On Monday, the dollar maintained its position to a one-month high against the strong currencies after last week’s run of data pointed out that the United States economy is doing well, while China’s yuan also reached to a new six-month high.
It was a weak start for the currencies
However, it was another weak start to the week for currencies, with FX volatility registering all-time lows and little in the way of key economic data. Investors are aiming at central bank meetings in Japan, which is planned for Tuesday, and the European Central Bank meeting which is scheduled for Thursday.
Moves were inconsiderable and volumes were sparse as Lunar New Year approaches in Asia and with U.S markets shut down for Martin Luther King Day on Monday.
Figures on Friday revealed U.S. homebuilding increased to a 13-year high in December, with retail sales also following the rising trend and activity regarding manufacturing rebounded to its highest in eight months.
The strength in the United States is observed at the time when the European economy is pointing in the opposite direction, though showing possible signs of decreasing to the bottom, there and in China.
Adam Cole, RBC Capital Markets’ currency strategist said, “Data released since the previous ECB meeting have been positive and consistent with the slightly more optimistic tone struck by (ECB President Christine) Lagarde in December regarding the economic outlook.”
The euro has failed to leverage much from the more positive noises. However, with the strong U.S. data coming in and the exchange rate of euro/dollar is firmly stuck within a tight trading range.
The dollar had a marginal edge when compared to a group of currencies, with the index at 97.658. The euro was changed little by $1.1094 EUR=EBS.
“I think the U.S. dollar will continue to outperform against the major currencies,” said Jeffrey Halley, senior market analyst for the Asia Pacific at broker OANDA, adding to it, he estimated the chance of a Federal Reserve interest rate cut soon at zero. “I think the bar for a rate cut is quite high at the moment.”
Offshore yuan of China increased to a high as 6.8458 CNH=EBS, which registered its new six-month high. China on Friday released its most sluggish annual growth figure in almost 30 years, although December data indicated rejuvenated business confidence and speeding factory output.
Last time the yuan was up only with a margin of 6.8634 yuan.
Again, Sterling experienced a drop on Monday to $1.2971 GBP=D3, decreasing by 0.3% on the day, following comments of Britain’s finance minister Sajid Javid’s at the weekend that Britain would not abide by European Union rules in post-Brexit trade talks.
Sterling also weakened versus the euro to 85.46 pence EURGBP=D3, down 0.2% on the session.
Tuesday’s employment data along with business surveys at the end of the week are going to tell the condition of the pound. Current Money markets may result in a 70% chance of a Bank of England rate cut later this month in the face of a struggling economy.
The Japanese yen remained constant in terms of the dollar at 110.15 yen JPY=EBS.
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