FX market outlook

FX market outlook

Posted on Tuesday, January 10 2017 at 8:58 am GMT+0000

Dollar retreats ahead of Trump press conference.


The US dollar posted some modest losses during Tuesday’s Asian trading despite relatively hawkish remarks from Federal Reserve officials the previous day.  Dollar / yen was below 116 at 115.72 while the euro was trying to climb above the 1.06 level at 1.0598.  The euro had climbed as high as 1.0627 earlier in the session.

Boston Fed’s Eric Rosengren called for a faster pace of interest rate hikes compared to the one-a-year pace of the previous two years while Dennis Lockhart of the Atlanta Fed called for productivity-enhancing reforms and for the Fed to take a step back from providing stimulus.  Nevertheless, traders were cautious in adding to their dollar-long positions ahead of a key press conference by President-elect Donald Trump, where some details of the new administration’s economic policies could emerge.

In other economic news, Chinese consumer prices for December slightly missed expectations by coming in at 2.1% y/y compared to expectations of a 2.3% rise while producer prices for the same month rose much faster-than-expected.  November retail sales in Australia also missed estimates by coming in at 0.2% month-on-month compared to expectations of 0.4% growth.  Japanese consumer confidence rose to 43.1 in December from 40.9 in November.

The mood on the markets was slightly risk off as a number of Asian markets fell, while oil was trying to stabilize around $52 a barrel following a steep drop overnight.

The pound remained under pressure on the increasing possibility of a ‘hard’ Brexit following statements by Prime Minister Theresa May on prioritising immigration controls ahead of EU Single Market access for the UK.  Pound / dollar was near its session lows at 1.2140 while Euro / pound rose to as high as 0.8737.

Looking ahead, the calendar is relatively quiet in terms of economic data with only some releases out of the US likely to attract some attention.  The NFIB business optimism index, wholesale sales and inventories and JOLTS job openings will come out during the US session.