US Dollar Starts 2017 with a Bang

04 January 2017 by News Desk   |   SHARE  

Following the festive season, Tuesday saw plenty of movement in the FX markets due to a mix of economic data releases, say currency experts FC Exchange.

Australian Dollar

The Australian Dollar was bolstered against other majors including the US dollar (AUD/USD), pound (AUD/GBP) and Euro (AUD/EUR) following some favourable economic data releases in Tuesday’s trading. The Australian AIG manufacturing index rose from 54.2 to 55.4 in December and offered the Aussie dollar some strength.

The AIG report read: ‘Comments from manufacturers in December indicate that demand (albeit somewhat mixed) appears to be improving again after a weak patch in the latter half of 2016. The recovery in commodity prices has led to better conditions for manufacturers exposed to the mining sector, with some revival of mining investment and maintenance spending.’

While China’s Caixin manufacturing purchasing managers index (PMI) (which assesses smaller, private or semi-private enterprises) managed to climb from 50.9 to 51.9 in December. Economists had predicted a fall to 50.7 – so the positive ecostat surprised the market after the sector registered the fastest rate of output since January 2013. These figures are a welcome piece of positive news following Sunday’s Chinese NBS manufacturing PMI which fell from 51.7 to 51.4.

Pound Sterling

Meanwhile, the UK economy also received some positive news during the first full day of European trading in the New Year. Markit’s UK manufacturing PMI jumped from 53.3 to 56.1 in a surprise move on Tuesday, slashing forecasts for a small rise to only 53.6. The rise marks the highest level since June 2014 – any figure over 50.0 shows expansion, whereas below denotes contraction. Markit will release its UK construction PMI on Wednesday, followed by the services and composite PMI’s on Thursday.

Rob Dobson – senior economist at HIS market, stated: ‘The UK manufacturing sector starts 2017 on a strong footing. The headline PMI hit a two-and-a- half year high in December, with rates of expansion in output and new orders among the fastest seen during the survey’s 25-year history.

‘Based on its historical relationship against official manufacturing output data, the survey is signalling a quarterly pace of growth approaching 1.5%, a surprisingly robust pace given the lacklustre start to the year and the uncertainty surrounding the EU referendum.’

Euro

The Eurozone also published good data on Tuesday with the revelation that German unemployment levels had fallen by 17,000 in December – the third consecutive month of declines. Germany is known as the powerhouse of the Eurozone and the economy has seemingly expanded much quicker in the fourth quarter of 2016 with an increase in domestic consumption and industry improvements.

Wednesday may see some movement for the single currency with the release of Eurozone consumer price index (CPI) figures. Economists have pegged the core inflation number to remain stable at 0.8 year-on-year in December, while the non-core estimate is expected to rise from 0.6% to 1.0%. If the core number remains stable there may only be little movement for the Euro, but if it deviates from forecasts there could be more significant fluctuations.

US Dollar

The US dollar has been hard to deflate of late with the exception of some profit taking in late December. 2017 has certainly started with a bang with Tuesday seeing the euro to US dollar (EUR/USD) exchange rate sink down to a three-month low after the US ISM manufacturing figure for December stomped higher than the forecast 53.8 to a healthy 54.7 following November’s 53.2. What’s more, ISM prices paid jumped to 65.5 in December from 54.5 and above the 55.5 prediction, while construction spending rose by 0.9% month-on-month in November.

Investors will be looking forward to Wednesday’s meeting minutes from the Federal Open Market Committee (FOMC) which are likely to be scrutinised as industry experts predict rate hike timings in 2017.

 

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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