Market News & Insights
23 December 2014

Dollar Looks Set to Finish the Year on a Higher Note

EUR/USD 1.2233
GBP/USD 1.5588
GBP/EUR 1.2741 (0.7847)
EUR/CHF 1.2029
GBP/CHF 1.5326
GBP/AUD 1.9181

As the year draws to a close, one of the dominant themes of the past few months, namely the US Dollar’s continued strength remains firmly in place. For a fifth consecutive day the US Dollar rose against the Japanese Yen with the currency pair hitting 120.178 highs, whilst simultaneously posting gains against other bell weather currencies such as the euro and sterling (1.2221 and 1.5590 lows respectively). The recent Fed meeting and subsequent statement has certainly cemented the belief that 2015 will be a period where the Federal Reserve starts to actually increase interest rates.

Today we have some final key US economic releases to help shed more light on the continuing improvement in the economy there. The Q3 GDP release is expected to show growth rates of 4.3% versus a year earlier, up from previous estimates of 3.9%. For release at the same time, Durable Goods Orders are expected to show a marked improvement, with analysts expecting 3% growth in November after only rising 0.3% a month earlier. Such bullish readings are likely to impress markets especially when benchmarked against stagnant economies like the Eurozone and Japan.

Of the other dominant themes of the last few weeks, oil continues to grab headlines. After posting some gains of late, the downward trend has resurfaced after Saudi Arabia announced that it will not decrease production in order to protect its market share. Crude oil is heading for its fourth weekly decline with the $50 mark now firmly in its sights.

Of the other dominant themes, i.e. the Russian Rouble story, extreme volatility remains with large intraday swings still the norm, although not at the recent 10-20% levels but still at the extreme side of things from a historical perspective. The RUB continues to remain on the back foot despite Russia getting a helping hand from its ally, China, who in recent times is seen as an alternative lender of last resort for those mineral rich countries that find themselves locked out of international markets (eg Venezuela). Chinese officials signaled that they are willing to expand a $24bn currency swap program designed to help Russia weather the storm.