Market Awaits Fed Minutes, Eurozone Inflation Accelerates
04 January 2017 by News DeskWednesday brought with it positive figures in the form of the Eurozone consumer price index (CPI) and UK construction data, before investors turned their eyes to the latest Federal Open Market Committee’s (FOMC) meeting minutes release, say industry leaders FC Exchange.
Australian Dollar (AUD) Exchange Rate Strengthened by Chinese Rules
The Australian dollar was able to climb against a basket of other currency majors on Wednesday after China implemented tighter capital controls. Beijing had introduced stricter currency rules over the weekend and investors were concerned that China would witness a rush of capital out of the country. Developments in China often impact the Australian dollar as the Australian and Chinese nations share such a tight trading bond.
In Thursday’s Oceanic session the Aussie dollar could experience some movement with the release of the AIG performance of service index and China’s Caixin services and composite purchasing manager’s indexes (PMI).
New Zealand Dollar (NZD) Falls on Dairy Prices
The New Zealand dollar was unable to stand its ground against other currencies in Wednesday’s trading as it made it’s fourth consecutive session of declines due to weaker dairy values. Global milk prices registered their biggest price drop in over three months in the first auction of 2017. As dairy is New Zealand’s most lucrative commodity, the Kiwi dollar had no choice but to fall along with it.
With the remainder of the week rather quiet for New Zealand domestic data, the NZD exchange rate is likely to fluctuate on the release of Chinese ecostats, global developments, and commodity prices.
UK Economic Data Prints Positively Amid Brexit Setbacks
The UK has had a positive start to the week in terms of figures and Wednesday continued the trend with the Markit UK construction purchasing managers index (PMI) jumping from 52.8 to 54.2 in December, defying the 52.6 forecast. Net consumer credit also increased by 1.9b in November, following the previous month’s 1.6b.
Meanwhile, the pound took a tumble following another Brexit development that emerged on Tuesday. Sir Ivan Rogers reigned from the role of UK ambassador to the EU on Tuesday and investors shied away from sterling as the market weighed up the possibility of a ‘hard Brexit’. The timing couldn’t be worse for the UK Government as Theresa May is due to trigger the process of leaving the EU in the next few weeks. The Pound is likely to be sensitive to developments in the near future, so economic data may take a backseat.
Eurozone Inflation Increases Beyond Forecasts
The latest Eurozone inflation data allowed the EUR exchange rate to increase against several other currency majors, but failed to make any gains against the strengthening Aussie dollar (EUR/AUD). The currency bloc’s inflation rate surged to its highest level in over three years on the back of increased food, energy, tobacco and alcohol prices. The Eurozone consumer price index (CPI) hit 1.1% in December year-on-year from the previous month’s 0.6% reading, rather than the 1.0% economists had expected.
Despite the rise, the Eurozone’s inflation is still residing a lot lower than the European Central Bank (ECB) would like, and so investors will pay close attention to any subsequent CPI readings for fear it could slip back into lower territory.
US Dollar Awaits Fed Meeting Minutes
The US Dollar could experience some fluctuations later in Wednesday’s stateside trading with the much anticipated release of the Federal Open Market Committee’s meeting minutes. The buck managed to rise against a basket of majors to reach a 14-year high following extremely positive manufacturing activity revealed in Tuesday’s session and hawkish comments on Wednesday may be able to boost the currency further. The Federal Reserve chose to hike interest rates in December and so investors will be paying close attention to the language used in the meeting.
There could be some more movement on Thursday when the US ISM non-manufacturing composite index is released. Economists have pegged the December figure to fall to 56.7 from the previous month’s 57.2.
Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.
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