The Dollar’s on the Ropes, with Trump and the Data Failing to Impress
Dollar woes continue with Treasury yields on the slide, as sentiment towards U.S monetary and fiscal policy remains Dollar negative. Economic data has also failed to impress, with doubts rising over the FED’s rate path for next year.
Earlier in the Day:
Key stats out through the Asian session this morning was limited to Japan’s prelim November industrial production and retail sales figures.
Data out of Japan continues to impress, with industrial production rising by 0.6%, ahead of a forecasted and October 0.5%, with retail sales surging by 2.2%, following October’s 0.2% decline.
For Prime Minister Abe, household spending has continued to be an issue, with weak spending having been attributed to tepid wage growth. Today’s figures provide much needed support to 4th quarter economic growth figures that have been largely dependent upon trade.
The Yen moved from ¥113.223 to ¥113.216 against the Dollar upon release of the figures. At the time of writing, the Yen was up 0.15% to ¥113.18 against the Dollar, which was on the back foot following disappointing consumer confidence numbers released on Wednesday.
Elsewhere, the Aussie Dollar was also on the move, up 0.17% to $0.7781, while the Kiwi Dollar was ahead of the pack, up 0.38% to $0.7084 at the time of writing, with yield differentials and rising commodity prices favouring the pair.
In the equity markets, the major indexes were all in positive territory at the time of writing, led by the CSI300, which was up 0.67%. The Nikkei struggled despite positive stats, with the pickup in the Yen pegging back more material gains through the early part of the session.
The Day Ahead:
While there are no material stats scheduled for release out of the Eurozone this morning, the ECB economic bulletin is due to be published, which will be sliced and diced by the markets in search of ECB sentiment towards the economy and inflation.
Any negative sentiment towards inflation could see the EUR give up some of the holiday gains, though with the Dollar going through a rough patch, the outlook will need to be quite negative for the markets to shift sentiment towards ECB monetary policy.
Outside the data, Spain will need to be monitored, with any increased tension with the Catalan independence parties a negative for the EUR.
At the time of writing, the EUR was up 0.23% to $1.1915, which may start becoming an issue for the European equity markets, particularly the DAX.
For the Pound, stats are limited to house price figures that are likely to be largely brushed aside by the markets, with Dollar weakness driving the Pound back up to $1.34 levels in the early part of the day.
There’s been no material shift in sentiment towards the UK economy and progress on Brexit to support today’s upside, with no real stats scheduled for release until next week’s private sector December PMI numbers. While economists have claimed that they had been overly pessimistic on the effects of the EU Referendum on the UK economy, next week’s numbers could be the beginning of the end from an economic growth perspective.
At the time of writing, the Pound was up 0.15% to $1.3420, with little likely to influence the Pound through the day.
Across the Pond, key stats out of the U.S include the weekly jobless claims figures, November’s goods trade balance and the Chicago PMI for December. While the goods trade balance deficit is forecasted to narrow, any upside for the Dollar may be offset should the Chicago PMI come in as forecasted or softer.
Market sentiment towards FED monetary policy remains the key issue for the Dollar, with a lack of inflationary pressure questioning whether there will be 3 rate hikes next year as had been projected in December’s meeting.
At the time for writing, the Dollar Spot Index was down 0.11% to 92.923, with the year-to-date number edging ever closer to double digits, currently down 9.09% year-to-date.