The US$ is back on the ropes today after an endorsement from US Treasury Secretary Mnuchin that a low dollar is good for US trade, attracting heavy selling pressure and sending most currency counterparts to new long term highs. Cable made its biggest 1 day gain in 9 months on the back of strong UK wage growth, while the EU PMIs were strong and underpinned the Euro. The EU manufacturing PMI dropped to 59.6 in January, down from 60.6 and missed expectation of 60.3. However, EU services PMI rose to 57.6, up from 56.6 and beat expectation of 56.4. The German manufacturing PMI dropped to 61.2, down from 63.3 and missed expectation of 63.0. The German services PMI rose to 57.0, up from 55.8 and beat expectation of 55.5. From here the dollar looks as though the downtrend is accelerating rather than finding a base.
In other markets, the commodities have had a strong session; Gold up $20 oz and WTI up by $1.50 p.b. all because of the weakness in the dollar. Stocks had a wild ride, making new highs before falling sharply and then recovering to sit unchanged on the day.
Looking ahead, Thursday is going to be a busy one, with the ECB Meeting in focus. Although no change to Monetary Policy is expected, traders will be closely watching Mario Draghi’s press conference for guidance as to what the future holds for the QE program and whether he takes a hawkish/dovish tone. Before then, Asia will be thin, with just the Q4 NZ CPI (exp 0.4%qq, 1.9%yy) and then, ahead of the ECB, Europe will look to the German Unemployment and IFO for guidance. Finally the US will have the weekly jobless claims, Wholesale Inventories, New Home Sales and the Kansas Fed Mfg Activity. The World Economic Forum in Davos will be ongoing, so watch for further comments to come from there. Donald Trump is scheduled to speak at some stage but I am not sure when.
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