Home Daily Commentaries US Dollar Index falls to 4-week low. AUD and NZD extend recent gains to 2-month highs; GBP and EUR both mixed.

US Dollar Index falls to 4-week low. AUD and NZD extend recent gains to 2-month highs; GBP and EUR both mixed.

Daily Currency Update

The US Dollar continues to slip gradually lower. Last week its index against a basket of major currencies fell from 93.50 to 92.85 and its fall has continued in this Christmas-thinned week. After a very brief opening rally on Tuesday, the index fell to a 3-week low of 92.73 and this morning in Europe it traded down to 92.55; the lowest level since December 1st.

The move lower comes even as US yields continue to creep higher across all points on the maturity spectrum. 2-year notes now yield 1.92%, 10-year Treasuries are at 2.47% and the 30-year long bond is at 2.82%. For sure, the equity market didn’t rise Tuesday but this isn’t yet flashing a red warning light for the Dollar. If we look at the S+P 500 index futures contract, this hit an intra-day high of 2694 back on Tuesday December 19th. The peaks of last Wednesday and Thursday failed to take the index back to this level and it closed the week 10 points off the high at 2684. Yesterday’s low was 2679 but the big level to watch is last Thursday’s 2678 low. If we see a break and a close below this level, then the technical picture turns much more negative in the short-run and will raise fears of a return to the post-FOMC low around 2650.

There were some US economic statistics released yesterday. The 20-city house price numbers published by S&P/CoreLogic showed the annual rate of growth around 6.2%, though 16 of 20 major U.S. cities experienced home price growth of 5% or higher: double the pace of average wage growth. Seattle prices rose almost 12.5% in the year to October whilst Las Vegas grew 10.2%. Later today, we’ll have consumer confidence, then the advance goods trade balance, weekly jobless claims and Chicago NAPM on Thursday.

The US Dollar index opens in North America this morning at 92.55.

Key Movers

The Canadian Dollar was the best of all the major currencies last week and continues to do well as foreign exchange markets return to their normal 24-hour global trading hours. We noted here yesterday how resilient the CAD had been in the face of somewhat weaker than expected GDP figures last Friday and it has subsequently received more support from higher oil prices. NYMEX crude rose $1.50 dollars per barrel to a 2 ½-year high of $59.92 Tuesday on reports of an explosion on a crude pipeline in Libya and voluntary OPEC-led supply cuts. It has slipped a little to $59.55 this morning but it is still a dollar higher than at the time of the OPEC meeting at the end of November.
We are at a very interesting technical juncture for the Canadian Dollar and price action around current levels could be very important. On both November 9th and December 4th, USD/CAD closed in the 1.2670’s before bouncing higher. If the pair breaks this level and closes lower today, the technical picture will turn far more bullish for the CAD.

The Canadian Dollar opens in North America this morning at a 2-month low (CAD stronger) of USD1.2630 with GBP/CAD at 1.6945 and EUR/CAD at 1.5030.


The EUR is higher against a generally weak US Dollar this morning but has done no better than hold its own against the GBP whilst falling against the Australian, New Zealand and Canadian Dollars. It has remained on a USD1.18 big figure ever since 6am local time on Tuesday December 19th, having traded up to a best level in Europe today of USD1.1897.
The Single European Currency still seems a favourite pick for 2018 for a wide range of FX strategists and analysts but one of the main questions in the near-term is the extent to which this is already reflected in investor positioning. A very interesting Bloomberg analysis of the EUR/USD options market yesterday reflected a 75% probability that the pair will reach 1.2170 by end-2018, a 67% probability of 1.2290 and a 50% probability of 1.2560.
The ECB publishes its monthly Economic Bulletin tomorrow and it will be interesting to see how much weight, if any, it places on recent economic developments in Spain. Thousands of businesses, including major banks and energy firms, have moved their headquarters out of Catalonia 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 country accounts for around 11% of Eurozone GDP and is the fourth largest country after Germany, France and Italy.
For today, the EUR opens in North America this morning at USD1.1895 and CAD1.5025.


Having closed last week around USD1.3365, the British Pound initially fell to the low 1.3350’s at the start of Tuesday’s New York trading before rallying up to a high of 1.3387. The overnight session in Asia was pretty quiet, but in London this morning the GBP moved sharply higher once stops were hit around last Friday’s intra-day high of 1.3390. GBP/USD is now on a 1.34 big figure for the first time in a week.
For many people in the UK, the best part of the festive break between Christmas and New Year is the absence of Brexit negotiations. The seemingly interminable rows between Government and Opposition parties have been temporarily suspended, whilst talks between the EU and European Union don’t restart for several weeks. That said, the Chancellor is being pressed to publish documents after he told the Treasury select committee earlier this month that the government had “modelled and analysed a wide range of potential alternative structures between the European Union and the United Kingdom”.
It is to be hoped any documents are more informative than the so-called sectoral studies which the Minister for Exiting the European Union published just before Christmas. As economic analysis, they were utterly useless. For comedy value, they were wonderful. On fishing, for example, we learned that, “As an island nation, the UK has been dependent on the sea for its trade and defence throughout history, and strong traditions of seafaring can be traced back hundreds of years… There is a concentration of activity in coastal towns.”
We’ll leave our readers to reflect upon this insight, and to wonder where else, other than coastal towns, a fishing industry might be based…
The pound opens in North America this Wednesday morning at USD1.3415, EUR1.1280 and CAD1.6950.


The Aussie Dollar opened the first day after Christmas in pretty good shape and a late rally saw AUD/USD hit a high of 0.7730; its best level since October 25th. Overnight, it has done even better, notching up more gains even as its cricketers collapsed in the fourth of a five-match series against the touring English side. During the European morning today, AUD/USD hit 0.7777 with AUD/CAD up around 20 pips to 0.9825.
Although to some extent the price action seems to reflect a continued squeeze on short positions in the institutional and hedge fund community rather than any fundamental reappraisal of the currency, the AUD has been helped by higher commodity prices. Gold has recovered almost $50 per ounce from its mid-December lows whilst the price of three-month copper on the London Metal Exchange rose to a three-and-a-half-year high of $7,201 a tonne and iron ore is up almost 25% over the past two months. It remains to be seen whether this recent strength in the AUD can persist, especially as 10-year Australian bonds now yield only 24bp more than their US equivalents and 3-month rates are only 11bp higher.
The AUD opens in North America this morning at USD0.7770 with AUD/NZD at 1.0990 and AUD/CAD0.9815.


We’ve now had fully 36 hours of post-Christmas trading in the New Zealand Dollar and it has largely kept pace with the strength in its Aussie cousin with the AUD/NZD cross in a 1.0970-1.1000 range since Friday last week. NZD/USD reached a best level of 0.7040 on Tuesday and this morning in Europe has extended its gains to a high of 0.7075; its highest since October 19th.

Yesterday there were reports of a 4.2 magnitude earthquake which was felt in Marlborough and the Wellington region. This follows a 3.8 magnitude quake at 7.17pm on Tuesday around 10km south-west of Wellington that was felt by more than 4,000 people. Mercifully, both of these tremors were light by recent standards and no injuries to people or severe damage to property have thus far been reported.

Overnight, we’ve had some data on electronic spending which showed sales on Boxing Day up 6.4 per cent this year, led by growth in department stores, appliance stores and home decorating, according to local payments company Paymark.

The Kiwi Dollar opens in North America this morning at USD0.7070 with NZD/CAD at 0.8930.

Expected Ranges

  • USD/CAD: 1.2570 - 1.2690 ▼
  • EUR/USD: 1.1860 - 1.1930 ▲
  • GBP/USD: 1.3370 - 1.3450 ▲
  • AUD/USD: 0.7730 - 0.8000 ▲
  • NZD/USD: 0.7040 - 0.7100 ▲