Currency Market Analysis

Nov 12, 2015 | Currency Market Analysis

Global Themes

North American markets are back from midweek holidays and the U.S. dollar is close to six-month highs. Central bank talk today from both sides of the Atlantic should move currencies, along with big-ticket data from the U.S. and Europe over the balance of the week. The euro weakened toward six-month lows hit Tuesday after dovish remarks from the head of the European Central Bank kept expectations lofty for action as soon as next month. Mario Draghi took a swipe at the euro, referring to its recent resilience as a factor behind the bloc’s anemic level of inflation. Also today, six Federal Reserve officials are slated to speak, including the bank’s Nos. 1-2 policymakers: Chair Janet Yellen and Vice Chair Stanley Fischer. Any tones that should bring a U.S. rate hike into closer focus should keep a brisk tailwind at the dollar’s back.


The Aussie dollar soared more than 1 percent to one-week highs after the fastest hiring Down Under in years suggested rate cuts were off the table for the rest of 2015. The 58,600 jobs added last month were the most in 3 ½ years and nearly four times more than expected, which shoved unemployment to 5.9 percent, a five-month low. The Aussie’s short run prospects appear a little less bearish but still uncertain with the Fed poised for a rate hike and China’s slowdown not out of the woods.


The euro was back near this week’s fresh six-month low against the dollar after the ECB chief voiced alarm over low inflation, keeping expectations lofty for action as soon as bankers’ Dec. 3 meeting. The pace of euro depreciation has seemingly slowed with the dollar within a few cents of multiyear peaks hit in March. Fresh peaks for the dollar may hinge on all of the central bank expectations coming to fruition. Five weeks remain until the Fed renders its final decision of the year on Dec. 16.


The pound’s rise to three-month peaks against the euro helped it recover from six-month lows hit earlier in the week against the dollar. U.K. jobs data Wednesday was a bit inconclusive on the local interest rate outlook, keeping expectations of a rate hike on a deep into 2016 horizon. On the bright side, U.K. unemployment fell to a seven-year low of 5.3 percent in the third quarter. But wages rose in underwhelming fashion.


The loonie hit a six-week low, putting it a little more than a penny away from 11-year lows, as oil weakened below $43 and markets looked ahead to U.S. events today on the job market and speeches from several Fed officials.


The dollar moved closer to six-month highs against the euro and a currency basket ahead of jobless claims and speeches by a half dozen Fed officials, including the bank’s top two in Chair Janet Yellen and Vice Chair Stanley Fischer. The dollar would need another bullish jobs reading and fairly hawkish remarks from the Fed today to keep buoyant. Jobless claims are forecast to fall 6,000 to 270,000. The Fed chair speaks 9:30 a.m. ET.

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