FX market outlook

FX market outlook

Posted on Friday, February 10 2017 at 9:09 am GMT+0000

Gold under pressure as dollar firms on Trump tax pledge; China trade surplus widens.


The strength of the dollar followed through from yesterday’s US session on President Donald Trump’s tax pledge. Meanwhile, upbeat trade data out of China showed signs of stability in the world’s second largest economy, helping lift risk appetite in today’s Asian markets.

The figures were strong on both exports and imports in China, helping lift the nation’s trade balance in January.  Exports jumped 7.9 per cent year on the year in dollar terms, beating forecasts, while imports rose by 16.7 percent, also beating estimates. The trade surplus widened to $51.4 billion from $40.8 billion.

In other news, the Reserve Bank of Australia published its monetary policy statement of the latest policy meeting. The Australian dollar rose 0.5 per cent to $0.7656, despite lower than expected Australian home loans data and slightly lower forecasts for long-term economic growth from the statement. The Bank does not see that a recession is likely in the economy and it expects rates to remain steady.

The dollar continued to trade above the key 113-yen level after breaking above it yesterday. The promise from US President Donald Trump of a “phenomenal” corporate tax announcement in the next few weeks helped support the greenback, which is on track for its first weekly gains versus the Japanese currency, since December.

The dollar index, which measures the US currency against a basket of major currencies, was up 0.1 per cent to 100.74 in today’s Asian session, after rising 0.4 per cent on Thursday. Trump’s talk also helped lift stocks markets, both in the US and Asia.

The stronger dollar, higher US Treasury yields and gains in equity markets, all helped push gold lower. The precious metal slipped 0.5 per cent in Asia trading to $1,221.55 per ounce.

The euro weakened further today as concerns grow over Greece’s debt burden and lenders are battling over how to handle the country’s bailout. Eurozone governments and the International Monetary Fund are failing to come to an agreement ahead of payment deadlines Greece has to make in April and July. The euro fell to as low as $1.0635 by late Asian session trading.

Looking ahead to the rest of the day, UK industrial production will be in focus during the European session. In the North American session, Canadian jobs data and the US Preliminary University of Michigan consumer sentiment report are due.