FX market outlookPosted on Monday, January 8 2018 at 9:26 am GMT+0000
Dollar recovers following decline caused by NFP; eurozone retail sales due
Here are the latest developments in global markets:
- FOREX: The US dollar index traded 0.2% higher during the Asian trading session Monday, recovering the losses it posted on Friday following the slightly softer-than-anticipated US employment report.
- STOCKS: In Asia, Hong Kong’s Hang Seng was up 0.2% while China’s CSI 300 was 0.5% higher. Meanwhile, Japanese equity markets remained closed today for the Coming of Age holiday. In Europe, futures tracking the Euro Stoxx 50 are currently up by 0.4%.
The three major US equity indices – Dow Jones, S&P 500, and Nasdaq Composite – extended their recent gains on Friday, all closing at new record highs as the so-called “Goldilocks” environment of solid economic growth with subdued inflation continued to support risk appetite. As the earnings season kicks off, JPMorgan Chase, Wells Fargo and Blackrock will be among US companies reporting quarterly results this week. Futures tracking the Dow, S&P, and Nasdaq 100 are currently in positive territory.
- COMMODITIES: In energy markets, WTI and Brent crude oil were up 0.3% and 0.2% respectively, likely supported by data released on Friday showing a decline in the number of active US oil rigs, even despite the recent surge in crude prices. Gold was down marginally on Monday, last trading near the $1317 per ounce zone, perhaps weighed on by the broader risk-on market sentiment.
Major movers: Dollar recovers its payrolls-related tumble; loonie flies
The US dollar index inched up by 0.2% on Monday, recovering all the losses it posted on Friday after the US employment report for December fell short of meeting market expectations. Nonfarm payrolls came in at 148k, notably less than the consensus estimate of 190k, but the previous figure was revised higher somewhat. The unemployment rate remained unchanged at 4.1% as was expected, and although the all-important average hourly earnings met their forecast of +0.3% m/m, the previous print was revised lower. Overall, these data confirmed what we already knew about the US economy; that the labor market is relatively tight, but wage growth remains subdued and thus, they are unlikely to have much impact on the Fed’s thinking.
Both euro/dollar and sterling/dollar were down slightly, likely a reflection of the greenback’s rebound rather than euro or sterling weakness.
The Canadian dollar skyrocketed on Friday, reaching a 3-month high against its US counterpart, after the nation’s employment data for December crushed market expectations, showing that the labor market continues to tighten at a rapid pace. At the time of writing, market pricing has tilted in favor of a rate hike at the Bank of Canada’s upcoming meeting in January, with the implied probability for such action resting at nearly 70% according to Canada’s Overnight Index Swaps.
The antipodean currencies were mixed against the greenback, with aussie/dollar trading 0.3% lower on Monday, but kiwi/dollar being marginally higher.
Day ahead: UK house prices and eurozone retail sales among day’s releases
The UK will see the release of data on house prices at 0830 GMT. The Halifax house price index is anticipated to show house prices rising for the sixth straight month in December, though at a weaker pace relative to November.
Numerous eurozone business and consumer surveys are scheduled for release today. Those include January’s Sentix index, which gauges investors’ sentiment for current conditions and expectations for the coming months, due at 0930 GMT. The European Commission’s Directorate General for Economic and Financial Affairs will later – at 1000 GMT – release its December business climate and economic sentiment surveys, as well as the final reading on December consumer confidence. Although these surveys will be gathering some attention, they’re not typically major market movers.
Eurozone retail sales figures for the month of November will also be made public today at 1000 GMT. Sales are expected to reflect an acceleration on both a monthly and yearly basis.
Loonie traders might be paying attention to the Bank of Canada’s survey on the business outlook scheduled for release at 1530 GMT.
Out of the US, consumer credit figures for the month of November are due at 2000 GMT.
Fed speakers making appearances today include Atlanta Fed President Raphael Bostic who will be speaking on the economic outlook and monetary policy at 1740 GMT. John Williams and Eric Rosengren, the San Francisco and Boston Fed Presidents, will also be participating in discussions scheduled to begin at 1835 GMT and 2125 GMT respectively.