FX market outlookPosted on Monday, August 7 2017 at 8:16 am GMT+0000
Dollar weakens on start of quiet week as other majors up; oil pressured
Forex markets have started the week on a relatively quiet note regarding economic releases. During the Asian session, New Zealand inflation expectations and German industrial output in June were the main figures of interest. The dollar gave up on some of Friday’s gains against most majors, including the yen and the euro.
The greenback weakened modestly against most majors during Asian trading, following its surge on Friday amid a better-than-
expected jobs report. The report pointed to a healthy and growing labor market, as 209K new jobs were created last month against the upwardly revised 231K payrolls in June, while the expectation was for 183 thousand. Following the release, the dollar index rallied to 93.77, retracing all its weekly losses. However, the index was soft today, falling back to 93.38, mirroring last week’s starting level. Euro/dollar rose to 1.1783, while dollar/yen fell to 110.70.
New Zealand business managers tempered their inflation expectations for the next two years. The country’s Reserve Bank survey of expectations showed local firms see annual inflation expanding at 1.8% in one year, down from 1.9% in last quarter’s survey. In two years, it is expected to be 2.1%, down from 2.2% in the prior survey. Annual inflation was 1.7% in the second quarter as lower fuel prices offset expansion in household basics like rent, food and electricity. These figures confirmed trader doubts that the RBNZ will delay rate hikes at its Thursday meeting. The kiwi weakened against its US counterpart, with the kiwi/dollar pair last trading at 0.7388.
Europe’s largest economy cooled in June, a survey of German industrial production showed. German industrial output fell 1.1% in June down from a 1.2% gain the prior month and faring much worse than the expected 0.2% gain. Excluding energy and construction, industrial production dropped 1.4%. Another breakdown of the data showed the production of capital goods fell 1.9% and intermediate goods by 1.2%. The production of consumer goods slid 0.7%. By contrast, energy production grew 1.4%.
Despite the negative data out of Germany, the euro managed to regain some strength against the dollar, with euro/dollar rising to 1.1783, following the opening level of 1.1772.
Sterling also rose against the greenback, with the pair last trading at 1.3045.
In other news over the weekend, media in China warned of sanctions on North Korea following an agreement between South Korea and the US. Earlier on Saturday, the UN Security Council unanimously imposed new sanctions on North Korea aimed to pressure the country to end its missile testing and nuclear program.
In the UK, the Sunday Telegraph reported that Britain is ready to pay 40 billion euros as part of its divorce from the EU, citing three unnamed sources. So far, the country officials have not given an indication of how the UK would be willing to pay.
Oil prices eased on rising output, though holding close to their nine-week highs. WTI was last trading at $49.40 a barrel while Brent was at $52.53 a barrel. Also starting today is a two-day meeting between OPEC and participating non-OPEC members in the deal to reduce production by about 1.8 million barrels per day.
Gold was broadly steady during Asian trading, with the precious metal last trading at $1,257.44 an ounce.