US Senate

Feb. 11, 2019 (Western Union Business Solutions)  – Elevated global risks kept the safer U.S. dollar well supported. Extending an upswing, the trade-weighted Dollar Index climbed to early January highs thanks to across the board gains versus rivals from Europe, Canada and emerging markets. The Swiss currency was a notable mover as it depreciated by nearly a franc in a matter of minutes overnight that knocked the Alpine unit to mid-November lows. The dollar continues to find a supporting cast from worries about a slowing world economy and uncertainty related to Brexit and U.S.-China trade talks. The buck also made headway versus the yen which fell to fresh 2019 lows. The dollar wavered weeks ago after the Fed turned decidedly cautious and closed the door to imminent interest rate hikes. The dollar has since gained traction given the lack of an alternative to the greenback which remains well supported by solid fundamentals which contrast slowing growth overseas.

 

GBP

 

Uninspiring U.K. data drove sterling toward recent multiweek lows against its American counterpart. As expected, Britain’s economy slowed to a 0.2% pace during the fourth quarter from a 0.6% rate in Q3. Data on trade and factory growth underwhelmed forecasts which offered evidence of how Brexit uncertainty has squeezed the economy. Look for the coming week to shed some light on the next steps in the Brexit process with a midweek update to Parliament by the prime minister. Data Friday is forecast to show U.K. retail sales inched up after a December plunge.

 

EUR

The euro slid to a Jan. 24 low against the greenback, its weakest in more than two weeks. Europe’s faltering economy will stay in the spotlight this week which could leave the single currency vulnerable. Thursday will be critically important with numbers due on German and euro zone growth during the final quarter of 2018. Top economy Germany already has one foot in recession after it contracted by 0.2 during the third quarter. Odds are seemingly on Germany’s side that it may dodge recession with fourth quarter growth expected up by a scant 0.1%. Any disappointing data could potentially be the euro’s ticket lower.

CAD

 

Canada’s dollar was broadly flat though weaker oil prices, if sustained, could leave the commodity-driven currency at risk in the day ahead. The loonie pared weekly declines Friday after bullish Canadian jobs data kept a local interest rate hike in the conversation. Canada netted more than 60K jobs last month, an amount about 10 times stronger than expected. Despite the sharp spike in hiring for the second time in three months, money markets still see a relatively slim chance (i.e. around 20%) of a rate hike from 1.75% by year-end.


USA 

Feb. 1, 2019 (Western Union Business Solutions)  – The calm before America’s jobs report this morning helped the greenback steady above multiweek lows. Ahead of the month’s most important look at the health of the labor market, the U.S. dollar softened against the euro but managed a gain versus counterparts from Japan, Britain and Canada. Sentiment deteriorated for the dollar in January after the Fed left borrowing rates unchanged and sketched a cautious outlook for growth that at best suggested steady rates over the foreseeable future and at worst opened the door to a potential rate cut by year-end. America’s government shutdown likely resulted in slower hiring last month. Forecasts call for cooler job growth of around 165,000 for January, down from December’s blistering pace of more than 300,000. The data will offer evidence of how much of a headwind the shutdown had on the wider economy.

 

EUR

 

The euro held within earshot of three-week highs against the greenback, defying more downbeat data from the bloc that argued against the ECB changing course on stimulus. Few signs of a bottom for Europe’s slowing economy in data showing German factory growth contracted and euro zone inflation moderated to a 1.4% increase, a move further away from the ECB’s near 2% goal. The fact that core inflation unexpectedly improved by a tick to 1.1% helped to limit the blow to the single currency.

 

USD

 

Surprisingly robust U.S. job growth helped the dollar chip away at its Fed-induced losses. While the shutdown pushed unemployment to a seven-month high of 4% in January, from 3.9% in December, it had no discernable impact on hiring as the economy added a stellar 304,000 jobs. Wage growth slowed to 3.2% from 3.3%. The market will likely take the data with a grain of salt as it could overstate some of the strength in the economy that faces crosscurrents from abroad. The data suggests it may be premature yet to price in bets on lower U.S. interest rates this year. On balance, the data is likely to have a limited impact on the buck, leaving its broader bias at the mercy of the Fed’s dovish turn.

 

GBP

 

Sterling sank to one-week lows after U.K. factory data underwhelmed and offered evidence of a fragile economic underbelly ahead of Brexit. Britain’s factory sector grew at the slowest pace in years last month, highlighting how Brexit uncertainty has weighed on manufacturing sentiment. The disappointing data spurred some pound selling after it logged its best month in more than a year when GBUSD appreciated by 3%.

Jan. 30, 2019 (Western Union Business Solutions)  – The USD fell as the Fed left interest rates unchanged at its first meeting for 2019 and signaled potential slowdown in economic activity and the pace of rate hikes for the rest of the year.

Below is the official FOMC statement issued earlier today:

“Information received since the Federal Open Market Committee met in December indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Job gains have been strong, on average, in recent months, and the unemployment rate has remained low. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier last year. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Although market-based measures of inflation compensation have moved lower in recent months, survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent. The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective as the most likely outcomes. In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the FOMC monetary policy action were: Jerome H. Powell, Chairman; John C. Williams, Vice Chairman; Michelle W. Bowman; Lael Brainard; James Bullard; Richard H. Clarida; Charles L. Evans; Esther L. George; Randal K. Quarles; and Eric S. Rosengren.”

Jan. 24, 2019 (Western Union Business Solutions)  – The year’s first ECB Day got off to a soggy start for the euro which slipped to three-week lows against its U.S. rival. By contrast, the greenback enjoyed broad gains with Europe’s weak economy dominating the spotlight. Across the board gains lifted the U.S. dollar versus counterparts from Japan, Britain and Canada. Emerging markets were generally lower amid persistent concerns about a slowing world economy. As expected, the ECB left its benchmark interest rate unchanged at zero with markets now waiting on an 8:30 a.m. ET press conference by the central bank president, Mario Draghi. Ahead of the ECB’s first announcement of the year, Germany reported that its influential manufacturing sector unexpectedly contracted in January, which pointed to the bloc’s slowdown stretching into the new year. Also in focus today will be weekly data on U.S. jobless claims which are forecast to increase, albeit from historically low levels.

 

AUD

 

The Aussie dollar sank to three-week lows despite bullish jobs data from Down Under. Instead, the Aussie took its main cue from a move by one of Australia’s top banks to raise mortgage rates as it contends with rising funding costs. With the nation’s housing market cooling, higher mortgage rates could hasten a local interest rate cut from 1.50%, an already record low level. With borrowing rates dominating the Aussie conversation, it overshadowed jobs data that showed employers added 21,600 jobs in December, a larger than expected amount that pushed unemployment down by a notch to 5%.

 

EUR

 

The euro fell to 2019 lows after the ECB left interest rates unchanged and acknowledged that risks facing the 19-nation economy had intensified. ECB President Mario Draghi reiterated that the central bank expected to keep interest rate low through the summer, maybe long if necessary. The fact that Mr. Draghi expressed greater concern over the bloc’s economic health suggested a later rather than sooner rate hike. The prospects of lower rates for longer is negative for the euro but perhaps somewhat less so with the Fed not expected to boost borrowing rates any time soon.

 

GBP

 

Sterling’s weekslong run ran into resistance which coaxed the U.K. unit lower. The pound scaled 10-week highs this week as growing expectations that Britain might delay its departure from the EU or perhaps put the Brexit impasse up to a second referendum. While the market appears less fearful of a dreaded no deal, hard Brexit, such a dire scenario hasn’t been removed from the table and could quickly return to undercut the pound.

 

USD

 

The dollar maintained a gain after spectacular news on America’s job market. Weekly jobless claims unexpectedly fell by 13,000 to 199,000, the lowest in nearly 50 years. The data may have been skewed by a holiday, however. Still, the underlying trend was consistent with the labor market retaining broad strength which bodes well for future hiring and wage growth. America’s record-long government shutdown could restrain the dollar by clouding the economy’s true health since several data releases have been delayed.

 

CAD

 

Lower oil prices and a stronger U.S. dollar kept Canada’s so-called loonie pinned near two-week lows. Crude, a top driver of Canada’s commodity influenced currency, fell by 0.5% to below $53. The price of oil could see surprise volatility over the short run given the political crisis in Venezuela. Loonie fundamentals suffered a setback this week in data showing a bigger than expected retreat in Canadian consumer spending, a potential harbinger of weaker growth over the final quarter of 2018.

Jan. 18, 2019 (Western Union Business Solutions)  – Constructive news on the trade war had a mixed impact on major currencies. The U.S. dollar was mostly flat as losses against the euro and Canadian dollar were offset by gains against the yen and sterling. Market morale is taking some comfort from reports that the U.S. is mulling reducing tariffs on Chinese goods to help broker a trade agreement. Reduced trade tensions weighed on safe havens, sending the Japanese currency to its lowest in more than two weeks. Sterling dipped from two-month peaks as weaker than expected U.K. consumer spending catalyzed a bout of profit taking on its broad outperformance this week. Britain’s Brexit crisis has shown marked signs of going from a boil to a simmer as fears of a potentially disastrous no-deal exit from the bloc recede. In focus today will be reports on U.S. consumer morale and Canadian inflation.

 

GBP

 

Sterling slipped from two-month highs as sobering news on the U.K consumer spurred many to take some chips off the table. Sterling pared some of its gains but remained a penny higher on the week as the rocky week of U.K. politics suggested a fading likelihood of Britain exiting the EU without a deal, markets worst case scenario. The Brexit process is in wait and see what the prime minister’s Plan B looks like when Theresa May reveals it Monday. The pound could be in the early innings of a significant rally if Britain in the end should decide to cancel Brexit. On the data front, U.K. retail sales tumbled nearly a percent in December, news that highlighted the vulnerable state of the economy months ahead of its expected departure from the EU in March.

 

EUR

 

The euro eked out a gain but its vital signs remained bearish as concerns about a slowing euro zone economy put a lid on meaningful gains. The euro was on track for a weekly loss with the big blow this week coming from news that Germany’s economy grew at the slowest pace in 5 years in 2018. Recent numbers suggest the economy is likely to remain in a lower gear over the foreseeable future, casting significant doubt on an ECB interest rate hike this year.

 

CAD

 

Canada’s dollar appreciated after news of warmer than expected inflation to close out 2018 kept the door ajar to higher interest rates. Overall inflation unexpectedly rose to a 2% annual rate in December, compared to forecasts to remain at 1.7%. However, less volatile underlying inflation steadied below the Bank of Canada’s 2% goal. While the data was consistent with tame inflation, it appeared warm enough to keep a rate hike later this year in the conversation, a notion that’s positive for the loonie’s appeal.

 

Jan. 15, 2019 (Western Union Business Solutions)  – Rising risks in Europe offered a broad boost to the U.S. currency. The euro led losses against the greenback with the yen and sterling also in the red. Somewhat stable global markets and oil prices supported Canada’s dollar. All eyes are on the U.K. today as Britain’s parliament is expected to vote on the divorce agreement that the prime minister forged with the EU. The unpopular plan all but assures that U.K. politicians will vote against the deal. Key for sterling and broader market morale will be the margin of victory, which is considered unlikely, or defeat. Voting on the deal is expected to start around 2 p.m. ET with a decision likely an hour or so later. The euro plunged after Germany reported the weakest growth in five years in 2018. While stronger Tuesday, the greenback’s fundamental appeal was perceived as limited with the Fed signaling a high bar to further rate increases.

 

CAD

 

The loonie firmed Tuesday as oil prices rose above $51. How the loonie fares today and over coming days could hinge on what transpires in Britain’s parliament since the big vote over there today could set the stage for broader market sentiment. An outcome that heightens political risk and uncertainty in Europe would tend to be bad for stocks and commodities, a situation that could leave the loonie at risk of losses against safer peers like its U.S. counterpart. Loonie sentiment has also wavered in the run-up to Canadian inflation on Friday. Softer price growth would inject uncertainty and doubt into the need for the Bank of Canada to raise borrowing rates this year.

 

GBP

 

Sterling slid a cent below two-month peaks against the dollar as players favored safer bets ahead of today’s expected vote in the U.K. parliament over the terms of Britain’s split with the EU. The market is positioned for the bill to be defeat but what could matter most is the margin. A small defeat might allow room for Theresa May to seek tweaks from the EU to make it palatable enough to cross the finish line. However, a large margin of defeat could spell heightened U.K. uncertainty. The pound is seen held hostage to the Brexit drama and tends to outperform when odds of a potentially cataclysmic no-deal, hard Brexit lessen.

 

EUR

 

The euro sank to its lowest in more than a week after Germany acknowledged the weakest growth in years in 2018. While Europe’s biggest economy grew for a ninth straight year, it did so at the weakest rate (1.5%) in 5 years which followed a 2.2% pace in 2017. The soggy data threw a wet blanket over chances of the ECB raising borrowing rates later this year. The big headwinds on growth were the slowing world economy and the trans-Atlantic trade dispute with Washington.

 

USD

 

America’s dollar garnered a haven boost with risks on the rise in Europe. Today’s main market driver is liable to arrive around 2 p.m. ET when U.K. lawmakers are expected to start voting on the prime minister’s Brexit plan. While stronger, meaningful gains could elude the buck with the Fed signaling a wait and see stance with respect to future interest rate increases. Downbeat data on the U.S. economy further dampened prospects of a rate hike as Empire State index of New York area business conditions disappointed and grew at the slowest pace since May 2017 in January.

 

Jan. 9, 2019 (Western Union Business Solutions)  – The U.S. dollar’s rout today to October lows was justified by a cautious set of minutes from the last Fed meeting. The minutes from the Fed’s December meeting at which officials raised rates for the fourth time in 2018 played up higher uncertainty and risks facing the U.S. economy from trade wars and slowing global growth. The minutes’ cautious tone bolstered the view that U.S. interest rates are on hold for now and even hinted that policymakers may almost be done raising rates. With inflation well contained and at risk of moderating in the wake of weaker oil prices, it seems like the door is closed for now for the Fed to increase borrowing rates, a dovish outlook that could leave the dollar susceptible to further downside risk over the coming days and weeks.

The Fed issues its first policy decision of the year on Jan. 30 at which it is all but certain to leave rates unchanged at 2.5%.

GBP

 

When it comes to all things Brexit – prepare for the unexpected. The coming week looms large for sterling with Britain’s parliament slated to finally vote on the prime minister’s unpopular Brexit deal on Jan. 15. Failure to pass Theresa May’s EU-endorsed plan would risk a sterling selloff, a scenario that could heightened the risk of a disorderly, no-deal, hard split from the EU. Still, the endgame for Brexit is anything but certain and could range from a host of scenarios such as delaying Brexit day that’s set for March 29 or holding another Brexit referendum.

 

CAD

 

The Bank of Canada today should offer a key test of strength in the loonie’s recovery from May 2017 lows. The loonie has clawed back ground thanks to the moderating greenback and the rebound in stock markets and oil prices. Crude topped $50 today, buoying commodity currencies. The BOC is expected to leave its base rate unchanged at 1.75% in the wake of tumultuous moves in both stock and oil prices. The BOC will also issue new forecasts for growth. The bar appears to be elevated for Canada to raise rates at all this year so if policymakers sound a hawkish note it could add fuel to the recent decline in USDCAD.

 

EUR

 

The euro moved to within striking distance of recent peaks in the wake of mixed data from the euro zone. News that area unemployment fell by a notch to 7.9% in November, a decade-low, helped to dim the spotlight on growing signs of weakness in the bloc’s top economy. Germany reported a larger than expected trade surplus of €19.6 billion in November which resulted from Germans buying far less from abroad than they sold. Next to fundamentally impact the single currency will be Thursday minutes of the ECB’s final meeting of 2018.

 

 

Jan. 4, 2019 (Western Union Business Solutions)  – The U.S. dollar ticked lower as risk appetite improved after a gangbusters U.S. jobs report tempered worries of a moderating economy and validated Fed forecasts of higher interest rates this year. America added a whopping 312,000 jobs in December, the most in 10 months. Unemployment rose by two ticks above 49-year lows to 3.9% but for good reason as it reflected a larger workforce. Wages unexpectedly increased, rising to an annual rate of 3.2% versus forecasts of 3.0%. While constructive for the dollar, the data won’t remove the cloud of political uncertainty over Washington amid a partially closed U.S. government, which suggests limited upside for the buck.

 

GBP

 

Sterling caught a boost after U.K. services data topped expectations, an outcome that surprised to the upside and helped the pound recover from a flash crash-induced slide this week to April 2017 lows. Britain’s economy-driving services industry closed out 2018 on firmer footing with the PMI rising to 51.2. Support from the data may not last long for sterling given the still unsettled situation in Britain over Brexit.

 

EUR

 

The euro fell after bullish U.S. jobs data stood in contrast to weaker inflation numbers from Europe that kept a near-term rate hike by the ECB off the table. Inflation in the euro bloc slowed to an annual rate of 1.6% last month, down from 1.9% in November, the weakest in 8 months. The less volatile core number steadied at a low 1%.

 

CAD

 

Canada’s dollar rose above 1 ½ year lows thanks to stronger oil markets and faster hiring last month. Canada added 9,300 jobs in December, above forecasts of 5,500, though a marked slowdown from the record spike of more than 94,000 in November. Unemployment stayed at 5.6% compared to forecasts of a modest uptick. A closer look at the data showed that all of the hiring came from the less meaningful part-time positions, suggesting limited support to the loonie.

 

Jan. 2, 2019 (Western Union Business Solutions)  – The U.S. dollar fared mixed on the first trading day of 2019. The dollar rallied against its European counterparts, hit a seven-month low against the yen and was little changed against the Canadian dollar. It may be a new year but the same uncertainties continue to dog global markets. Disappointing data from China and Europe added to mounting signs of a moderating world economy, a risk-averse backdrop that supported safe bets like the U.S. and Japanese currencies. The broadly weighted U.S. Dollar Index appreciated 4% in 2018 which proved its strongest year in three. Yet the U.S. currency finished 2018 in second place as it took a back seat to the yen which thrived as a haven destination from global stock swings and moderating expectations for U.S. growth and higher interest rates this year. This week’s main event will be America’s jobs report on Friday that’s forecast to show faster hiring in December.

 

USD

 

The dollar caught a safe haven boost with global markets in the red in the wake of dismal data from China and Europe. The coming year could prove more challenging for the dollar should the U.S. economy slow and throw a wrench in Fed plans to continue to lift borrowing rates in 2019. America’s jobs report Friday will be important for the buck’s early 2019 prospects as labor market strength and the lowest unemployment in 49 years have the Fed penciling in higher interest rates this year.

 

JPY

 

The yen kept in pole position after gaining against the otherwise stronger greenback in 2018. A messy global backdrop of moderating growth and political uncertainty in Britain and beyond continues to stoke demand for safer plays like the yen which clocked a seven-month high on the first trading day of 2019. Until market risk factors subside, the path of least resistance appears higher for the yen.

 

EUR

 

The euro started the year with a plunge after disappointing factory data from the Top 4 euro zone economies weighed. The big blow came from manufacturing data from France and Italy that showed growth below the boom or bust level of 50. With factory growth in the red in the bloc’s Nos. 2 and 3 economies, it underscored the dovish outlook for ECB policy, a chief source of euro weakness.

 

CAD

 

Canada’s dollar steadied out of the 2019 gates but its outlook remained fraught with negativity with oil markets in the red. Sliding oil prices signal a weaker outlook for global growth, a scenario that suggests a closed door for the Bank of Canada to raise borrowing rates this month or any time soon. Canada on Friday will release the nation’s December jobs report that’s forecast to show a marked slowdown in hiring to around 5,500 jobs after a record gain of more than 90,000 in November.

Dec. 19, 2018 (Allthingsforex.com)  – The EUR is giving up gains following the Federal Reserve’s decision to raise rates by 0.25% today.

At the moment, the EUR is fluctuating around 1.1385.

With another two or three Fed rate hikes expected in 2019, while the European Central Bank keeps rates unchanged until next summer, we could see the USD maintaining its bullish stance into the first half of the new year.

Below is the official statement published by the FOMC earlier today:

“Information received since the Federal Open Market Committee met in November indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has remained low. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier in the year. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee judges that some further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term. The Committee judges that risks to the economic outlook are roughly balanced, but will continue to monitor global economic and financial developments and assess their implications for the economic outlook.

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2‑1/2 percent.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the FOMC monetary policy action were: Jerome H. Powell, Chairman; John C. Williams, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly; Loretta J. Mester; and Randal K. Quarles.”