Today we started with inflation datas from UK in London session, the expectations were positive as the Sterling has dropped so significantly since Brexit, the inflation should have kept up more to pressure BOE to raise rate.
However, the result was lower than the expected number and we saw selling into GBP. Once again this was a pure sentimental move as the inflation datas did reflected the underlying condition of UK where we had the highest inflation rate today since June 2014.
If the inflations continue to go up while the economic condition remains strong, BOE will most likely raise rate to push GBP higher.
Eurozone GDP q/q was lower than expected with growth picked up in Germany & France, unchanged in Spain and slowed in Italy.
It once again shows the mixed economic growth among the Eurozone members and also tells you just how important France is to remain within Eurozone.
That’s also the reason while the election of France will be very volatile for the market.
In NY session we saw PPI and Core PPI data from USA and were once again a beat than previous & expected numbers.
As mentioned, U.S economy continues to outperform and in a steady uptrend. Of course the biggest event today was the Testify by Janet Yellen in front of Congress and the biggest driver was that Yellen has signalled the importance of raising rate and the intention to keep Dec forecast of 3 rate hikes in 2017.
Now the statement was nothing new, however, to hear it from Yellen whom has always held a dovish outlook and is always very cautious in given out rate hike signals, this was a big catalyst and we immediately saw USD surged up across the board.
The equity markets ended up green with a risk on sentiment day while the oil market also found its support.
Tomorrow Yellen is due to testify again and we have another new US inflation datas and retail datas coming out.
Right now the negative sentiment from Donald Trump has completely shifted to a positive tone. From Japan Abe today commented on last weekend’s meeting between him and Trump and said Trump has shared his view on monetary policy not FX manipulation, contrary to Trump’s previous attack on Japan.
The Monday meeting with Canadian PM Trudeau was also positive and Trump has commented to “tweak” the NAFTA instead of completely eliminate it - which again, was part of his previous talk.
On top of that, the possible Tax Reform plan and the elimination of Dodd-Frank regulation are all positive booster for USD and the sentiment.
Finally, the trouble between White House and Russian continue to shadow the integrity of Trump administration and that is Trump’s main focus now.
So if Trump stops attacking his allies, FED or how to run the economy, then most likely everything will revert back to the fundamentals and fundamentally speaking, USD is the strongest currency for 2017.
For EUR
EUR has been sold off because of the French election, the ECB rate decision and the Greek debt issue, and today the dollar has once again come back on the rising track which pressured down EUR even further.
The weaker than expected GDP today also signalled a slower growth than what people expected.
French bonds have been sold off due to political unstableness while German bond yield went to one week high today after Yellen’s speech.
Investors are dumping European bonds and more hot money is flowing into U.S now.
Greece and international lenders are also not expected to reach agreement on next Monday, which a lot of people were expecting.
EUR is the most bearish currency now both fundamentally and sentimentally.
For USD
The fundamental datas have once again showed the strength of U.S economy, and to hear a confirmation of hawkish tone from the chair of FED is a very big deal. Now the March rate hike is back on the table and we should see more price in action from now on.
For GBP
The inflation datas have disappointed some traders, but looking at the context, UK still has a higher high inflation condition with a pretty solid economic picture. If this situation keeps on, BOE is most likely to hike the rate.
The biggest uncertainty is still the Brexit which we haven’t heard too much updates about it, but it is still very much alive and will shake the market anytime soon as we’re approaching March.
For CAD
The risk on sentiment has helped the oil market and all commodity currencies. CAD is still fundamentally and sentimentally strong and the only road block will be a stronger USD to pressure the oil market. But nevertheless, CAD is still a good currency to buy against other weaker currencies.
For AUD
The risk on sentiment today also helped AUD to gain some ground, but don’t forget the effect of a strong USD will always pressure AUD down. On top of that, AUD has been on this rising path since 2017, a large retrace for AUD is very possible.
Finally, AUD has not yet been able to prove its fundamental strength, aside from the sentimental confidence from RBA and the high commodity prices fuelled up by China and speculations, there isn’t really a solid data yet in GDP, Employments and inflation.
We do need to see at least something fundamentally strong in these 3 areas (GDP, employments and inflations), otherwise the bubble might be bursted and we will see AUD dropping down very fast.
For NZD
The risk on sentiment today also helped NZD to find support. NZD still suffers from RBNZ pressure last week but it seems to find support as we haven’t seen too much downside movement yet.
NZD has a much better fundamental picture than AUD but a worse sentimental strength than AUD.
In fact, they are in the exact opposite situation now where AUD is fuelled up by the confidence of RBA but lack the fundamental evidences to support the statement while NZD is pressured down by the pessimistic outlook of RBNZ but has the fundamental evidences to contradict the statement.
For JPY
The current risk on sentiment and a strong Dollar with strong commodity currencies have all been the reasons to pressure down JPY.
Japan cannot be more than happy to have this weak situation going as the devaluation of the currency is not done by their “manipulation” but by the natural global demands.
For CHF
It’s in the same picture as Japanese Yen but CHF has more risk to the upside as we have more of a risky situation in Eurozone now, and this could benefit CHF.
Today we started with inflation datas from UK in London session, the expectations were positive as the Sterling has dropped so significantly since Brexit, the inflation should have kept up more to pressure BOE to raise rate.
However, the result was lower than the expected number and we saw selling into GBP. Once again this was a pure sentimental move as the inflation datas did reflected the underlying condition of UK where we had the highest inflation rate today since June 2014.
If the inflations continue to go up while the economic condition remains strong, BOE will most likely raise rate to push GBP higher.
Eurozone GDP q/q was lower than expected with growth picked up in Germany & France, unchanged in Spain and slowed in Italy.
It once again shows the mixed economic growth among the Eurozone members and also tells you just how important France is to remain within Eurozone.
That’s also the reason while the election of France will be very volatile for the market.
In NY session we saw PPI and Core PPI data from USA and were once again a beat than previous & expected numbers.
As mentioned, U.S economy continues to outperform and in a steady uptrend. Of course the biggest event today was the Testify by Janet Yellen in front of Congress and the biggest driver was that Yellen has signalled the importance of raising rate and the intention to keep Dec forecast of 3 rate hikes in 2017.
Now the statement was nothing new, however, to hear it from Yellen whom has always held a dovish outlook and is always very cautious in given out rate hike signals, this was a big catalyst and we immediately saw USD surged up across the board.
The equity markets ended up green with a risk on sentiment day while the oil market also found its support.
Tomorrow Yellen is due to testify again and we have another new US inflation datas and retail datas coming out.
Right now the negative sentiment from Donald Trump has completely shifted to a positive tone. From Japan Abe today commented on last weekend’s meeting between him and Trump and said Trump has shared his view on monetary policy not FX manipulation, contrary to Trump’s previous attack on Japan.
The Monday meeting with Canadian PM Trudeau was also positive and Trump has commented to “tweak” the NAFTA instead of completely eliminate it - which again, was part of his previous talk.
On top of that, the possible Tax Reform plan and the elimination of Dodd-Frank regulation are all positive booster for USD and the sentiment.
Finally, the trouble between White House and Russian continue to shadow the integrity of Trump administration and that is Trump’s main focus now.
So if Trump stops attacking his allies, FED or how to run the economy, then most likely everything will revert back to the fundamentals and fundamentally speaking, USD is the strongest currency for 2017.
For EUR
EUR has been sold off because of the French election, the ECB rate decision and the Greek debt issue, and today the dollar has once again come back on the rising track which pressured down EUR even further.
The weaker than expected GDP today also signalled a slower growth than what people expected.
French bonds have been sold off due to political unstableness while German bond yield went to one week high today after Yellen’s speech.
Investors are dumping European bonds and more hot money is flowing into U.S now.
Greece and international lenders are also not expected to reach agreement on next Monday, which a lot of people were expecting.
EUR is the most bearish currency now both fundamentally and sentimentally.
For USD
The fundamental datas have once again showed the strength of U.S economy, and to hear a confirmation of hawkish tone from the chair of FED is a very big deal. Now the March rate hike is back on the table and we should see more price in action from now on.
For GBP
The inflation datas have disappointed some traders, but looking at the context, UK still has a higher high inflation condition with a pretty solid economic picture. If this situation keeps on, BOE is most likely to hike the rate.
The biggest uncertainty is still the Brexit which we haven’t heard too much updates about it, but it is still very much alive and will shake the market anytime soon as we’re approaching March.
For CAD
The risk on sentiment has helped the oil market and all commodity currencies. CAD is still fundamentally and sentimentally strong and the only road block will be a stronger USD to pressure the oil market. But nevertheless, CAD is still a good currency to buy against other weaker currencies.
For AUD
The risk on sentiment today also helped AUD to gain some ground, but don’t forget the effect of a strong USD will always pressure AUD down. On top of that, AUD has been on this rising path since 2017, a large retrace for AUD is very possible.
Finally, AUD has not yet been able to prove its fundamental strength, aside from the sentimental confidence from RBA and the high commodity prices fuelled up by China and speculations, there isn’t really a solid data yet in GDP, Employments and inflation.
We do need to see at least something fundamentally strong in these 3 areas (GDP, employments and inflations), otherwise the bubble might be bursted and we will see AUD dropping down very fast.
For NZD
The risk on sentiment today also helped NZD to find support. NZD still suffers from RBNZ pressure last week but it seems to find support as we haven’t seen too much downside movement yet.
NZD has a much better fundamental picture than AUD but a worse sentimental strength than AUD.
In fact, they are in the exact opposite situation now where AUD is fuelled up by the confidence of RBA but lack the fundamental evidences to support the statement while NZD is pressured down by the pessimistic outlook of RBNZ but has the fundamental evidences to contradict the statement.
For JPY
The current risk on sentiment and a strong Dollar with strong commodity currencies have all been the reasons to pressure down JPY.
Japan cannot be more than happy to have this weak situation going as the devaluation of the currency is not done by their “manipulation” but by the natural global demands.
For CHF
It’s in the same picture as Japanese Yen but CHF has more risk to the upside as we have more of a risky situation in Eurozone now, and this could benefit CHF.