Home Daily Commentaries Very quiet post-Christmas trade sees EUR weaken and USD gain. AUD and NZD largely sidelined

Very quiet post-Christmas trade sees EUR weaken and USD gain. AUD and NZD largely sidelined

Daily Currency Update

The Dollar had a poor pre-Christmas week despite further record highs for the stock market, a rise in market interest rates at all points of the maturity spectrum and generally solid incoming economic data. Its index against a basket of major currencies opened on Monday morning at 93.50 which proved to be the high of the week; it subsequently fell almost without interruption to end on Friday around 92.85.

According to the latest analysis by the Pew Research Centre, Christians remained the largest religious group in the world in 2015, making up nearly a third (31%) of Earth’s 7.3 billion people. So, whilst Christmas is widely celebrated (nine-in-ten Americans and 95% of Christians say they celebrate Christmas), it is by no means universal. Indeed, 69% of the world’s population is not Christian.

Financial markets remained open in the non-Christian centres yesterday, with Tokyo and Shanghai the two stand-out markets; albeit volumes were not high. In China the renminbi jumped to USD/CNY6.5514; the strongest since mid-September though the US Dollar was little changed against other major currencies. Overnight, the US Dollar index traded down to a 3-week low of 92.78 before rebounding a tenth of a point to a best level of 92.88.

There are some US economic statistics today. There are the 20-city house price numbers released by S&P/CoreLogic which are expected to show a 0.8% m/m increase to leave the annual rate around 6.2%, whilst both the Dallas and Richmond Federal Reserve banks publish their surveys on manufacturing activity. Later in the week, we’ll have consumer confidence, the advance goods trade balance, weekly jobless claims and Chicago NAPM.

The US Dollar index opens in North America this morning at 92.85.

Key Movers

Unlike its American cousin, the Canadian stock market remains closed today and the Canadian Dollar has been trapped in an extremely tight range overnight from USD 1.2711 to 1.2723 having printed at a high in Asia very early in the session at 1.2733. It has done very well to hold on to most of last week’s gains which saw it finish at the top of the FX leader board. As well as the strong performance immediately after the very strong CPI and retail sales numbers, it’s worth pointing out how resilient the CAD was after a relatively soft set of GDP figures on Friday. USD/CAD spiked immediately from 1.2705 to 1.2885 yet by close of business had regained around three-quarters of its losses to finish the week at 1.2720.

Statistics Canada is quite sensibly taking a break, with no further economic data releases until January 4th. Oil prices are steady this morning with NYMEX crude trading at $58.50. The Canadian Dollar opens in North America at USD 1.2715 and GBP/CAD 1.6990.


Five days have passed since the elections in Catalonia and it is still not clear who will form a regional coalition there, let alone what relations will be with the rest of the country. Although Spanish Prime Minister Rajoy's conservative Popular Party (PP) had a disastrous election, winning just three of the 135 seats, he will for the moment keep control of the region, because he imposed direct rule in October, invoking Article 155 of the constitution. That extraordinary measure was a first in post-Franco Spain and though it was said to be “temporary”, no end date has yet been announced for the current situation.

The European Union has treated the matter as an internal affair for Spain to resolve and is highly unlikely to change its stance. Meantime, the Catalan economy has suffered. Thousands of businesses, including major banks and energy firms, have moved their headquarters out of the region and, as it accounts for around 19% of Spanish GDP, the economic uncertainty is weighing down on activity. The OECD, for example, now forecasts GDP growth of just 2.3% in 2018 after 3.0% in 2017.

The ECB publishes its monthly Economic Bulletin on Thursday and it will be interesting to see how much weight, if any, it places on developments in Spain. The country accounts for only 11% of Eurozone GDP and is the fourth largest country after Germany, France and Italy.

For today, the EUR has slipped around a quarter of a cent from its overnight highs and opens in North America this morning at USD 1.1855 and CAD 1.5075.


The British Pound didn’t have a great end to last week and after a very modest rally in Asia yesterday and overnight is back to testing the lows once more.

The latest revisions to the whole of the UK GDP data series last week served only to polarise opinion about the state of the economy. Upward revisions to Q4 2016 meant that in the calendar year which included the EU referendum, the UK economy was the joint fastest-growing in G7; its 1.9% rate was the same as Germany, above the US & Canada (both 1.5%) and well ahead of France’s 1.1%. The revised numbers also meant that the latest y/y growth of 1.7% in the year to September 2017 was better than the 1.5% which had been expected. Unfortunately, the revisions also raise the starting point for the next set of quarterly data, meaning we could see a sharp slowdown in the annual rate of growth when the Q4 numbers are published at the end of January.

In the shouty echo chambers of social media, both sides in the Remain/Leave argument sought vindication in the GDP numbers. In the eyes of the foreign exchange market, the figures supported the view that the best of the UK’s post-referendum performance might now lie behind it and the early part of 2018 could well be more challenging.

The pound opens in North America this Tuesday morning at USD 1.3355, EUR 1.1270 and CAD 1.6990.


The Australian Dollar was just edged out of top spot last week by its Canadian counterpart. A solid but unsurprising Mid-Year Economic and Fiscal Outlook earlier in the week was followed by a relatively upbeat set of RBA Board Minutes before the Central Bank headed off for its Summer holidays. There is no further meeting now scheduled until the first Tuesday in February.

Though the weather in Melbourne and Sydney was an unusually mild 23 degrees centigrade yesterday, Queenslanders endured a Christmas Day scorcher as western parts of the state sweated it out at 45 degrees (113 fahrenheit) while Brisbane sizzled above 36C. There are better things for the locals to do than worry about interest rates for the next few weeks!

The Aussie Dollar begins the holiday season in much better shape than might have seemed likely just a few weeks ago but whether it can retain its recent strength remains to be seen. Against the US Dollar it reached 77 cents for the first time since early November whilst against the British Pound it has gained more than 6 cents over the past three weeks. The price action seems to reflect a squeeze on short positions in the institutional and hedge fund community rather than any fundamental reappraisal of the AUD. For any locals planning an overseas vacation, this might represent a very good opportunity to load up on some cheaper spending money.

The AUD opens in North America this morning at USD 0.7715 with AUD/NZD at 1.1000 and AUD/CAD 0.9815.


The New Zealand Dollar had a pretty symmetrical week before the Christmas break; falling for the first half and regaining pretty much all its losses in the second. Business confidence didn’t bounce back in December as many analysts had anticipated though the Q3 GDP numbers beat consensus estimates thanks to some upward revisions to back data. Having fallen from 0.7027 last Monday to 0.6960 on Wednesday, NZD/USD recovered to 0.7072 at Friday’s close.

Overnight, the NZD extended its gains to a near 10-week high of USD 0.7036 before slipping back to open in North America this morning at 0.7015 with NZD/CAD at 0.8925.

Expected Ranges

  • USD/CAD: 1.2700 - 1.2780 ▼
  • EUR/USD: 1.1830 - 1.1885 ▼
  • GBP/USD: 1.3340 - 1.3390 ▼
  • AUD/USD: 0.7700 - 0.7750 ▼
  • NZD/USD: 0.6990 - 0.7040 ▼