Forex Major Currencies Outlook (Jan 04, 2018)

Several members confirmed that gradual rate hikes are in the cards, although many remained concerned about weaker inflation. Policymakers also suggested that strong jobs data could lift wages and price levels. The ISM manufacturing PMI turned out stronger than expected at 59.7, with an uptick in the prices component and a dip in the jobs figure. The ADP data is due next and a 191K increase in hiring is eyed, slightly higher than the earlier 190K gain. 

EUR 

The euro also took some hits as bond yields turned lower in anticipation of MiFID II. Data was stronger than expected, with both Germany and Spain printing better than expected jobs figures. Today has the final services PMIs from the top economies and positive revisions could be bullish for the shared currency.  

GBP 

The pound lost a bit of ground when the construction PMI also turned out weaker than expected. The reading fell from 53.1 to 52.2 instead of improving to 52.8. The services PMI is due today and an improvement from 53.8 to 54.1 is eyed. Net lending to individuals and mortgage approvals data are also lined up. 

CHF 

The franc was one of the weaker performers during the day as risk-taking during the latter trading sessions weighed on the currency. Swiss manufacturing PMI was actually better than expected as the reading ticked up from 65.1 to 65.2 instead of falling to 64.6. There are no reports due from the Swiss economy today so market sentiment could drive franc action. 

JPY 

The yen was off to a good start during the Asian and London sessions but wound up returning most of its gains to the dollar later on. Bond yields favored the US currency and led to a weaker yen as risk-taking continued. Japan's final manufacturing PMI was downgraded from 54.2 to 54.0. 

Commodity Currencies (AUD, NZD, CAD) 

The Aussie was one of the strongest performers of the day while its peers followed closely behind. Crude oil staged another rally on another day of unrest in Iran and a larger than expected draw in API stockpiles. China reported a gain in its Caixin services PMI from 51.9 to 53.9 versus the 51.8 consensus. EIA crude oil inventories and Canada's underlying inflation figures are due.  

By Kate Curtis from Trader's Way