Daily Forex Commentary

11 August 2017 - Risk off approach expands forcing stocks down.

By Joshua Hughes - Private Client Dealer

United States Dollar

As the weeks trading draws to a close we have seen a risk off approach to investment continuing to motivate and monopolise movement. Safe havens such as CHF, JPY and gold have seen a surge in price while US stocks have seen a sharp decline. The USD has been able to maintain a strong position off the back of solid data and positive sentiment. International tensions have continued to grow as the threats from both North Korea and the US intensify. On the data side, PPI m/m figures came in yesterday and unexpectedly fell from 0.1% to -0.1%. This figure came alongside Unemployment claims which rose to 244K from 241K. These poor figures did little to motivate movement as investors were focused on global sentiment and uncertainty. Focused then shifted to Fed Vice Chair Dudley who spoke regarding the US economy. Dudley stated that issues still remain with productivity and wage growth which is weighing on inflation. In terms of future policy, he reaffirmed the Fed’s position of a steady transition and the need to see continued improvement from data releases. This did little to sway sentiment regarding further rate hikes this year with markets still pricing in a 50/50 chance of a further hike in December. Today’s main releases will come in the form of CPI m/m and Core CPI m/m. Both figures are due to tick up slightly and may push the USD slightly higher into the weekend.

 

Manufacturing production came in as forecast yesterday at 0% which shows that industry in the UK is struggling to pick up with any sustained momentum. This did little to motivate the currency as the pound remains firmly under pressure and will likely continue to struggle into the weekend as we have very limited data releases scheduled for today. The next major release from the UK will come in next Tuesday in the form of CPI y/y. As a risk off approach continues we may see sterling continue to struggle but with investment likely to remain defensive rates will likely stay relatively range bound. GBP/USD is currently trading at 1.2980.

We expect a range today in the GBP/USD1.2950 to 1.2999

Euro

Only minor releases from the Eurozone yesterday as markets were motivated by wider sentiment. The Euro has struggled this week as markets take a risk off approach and investors favour safe haven currencies. This morning we have seen a number of minor releases such as French and German CPI m/m figures. These announcements have come in relatively as forecast and have done little to motivate movement. With no other releases scheduled for today, we will see the focus shift to wider sentiment for guidance as we could see the EUR struggle to hold up against the USD and other safe havens. GBP/EUR is currently trading at 1.1040.

We expect a range today in the GBP/EUR rate of 1.1010 to 1.1080

Aussie and Kiwi Dollars

This week has been quiet globally in terms of data and this is no different in Australia. The headline news overnight came from RBA governor Lowe who did little to inspire any guidance. Lowe briefly discussed future rate hikes but kept to the status quo of possible rate hikes in the future dependent on employment figures. Markets have priced in the view that the RBA will not likely raise rates in the near future as the central bank moves forward cautiously. The New Zealand Dollar has struggled to maintain a position following the dovish remarks from the RBNZ on Wednesday. Minor releases came in overnight which did little to inspire movement and with nothing scheduled today we could see the NZD fall further as we move towards the close of trading today. GBP/AUD is currently trading at 1.6511. GBP/NZD is currently trading at 1.7814.

We expect a range today in the GBP/AUD rate of 1.6480 to 1.6550

We expect a range today in the GBP/NZD rate of 1.7800 to 1.7870

Data Releases

AUD: No data

EUR: No data

GBP: No data

NZD: No data

USD: CPI m/m

 

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