FX market outlook

FX market outlook

Posted on Thursday, November 23 2017 at 9:27 am GMT+0000

Dollar flat following losses on Fed perceived dovishness; thin trading on Thanksgiving holiday

As the Asian session was nearing completion, the dollar was little changed on the day relative to major rival currencies after yesterday posting sizable losses following the release of the minutes of the Federal Reserve’s October 31-November 1 meeting which showed differing views within the FOMC, casting doubts about the timing of delivery of future rate hikes. Trading activity is relatively thinner today as Japan is closed for Labor Thanksgiving Day and US markets will also be closed for the Thanksgiving holiday.

The dollar index, which gauges the greenback’s strength versus the currencies of six major US trading partners, was flat on the day at 93.19 at 0824 GMT. Yesterday it lost 0.8%, while at its lowest today it fell to the one-month low of 93.12. The minutes from the Fed’s latest meeting showed some policymakers expressing worries about persistently low inflation, with future data on price pressures determining whether they will support future rate increases. However, the minutes supported that the Fed remains firmly on track to deliver a rate hike during the December meeting with markets almost completely pricing in that move.

Dollar/yen was little changed at 111.23 after losing 1.1% during yesterday’s trading and touching a two-month low of 111.05 earlier in the day.

German third quarter GDP data showed the eurozone’s (and Europe’s) largest economy expanding by 0.8% q/q as expected and by 2.3% y/y versus forecasts of 2.6%. Euro/dollar didn’t react much within the first minutes of data release. The pair last stood 0.1% higher on the day at 1.1831 after also experiencing considerable advancing during yesterday’s trading. Eurozone November preliminary PMI data – manufacturing, services and the composite measure – are due at 0900 GMT (the respective figures for Germany are due at 0830 GMT). Also euro-related, the ECB minutes pertaining to the meeting completed on October 26 will be released at 1230 GMT.

Pound/dollar was 0.1% lower at 1.3312, though the pair was holding up the bulk of yesterday’s gain. The UK will see the release of the second estimate of third quarter GDP figures at 0930 GMT.

Dollar/loonie was 0.1% down, trading near the 10-day low of 1.2681 recorded earlier in the day ahead of Canadian retail sales data due at 1330 GMT.

The New Zealand dollar posted some short-lived gains versus its US counterpart following the release of retail sales data out of the country, rising to an eight-day high of 0.6893. The pair, which also gained on the back of dollar weakness yesterday, was last flat on the day and not far below the aforementioned peak. Aussie/dollar was also little changed, trading close to an eight-day high of 0.7624 recorded earlier in the day.

In commodities, gold was 0.2% lower at $1,289.31 per ounce following yesterday’s advance. WTI and Brent crude were down by 0.3% and 0.5%, at $57.84 and $63.02 per barrel respectively. Despite being down on the day, the two benchmarks were not far below the recently recorded more than two-year highs.