Yesterday may have been a day for giving thanks in the US but the USD was certainly not thanking the Fed following the release of the FOMC minutes on Wednesday evening. This result left the USD on the back foot, while much of the USD selling occurred on Wednesday evening, the greenback still found itself wanting for demand through yesterday’s quieter session. The USD index is more than 1% off the weeks highs and down over 2% from its November high print, this has left major US crosses sitting at a crossroads. EURUSD sits just below 1.1860, a break above 1.1880 would turn EURUSD bullish once more and while recent rallies above 1.1800 have quickly found sellers, thus far EURUSD looks to be holding well above.
GBPUSD is in a similar position, trading back up towards resistance but not breaking through 1.3330 just yet. USDJPY currently sits just above the 2 month lows posted on Wednesday evening while the antipodeans have also managed to drive higher on the back of a weaker USD. Outside of the US it was business as usual and the Euro was broadly firmer on the day following generally better data from the region including manufacturing PMI breaking up to 60.0 vs 58.2 and major PMI readings in services and manufacturing for the Eurozone surprised to the upside, the only exception was a weaker German print in services but that was trumped by the large amount of stringer data. In the UK GDP for the 3rd quarter was confirmed at 1.5%, however the .7% decline in exports is a slightly concerning print. The pound itself was steady on the day, holding gains vs the USD while only dropping slightly vs the broadly firmer Euro.
It’s hard to believe we are looking at a little over a month left in 2017 and many are now fixing their sights on 2018 expectations for major currencies. The 2017 we have seen EURUSD rally over 14%, GBPUSD is up over 11%, while the trade weight USD index that measures the greenbacks performance against a basket of currencies is down over 10% from its peak which printed on Jan 3rd. If we were to rewind back to Jan 1st few would have expected to see such a decline in USD, especially given the Feds plan to hike rates 3 times through the year. Euro-sceptics who were calling for parity and the fall of the single currency have been left red faced with EURUSD failing to get anywhere near parity and in fact the single currency was the best performer out of the majors through 2017. The Eurozone got through several contentious elections which provided some geopolitical risk but the region is far from out of the woods and this may still expose the Euro to additional downside especially as we look towards Germany and the possibility of sending voters back to the polls. Just one area to watch for Euro volatility into the new year.
We have a quiet calendar today, and trading is expected to be somewhat on the low side in volume terms as the US takes extended vacation around the thanksgiving holidays. There are some US releases however and markets are open with PMI data due to show slight growth expansion in US services and manufacturing. German IFO data headlines the morning calendar and has just been released, slightly firmer than expected. That’s been enough to lift EURUSD above 1.1860 but 1.1880 remains the key level of resistance to break above. EURGBP also on track back towards .9000, every attempt above that level has found Euro sellers emerge. This time should be no different. GBPUSD is looking to break above 1.3330 area, failure to do so should see sterling come under some selling pressure again and back into mid range around 1.3200 next week.