28.12.2016 Daily Market Analysis

Forex commodities USD CHF JPY


It was another day of muted action on Tuesday, but the US dollar (USD), in characteristic fashion, asserted its authority on all the major currencies (except for the euro) when the US banks reopened after the Christmas holidays.  

The USD was buoyed by positive data from the country as the CB Consumer Confidence printed 113.7, much higher than the expected 108.9 as well as the previous 109.4. The Richmond Manufacturing Index also came in at 8, better than the expected 5 as well as the previous 4. Both data releases were from surveys and it confirms that both the consumer and corporate public expect president elect Donald Trump, who will be assuming office next month, to deliver.

There was no major news from the Eurozone, but the euro’s (EUR) strength emanated from the European Central Bank’s (ECB) decision to pause its bond buying program due to limited volatility over the festive period. The program will resume next week and the Eurozone’s weak fundamentals should continue to weigh down on the euro.

Meanwhile, the British pound (GBP) was pressured marginally lower by the USD, and it is also another currency set to have a tough 2017.

It is all about the Brexit for the Queen’s currency, with headlines emanating that hardliners in parliament are keen to put immigration above all else in the negotiations. This would set the stage for a hard exit, an unwelcome position for the GBP. The ripple effects of a hard exit will be dire, and while this is not confirmed, the uncertainty will not be any better for the GBP.

In other currency news, all commodity currencies edged lower against the USD, and the price action was particularly curious for the Canadian dollar (CAD). The CAD was the worst performer of the day, even as crude oil prices improved. US yield spread rates widened versus Canada, and this provided the cue for the CAD price action. The Australian dollar (AUD) also ticked lower despite improving Gold prices, with the New Zealand dollar (NZD) following suit.

The thinned-holiday trading mood is expected to continue, with no major market moving data scheduled for release today.