All Eyes on the Fed Today
The Federal Reserve (Fed) is scheduled to release its latest monetary policy decision today. Following the inauguration of the unpredictable new US President, Donald Trump, Janet Yellen and team might be forced to leave the interest rate unchanged for now to see how the US Dollar reacts to his first few weeks in power. However, investors await signals on whether the next rate rise is likely to come in March or later in 2017. On the data front, the US ISM purchasing managers’ index (PMI) and the ADP employment change data will be closely eyed by market participants.
In the UK, the just out data showed that UK’s manufacturing activity was weaker for January. On the other side of the English Channel, factories in the Euro zone posted their best reading in almost 6 years last month.
Pound Sterling – UK Markets
The Pound is trading on a stronger footing against the US Dollar this morning. The just out data showed that Britain’s manufacturing PMI recorded a drop for January. Earlier in the session, data showed that the nation’s BRC shop prices declined in January, amid weaker sales in fashion, footwear, furniture, and electricals. Another report released by Nationwide revealed that annual growth in house prices slowed in January, recording its weakest reading since November 2015.
Separately, leading think tank, National Institute of Economic and Social Research, suggested that Britain is likely to experience an economic slowdown in the current year, as rising inflation will hurt consumer spending. The Sterling - US Dollar currency pair traders now move attention to tomorrow’s crucial event i.e. the Bank of England’s interest rate decision, the meeting minutes and press conference along with the central bank’s quarterly inflation report.
US Dollar – US Markets
The US dollar has reversed its previous session losses and is trading higher against the Euro this morning. Going ahead, the Fed’s interest rate decision is scheduled to be revealed later in the day. In addition to this, several economic releases in the form of US manufacturing PMI, ADP employment change and weekly mortgage applications are due to release today.
Yesterday, the US President, Donald Trump’s administration cranked up the tension in currency markets overnight with remarks that every other country lives on devaluation. In addition to this, the Head of Trump's National Trade Council, Peter Navarro, commented that the Euro is ‘grossly undervalued’. As a result, the greenback tumbled across the board. Subsequent poor results from the US docket caused the greenback to deflate further. US consumer confidence index declined more than expected for January, dampening optimism over the outlook for the world’s largest economy. Additionally, manufacturing activity in the Chicago area unexpectedly deteriorated in January, largely because of a decline in orders.
Euro – European Markets
This morning, the Euro has retreated against the US Dollar and Sterling. Data released earlier in the session showed that final print of the Eurozone’s manufacturing PMI outpaced market expectations in January. However, German manufacturing activity grew slightly less than estimated for the same month. In other news, French and Spanish manufacturing PMI registered an increase in January. Further, Italian manufacturing PMI surprisingly declined during the period. Ahead in the day, the European Commission’s report on economic growth forecasts will attract market attention.
Yesterday, the shared currency surged against the greenback, after a Trade Adviser to the US President, Donald Trump called the shared currency ‘grossly undervalued’. On the data front, the Eurozone’s economy grew faster than expected in the last quarter of 2016, while flash estimates indicated that a surge in energy prices led the region’s annual consumer inflation to a 4-year high in January. Further support came from Euro area’s unemployment rate data, which fell to its lowest level since 2009.
Other Currencies – Highlights
The Australian Dollar is trading on stronger footing against the greenback this morning. A couple of economic releases from China, Australia’s largest trading partner, crossed the wires earlier today. An official gauge of China’s factory activity edged down in January from December, showing a slight slowdown in momentum. However, it managed to stay in the expansionary territory. Further, China’s non-manufacturing PMI slightly advanced in January. Closer home, a report released by the Reserve Bank of Australia showed that Australia’s key commodity prices continued to rip higher last month.
During the previous session, data showed that total private sector credit growth in Australia topped expectations in December. Separately, the National Australia Bank’s survey report indicated that operating conditions for Australian businesses drastically improved in December. Additionally, the business confidence index registered an increase for the same month. In other economic news, activity levels across Australia’s manufacturing sector noticeably slowed at the start of 2017, marking the first time in 5 months that the index has failed to record an increase.