USD Gets Hammered, with Stats Bringing the EUR and GBP into Focus

Earlier in the Day:

Economic data through the Asian session this morning was on the lighter side, with stats limited to Japan’s December trade figures.

Japan’s adjusted trade surplus narrowed from ¥0.36tn to ¥0.9tn, with a 14.9% surge in imports driven by rising fuel prices, overshadowing a solid 9.3% rise in exports in December.

While the import numbers ballooned as a result of rising fuel prices, the export figures reflect solid demand for Japanese goods, supported by a weaker Yen through 2017, with exports to China seeing a sizeable increase.

The Yen showed little movement upon release of the figures, moving from ¥110.176 to ¥110.166 against the Dollar upon release of the numbers, with the Yen up 0.43% to ¥109.84 against the Dollar at the time of writing.

With Trump having started imposing trade tariffs on certain sectors, the latest figures will likely be scrutinized by the U.S administration. Trump has previously held talks with Prime Minister Abe and indicated a need to address trade terms that remain unfavourable for the U.S. Japan’s trade surplus hit the highest in 2-years in December.

Elsewhere, with a softer U.S Dollar, the Aussie Dollar was up 0.16% to $0.8013, with the Kiwi Dollar also up 0.26% to $0.7374 ahead of tomorrow’s 4^th quarter inflation figures, which could give the Kiwi Dollar that sinking feeling again.

In the equity markets, it was a less spectacular session, with the gains in the Japanese Yen pinning back the Nikkei, which was down 0.61% ahead of the close, with the Hang Seng and CSI300 also seeing red, down 0.28% and 0.06% respectively.

Bucking the trend, was the ASX200 which ended the session up 0.40%, supported by gains in the big-4 and a pickup in oil and mining stocks through the session.

The Day Ahead:

Following the positive economic sentiment figures out of Germany and the Eurozone on Tuesday this morning’s prelim December private sector PMI figures out of France, Germany and the Eurozone will be in focus this morning.

While the prelim figures are forecasted to be on the softer side, the EUR is unlikely to be dented too much by the numbers, which will still be considered positive from an economic outlook perspective. The devil will be in the details however, with new orders, employment and price pressures needing to remain robust at the end of the year.

At the time of writing, the EUR was up 0.23% to $1.2327, with focus likely to shift to tomorrow’s ECB press conference once the data has been released. Dollar weakness will be an issue for Draghi and the team, which leaves the EUR open to a slide should Draghi pin backs hope of a shift in policy towards interest and deposit rates.

For the Pound, economic data includes wage growth and unemployment numbers that will provide further direction for the Pound, with forecasts positive.

At the time of writing, the Pound was up 0.31% to $1.4043, with Dollar weakness contributing to the Sterling rally that has been an impressive one, hitting $1.4 levels for the first time since the EU Referendum result.

Across the Pond, a quiet economic calendar through the start of the week has left the Dollar struggling with the FED’s rate hike forecasts largely priced in. Sentiment towards ECB monetary policy has also become more hawkish, adding pressure to the Dollar.

Economic data out of the U.S this afternoon includes prelim December manufacturing and service PMI numbers for December, together with existing home sales. Services PMI and existing home sales numbers will be the key drivers. Based on forecasts, sentiment will be mixed with service sector activity forecasted to pick up, while existing home sales are forecasted to fall, following November’s sizeable increase.

At the time of writing, the Dollar Spot Index was down 0.28% to 89.874, with the Dollar at the mercy of the EUR and the ECB this week, any revival needing a dovish Draghi.