CSS Daily FX Update and Outlook for 24nd January 2014
Update
US Dollar Index – (-0.9%)
- The USD made significant losses on Thursday, as American economic data failed to inspire to provide any extra optimism towards the Federal Reserve tapering further. It was generally a busy day on the economic schedule, with data sets from China, Europe and the US all in the mix. The euro and yen strengthened around 1% on the day, whilst the only the only currencies to perform worse than the greenback was the AUD and CAD.
- China overnight released their most recent manufacturing data, revealing another monthly decline; PMI manufacturing dropped from 50.5 to 49.9 in January, missing expectations for a mild rise. There was little reaction seen within the currency markets, with the result separately affecting some commodities like copper.
- Europe during the morning session reported their latest manufacturing and services indicators. Despite Germany issuing slightly disappointing services figures, the overall numbers for the bloc were much more encouraging. Manufacturing PMI jumped from 52.7 to 53.9 and services also rose from 51.0 to 51.9. Both these indicators easily beat consensus and the market response was indeed swift. EUR/USD quickly rallied through 1.3600 to around 1.3640, a move that was then extended to a high of 1.3685 as US data fell flat.
- UK economic data was less promising however, and this would explain the pounds less enthusiastic approach to the session. CBI Distributive Trades Survey fell from 34 to 14, suggesting all is not as bright as previously believed in the UK retail sector. After a rally in cable earlier in the morning session, this data set simply dropped the cross back below 1.6600, a level that appears to have seen the market settle around.
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- US economic data as mentioned above was poor. Continuing jobless claims saw another rise, cementing the previous weekly release above 3mln claimants. Whereas forecasts had been for a drop back below 3mln to 2,930k, the actual numbers saw a rise to 3,056k. Manufacturing PMI data later in the session was equally dismal, mirroring China’s slack result earlier in the day. PMI fell to 53.7 from 55.0, missing official forecasts for an unchanged index reading. Housing data thereafter also fell short, with the house price index only revealing a modest rise, with existing home sales also not reaching targets. The USD weakened off the continual stream of bad news and EUR/USD is now firmly trading higher on the week.