FX market outlook

FX market outlook

Posted on Monday, July 17 2017 at 8:06 am GMT+0000
Dollar weakness eases; China releases upbeat economic data; commodities up

As a result of a holiday in Japan the first trading session of the day was more quiet than usual. A set of economic data releases out of China dominated the news flow so far. Pressure on the dollar against major currencies stalled during the Asian session, following the greenback’s plunge on Friday amid disappointing inflation and retail sales data.

China’s upbeat economic data releases took markets by surprise today. The second quarter GDP rose 6.9% year-on-year, faster than expected (6.8%) as industrial output and consumption picked up and investment remained strong. This gave a boost to China dependent currencies such as the aussie that rose against the dollar following the release, but later gave up on the gains.

The greenback firmed slightly against the yen, up one-tenth of a percent, with dollar/yen last trading at 112.69 ahead of the European session. The dollar index was broadly flat today. This comes after the dollar tumbled on Friday amid the release of disappointing inflation and retail sales figures. The dollar index fell to a fresh 10-month low of 95.25 immediately following the release. Market participants are now especially skeptical about the prospects of future interest rate hikes by the Federal Reserve.

The euro gave up on some of the gains from Friday against the dollar, but remained close to its highest level in a year. Euro/dollar was last trading at 1.1456 ahead of the European session. Looking ahead, June final inflation for the eurozone will be released later today. Economists are expecting an upward revision to the monthly figure. The main event of the week will be the European Central Bank meeting on Thursday.

Sterling also gave up on some of the gains from Friday against the greenback. Pound/dollar was last trading at 1.3090. Traders will likely monitor the second part of the Brexit negotiations that start today in Brussels.

Oil prices continued gaining during the Asian session, amid a slowdown in the US rigs expansion and due to a strong refinery demand from China. WTI was last trading at $46.75 a barrel and Brent at $49.17.

Gold continued building on Friday’s strong gain when the precious metal rose amid dollar weakness. Gold was last trading at $1,230.7 an ounce ahead of the European session.