FX market outlook

FX market outlook

Posted on Friday, July 14 2017 at 8:32 am GMT+0000
Dollar steady ahead of key inflation release; euro, sterling gain

The US dollar was steady against the yen during the Asian session, but weakened against most other majors. The key inflation data out of the US could potentially dictate today’s biggest forex market moves. The euro and the pound were both up, while oil came under some pressure ahead of the European open.

The dollar steadied against the yen, helped by upbeat US economic data, after earlier weakness due to a dovish-perceived testimony by Federal Reserve Chair Janet Yellen to Congress. The Fed Chair believes that the current level of interest rates is not far from a neutral policy stance and hence rates would not have to rise “all that much”. She also sounded less confident about the lack of inflationary pressure being just a temporary issue. A set of important US data releases, which could significantly impact dollar trading such as June consumer inflation and retail sales, is due later today.

The dollar index was down 0.05% at 95.68 ahead of European trading. The dollar was broadly flat against the yen and the loonie, but weakened against other major counterparts. Dollar/yen was last trading at 113.29.

Both, the Australian and New Zealand dollars gained against the dollar during the Asian session, continuing their rally from yesterday. Aussie/dollar was last up 0.32%, trading at 0.7751, while kiwi/dollar was up 0.05%, trading at 0.7326. The kiwi came under a bit of pressure after business PMI for June fell to 56.2, below last month’s high of 58.5, though it quickly recovered.

The euro was up 0.20% against the dollar to last trade at $1.1415 ahead of the European open. The eurozone common currency got a lift yesterday following the report by the Wall Street Journal on the European Central Bank signalling the timing of QE tapering in September.

Sterling continued strengthening against the dollar for the third consecutive day as investors covered some short positions after the Fed Chair induced dollar weakness. Pound/dollar was up 0.20% to last trade at 1.2961. Following the recent hawkish comment by Bank of England member Ian McCafferty, no other obvious catalyst seems apparent in terms of economic releases and news today.

The Canadian dollar weakened slightly against its US counterpart, but at 1.2730 the loonie is still around the 12-month high level.

Crude prices were on the rise for most of the Asian session after a late-day rally during the preceding session. However, prices came under some pressure as European trading was starting. WTI was last trading at $45.92 a barrel, while Brent was at $48.31.

Gold prices rose erasing yesterday’s losses. The precious commodity was last trading at $1,218.23 an ounce.