Dollar Makes a Comeback thanks to Stocks

Daily Update - 07th February 2018

Yesterday’s Focus

• AUD RBA Interest Rate Decision, RBA Rate Statement
• CAD International Merchandise Trade
• US Trade Balance, FED’s Bullard Speech

Yesterday’s explained

The Reserve Bank of Australia kept the Cash Rate unchanged in line with expectations. German factory orders rose strong 3.8% in December. German Bundesbank President Jens Weidmann said at the Bundesbank Lecture, that the greatest risk now is to assume that all problems are solved as shocks in specific regions or sectors of the economy can still put Eurozone to an "endurance test".

The US trade balance in goods and services reached a deficit of $53.1 billion in December, up from $50.4 billion in November. Canada’s trade balance reached a deficit of C$3.2 billion in December, missing market expectations by C$1 billion. St. Louis Federal Reserve President James Bullard said recent labor market data may not be a signal inflation will accelerate with monetary policy being closer to neutral than in previous years. Canada’s Ivey PMI decelerated unexpectedly strongly to 55.2 in January.

Today’s Focus

• EUR Industrial Production
• USD ADP Employment Change, FED’s William Dudley Speech, FOMC Member William Speech
• NZD RBNZ Monetary Policy Statement, Interest Rate Decision, Press Conference, Deputy Gov. Grant Spencer Speech

Today’s Market

For the EUR, economic data scheduled for release is limited to Germany’s December industrial production figures this morning, which are forecasted to be EUR negative. Markets are expected to show little response to any soft numbers following December factory orders having surged by 3.8% in December, according to figures released on Tuesday that suggests another jump in production is on the cards in the months ahead.

On the political front, news of Merkel having to accommodate the demands of the SDP will not have helped the EUR at the start of the week. For the Pound, it’s been a particularly rough week, falling 1.2% from Tuesdays strong position, with the risk off sentiment and concerns over the Theresa May and Brexit adding fuel to the fire.

In spite of the early part of the week slide, expectations are for the BoE to take a hawkish stance in tomorrow’s Monetary Policy Committee meeting. While rates are expected to remain unchanged, an upbeat outlook on the economy and labour market conditions could provide some upside for the Pound. On the data front, stats are limited to January house price figures that will have limited to no impact as the market returns to normal after an aggressive sell-off in the early part of the week.

 

Across the Pond, while there are no major US reports scheduled for release, FOMC voting members Dudley and Evans are scheduled to speak, which will be of particular interest to the global financial markets.