FX market outlook
Posted on Friday, March 31 2017 at 8:24 am GMT+0000Dollar on track for weekly gains after lift from US GDP data and hawkish Fed speakers; China manufacturing PMI rises to highest in 5 years.
The US dollar is set to end the week with gains after being lifted by strong GDP data and hawkish Federal Reserve officials who support further rate increases this year. The Australian dollar was underpinned by upbeat Chinese data.
China’s official factory gauge rose to the highest level in almost five years, with the March manufacturing PMI coming in at 51.8 versus a 51.7 reading expected and up from the previous 51.6. Today’s data points to stabilization in the world’s second-largest economy.
Economic releases out of Japan showed core consumer prices rose slightly for a second month in February and industrial production grew more than expected during the month. Core CPI rose 0.2% last month but was far from the Bank of Japan’s 2% target. The yen weakened after the data.
US data yesterday helped lift the dollar after fourth-quarter GDP was revised up from the previously reported figure, to 2.1% from 1.9% and above expectations of 2.0%.
The dollar also received support by comments from New York Fed President William Dudley who stated that gradual rate hikes were appropriate and that US growth and inflation may be shifting to the upside.
Dollar / yen built on yesterday’s gains to reach an Asian session high of 112.19 before slipping back below the key 112-yen level.
The euro consolidated losses against the dollar today after yesterday’s break below the key $1.0700 level. It halted a three-day decline at $1.0671. The single currency was hurt after reports earlier this week le to investors scaling back expectations that the ECB would withdraw stimulus.
Sterling is on track for a weekly loss against the dollar and remained below the key $1.2500 level after falling on uncertainty surrounding the Brexit negotiations following the triggering of Article 50 this week.
Oil prices rallied all week, with WTI crude reaching as high as $50 a barrel. There were also reports that OPEC was in discussion with members to extend cuts.
The firmer dollar undermined precious metals and gold extended yesterday’s losses that took prices below the key $1245 an ounce level, reaching a session low of $1239.54 an ounce today.
The economic calendar for the rest of the day includes the final reading on UK fourth-quarter GDP and CPI for the Eurozone. Meanwhile, the US will release data on personal income and spending and the revised University of Michigan consumer sentiment. Fed speakers will also be eyed, with Neel Kashkari and William Dudley due to make appear today.
