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The Dollar Ship Steadies for now

By:
Bob Mason
Published: Dec 29, 2017, 05:20 UTC

The Dollar steadies on the final day of what has been a dire year for the Greenback, with data and volumes on the lighter side through the remainder of the day.

U.S. Dollar

Earlier in the Day:

Key stats out through the Asian session this morning was limited to November private sector credit figures out of Australia.

While private sector credit rose by 0.5% month-on-month, the key driver for the increase was business credit, which increased by 0.7%. Personal credit fell for a 2nd consecutive month, down by 0.2% in November, suggesting that improvements to bank credit lending standards were making an impact. The combination of rising business credit and slowing personal credit will be good news for the RBA, who has continued to raise concerns over the pace of rising household debt. Business credit gains suggest that things may not be as bad as the November NAB Business Confidence Index figures had suggested.

The Aussie Dollar moved from $0.7794 to $0.77958 upon release of the figures, which tend to have a limited impact, before moving to $0.7797 at the time of writing, an intraday gain of just 0.04%.

Thursday’s declines in the Dollar were telling through the Asian session this morning, with the Yen up 0.1% to ¥112.76 against the Dollar, and the Kiwi Dollar up 0.21% to $0.7099, continuing its recovery following the surprise election result.

It was a mixed bag in the equity markets, with the ASX200 down 0.31% at the time of writing, while the Hang Seng, CSI300 and Nikkei were all on the up, following the gains in the U.S on Thursday, with the Nikkei managing to move ahead in spite of a stronger Yen.

The Day Ahead:

Economic data out of the Eurozone this morning includes Spain and Germany’s inflation figures. Based on forecasts, the numbers are expected to be EUR positive, with the markets eager to see whether ECB President Draghi’s views on inflation become a reality.

With the tapering to the asset purchasing program scheduled to begin, the next step will be for the ECB to begin to move on deposit and interest rates. Dollar weakness will certainly hit the brakes on any such moves in the early part of next year, but should inflation begin to accelerate, it will be hard for the ECB to ignore the numbers.

At the time of writing, the EUR was up just 0.02% to $1.1945, with much of this week’s gains coming off the back of a tumbling Dollar.

For the Pound, there are no material stats scheduled for release this morning, though that has not stopped a 0.11% rise through the Asian session to $1.3458. The lack of Brexit chatter through the holidays has eased some of the tension in the Pound, though we will likely see things change rapidly going into the New Year.

The good news for the BoE is that the rising Pound should ease some of the inflationary pressure that has weighed on consumer spending, with the BoE’s rate hike having had limited impact on the Pound, overshadowed by Brexit noise from Brussels.

It’s a quiet day across the Pond, with no material stats scheduled for release. Through the Asian session this morning, the Dollar was certainly on a better footing, with the Dollar Spot Index up 0.01% to 92.611. It’s been a dire year for the Greenback, down 9.39% year-to-date, but that’s in line with the U.S President’s desire for a weaker Dollar.

With Jerome Powell moving into the FED’s top spot in February, few are expecting the FED to take a more aggressive rate path through the year, with the tax reform bill leaving the markets with mixed feelings on the possible effects on the U.S economy. An infrastructure spending plan next year would be an altogether different proposition however and any chatter on such a plan could be the Dollar’s saviour next year.

There are unlikely to be any major moves in the Dollar through the European and U.S session, while the Dow mini futures is pointing to a 34 point rise at the open, signalling investor confidence going into 2018.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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