Forex News

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.


USA 

Feb. 23, 2017 (Tempus Inc.) – The U.S. dollar is fluctuating in a downward trend against most counterparts following the dovish reading of the Fed Minutes yesterday, in which the central bank seemed cautious about raising interest rates. The odds of a hike coming at the March 15th Fed meeting fell to 34.0% after trending in the 40.0%+ range.

Market watchers interpreted the Minutes as a sign of hesitation from Fed officials who appeared less concerned about inflationary growth exceeding their desired 2.0% annual target and want to see further consistency in economic growth. The outlook for the economy is a positive one, but that’s taking under consideration that the Fed is awaiting plans for major fiscal spending from the Trump regime.

We believe current ranges are bound to change next week as we enter March with a slew of data to digest. While the Fed’s policy may be on focus at the moment, the spotlight will turn to Europe and other developments abroad, which because of their negative nature, could hold the dollar afloat. Home Sales figures and consumer Sentiment from the Wolverines (Univ. of Michigan) will close out the week.

JPY

The Japanese Yen advanced overnight based on the pessimism behind the Fed rate outlook and downward stock markets across the Asian session. Once again the Yen is improving on being a safe-haven asset and the fact that policy divergence may not be a drag on the Yen in the short-term.

Also, day-trading of USD/JPY pair has increased in Japan where investors are jumping on the wild swings that occur from statements and uncertainty in the U.S. The currency couple that looked so boring just a few years back is the most exciting investment in a time of high volatility. JPY is up 1.8% since February 15th.

EUR

The Euro strengthened by over half a percent since noon yesterday as a result of major changes to the upcoming presidential election in France. Candidate Francois Bayrou announced that he would no longer seek to be head of state in order to support candidate Emmanuel Macron and significantly improve his chances of preventing a Marine Le Pen presidency. Ms. Le Pen has promised to do all she can to isolate France if elected by pushing for abandonment of the Euro and the European Union as well. Markets welcomed the news of the alliance.

We expect the euro to continue trading in positive ranges since it recovered from falling to its weakest level since January from political developments, but also because German and French data met expectations. Gross domestic Product in Germany and Business Confidence in France boosted the shared currency, but the effect may have been subdued by Italian Retail Sales that revealed a contraction instead of an expected expansion.

Feb. 10, 2017 (Tempus, Inc.) – The U.S. Dollar is trading in mixed direction as it has throughout the week with statements and political developments driving fluctuation in the absence of major data. The Bloomberg Dollar Spot Index shows a relatively flat USD since the start of February, a quiet time as foreseen in our monthly outlook.

President Trump is trying to improve his diplomatic approach by writing a letter to China and will meet with Japan’s Prime Minister Shinzo Abe tomorrow to discuss trade as well as military capabilities. His administration also seems more focused on domestic policy and continues to deal with the legal havoc of the travel ban, an item on the agenda that many global leaders have criticized.

Equity markets and commodities are on the rise, boosting CAD and “Aussie” slightly. In terms of Jobless Claims in the U.S., they continue to be around the lowest levels in four decades with this week’s reading 12,000 points lower. We expect the greenback to stay in familiar ranges as we close the week with Consumer Sentiment and Trade figures.

 

JPY

The Japanese Yen fell overnight along with its domestic stock index, the NIKKEI, while other global exchanges improved by 0.5% on average. The Yen hit the brakes, but it’s up by 1.25% thus far in February, primarily improving on uncertainty regarding Europe’s potential for further division. Tomorrow will mark a very important meeting between Prime Minister Abe and President Trump in which trade and exchange rates will be discussed.

Since his inauguration, Trump has freely accused many countries, including Japan, of devaluing their currency for benefits to their exporters. On the other hand, Japanese officials have reiterated commitment to manufacture Japanese-brand vehicles in the U.S. and explained that they never deliberately intervened in the FX market, but rather focused on creating price stability. We’ll see if their commentary moves markets right away, but it will definitely have an impact moving forward.

 

GBP

The Pound appreciated after the lower House of Commons approved Prime Minister Theresa May’s ability to invoke Article 50 of the Lisbon treaty that officially starts separation from the UK. The thumbs up on the Brexit process will now fall in the hands of the unelected House of Lords. The political drama may not necessarily be over as the Prime Minister faces pressure from her Conservative party members to have an early vote on the final agreement and some in the opposition who would like to reject it.

This is all unchartered territory, but it seems the government is determined to have a deal that parliament will finally approve. There are still many doubts on how to work on tariffs and other trade issues between the EU and the UK once the divorce is official. With fundamentals still consistent, GBP may stay in current ranges, but any delay to Brexit or companies fleeing could bring it down swiftly. Pound is up by 3.3% thus far in 2017.

Feb. 4, 2017 (Tempus Inc.) – The U.S. Dollar is trending in a negative direction following the U.S. Non-farm Payrolls report and stellar data out of the Euro-zone and growing concerns over the unpredictability of President Trump’s administration. The U.S. economy added 227k jobs in January, up from 156k in December, but the drop in wage growth means less inflation and reduced odds of more aggressive rate hikes by the Fed.

Markets are also worried that President Trump’s tough and confusing stances on immigration as well as travel could negatively impact business activity across the globe. More concerning was yesterday’s firing of Sally Yates who as Attorney General stood against the controversial measures which deemed her as too soft on immigration. The Bloomberg Dollar Spot Index is down by 1.9% since January 20th.

The Dow Jones, S&P, and NASDAQ indexes have tumbled after reaching record highs. With trade agreements also on the chopping block, there is little in terms of stability at the moment.

 

JPY

The Japanese Yen is up this morning after the Bank of Japan’s policy meeting in which the outlook for economic growth was upgraded. No changes were made, but the tone was positive and the commitment to quantitative easing will be there to keep credit flowing.

BOJ Governor Haruhiko Kuroda did not criticize Trump’s statements regarding the perceived unfairness of trade agreements with Japan and others, but did point out that protectionism only serves as an obstacle to progress in an already globalized world.

Kuroda also explained that the BOJ does not have an exchange-rate target in mind and, once again, BOJ meetings are leading to Yen appreciation. The currency of the rising sun is up 4.0% since its weakest level of the year reached during the first week of January.

 

EUR

The Euro is up as a result of better-than-expected inflation data and likelihood of reassessment of loose monetary policy by the European Central Bank. Inflation for the Euro-zone revealed a 1.8% annual increment for the first month of the year, the best pace of growth in four years. A lot of it is owed to higher costs of energy, but puts the level near the ECB’s 2.0% target for price-growth.

Additionally, a trade advisor for the White House described the Euro as “grossly weak,” which in turn has benefitted Germany greatly, he said. These types of statements not only move markets, but are preambles to more incendiary statements that could signal a trade/currency war, which no one would want to be involved in. Euro is up 3.3% thus far in 2017.

Jan. 14, 2016 (Tempus, Inc.) – The U.S. Dollar is trading in familiar ranges after losing ground throughout yesterday and overnight sessions. Stock indexes fell flat as traders start weighing divergent outlooks and political downside, as well as upside, risks. Investors are not as prone to take risks at the moment, but the Dow Jones is close to hitting 20,000 points while the greenback continues to swim around multi-year highs against most peers.

There is no major data to push further momentum, but in today’s markets anything is possible. Fed Chairwoman Janet Yellen will be speaking at a few engagements in the coming weeks prior to the January 19th meeting. We will monitor her influence, particularly at the Commonwealth Club in San Francisco on Wednesday January 18th.

JPY

The Yen has been on a tear, rising by 1.5% in the last two days. Markets starting to dwindle after being on a hot streak are starting to benefit the safe-haven asset. The Bank of Japan is slated to meet on January 19th where the bank could potentially add to their stimulus. More importantly, we want to find out if there is talk about coupling with fiscal policy as Shinzo Abe’s government rolls up its sleeves to boost growth in a much deflated country.

Also, will the Yen follow the 2016 trend of JPY appreciation after every meeting regardless of the decision? We shall see. In December, the trend switched, but the currency has stayed resilient unlike others.

GBP

Pound Sterling stopped falling, especially after Retail Sales for December revealed better-than-expected numbers. The “Hard Brexit” possibility is very real since UK lawmakers are starting to blatantly disregard any effects that leaving the European single market may bring.

Indeed, the Brits seem excited about the possibilities of working their own agreements, but ignore the potential everlasting damage of separating financial and business ties abruptly. Article 50 will likely be invoked by end of the first quarter, but now friction between the Prime Minister, the Conservative Party, and the Supreme Court will likely lead headlines in regards to the official Brexit process.

Dec. 16, 2016 (Tempus, Inc.) – After an historic rally over the past day and a half, the U.S. dollar opened this morning slightly weaker against its European counterparts. Nevertheless, the greenback remains at historically strong levels. The rally begun late Wednesday after the Federal Reserve’s “dot plot” showed the central bank was slightly more dovish than earlier in the year. The rally continued yesterday and saw the Dollar Index (DYY) reach its highest level since 2002. The dollar touched its strongest level versus the safe-haven yen since February.

The fundamental data also help reinforce the “buck” as consumer inflation continues to build and give the Fed reason for additional rate hikes. This morning’s data disappointed but is unlikely to seriously dent the dollar’s bullish run. Housing starts fell by 18.7% in November, missing an already bearish expectation of a 7.0% contraction. Expect the focus to continue to remain on the Federal Reserve and policy divergence. While the dollar may still have room to improve, it would be prudent to watch for a forceful reversal if U.S. data begins to slip.

EUR

The Euro managed to stop the bleeding against the U.S. dollar overnight but remains near historically weak levels against its American counterpart. The common currency broke fresh 13-year lows during yesterday’s session on broad dollar strength and diverging monetary policy.

The European Central Bank extended its quantitative easing program last week as the Fed tightened policy for the first time this year on Wednesday. The Euro may have found minimal support after a report showed service and manufacturing expanded last month.

GBP

The British pound was also able to recoup some losses against the U.S. dollar but remains lower than earlier this month. The Bank of England kept rates unchanged yesterday; a day after the U.S. raised interest rates. While the Bank of England said that the Brexit vote had a limited initial effect on consumers, we may soon see proof to the contrary as U.K. companies look to hike prices.

Indeed, the Confederation of British Industry’s December survey shows that manufacturers expect to lift prices by the most in more than five years over the next six months as the pound’s plunge is boosting companies’ costs and forcing them to respond. The CBI said the sterling’s 17% depreciation “continues to ramp up pressure on prices.”

Dec. 2, 2016 (Tempus Inc.) – A decent NFP report showing the U.S. economy adding 178k new jobs in November and the unemployment rate falling to a nine-year low of 4.6% failed to lend support to the USD, as markets focus on the outcome of the Italian referendum.

The Federal Reserve is widely expected to raise interest rates later this month, but attention will then shift into 2017. Questions about the economy’s overall strength and inflation pressures created by some of Donald Trump’s proposals are likely to dominate interest rate speculation going into the New Year.

This morning’s economic docket was unable to change the greenback’s fortune. Weekly jobless claims came in higher than expected and touched the highest level since June. Claims increased by 17K to 268K. However, the four week average was mostly unchanged. Jobless claims this year have averaged near the lowest levels in four decades.

EUR

The Euro recovered slightly overnight playing its role as safe-haven to tumbling equity markets across the ancient continent. Investors are concerned that Italy’s referendum will not pass; risking the loss of a key pro-EU leader in Italian PM Matteo Renzi whose political existence is dependent on the “Yes” succeeding.

As discussed in the last few days, Brexit rhetoric from both sides of the equation has been less than friendly as both sides continue to accuse the one another of lack of cooperation. Britain’s incessant interest to remain a player in the single free market while reducing people’s mobility has struck the wrong chord with many EU lawmakers. The shared currency is likely to remain fragile and volatile in the days ahead.

GBP

The British pound was the biggest winner overnight, gaining a full percent against the U.S. dollar. The sterling traded to its strongest level since November 11th after Brexit Secretary David Davis said the U.K. would consider making contributions to the EU in order to secure the best possible access to the single market. Most EU officials have taken a hard line regarding access to the single market but recent commentary may show a thawing. Dutch Finance Minister Jeroen Dijsselbloem was quoted as saying that Britain might be able to participate in the internal market, albeit at a cost.

Nov. 17, 2016 (Tempus, Inc.) – The U.S. Dollar is holding on to its recent advances and is trending positively at the moment of writing following the release of good inflation data. Consumer Price Index figures fell in line with expectations and showed improvement from last month. Year-on-year growth fell in line with the estimated 1.6% and month-over-month registered at the exact forecast 0.4%.

Initial as well as Continuing jobless claims fell below expectations, a sign of continuing labor health. Steady numbers are certainly boosting the dollar’s prospects as we get closer to a potential rate hike in December. The Fed’s Yellen’s foreseen hawkish comments from earlier this morning are also helping the ongoing appreciation.

Oil prices rose with the news of another possible agreement between OPEC members to curtail production. Mexican Peso and Canadian Dollar are not likely to recover much ground, but their depreciation has slowed down. MXN is 2.8% away from its worst level on record and CAD is trading at it weakest level since March 1st.

GBP

The Pound is holding its tight ranges despite detrimental statements surrounding the Brexit process. Reactions to the terms of the separation have been strong recently, casting further doubt on a successful and mutually beneficial accord once Article 50 is invoked. Nevertheless, the UK economy does not want to hear it.

Fundamentals such as Unemployment and Retail Sales have exceeded expectations with the UK jobless rate falling to 4.8% and sales up 1.9%. We believe GBP has room for losses, especially weighing in policy divergence, but thus far post-U.S. election its downside risks have diminished.

JPY

The currency of the rising sun is currently trading around its worst levels since the beginning of June. Although JPY gained mostly from havoc in markets this year, it is down by 8.0% since election results came out last week.

In addition to markets flourishing, the Yen is now falling as a result of the Bank of Japan’s brand new fixed-rate operations buying program in which they will start purchasing unlimited two and five-year bonds at (-0.09%) and (0.04%). The approach is more of a statement since it got no offers and its goal is to control the yield curve in the midst of a turbulent bonds market this year.

Oct. 28, 2016 (Tempus Inc.) – As expected, the U.S. dollar was mostly flat overnight as market participants looked ahead to today’s economic docket.  Yesterday’s data revealed positive signs for the U.S. economy with Durable goods orders coming in net positive and jobless claims remaining near the best average in over 40 years. However, those prints were not enough to change the outlook on interest rates.

Today’s data, however, should solidify bets that the Federal Reserve will raise interest rates by the end of the year.  The U.S. economy expanded 2.9% in the third quarter of the year, beating expectations of a 2.6% reading. The increase represents the largest expansion in two years. The stellar growth follows a disappointing 1.4% expansion in the second quarter.  The report was not all roses, however. Personal consumption rose only 2.1%, missing expectations of 2.6%.  Nevertheless, the data should strengthen the Fed’s view that the economy is making slow and steady progress. Indeed, in the minutes following the GDP release odds that the Fed will increase rates by the end of the year jumped to 76% from 72% yesterday.

The U.S. dollar has gained modestly after the positive print. The University of Michigan consumer sentiment report is due out at 10 a.m. but will take a backseat to the growth numbers.

GBP

The British pound continued its retreat yesterday and overnight. The beleaguered currency was unable to take advantage of a report released yesterday that showed the British economy expanded more than economists expected. The country’s gross domestic product expanded 0.5% in the third quarter, after the Brexit vote. The sterling’s negative reaction to positive data shows that the currency may not have yet carved out a bottom and more losses are possible.  The main worry remains political, with uncertainty surrounding how the U.K. will exit the European Union. From our view, it is very likely that British businesses will be faced with a less skilled workforce as the free movement of EU citizens into the British marketplace will be limited.

CAD

The Canadian dollar has pushed to fresh multi-month lows against the U.S. dollar this morning after strong U.S. GDP highlights monetary policy divergence. The “loonie” touched its weakest level since March yesterday and continued its decline overnight as oil prices continue their retreat. WTI is holding under $50 a barrel and its 1.0% lower from yesterday.

Oct. 14, 2016 (Tempus Inc.) – The U.S. dollar extended its strong week overnight, rallying against almost all of its major rivals. The exception would be the commodity-based currencies that found support following strong Chinese inflation data. The greenback has been buoyed by rising interest rate expectations. The minutes of the last Fed meeting showed that policy makers were warming up to the idea of higher rates “relatively soon.”

Today’s economic data should bolster that narrative. Advanced retails sales met expectations, rising 0.6% in the month of September. The core sales that excludes volatile auto and gas sales, also met expectations of a 0.3% rise. A separate report showed that producer prices are also on the rise in the U.S., which should give added support to the case for higher interest rates. Total PPI rose 0.3% on a month over month basis, higher than the 0.2% expected by economists. All of the core readings either matched or slightly outpaced expectations as well. Later, the University of Michigan consumer sentiment report is slated to cross the wires.

JPY

After rallying yesterday on poor Chinese trade data, the Japanese yen is on the defensive again this morning. China’s factory-gate prices rose for the first time since 2012 indicating the Chinese economy is stronger than initially thought.

Consumer price inflation also rose for the first time in five months. The data sparked a rally in global equities with Japanese Nikkei rising half a percent and the European Stoxx 500 rising nearly 2.0%. The risk rally dampened demand for the safe-haven yen.  However, strong Chinse data cause the Australian dollar to rally nearly 1.0% against the U.S. dollar. China is Australia’s largest trading partner.

GBP

Another day, another sell-off for the British pound. The sterling remains under pressure due to the economic and political uncertainty surrounding the pending Brexit. The President of the European Council, Donald Tusk, had harsh words for the U.K.’s prospects. He said the options on the table were either a “hard Brexit” or “no Brexit” and that the notion that the U.K. would be able to remain a part of the EU’s single market was “pure illusion.”

The sterling has lost nearly 2.0% against the U.S. dollar this week. Overall, the pound is 18% weaker from the Brexit vote in June.