the Asian trading session was coming to a close.

The dollar index, a broad measure of the greenback’s strength, firmed up during the Asian session to last trade at 96.072.

The euro was steady against the greenback during the Asian session. Euro/dollar opened at 1.1397 and was last trading at 1.1399 as the European trading session was about to start. The euro didn’t get much boost from the weekend interviews by two members of the European Central Bank. In a TV interview for Bloomberg, Bank of France Governor Francois Villeroy de Galhau called for a decision on adaptation of the intensity of the ECB monetary policy in autumn. This may signal a potential absence of clues during the last policy meeting before summer holidays on July 20. ECB Chief Economist Peter Praet, speaking in a newspaper interview released the same day, insisted that “we still need a long period of accommodative policy.”

Sterling edged higher during today’s session, easing some of Friday’s losses. Pound/dollar opened at 1.2881 and was last trading at 1.2886. In the absence of data releases out of the UK, the current political situation around the latest Brexit developments could have been commanding much of the forex trading around the pound as of today. The UK will release key labor data such as June unemployment and average earnings for May on Wednesday, which could dictate much of sterling’s volatility. In the meantime, two Bank of England members will speak on Tuesday, potentially giving more insight into the bank’s latest thinking.

The Canadian dollar edged lower today after a strong rally on Friday amid figures pointing to an improving labor market. The upbeat data also adds to speculation that the Bank of Canada could start tightening monetary policy as soon as this week during its planned policy meeting.

Looking at commodities, oil prices continued to fall, inching lower during the Asian trading hours. WTI was last trading at $44.20 a barrel, while Brent was at $46.65. The oil price have been under pressure for four consecutive days.

Gold also continued to decline as the dollar strengthened. The precious metal was last trading at $1,206.31 an ounce, its lowest since mid-March.