Weekly currency news: dollar picks up on bright US data
The dollar bounced up on Friday, following stronger than expected non-farm payrolls and manufacturing activity figures, which have boosted confidence about the strength of US economy, easing investor’s concerns about the dovish monetary policy statement put forward by the Federal Reserve on Wednesday.
The euro remains fairly steady, consolidating near three-week highs, while the pound retreated from three-month highs, weighed by weak manufacturing data and the increasing uncertainty about the Brexit just a few weeks ahead of the deadline.
This week we will have a rather thin calendar, with the exception of the monetary policy decisions of the Bank of England and the Reserve Bank of Australia and Fed Powell’s speech.
- EUR/USD pares losses and returns above 1.1400
- GBP/USD: pulling back from 1.3215 highs
- EUR/GBP bounces up at 0.8620, approaches 0.8800
- USD/JPY: support at 108.50
Main events this week:
The US calendar will be light this week, On Monday the US Census Bureau will release November’s factory orders. This is a leading indicator of industrial activity which is expected to have improved after a sharp decline in the previous month. Another positive reading in the manufacturing r sector might improve the confidence on the US economy and increase buying pressure on the US dollar.
On Tuesday the ISM Institute will release the non-manufacturing PMI Index, which is expected to have ticked down, yet at levels consistent with healthy business activity. Unless there is a surprise, we do not expect this indicator to trigger any relevant volatility.
On Thursday, the market will be attentive to Fed chairman Powell’s speech. With the investors assimilating a dovish shift on the bank’s rate hike path, Powell’s comments on the near-term monetary policy plans might have a relevant impact on US dollar volatility.
In the Eurozone calendar, the only event worth mentioning this week will be January’s Markit Services PMI index which is expected to confirm that the sector’s activity slowed down to its weakest pace in six years. The impact on the euro is likely to be neutral to negative.
The UK, calendar opens on Tuesday with the Markit Services PMI Index. Services activity is expected to have slowed down considerably in the UK, which might add concerns to the uncertain situation regarding the future relationship with the EU, and might increase negative pressure on the pound.
The main event in the UK this week will be the BoE Monetary Policy Decision. The Bank is expected to leave its bank rate unchanged at 0.5% and maintain their “wait and see” stance, at least until the Brexit situation clarifies. The impact on the pound, if any, will come from the BoE officials’ views about the economic outlook.
On Tuesday, the RBA will release its monetary policy decision. The Bank is widely expected to maintain its benchmark rate at the current 1.5%, thus, the focus will be on the ensuing monetary policy statement for some insight into the Banks’ monetary policy plans.