The Dollar Finds Support but for How Long?

Earlier in the Day:

There were no material stats released through the Asian session this morning to provide direction for the markets, leaving sentiment towards Friday’s nonfarm payroll and wage growth figures out of the U.S to drive the markets through the session.

At the time of writing, the Yen was down 0.13% to ¥113.2 against the Dollar, with the risk on sentiment through the session weighing on appetite for the Yen, with the Aussie Dollar also struggling through the morning, down 0.28% to $0.7842 at the time of writing.

The lack of material stats through the session saw the Aussie Dollar struggle following the release of December’s low impact AIG Construction Index, which slipped from 57.5 to 52.8.

In contrast, the Kiwi Dollar was up 0.04% to $0.7176, with the gains coming in spite of the U.S Dollar on the rise through the early part of the day.

In the equity markets, the ASX200 and CSI300 were up 0.12% and 0.49% respectively at the time of writing, with the Hang Seng down 0.04% in what has been a choppy start to the week.

The CSI300 recovered from losses earlier in the session, with the markets having initially responded to more regulatory news out of China, as the government continues to address the ballooning debt crisis.

The Day Ahead:

It’s a relatively quiet day ahead, with key stats out of the Eurozone limited to this morning’s German factory orders for November and the Eurozone’s November retail sales figures.

Based on forecasts, Germany factory orders are forecasted to rise by 0.5%, which is at the same pace as October, with data in line with or better than forecasts likely to provide support to the EUR. Recent manufacturing PMI numbers out of Germany have been particularly impressive, so continued demand will support the positive sentiment towards the bloc’s largest economy. For Eurozone’s retail sales, further upside for the EUR is likely, with last week’s German retail sales figures having impressed. While the EUR is expected to see some upside off the data, last week’s inflation figures will peg back any material gains, with the ECB unlikely to be too impressed with the lack of inflationary pressure.

With data on the lighter side, business and consumer confidence figures out of the Eurozone will have more of an influence than usual, with sentiment expected to be EUR positive.

Outside of the data, the markets have yet to begin panicking over Chancellor Merkel’s struggles in forming government, which should see the EUR unresponsive to any news of progress on coalition talks with the SDP, which are due to start today.

At the time of writing, the EUR was down 0.03% to $1.2025, with some upside expected off the back of today’s stats.

For the Pound, stats are limited to house price index figures that are unlikely to have a material impact through the day, with the Pound down 0.05% to $1.3564 at the time of writing, weighed by U.S Dollar strength ahead of the European session. Brexit chatter will continue to be of influence, though things have yet to really kick off in the New Year, with the markets looking ahead to the UK government’s ability to navigate through trade talks.

Across the Pond, there are no material stats scheduled for release through the afternoon. Sentiment towards last week’s labour market data has been mixed and, while nonfarm payrolls disappointed, wage growth saw an uptick and suggests that a shortage of skilled workers may have contributed to December’s softer than anticipated payroll numbers.

At the time of writing, the Dollar Spot Index was up 0.12% to 92.06, with little to influence other than the Dollar being considered oversold ahead of this week’s retail sales and inflation figures.

The Dollar bulls have yet to appear with inflation continuing to be the Dollar’s nemesis. Could this week be the week, when the bulls come out of hiding?