Forex News

July 15, 2017 (Tempus, Inc.) – The U.S. Dollar is pivoting downward following the release of truly disappointing inflation and retail sales data. Monthly Consumer Price Index figures showed no expansion and the year-on-year CPI increased by 1.6% under the estimated 1.7%, which suggests inflationary growth is not increasing near the desired pace by the Fed of 2.0%.

Furthermore, Retail Sales really surprised us with contraction instead of any improvement, which economists expected. June’s numbers were supposed to show 0.4% growth, but fell by (-0.1%). At the time of writing, the Bloomberg Dollar Spot Index was headed towards a half percent loss immediately after the indicators hit the wire.

Fed Head Janet Yellen’s testimony this week to the congressional Housing Committee already cast doubt on the economy and the Fed’s approach to future hikes, but these numbers certainly lower the chances of a Fed rate increment by end of the year to just 43.9%. With distractions in Washington as political infighting takes over headlines and the economic reality of poor consumption, the greenback is starting to feel the pressure and we see little chance of much recovery from current ranges in the next few weeks.

EUR

The Euro is now up 1.1% for the month of July, slowly but surely appreciating as a result of better economic performance and hopes of monetary policy tightening. Today happens to be Bastille Day in France, so we may not get much in terms of news out of the Old Continent. CPI numbers for Italy came out as predicted, so if even Italy has growth it does not bode well for the buck against the shared currency, which could climb further as the day goes on.

GBP

The Pound is on the rise also as a result of poor economic performance in the United States. Additionally, Bank of England’s Ian McCafferty sounded the trumpet of hawkish sentiment after he expressed his belief that the central bank should start winding down some its sovereign bond purchases from QE.

It would be way too early to take such action since rates have not been increased and would require levels near where the Fed is. However, this discord between BOE members is convincing traders that the bank will likely not maintain its easing stance much longer.

Brexit-wise, Britain has finally admitted on paper that indeed an amount of money will need to be paid for the divorce process to start going, if possible in any way, somewhat smoothly. The EU has estimated a required payment of about EUR 100.0 billion. While many surrounding PM Theresa May disagree with the quantity, it is an important step toward talks getting better and with less friction.


USA 

July 11, 2017 (Tempus, Inc.) – The U.S. Dollar was trading in positive territory yesterday, holding on to the minor gains experienced at the end of last week once the employment Situation revealed a consistently improving labor sector.

Today, however, most of the buck’s counterparts pushed higher fluctuating around their strongest levels since last summer, with the EUR reaching a new 14-month high slightly below the 1.15 mark.

Ultimately, the greenback will need to see stellar developments in consumption and perhaps signs of confidence from statements by Fed officials who’ll speak throughout the week.

The G-20 summit came to a close with some minor policy progress, but highlighted by the growing difference in approach to problems such as North Korea and discord with climate change agreements between the U.S. and some of the global community. We shall see if central banks around the world continue to work towards tightening with the Bank of Canada meeting on Wednesday.

EUR

The Euro did not falter much after Friday’s good news out of the U.S. This week brings individualized country data such as Industrial Production and Consumer Price Index figures from Germany, France and Spain that could move the needle in the shared currency’s favor if impressive.

Economic indicators are the primary cause of the Euro’s recent surge, along with potential European Central Bank tightening. Any near-term suggestion that the continent is ready for a reduction in QE prior to the program’s full completion in December will certainly result in further Euro strengthening, which we feel, is possible for Q3.

 

GBP

The Pound slid at the end of last week and continued to flounder overnight based on, once more, poor economic numbers out of Britain and a gloomy Brexit future. Industrial output, manufacturing, and construction are indeed not just lagging, but also contracting.

Furthermore, a study of what would occur if the UK were to pay World Trade Organization tariffs for EU-produced goods showed that an English breakfast would go up in price by close to 15.0% as things such as olive oil and orange juice could represent an additional 30.0% in importing costs.

 

June 2, 2017 (Tempus, Inc.) – The U.S. dollar held flat ranges overnight as the fallout from yesterday’s news was digested by markets. Yesterday afternoon President Trump announced that the United States would exit the Paris Climate Accord. While the decision was met with widespread condemnation from world leaders and high-profile business executives, the President made the argument that the leaving the accord would benefit U.S. businesses. Equity markets have yet to take notice. And while many currency analysts around the globe slammed the decision, fx traders shrugged off the news and focused their attention to today’s data releases.

The greenback is losing across the board in early trading following a dismal jobs report. The U.S. economy only added 138K jobs in the month of May, missing expectation of 182K rise. In addition, March and April’s readings were downwardly revised by a total of 66K jobs.

Despite the poor data, current Fed Futures show that odds the Federal Reserve will raise interest rates later this month has stayed constant at around 90%.

 

EUR

After trading in sideways ranges overnight, the Euro jumped to a 7-month high against the U.S. dollar following poor U.S. jobs data. There was little data released today in the Eurozone so EUR/USD will trade with U.S. headlines.

The European Central Bank will dominate next week. The central bank will make their interest rate decision next week. While no policy change is expected, analysts will pour over Mario Draghi’s statement for clues as to whether the Bank is gearing up towards lessening their easing.

 

GBP

The British pound has taken advantage of a generally weak dollar this morning, rising as much as 50 basis points before ceding some of those gains. Attention will shift back to next week’s snap parliamentary elections in the U.K. While Theresa May and her Conservative party are expected to hold onto a majority, traders are not willing to evacuate the chances of a surprise victory by the Labour party as polls have tightened in recent days.

May 20, 2017 (Tempus, Inc.) – The U.S. Dollar tumbled once more overnight, closing this week about 1.5% worse overall according to the Bloomberg Dollar Spot Index. It has been an eventful week with eyes on the political turmoil brewing in Washington, disturbances in global markets, and renewed volatility. Plans for economic expansion are still underway per Treasury Secretary Steve Mnuchin statements to the Senate Banking Committee yesterday in which he highlighted efforts to push for growth via major tax incentives.

Without any data for today, we see the greenback sustaining its losses and hoping for a better week. The slew of news lately has not aided the “buck,” with economic indicators failing to meet estimates and advances in performance elsewhere.

We hold on to our belief that the dollar will be healthy in the long-term as the Fed remains the one major central bank willing to increase interest rates. Nevertheless, some of the major currencies merit their higher value and only focus on their regional concerns (Brexit, nuclear conflict threat, future elections) could upend the upward progress seen recently.

 

EUR

The Euro has surged by 2.6% thus far in May, reaching its strongest level since the start of November. Yesterday the Minutes from the last European Central Bank meeting revealed that indeed officials are confident about the economy, but do not want to motivate bets on rapid Euro appreciation. There was mention of potentially cutting some of the QE that still remains for 2017, but President Mario Draghi had warned that the ECB outlook would remain accommodative and cautious.

At the moment, EUR is a good bet after the French elections eased the political downside risks that had kept the shared currency quite subdued. Other underlying issues could bring EUR down later, but as long as the spotlight is on American political news and unstable markets, the carry-trade tender shall stay afloat.

 

GBP

The Pound reversed losses from yesterday’s session as no other data was released to affect it current strengthening status. The sturdy currency has been improving because of mixed data that suggests the British economy can withstand obstacles from the rapid depreciation that Sterling had after the referendum on leaving the EU last year.

The Brexit talks are not getting the attention that it merits because American dynamics have become a bigger factor in market movements; however, any difficulties between UK and EU lawmakers could possibly impose a threat to the recent upward trend. GBP is 6.4% for the year and is ranked as the 6th strongest performing currency.

Apr. 28, 2017 (Tempus Inc.) – The U.S. dollar came under pressure early last night as geopolitical tensions are back in the headlines. In an interview with Reuters, President Trump said it was possible that there will be a “major, major conflict” with North Korea if diplomatic solutions fail. The comment would have been out of the ordinary from past administrations as North Korean leaders believe they are defending themselves from a pending attack from the U.S. and its allies.

This morning’s economic data will is unlikely to give the greenback any reprieve. The U.S. economy expanded at its slowest pace in three years in the first quarter of the year. GDP, the value of all goods and services produced, rose 0.7% on a year over year, failing to meet expectations of 1.0% growth. The data shows a noticeable dip from the 2.1% expansion in the 4th quarter of 2016. A breakdown of the number shows that consumer spending, the biggest part of the economy, rose 0.3% representing the worst performance since 2009.

Nevertheless, the poor data may not dissuade the Federal Reserve from normalizing monetary policy. Indeed, future show a nearly 70% chance that the Fed will raise interest rates at their June meeting, up from 50% odds a week ago.

EUR

The Euro popped higher and continues to flirt with 5-month highs against the U.S. dollar as inflation in the Eurozone accelerated. Core inflation rose 1.2% in March, higher than the 1.0% forecast by economists and represents the fastest growth in almost four years. Inflation grew 0.7% the month prior. Other reports showed signs of optimism in the Eurozone. Spanish GDP showed 0.8% growth and French growth ticked 0.3% higher.

GBP

The British pound gained against the U.S. dollar despite poor economic data released in the United Kingdom. Gross domestic product rose only 0.3% in the first quarter, less than the 0.4% median estimate of economists. The number represents the slowest growth in a year.

The sterling is set for its second monthly advance versus the U.S. dollar. The bulk of the pound’s strength came after Prime Minister Theresa May announced a snap parliamentary election for June on April 18th.

 

Apr. 18, 2017 (Tempus Inc.) – The U.S. dollar found some strength early in the evening but reversed those gains following breaking news abroad. U.S. Treasury Secretary Steven Mnuchin said that the greenback’s strength was a “good thing” in the longer term, walking back some of President Trump’s verbal intervention from last week. Nevertheless, the greenback is weaker against the majority of its rivals, except a few commodity-based currencies.

The dollar has extended its losses in early trading after data showed some speed bumps for the housing market. Housing starts fell 6.8% on a month of month basis in March, failing to meet dismal expectations of a 3.0% decline. Building permits did surprise to the upside, but not enough to stop the dollar’s decline.

Later this morning, industrial production is expected to expand 0.5% in March, up from a flat reading in February.

 

AUD

The Australian dollar and other commodity-backed currencies are lower this morning as the price of iron ore collapses. Iron Ore, a major export of Australia, is down 7.0% over the last two days, despite strong growth data released in China.

The Aussie is also under pressure after the Reserve Bank of Australia’s minutes showed policy makers believe underemployment “remained high.” The minutes also showed concern for the country’s housing market.

 

GBP

The British pound experienced wild fluctuations last night and is now currently nearly 1.0% stronger against the U.S. dollar than last night’s close. In a surprise announcement, British Prime Minster Theresa May called for an early general election for June 8th. May is seeking to consolidate power in Parliament in an attempt to strengthen her hand for Brexit negotiations. An opinion poll released yesterday shows her Conservative party with a 21 point lead over Labour, meaning she is likely to add to her parliamentary majority. As a result, the sterling has benefited and reached its strongest level since February.

Apr. 14, 2017 (Tempus Inc.) – The U.S. dollar is still reeling after a sharp sell-off yesterday afternoon. The Bloomberg Dollar Spot Index dropped below its 200 day moving average after President Donald Trump said the dollar is “getting too strong.” Many analysts have labeled the comments as “verbal intervention” to weaken the greenback. In the same interview he reversed previous promises that he would label China a currency manipulator and that Fed Chair Janet Yellen is “not toast” when her term expires next year. With no other risk events on yesterday’s docket, traders were forced to react to the President’s comments.

We will also continue to keep an eye on geopolitical risks in Syria and Korea.

Today’s data releases are unlikely to help the greenback. Wholesale prices in the U.S. declined in March for the first time since August of 2016. The print shows a lack of inflation pressures and will keep pressure off of the Federal Reserve to raise rates at their next meeting in May. Headline PPI decreased 0.1% following a 0.3% advance in the prior month. Later, the University of Michigan consumer sentiment print is expected to show a slight dip in April to 96.5 from 96.9 in the month prior.

AUD

The Australian dollar was the big winner overnight, gaining almost a full percent against the U.S. dollar. The Aussie was buoyed after data showed full-time jobs climbed the most in almost 30 years last month. Overall, employment rose 60,900 in March, beating forecasts of a 20K increase. The Aussie found added support on strong Chinese trade data. Chinese imports increased 26.3% year over year which is good news for Australia as nation relies heavily dependent on exports to China.

EUR

The Euro shot higher yesterday afternoon, benefiting from President Trump’s verbal intervention. The common currency has since given back most of its gains as political uncertainty in France looms over the currency. Inflation prints in France and Germany came in as expected. Inflation across the Eurozone has spiked higher over recent months, but we believe they have reached a peak. We do not expect the European Central Bank to change policy this year.

March 31, 2017 (Tempus, Inc.) – The U.S. Dollar sustained most of its gains overnight and is looking to perhaps improve this morning based on solid economic data that once more signals inflation growing and consumption being steady. The Bloomberg Dollar Spot Index grew by 1.0% thus far this week, but the “buck” may be under pressure. Investigations over Russian ties to President Trump have taken a turn since last night when former U.S. National Security Adviser Mike Flynn said that he’d be willing to speak to interested authorities if promised immunity in the case. Political meddling between nations is a serious matter and that may keep the U.S. Dollar subdued.

Personal Income and Spending data this morning showed consistency as expected. Inflationary growth continues to rise as Personal Economic Expenditures grew 1.8% over the expected 1.7% estimate while also being revised upward from the prior month. Other Fed members will speak today, but we’ll keep close eyes mostly on headlines over Brexit negotiations, which might get ugly quick and the potential for scandal in the world’s highest office.

EUR

The Euro fell 1.8% this week, based on European Central Bank dovish commentary and now deflationary pressures. The Euro-zone’s inflation slowed to 1.5% last month, way below expectations of 1.8%, a figure closer to the desired 2.0% target set by the ECB. Although the political risk of France going rightist is fading according to polls that show Emmanuel Macron, the pro-further-globalization candidate, could win with a comfortable margin, there are growing doubts over Brexit talks and the future of the EU.

The Portuguese government is saying that Brexit shows the EU needs to be reformed, echoing the sentiment of other troubled nations that feel squeezed by austerity measures placed on them to prevent defaulting on debt. The struggles are very real with an economic recovery that may need further help from the ECB next year and political uncertainty across the continent. EUR could have room for losses in the next week, maybe beyond.

GBP

The Pound fell this morning based on underwhelming data revealing that fourth quarter GDP in 2016 negatively affected consumer spending as inflation rose quickly. Trade as a result of a weakened Pound benefited, but this means only the bigger players in the economy saw growth. Although prices may be on the rise for some products, they are falling where it matters most.

Housing prices in the UK fell for the first time in two years, a worrisome figure considering that the housing and property industry suffered the most after the Brexit referendum. In terms of Brexit talks, the European Union now looks committed to holding a united front against any UK perks, saying that Britain will not decide its fate when it comes to how the full separation will take place. Friction is in the air, certainly not love.

Mar. 15, 2017 (Tempus, Inc.) – As anticipated, the Federal Open Markets Committee raised rates by 25bps today, but the USD came under pressure due to the lack of clear guidance by the U.S. central bank on the amount of future rates hikes for the rest of the year.

Today’s economic data met expectations as Consumer Price Index and Retail Sales expanded by 0.1% each.

Markets rose overnight, helping some resource-based currencies that had been sliding for days. Oil prices declining hurt the commercial value of other commodities, but a report of lower than estimated inventories of shale oil in the U.S. put a stop to the bleeding. The neighboring CAD and MXN are improving as well as the oceanic NZD and AUD.

 

EUR

Despite of today’s post-Fed announcement rally, the EUR, a currency chained by the shackles of political uncertainty, will likely trade around current ranges until we get a clearer picture of results in the Netherlands and in France. Twenty eight parties are on the race for power so a coalition is expected to form in order to have a government.

Geert Welders, the rightist politician who could shake things up in regards to trade and immigration, has lost some steam recently and his Freedom Party members may not be able to gain much support from other parties unless their numbers are impressive. A lot is up in the air, but all we can do now is to wait for the chips to fall.

 

GBP

The Pound erased some of its early week losses because it seems not a majority of Scots are feeling the whole separation from the UK as much as their fearless leader. Although Nicola Sturgeon diligently started the legal process to establish a referendum asking Scotland if it wants to be independent, a few polls showed that 57.0% of those surveyed would like to stay British.

It seems like Euro-skepticism is not just a far-right phenomenon, but a growing sentiment amongst many across the continent that the Union may no longer be the best system for economic or social cooperation between nations. GBP is still on an almost 4.0% slide since the start of February. The instability will keep downward pressure on the “quid.”

 

March 10, 2017 (Tempus Inc.) – This morning’s Employment Situation figures validate the labor sector’s consistent good run, but the U.S. Dollar is not reaping any benefits. Thus far, EUR, CAD, AUD, NZD, and the Nordic currencies are up against the “buck” by half a percent since the release. The data also revealed that Avg. Hourly Earnings grew at a 0.2% pace, less than the expected 0.3%, but January’s numbers were revised upward. It’s likely that market reaction thus far reflects a sentiment of certainty over a March hike, but that the indicators are not solid enough to price in three hikes for the year.

Optimism elsewhere is also pushing the greenback lower. Canadian unemployment fell to 6.6% and 15K jobs were added. It was estimated that there would actually be a contraction of about 5K jobs so this helps the “loonie” mitigate losses from oil prices sliding. The hawkish tone of the European Central Bank can also be interpreted as a sign of waning policy divergence between the two regions as the central bank prepares to get step away from intervening and using economic crisis rescue measures. BDXY, Bloomberg Dollar Spot Index is down almost half a percent.

 

EUR

The Euro is at its highest level since February 16th, rising on the basis of a much better outlook from the ECB. Officially, the next nine months will have less sovereign bond purchases and ECB President Mario Draghi explained that there was reason to upgrade inflationary targets for 2017 and 2018. The risks to growth have also diminished, which has Euro bulls raving.

Although we still believe the mounting political problems in Europe will keep gains subdued, the ECB’s ability to slowly start to retreat from injecting any help into the economy of the Euro-bloc is an appreciating element for the shared currency. Any major changes to the fluctuation will not be a surprise as the EUR/USD pair has been wild since last year’s election.

GBP

Pound Sterling was under pressure until the U.S. NFPs came out, primarily losing ground on the basis of underwhelming data on their side of the Atlantic. Britain seems to be in trouble. Industrial Production contracted almost as much as expected by 0.4% last month. More worrisome, Manufacturing contracted by 0.9%, worse than the foreseen (-0.7%).

Along with trouble in both sectors, the trade deficit was higher than expected while also revised higher for January. Coming up with a Brexit deal that shall be presented once Article 50 is invoked has kept Pound on a depreciating trend, but now that fundamentals seem under threat, we believe GBP is still in search of a bottom. The “quid” is 3.9% weaker than its 2017 high reached on February 1st.