Category: Daily Look

US dollar on the rise



Dollar strength was the continuing theme of Wednesday. The dollar index pushed above the 85.0 level and more decisively above the peak of 84.75 seen in mid-2013, putting the dollar (on this measure) at levels last seen mid-2010 when the euro was getting hammered in the early stages of the Eurozone crisis. We are now in our 11th consecutive week of dollar gains, something not seen since the start of floating exchange rates in the early 70s. Both sterling and the euro are bearing the brunt of this latest move. EURUSD has moved decisively below the 1.28 level, whilst the recovery in cable has been halted by the break below trendline support drawn from the 16th September low. This is less a data driven dollar move, because the recent run of data through September has actually fallen short of expectations. It’s more down to a shift in FX market dynamics, as the dollar shifts more decisively from being a funding currency towards being an asset currency. The push lower in Eurozone interest rates and yields has naturally added to this dynamic, together with the weakness seen in commodity prices and also with it the Aussie dollar and also the kiwi.

The kiwi pushed below the 0.80 level in overnight trading, to levels not seen for a year. There were more stern comments from central bank governor Wheeler, who said that the central bank expected “significant further depreciation” of the currency. The sentiments of both the RBNZ and also RBA are well known, but the timing of the remarks are pertinent given the generalised dollar strength at this time. The Aussie itself has broken below the 0.88 level, undermined by (amoung other things) the recent weakness of iron ore prices. The moves over recent days suggest we are going to see a fairly lively month last few trading days of the month.

Further reading:

EUR/USD collapses to 22 month low – no sign of recovery

GBPUSD likely to be driven by interest rate expectations

German IFO takes center stage

German IFO takes center stage

Eurozone PMIs yesterday did little to enthuse investors and a number of concerns over the outlook from both a macro and corporate perspective caused a big sell off in risk assets. Even the likes of the commodity currencies were affected with AUDUSD continuing its downward trend hitting a new seven month low around 0.8830 but

Temporary Aussie relief

Temporary Aussie relief

The main standout overnight is the recovery in the Aussie dollar, which has recovered back above the 0.89 level after the latest data from China brings at least some relief at the margins. The rise in the HSBC manufacturing series was marginal (from 50.2 to 50.5), but was sufficient to take away some of the

The Aussie goes down under

The Aussie goes down under

After the excitement of last week, FX markets are back to reality, which includes fresh concerns regarding the fine balancing act going on in China. Asian stocks and key commodities are starting the week softer, after comments from the Chinese Finance Minister played down the possibility of more stimulus from the government. This is the

A Big Day for Scotland

A Big Day for Scotland

Scotland has been the most talked about country in the world in recent weeks and today its residents have the chance to make one of the most important decisions in not only their history, but potentially the history of many other semi-autonomous parts of the world. Waiting in the wings are other regions across Europe

Considerable focus on the  dollar

Considerable focus on the dollar

We talked about emerging market risks yesterday and the sell-off in EM currencies seen so far this month, with the Russian rouble leading the way. This continued yesterday, with shortages of foreign currency, primarily US dollars, which prompted the Russian central bank to offer FX swaps with the aim of improving dollar liquidity. This pushed the US dollar lower

Focus on Dollar and Sterling

Focus on Dollar and Sterling

As we mentioned yesterday this week is all about the dollar and then sterling. For today, the focus is on both. For the dollar, it’s with the start of the two day Fed meeting, with results announced tomorrow evening. The main focus is on the statement and the potential for a change in language, which could prove

The FX rollercoaster continues

The FX rollercoaster continues

The past month has seen FX volatility increase for a variety of reasons and things don’t look set to calm down this week, with two key events to look forward to. The first is the Fed meeting on Wednesday, where the market is becoming more concerned that we could see a change of language in

Sterling rebounds after “No Campaign” takes the lead

Sterling rebounds after “No Campaign” takes the lead

Sterling has found support now as the rallying cries for Independence seem to be falling on deaf ears. The latest Gov poll (which is reputedly one of the more accurate pollsters, although they released the one last weekend that showed the Campaign in the lead causing the recent spike in volatility in FX markets), showed the No Campaign back in the

Currencies pressured down under

Currencies pressured down under

The Aussie was looking decidedly weak yesterday, having been pushed lower by a combination of weak iron ore prices (down more than 6% in Sep) and softer domestic data. The reaction to the much better than expected employment data overnight (initial 50 pip gain unwound) is indicative of the fact that few seem to be