FX market outlook

FX market outlook

Posted on Friday, February 17 2017 at 8:56 am GMT+0000

Dollar steadies after drop to one-week low against yen.


The US dollar continued its corrective move against the yen in Asia today. After hitting a more-than two-week high above 114-yen this week, following hawkish comments from Fed Chair Janet Yellen and upbeat US inflation and retail sales data, the greenback failed to maintain the rally.

The dollar index, which measures the US currency against a basket of six other major counterparts, was flat in Asian trading after having dropped 0.7 per cent on Thursday.

Dollar/yen traded just below 113.50 yen during the Asian session after hitting as high as 114.95 earlier in the week, as investors took the opportunity to book profits from the pair’s gains in the past few days. The Philly Fed manufacturing index released yesterday showed a jump to a 33-year high of 43.3 in February, from 23.6 in January. This data added to the week’s strong run of US data on retails sales and inflation but failed to lift the dollar. Political issues are also in play in the markets, aside from economic fundamentals, as investors are trying to assess the implication of US President Trump’s policies.

The euro held onto gains made versus the dollar after a big jump yesterday to a one-week high of $1.0678. The single currency is poised to end the week with gains against the dollar following sharp losses in the previous week due to market concerns of political risks to the Eurozone.

Sterling held onto yesterday’s gains made against the dollar, to trade around the key $1.2500 level. UK retail sales will be in focus later in the day, which could have an impact on the pound.

The Aussie was little changed after having hit a three-month high of $0.7731 versus the greenback on strong Australian jobs data yesterday.

The New Zealand dollar was under pressure after disappointing retails sales numbers. The kiwi fell below the key $0.7200 in late Asian trading.

Oil prices steadied today, with WTI oil trading back above the $53 a barrel level after a sharp dip the previous day amid continued concerns about rising US crude inventories. Gold is heading for a weekly gain, as the dollar’s strength faded this week. The precious metal traded at $1,237 an ounce.

Looking ahead to the rest of the day, the main focus will be on UK retail sales data and the Eurozone current account.