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FX

USD Weakeness Boosts Euro

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USD hurt by Trump's political controversies and mixed US economic data.

 

USD & JPY

  • US housing starts disappointed but industrial production and manufacturing rebounded, beating Citi's and consensus expectations.

 

Strategy: Watch weekly close of the Dollar Index

  • USD: The sharp drop overnight in the Dollar Index (DXY) to 98.11 is worrying. Adverse political developments in the US are posing strong headwinds to the USD but progress on the healthcare bill and the Fed's expected rate hike in June would be positives. This week’s close in DXY would be in determining the direction of the dollar in the weeks ahead.

 

EURO BLOC

  • Germany's sentiment survey (ZEW) beat expectations at 83.9.
  • UK's headline inflation hit 2.7% in April, the highest since September 2013.

 

Strategy: Position for positive EUR sentiment against the crosses

  • EUR: Gains versus the USD are grabbing headlines but ECB optimism/Trump pessimism needs to watched closely as reversals can be quick. Citi analysts prefer positioning for a stronger EUR against the crosses. EURJPY is potentially targeting 126.50 followed by 128.50. 

 

COMMODITY BLOC

Strategy: Stabilising oil prices support commodity currencies

  • Despite poorer USD sentiment and expectations of higher oil prices, the gains of the commodity currencies against the USD were surprisingly modest. While the AUD, NZD and CAD are likely to outperform against the USD, they are likely to underperform the EUR and GBP.
  • The technical picture for oil is improving and Brent as well as WTI can potentially cross US$52.09/bbl and US$49.24/bbl. The CAD is likely to outperform in this scenario, potentially targeting 1.3600, followed by 1.3473.

 

This is an extract from the Daily Currency Update, dated 17 May 2017. Please approach a Citigold Relationship Manager if you would like more information. 

 

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