17.11.2016 Daily Market Analysis

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The greenback show continued as the US dollar Index printed its strongest levels in 14 years, with the US dollar (USD) ticking higher against most of the major currencies.

However, there was a little pullback on the USD late in the day as the Bureau of Labor Statistics released weaker than expected PPI numbers. The month on month Producer Price Index came in flat at 0.0%, which was lower than the expected amount as well as the previous growth of 0.3%.

Euro (EUR) weakness continued on Wednesday, with the currency posting fresh 2016 lows. There was no Eurozone data to make sense of the weakness, and it seems the currency continues to be at the mercy of the greenback as well as being weighed down by political pressures. The first round of primary elections in France start this weekend and Italy’s referendum will be held early next month. If signs of nationalism are detected in early voting, the euro will continue to be pressured with more nations going to the ballot in 2017. The British pound (GBP) also sustained marginal weakness against the dollar after comments from BOE Governor Carney that downplayed Inflation targets. The market will watch out for the release of month on month Retail Sales, with a positive figure expected to be announced.

It was another day of mixed performance by the commodity currencies. Both the Australian dollar (AUD) and New Zealand dollar (NZD) extended losses against the USD, but the Canadian dollar (CAD) sustained an assault against the greenback. The AUD was the biggest loser, shedding off 1% of its value against the USD on Wednesday. Lower commodity prices were the main reason, and weak employment data that came out in early Asian trading on Thursday did not help matters. The Australian economy added 9,300 jobs in the month of October, against high expectations of 20,300 jobs. The NZD also ticked lower, even as the country postponed the release of PPI and Retail Sales data to today.

As other commodity currencies lost ground against the USD, the CAD swung in both directions as it reacted to macroeconomic data and OPEC headlines. US Crude Oil Inventories showed a build of 5.3 million barrels in stockpiles, much higher than the expected build of 400,000 barrels as well as the previous 2.4-million-barrel build. The CAD ticked lower on this news, but later surged higher as crude oil prices rose following headlines that Russia will hold discussions with Saudi Arabia regarding a production freeze or cut agreement that can be reached as soon as the end of this month.

Aside from UK and New Zealand data, the market will no doubt be keen on the US. Having determined market proceeding this week, the US dollar is expected to provide volatility as a host of US events are scheduled for release on the economic calendar today. Building Permits, CPI data, Manufacturing figures as well as Unemployment Claims are set to be released in the US today. But the major focus will still be on Fed Chair Janet Yellen’s testimony in Washington before the Joint Economic Committee. Yellen will talk about the US economic outlook, and being her first address since Trump won the elections, the market will no doubt be very keen to hear what she has to say.