01.02.2017 Daily Market Analysis

The US dollar (USD) edged lower against all the major currencies on Tuesday, as it was weighed down by weak data as well as by the persistent Donald Trump arm-twisting.

US CB Consumer Confidence printed 111.8, lower than the expected 112.6, while the Chicago PMI came in at 50.3, worse than the expected 55.1. The USD is weakening ahead of today’s Federal Reserve monetary policy announcement, the first of 2017. The Fed is not expected to hike rates, but investors will be keen on the FOMC statement for a guarantee that interest rates will indeed rise in 2017. Still, the biggest risk for the USD is Trump. The US President has talked down the currency, and yesterday, one of his aides accused Germany of using a greatly undervalued euro (EUR) to exploit its EU partners and the US. By seemingly taking anyone head on, Trump is creating uncertainty that is not inspiring USD investors. Aside from the Fed, USD traders will also watch out for the Crude Oil Inventories, the ISM Manufacturing PMI as well as the ADP Nonfarm Payrolls estimates due out today.

Meanwhile, the euro (EUR) was the best performer yesterday, as it was inspired by upbeat data and USD weakness. Trump talked up the euro, and it printed its highest level in 2017. Strong data also supported the currency. Year on year Spanish CPI printed 3.0%, higher than the expected 2.4%, while German Unemployment Change came in at -26K, better than the expected -5K. The Eurozone CPI estimate also came in at 1.8%, higher than the expected1.5%, while Preliminary quarter on quarter GDP printed 0.5%, better than the expected 0.4%. There is no major data from the Eurozone today, and the euro is expected to take its cue from the greenback.

In other currency news, the British pound (GBP) also performed admirably despite weak data during the London session. Month on month Net Lending to Individuals came in at 4.8B, weaker than the expected 5.3B, whereas month on month M4 Money Supply printed -0.5%, worse than the expected 0.3%, after a series of credit misses were reported. Finally, UK consumers are starting to feel or show the impact of the looming Brexit. Today, GBP traders will focus on the UK Manufacturing PMI data, where a positive number will support the Queen’s currency further.

All commodity currencies drifted higher against the weak USD. The Canadian dollar (CAD) led the way as it was boosted by rising crude oil prices as well as by upbeat month on month Canadian GDP data, which printed 0.4%, against expectations of 0.3%. The Australian dollar (AUD) was also lifted by rising gold price, but gains were limited after weak Manufacturing data came out from Australia later in the Asian trading session. The New Zealand dollar (NZD) also spent most of the day in the green, but gains were later curtailed by weak Employment data. The Country’s quarter on quarter Employment change came in as expected at 0.8% (the previous was 1.3%), but the Unemployment rate worsened to 5.2%, against the expected 4.8%. There is no major data expected from the commodity countries today, with their respective currencies well expected to take their cue from the USD.