- 2 days 19 hours ago 07:00 am
- 2 days 19 hours ago 08:00 am
- 6 days 1 hour ago 08:00 am
- 6 days 1 hour ago 02:00 am
- 6 days 20 hours ago 04:00 am
Summary: Currencies ended a volatile week of trading on Friday with mixed finishes as traditional correlations were set aside. The two main catalysts for the FX markets, prominent since the start of this year have been the changing nature of Fed monetary policy amidst rising inflation and the current spread of the Omicron variant. Global treasury yields dropped sharply while Wall Street stocks extended their slide as risk aversion dominated trade. The CBOE VIX Index soared 35.2% higher to finish at 28.85 (25.59 Friday). The Dollar Index (USD/DXY), a popular gauge of the Greenback’s value against a basket of 6 major currencies, dipped 0.10% to 95.62 from 95.77. Best performing FX went to the haven sought Swiss Franc and Japanese Yen. The Greenback continued to fall against the Japanese Yen, settling 0.36% lower to 113.65 (114.20). Against the Swiss Franc, the US Dollar slid 0.72% to 0.9120 from 0.9172 Friday. The Euro (EUR/USD) rallied 0.19% against the US Dollar to close at 1.1345 from 1.1303. However, it was not a one-way street lower for the Greenback. The British Pound (GBP/USD) finished at 1.3555 from 1.3595, it’s lowest finish in 2 weeks. Despite ongoing expectations of a Bank of England rate hike on 3 February, growing pressure on Boris Johnson to resign has weighed on Sterling. UK economic data released on Friday were also disappointing. Risk leader, the Australian Dollar (AUD/USD) tumbled 0.79% to 0.7180 from Friday’s 0.7222 while the Kiwi (NZD/USD) slumped to 0.6715 (0.6775). Against the Canadian Dollar, the Greenback (USD/CAD) rallied 0.44% to 1.2580 (1.2510). The US Dollar finished mixed against the Asian and Emerging Market currencies. Against the Offshore Chinese Yuan (USD/CNH), the Greenback was last at 6.3415 from 6.3455. USD/THB (US Dollar-Thai Baht) rose modestly to 33.95 from 32.85 Friday while the USD/SGD pair (US Dollar-Singapore Dollar) settled at 1.3450 (1.3460).
The benchmark US 10-year bond yield slumped 7 basis points to 1.76% (1.73%). Germany’s 10-year Bund rate was down four basis points to -0.07% (-0.03%). The UK Ten-year Gilt yield fell 5 basis points to 1.17% (1.22% Friday). Australia’s 10-year Bond rate tumbled 8 bp to 1.91% (1.99% Friday).
The DOW extended its slide, settling at 34,227 (34,703). The S&P 500 settled at 4,360 (4,483). Japan’s Nikkei Index tumbled 1.32% lower to 27,150 from 27,680 Friday.
Data released yesterday saw New Zealand’s Visitor Arrivals in January slump to 44% from 59.6%. Japan’s National Core CPI dipped to 0.5% against expectations of 0.6%, and a previous 0.5%. UK GFK Consumer Confidence slid to -19.0 in January from -15 in December. UK Retail Sales slumped -3.7%, from a downward revised 1.0% (initially 1.4%), and lower than expectations of -0.6%. Canada’s Retail Sales fell to 0.7%, missing median estimates of 1.2% and a previous downward revised 1.5% (from 1.6%). The Eurozone Consumer Confidence Index matched forecasts at -9. The US Conference Board’s Leading Index matched expectations at 0.8%.
On the Lookout: Another week, another Dollar. Today’s economic calendar sees the release of the first set of global PMIs for January. Australia kicked off with its Markit Manufacturing PMI, down to 55.3 from a previous 57.7. Australia’s Flash Services PMI in January eased to 45 from 55.1. No forecasts were given. Australia’s Markit Composite Flash PMI dipped to 45.3 from 54.9. Japan follows next with its Jibun Bank Flash Manufacturing PMI (f/c 55.0 from 54.3), Japanese Jibun Bank Flash Services PMI (no f/c, previous was 52.1), Japanese Jibun Bank Composite Flash PMI (no f/c, previous was 52.5). European data starts off with French Markit Manufacturing Flash PMI (f/c 54.5 from 55.8), French Market Services PMI (f/c 55.3 from 55.7), French Composite PMI (f/c 54.5 from 55.8) – ACY Finlogix. Germany follows with its Markit Manufacturing PMI for January (f/c 57 from 57.4), German Markit Services PMI (January f/c 48 from 48.7), German Composite PMI (January f/c 49.2 from 49.9). The Eurozone follows with its Markit Manufacturing PMI for January (f/c 57.5 from 58.0), Eurozone Markit Services PMI for Jan (f/c 52.2 from 53.1), Eurozone Composite Jan PMI (f/c 52.6 from 53.3). The UK rounds up Europe with its UK Markit Manufacturing PMI for Jan (f/c 57.9 from 57.9), UK Market Services PMI (f/c 54.8 from 53.6), UK Composite PMI for Jan (f/c 55 from 53.6). The US follows with its Chicago Fed National Activity Index for Dec (no f/c, previous was 0.37). Canada releases its December Preliminary Manufacturing Sales data (no f/c, previous was 2.6%. Finally, the US releases its Markit Manufacturing Flash PMIs for Jan (f/c 55.0 from 57.6, US Markit Non-Manufacturing PMI (f/c 56.7 from 57.7) and US Markit Composite PMI (no f/c, previous was 57). All data and forecast sourced from ACY Finlogix.
Trading Perspective: While the DXY (Dollar Index) gained marginally, it was mixed against its various Rivals. A fall of 7 basis points in the US 10-year bond yield in earlier days would’ve seen a marked fall in the Greenback. Global stock markets extended their slide which created a mostly risk-off stance from FX. The Australian, New Zealand and Canadian Dollars were all lower while the Japanese Yen and Swiss Franc outperformed. However, the Chinese Offshore Yuan and other Asian and Emerging Market currencies finished higher against the Greenback. The USD/CNH pair closed at its lowest this year at 6.3415 (6.3455 Friday). Two weeks ago, the USD/CNH pair hit a high at 6.3945.
Data released today will shine a light on global PMIs. Apart from the UK, most PMIs which measure the prevailing direction of economic trends are expected to ease due to the Omicron variant’s spread across the major and developing economies.
The first Fed meeting of 2022 will unfold next week with indications that the US central bank will commence rate hikes as early as March. Overnight US treasury yields tumbled after trading in a volatile band last week. The benchmark US 10-year bond yield traded between 1.88% and 1.76%. That’s huge. This knee-jerk action in the treasury markets only means more volatility for the currencies. Happy days!
Expect further volatile FX trade today and in the week ahead. Happy Monday, happy trading, happy days!
This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.
Get FinTech news headlines, videos, stories and product reviews on your mobile device. Download Financial IT App for Free