AUD/USD at Multi-Month Highs, GBP/USD Above 1.35, USD Softens Broadly
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AUD/USD at Multi-Month Highs, GBP/USD Above 1.35, USD Softens Broadly

04 January 2018 by FC Exchange

Currency experts FC Exchange take a look at what could impact financial markets this week and offer a quick recap of Christmas trading.

Pound breaches 1.35 against US dollar (GBP/USD)

Last week

– In the last week, the pound has crept above the 1.35 level against the US dollar as a softer buck continued to trend in the market. This comes just over a week after US President Donald Trump signed his monumental tax bill that had been a hot topic throughout 2017.

– The pound noted some gains over the festive period, marking multi-day highs against some currencies such as the Japanese yen and euro, and weekly highs versus the Swiss franc and US dollar.

Week ahead

Tuesday is a rather quiet start to the week concerning UK economic data with only Markit’s manufacturing purchasing managers’ index (PMI) released. The ecostat showed a decline to 56.3 in December, down from 58.2 in the previous month.

Wednesday is expected to be another quiet day with only Markit’s construction PMI due for publication, but Thursday could be more exciting with UK mortgage approvals and consumer credit numbers making their way into the spotlight, as well as Markit’s services and composite PMI’s. Friday will close the week with new car registrations and unit labour costs numbers.


Politics hot up in the Eurozone

Last week

– Politics in Italy heated up over the Christmas period with Italian President Sergio Mattarella dissolving parliament and calling for ‘realistic’ proposals to benefit the country and combat some of its problems ahead of the election in March. Mattarella commented: ‘The duty to make adequate proposals – realistic and concrete ones – is a must given the dimension of the problems our country faces.’

– On Christmas day, the euro experienced some hefty losses thought to be a result of computer-driven selling.

– The situation in Catalonia developed in recent weeks when regional elections showed a victory for pro-independence parties.

Week ahead

The euro has begun the year healthily, attaining four-month highs versus the US dollar as the economic outlook for the currency bloc brightens. 2017 was the best year for the euro to US dollar (EUR/USD) exchange rate since 2003 as markets were filled with optimism that the European Central Bank (ECB) would begin to quell its hefty monetary stimulus package and currency bloc countries noted an upswing in economic data.

This week, data has revealed Eurozone manufacturers upped their activity in 2017 with Markit’s manufacturing PMI coming in at 60.6 in December, the best level since records began in 1997. In the rest of the week, German unemployment data will be out, along with Eurozone consumer price index readings.


US dollar (USD) exchange rate experiences worst year since 2003

Last week

– Over the Christmas period US economic data was mixed, with consumer confidence slowing, but housing numbers and new home sales showing strength. New home sales increased by a healthy 733,000, the highest level since September 2007.

– The US currency fell in the last week of the year with the dollar index hitting a one-month low as investors felt less optimistic that Trump’s tax reform would translate into consumer confidence quickly.

Week ahead

The US dollar has begun 2018 on the defensive after figures at the end of 2017 showed the dollar index had slid by 9.8% – the worst year on record for the buck since 2003. There could be some opportunity for the US dollar to move this week with the release of US ISM manufacturing and ISM employment numbers out on Wednesday, followed by the highly influential change in non-farm payrolls on Friday and the ISM non-manufacturing/services composite data on Friday. The Federal Reserve’s meeting minutes from the December gathering will also be out on Wednesday.


AUD – Aussie (AUD) exchange rate experiences two-month highs

– Over the Christmas period, the Aussie dollar rose to two-month highs on the back of oil and metal prices. Currency strategist Masafumi Yamamoto commented: ‘With the Australian economy improving and commodity prices, especially copper for Australia, increasing, the Aussie is set to rise next year [2018].’

– On Monday, the Australian performance of manufacturing index softened from 57.3 to 56.2 in December. However, despite the decline, the index remained above the 50.0 benchmark which separates expansion from contraction and marked the 15th consecutive month of the data either holding steady or improving.

– Wednesday will see the release of the AiG performance of service indicator which could impact the Aussie moderately ahead of Friday’s Australian trade balance data.


CAD – Could CAD/USD fall after recent improvements?

– The Canadian dollar attained a 10-week high at the end of December after six consecutive sessions of gains. The Canadian dollar to US dollar (CAD/USD) climbed after recent economic data inspired investors to buy the loonie, but it’s thought there could be some headwinds in the month ahead if the US Federal Reserve opts to increase interest rates again at the January meeting.

– Tuesday could be an exciting start to the year for the Canadian dollar with the highly influential December Canadian manufacturing PMI being released. Friday could be another significant day for the loonie with Canadian labour market figures coming to light.


NZD – New Zealand Q3 growth surprises markets, buoys kiwi dollar (NZD)

– The New Zealand dollar also managed to climb during the Christmas festivities to hover near a two-month high after domestic data showed that third-quarter growth had beaten expectations. Gross domestic product (GDP) numbers showed growth had improved by 0.6% in the Q3, with expansion on an annual basis coming in at 2.7%.

– It’s a quiet week ahead for New Zealand data, but Chinese figures could impact the Kiwi as China is New Zealand’s largest trading partner.

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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