Daily Market Commentary

Friday, 24 February 2017 - Market Commentary

Manager - Private Client Desk

United States Dollar

The dollar’s poor week continued during yesterday’s trading session, as weaker than expected jobs data coupled with uncertainty surrounding tax reform and public spending took its toll on the greenback. Unemployment claims rose by 6,000, more than the expected 4,000 for the week ending February 18th, going against recent strong jobs releases. Meanwhile, new US Treasury Secretary Steven Mnuchin’s comments were also not received well by markets, telling the Fox Business Network that any policy steps the Trump administration takes would have a limited impact this year and that he wanted to see tax reform passed before Congress’ August recess. The aim is to focus on middle-income tax cut and simplification for business, with no further clues on this markets were disappointed who have been expecting the Trump administration to deliver on promises of tax reform, infrastructure spending and a cut in regulation. Whilst broadly in line with recent comments made by other politicians, meeting expectations, but disappointing the bulls who were hoping for more details and a more rapid reform. This stance is likely to limit dollar strength in the short-term. Cable is currently trading at 1.2550, up from 1.2450 at the beginning of yesterday’s European session.

The Sterling is ending the week in a strong position, as modest retail sales data coupled with negativity from France (Le Pen’s potential to make the second round of voting), and the States (FOMC Minutes and jobs data) have seen it stay above recent resistance levels of 1.18 and 1.25.

We expect a range today in the GBP/USD1.2500 to 1.2600

Euro

The only major release, on an otherwise quiet day, came in the form of German budget surplus figures which came in at a multi-decade high of 23.7billion euros. To German economists this figure came as welcome news, with Angela Merkel indicating this meant the German economy is performing well, which it is. However this cautious approach taken by the German government has been criticised by underperforming EU nations who see this as somewhat of a wasted resource that could benefit an increasingly fragile Eurozone. The instability of many Eurozone economies continues to weigh on the Euro and with credit rating agencies Moody’s and Fitch both likely to adjust their ratings of Greek debt today we could see further weakening. We have little data of note today as markets will turn to the geopolitical landscape for guidance. GBP/EUR is currently sitting at 1.1848.

We expect a range today in the GBP/EUR rate of 1.1790 to 1.1890

Aussie and Kiwi Dollars

Overnight the Australian dollar was little changed. In a speech from Central bank Governor Philip Lowe, he went on to say he expects “a period of stability” in interest rates and suggested further cuts could push already high household debt to “dangerous” levels. With much uncertainty surrounding Trumps policies and any Fed changes the AU Dollar still needs to tread carefully. The Aussie has held its position above 0.77 us cents but only just, currently at 0.7715 and a snap below this could see a hefty drop. For GBP/AUD gains were seen after a rebound in retail sales for the UK and the price went from a low of 1.6165 to a high of 1.6286.

The Kiwi dollar moves have mirrored that of the Aussie throughout the past 24 hours. With nothing on the docket yesterday we have seen the dollar gain against its US counterpart, based on Mnuchin’s comments discussed above. GBP/NZD currently sits at 1.7353.

We expect a range today in the GBP/AUD rate of 1.6190 to 1.6320

We expect a range today in the GBP/NZD rate of 1.7280 to 1.7390

Data Releases

AUD: No Data

EUR: No Data

GBP: No Data

NZD: No Data

USD: New Home Sales, Revised UoM Consumer Sentiment

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