The US dollar rises after lower numbers in the unemployment claims and Mario Draghi’s speech at the ECB
Thursday 13 December, 2018
Daily Currency UpdateThe US dollar index fell around 0.5 percent in yesterday’s session on an improved risk sentiment, as PM May won her confidence vote (200-117) in the UK. WSJ reported that China is going to rethink its “Made In China 2025” policy, which means that it may open it's markets to foreign companies in a move to help resolve trade tensions with the US. This morning however, the US dollar index is rising 0.2 percent. The European Central Bank's governing council confirmed they will stop expanding quantitative easing (QE) from the end of December (it marks a historic moment for the ECB), and Mario Draghi stated that the balance of risk is moving to the downside. On the release side, the unemployment claims came in at 206k when the forecast was 226k. This also helped the Greenback to make a comeback to the upside.
Key MoversThe USD/CAD fell to 1.3350 (Loonie appreciation) yesterday morning. This was as a result of a weak US dollar and the WSJ reporting that China is going to rethink its "Made In China 2025" policy, which means that it may open it's markets to foreign companies in a move to help resolve trade tensions with the US. On the release front, the new housing price index month to month and year to year came in at 0 percent and 0.1 percent respectively, as expected in both cases. More significant numbers than expected are good for the Loonie, because it is a leading indicator of the housing industry's health. Rising house prices attract investors and spur industry activity. Today's data is pushing the USD/CAD higher (weaker Loonie) however, because there was not a positive surprise. The US/CAD pair is trading at 1.3378, up 0.20 percent.
The European Central Bank leaves its interest rates unchanged, and confirms the end of QE in 2019. The ECB's governing council confirmed they would stop expanding quantitative easing (QE) from the end of December when bond purchases fall from 15 billion euros a month to zero. It marks a historic moment for the ECB, as President Mario Draghi dismantles one of his most contentious policies. The ECB also said it would continue to reinvest cash from maturing bonds for an extended period. The EUR/USD is falling slightly - 0.19 percent - to 1.1346 this morning.
The GBP/USD rallied 1.3 percent yesterday, with most of the rally done before the actual confidence vote took place; 185 MPs said they would support PM May (she needed 159). The good news is that the European Research Group cannot challenge May’s leadership for another 12 months, but the bad news is that she is still facing stiff opposition with 117 voting against her. This opposition gives an indication of how resilient some will be to getting the Brexit vote through Parliament, and why GBP rally was limited after the vote. At this moment the GBP/USD pair is trading at the same highest level achieved yesterday - 1.2669 - which is a strong resistance.
The rally in Asian equities helped the Aussie dollar to trade higher overnight and in this morning's session, as an improvement in tone between the US and China regarding trade helped risk assets. The Aussie dollar has recouped some it's losses since last Friday, however the gains are relatively modest. AUD/USD is at 0.7228 - up 0.18 percent - after bouncing off from the 0.7200 handle. In the absence of any domestic data, the US-China Trade issue will be the primary mover for the Aussie for the rest of the week.
The Kiwi has mirrored the Aussie dollar’s modest appreciation over the past 24 hours, as a mildly risk-on tone benefits the Kiwi-dollar. There is little in the diary for the rest of the week, however next week sees ANZ business confidence numbers and GDP figures being published. The NZD/USD pair is trading at 0.6867 - up 0.15 percent.
- USD/CAD: 1.3321 - 1.3381 ▲
- EUR/USD: 1.1315 - 1.1400 ▼
- GBP/USD: 1.2563 - 1.2693 ▲
- AUD/USD: 0.7218 - 0.7299 ▲
- NZD/USD: 0.6851 - 0.6897 ▲