Market Brief: Dollar weaker across the board

11 Sep 2018

Shaun Garrett

Dealing Team

The markets have started rather slowly today as traders seem to be staying in the holiday mood.

Today's data releases
  Key levels
09:00 Markit Eurozone Manufacturing PMI   Support Resistance
09:30 Markit UK Manufacturing PMI GBP/USD 1.3220 1.3520
14:45 Markit US Manufacturing PMI GBP/EUR 1.1134 1.1566

Market overview

Good morning all and happy New Year! The markets have started rather slowly today as traders seem to be staying in the holiday mood. However, the Dollar has continued its year-end decline by slipping to its lowest point in more than three months against a basket of major currencies, marking its steepest annual drop since 2003, on doubts over the durability of a pick-up in U.S. economic growth in the wake of the country’s tax overhaul. The USD is now the weakest currency on the major bloc, meanwhile, the NZD and CAD are extending gains today. Risk sentiment is relatively positive to start off the New Year, and that's helping to give commodity currencies a boost.
China manufacturing PMI: The Caixin manufacturing PMI for December was seen climbing marginally to 51.5 from 50.8 in November; consensus expectations had been for 50.7. However note that a small decline, matching consensus expectations, was recorded in the ‘official’ PMI released over the weekend. The NBS manufacturing PMI for December was seen sliding from 51.8 to 51.6. Overall though, the message is that China’s manufacturing sector continued its expansion as 2017 drew to a close.
Although cut short by Monday's New Year celebrations, this week offers several important data releases, but the most keenly awaited economic update will be from the minutes of the Federal Reserve's December Open Market Committee (FOMC) meeting. Market participants around the globe will be looking for clues on the Fed's next move after the US central bank delivered a quarter-point hike in December - it’s third of 2017. Wednesday's FOMC minutes are unlikely to hint at any speedier rate of policy tightening but clues on its thinking about the pace of economic recovery could give the dollar a welcome boost, as well as any reaction to the tick higher in personal consumption (PCE) inflation in November.

The week ahead

Today the UK, EU and the US release their PMI Manufacturing data – a slight uptick is expected on each release. Tomorrow the UK and US release their PMI construction data, followed by the FOMC meeting minutes released tomorrow evening. Thursday has the final PMI release for the week, as the UK, EU and US release their PMI Services data. The US also reveal the ADP employment number before the main event on Friday - Non-farm payrolls. A number close to 200,000 would likely help support the Dollar and US equity markets, however, many may be keeping a closer eye on wage growth which remained subdued through most of 2017. Prior to this release, we have CPI inflation data released from the EU at 10am. 

Thought of the day

In what was a stunning victory last night, debutant Rob Cross sealed the PDC World Darts title defeating 16-time world champion Phil Taylor. Rob Cross, 27, was born in 1990 which was actually the same year that Phil Taylor won his first title. In defeat, Taylor said ‘I tried my best but he was like me 25 years ago, he was relentless and didn’t stop putting me under pressure.’ So not so much of a Happy New Year for Phil Taylor but here at Investec, we would like to take this opportunity to wish all of our clients a Happy New Year. We are here to answer any questions you might have on what could lie ahead in 2018.

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