11 Sep 2018

Market Brief: the Dollar heads for its worst year in a decade

Shaun Garrett

Dealing team

We are anticipating another quiet day in the market today as liquidity and data are both pretty thin. 

Today's data releases
  Key levels
09:00 EZ ECB publishes economic bulletin   Support Resistance
09:30 UK finance loans for housing GBP/USD 1.3220 1.3520
15:00 US pending home sales GBP/EUR 1.1134 1.1566
Market overview

We are anticipating another quiet day in the market today as liquidity and data are both pretty thin. The US Dollar fell to its lowest level in three weeks overnight as EURUSD moved to 1.1945 and cable moved to 1.3450. A slide in treasury yields weighs on the currency that’s heading for its worst year in more than a decade. DXY, the Bloomberg dollar index, has declined 8.2% this year alone. Furthermore, the Conference Board measure of consumer confidence in December undershot consensus expectations at 122.1 (consensus 128.0, November a downward revised 128.6). This marks a 3-month low. At the same time, pending home sales showed a picture of relative resilience, posting a monthly gain of 0.2% against expectations of a 0.5% decline.

Contrastingly the NZD strengthened for a seventh day running, gaining along with other commodity-linked currencies including AUD - copper in London surged to the highest in almost four years after China ordered its top producer to halt output to combat winter pollution. Note that NZD has climbed more than 4% since reaching 17-month low of 0.6781 on Nov. 17 as traders speculate that incoming RBNZ Governor Adrian Orr will be able to steer the mandate change at the monetary authority. 

The day ahead

This morning the ECB publishes its economic bulletin at 09:00. Shortly after the delayed UK finance mortgage data is released. This afternoon we head to the States for weekly jobless claims, Chicago PMI and wholesale inventories. 

Thought of the day

Fewer people hit the UK’s Boxing Day sales this year, with shop visits dropping by 4.5% compared with last year, according to research group Springboard. Shopping centres and high streets recorded the biggest declines. Did shoppers go online? Perhaps yes, but the main driver for this year’s decline is believed to be caused by Black Friday sales. In recent years, Black Friday sales have shifted the Christmas trading period. But the impact was particularly felt this year, as retailers began discounting a week before 24th November and carried on right up until Christmas, making Boxing day sales less attractive. What will this mean for UK’s next retail sales release? Usually markets anticipate a higher release as they expect sales to shoot up on Boxing Day. If you are in the office and would like to discuss your FX exposure then don’t forget the Investec FX team are around to help. 

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