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US Dollar Fails to Capitalise on Rising Fed Interest Rate Hike Odds

Pound News: Sterling Shrugs Off Underwhelming Manufacturing PMI

While the UK manufacturing PMI fell short of forecast in January, dipping from 56.2 to 55.7, this failed to particularly weigh on Pound (GBP) exchange rates.

As the index stayed firmly within expansion territory and demonstrated a sharp uptick in export growth the mood towards Sterling remained largely positive on Thursday.

Even so, if January’s construction PMI also disappoints this could see GBP exchange rates return to a softer footing ahead of the weekend.


Euro News: Eurozone Economy Continues to Demonstrate Robustness

The finalised raft of Eurozone manufacturing PMIs for January confirmed that the currency union started 2018 with a strong level of momentum.

Particularly solid improvement in the Netherlands, Greece and Italy indicated that this strength was not just confined to economies such as Germany, improving confidence in the Euro (EUR).

However, if the Eurozone producer price index points towards a weakening in domestic inflationary pressure this may put EUR exchange rates under fresh pressure.


US Dollar News: Hawkish Fed Meeting Fails to Shore Up USD Rates

Even though the Federal Reserve policy meeting encouraged increased bets that interest rates will rise again in March the US Dollar (USD) was unable to hold onto any particular bullishness for long.

A shock contraction in US non-farm productivity sharply dented confidence in the underlying health of the world’s largest economy, giving investors fresh incentive to sell out of USD.

Volatility is likely in store for USD exchange rates this afternoon, with the release of the latest non-farm payrolls report and wage growth data.


Canadian Dollar News: Impact of Oil Price Recovery Limited

Demand for the Canadian Dollar (CAD) remained generally muted yesterday, in spite of a moderate recovery in oil prices.

Even though the Canadian manufacturing PMI showed another strong month of sector expansion this was not enough to diminish jitters over the prospect of an imminent Fed interest rate hike.

A strong US jobs report could see CAD exchange rates weaken further, with the commodity-correlated currency vulnerable to any deterioration in market risk appetite.


Australian Dollar News: Contraction in Building Approvals Undermines ‘Aussie’

December’s building approvals figure showed a surprise contraction of -5.5% on the year, undermining confidence in the outlook of the Australian economy further.

This weak showing overshadowed better-than-expected import and export price index figures, with the Australian Dollar (AUD) lacking demand thanks to the more hawkish Fed meeting.

An upside surprise from this afternoon’s US jobs data may weigh heavily on AUD exchange rates, increasing the odds of imminent Fed action.


Upcoming Data

Friday, 2 February

09:30     UK Construction PMI

10:00     Eurozone Producer Price Index

13:30     US Change in Non-Farm Payrolls


Joe Mayhew

Currency Dealer

01442 892 069

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