FX market outlook

FX market outlook

Posted on Friday, February 24 2017 at 9:42 am GMT+0000

Gold at 3-month highs on softer dollar after Mnuchin comments.


Gold consolidated gains at a 3-month high as the US dollar was on track to end the week with losses. The greenback touched a 2-week low against the yen on Thursday after being weighed by disappointing US jobless claims data and US Treasury Secretary Steven Mnuchin’s remarks.

The number of Americans applying for unemployment benefits increased by 6,000 to 244,000 in the week ending February 18 from the previous week’s revised total of 238,000. Expectations were for jobless claims to rise by 2,000 to 241,000 last week.

Meanwhile, the dollar was already under pressure after the FOMC minutes on Wednesday, which did not give a clear picture about when the next Fed rate hike would take place. Additionally, the greenback was dragged down by comments yesterday from Secretary Mnuchin who said the government’s policies will have a limited impact on the economy this year.

Hawkish remarks by FOMC member Robert Kaplan yesterday helped cushion a further decline in the dollar. Kapan said the Fed should raise rates sooner rather than later.

Dollar / yen consolidated losses just below the key 113-yen level in Asian trading.

The euro maintained gains against the dollar to move further away from a one-month low hit earlier this week.  Euro / dollar rose to a session high of 1.0594. Further gains may be limited due to concerns over the French elections weighing on the currency.

Gold was buoyed by a slump in the dollar, and rose to a new 3-month high in late Asian session trading, to hit $1254.19 an ounce.

Oil was helped higher after the EIA inventory report yesterday showed a smaller-than-expected build in US crude inventories. Crude stockpiles rose 0.6 million barrels versus 3.4 million anticipated last week. This was much lower than the prior week’s 9.5 million barrels. WTI oil remained above $54 a barrel while Brent crude traded above $56 a barrel.

The economic calendar is light for the rest of the day, with markets focusing only on Canadian inflation data and US new home sales.