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Daily FX Update – 4th January 2016

Welcome to 2016! Whilst most of us may have settled in for new year resolutions that may last as long as this post, the common themes that saw us close out 2015, remain as we start the new calendar year; monetary policy divergence, the impact of the potential China fallout and the commodity story, currently most notably led by oil. Add to this geopolitical uncertainty which was highlighted by the Saudi – Iranian fallout overnight and it’s yet another case for further USD strength.

Cable came under immediate pressure, dropping to a low of 1.4692 and the single currency also slipped to a low of 1.0582. The Buck didn’t have it all its own way as we opened our account to the new year with the Yen finding a bid amidst a risk off cautious start, and the EUR eventually bouncing back to poke its head back above 1.0900. As we come in to this morning, it seems that the last couple of days of Dollar gains have eroded somewhat and we start pretty much where we finished. It’s important to note that we may not be at a case of full liquidity quite yet so we may need to let the dust settle a little before “usual” service resumes.

Looking ahead, it’s a big week for data. We kick off today with manufacturing PMI from Spain, Italy, France, Germany, the EU and the UK. We also have UK mortgage approvals and lending together with consumer credit. The afternoon brings with it German CPI and inflation with US US ISM manufacturing PMI rounding us off.

Friday’s non-farm payroll numbers are the most important data release of the week but we have plenty to assess prior to then.

Have a great week.

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