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FX Daily, January 03: Dollar-Bloc and Sterling Advance, while Euro and Yen Slip

Swiss Franc

The Swiss SVME PMI is nearly at its highest level.
Apparently it has recovered all problems with the “overvalued” Swiss Franc.

Switzerland SVME PMI, December 2016

(see more posts on Switzerland SVME PMI, )
Switzerland SVME PMI, December 2016

Source: Investing.com - Click to enlarge

FX Rates

The US dollar is mixed.  After a soft start in Asia, where Tokyo markets were closed, the dollar recovered smartly against the euro and yen. The dollar-bloc and sterling are firmer.  Sterling’s earlier losses were recouped following news that the manufacturing PMI jumped to 56.1, its highest since June 2014

FX Performance, January 03 2017 Movers and Shakers

FX Performance, January 03 2017 Movers and Shakers

Source: Dukascopy - Click to enlarge

Rising global yields with the US 10-year Treasury yields up five bp today, and European yields up 5-8 bp, while equities firm, may be a factor driving the yen lower. The yen’s 0.5% fall is the most among the majors today, sees the dollar resurface above JPY118 to its best level since December 20.

Excluding Japan, the MSCI Asia Pacific Index gained 0.4%, and it’s the sixth consecutive gain. Of note, the Shanghai Composite rose a little more than 1%, and Australian equities rose 1.2% to lead the region.

FX Daily Rates, January 03

FX Daily Rates, January 03

- Click to enlarge

Thin market conditions prevail. Our reading of the technical condition underscored the risk of further corrective action on the dollar. Although the euro drifted to briefly trade below $1.04 were are hesitant about abandoning this near-term technical view. However, a break of $1.0370-$1.0380 would prompt a reconsideration. The dollar’s gains against the yen are a bit more impressive. There is little in the way of the December high strike near JPY118.65. Support is now seen near JPY117.65. The hourly RSI is elevated but has yet to turn down.Sterling’s PMI-inspired bounce ran out of steam near $1.2300. Support is seen near $1.2240. The Australian dollar is straddling $0.7200, but the intraday technicals suggest it can return to the session highs near $0.7235. The Canadian dollar is firmer but is not drawing much succor from the 2% rally in oil prices as OPEC cuts begin. The US dollar is holding above CAD1.34. Resistance is seen near CAD1.3450.

FX Performance, January 03

FX Performance, January 03

- Click to enlarge

Eurozone

European bourses are higher, and the Dow Jones Stoxx 600 is up 0.7% near midday in London, led by financials and energy. It is the third consecutive advancing session and sixth in the past seven sessions. Italian banks shares are up nearly one percent after yesterday’s 2.25% gain. Last week’s 2.8% drop, snapping a four-week rally, has been recouped.

Eurozone Manufacturing PMI, December 2016

(see more posts on Eurozone Manufacturing PMI, )
Eurozone Manufacturing PMI, December 2016

Source: Investing.com - Click to enlarge

United Kingdom

In addition to the UK’s manufacturing PMI, there are three other economic reports to note. First, preliminary French December CPI rose 0.3% for a 0.8% year-over-year pace. While better than November’s 0.7% year-over-year pace, it was a touch below expectations. It appears that energy was the main driver. Service prices, a proxy for domestic price pressures, eased to 0.9% from 1.0%.

U.K. Manufacturing PMI, December 2016

(see more posts on U.K. Manufacturing PMI, )
U.K. Manufacturing PMI, December 2016

Source: Investing.com - Click to enlarge

Germany

Second, German inflation jumped as a function of the sharp rise in December and a base effect. All of the German states have reported their December figures, and they all rose 0.7% or 0.9% in the month.

Germany Manufacturing PMI, December 2016

(see more posts on Germany Manufacturing PMI, )
Germany Manufacturing PMI, December 2016

Source: Investing.com - Click to enlarge

The year-over-year rates more than doubled to 1.7%-1.9%. Baden-Wuerttemberg was the notable exception. Its 0.7% rise on the month translates into a 1.6% year-over-year pace from 0.8% in November.  The national figure is due shortly. The risk may be on the upside to the Bloomberg median guesstimate of 0.6% on the month and 1.3% year-over-year rate.

Germany Consumer Price Index (CPI) YoY, December 2016

(see more posts on Germany Consumer Price Index, )
Germany Consumer Price Index (CPI) YoY, December 2016

Source: Investing.com - Click to enlarge

Third, Germany also reported a 17k decline in its December unemployment queues. This was three-fold larger of a decline than the median expected, and the largest since last January.

Germany Unemployment Change, December 2016

(see more posts on Germany Unemployment Change, )
Germany Unemployment Change, December 2016

Source: Investing.com - Click to enlarge

The unemployment rate was unchanged at 6%, which is the lowest since reunification.

Germany Unemployment Rate, December 2016

(see more posts on Germany Unemployment Rate, )
Germany Unemployment Rate, December 2016

Source: Investing.com - Click to enlarge

United States

In North America, Markit and ISM report December manufacturing PMI. The preliminary Markit measure ticked up to 54.2 from 54.1, which is the highest since March 2015. Separately, the US also reports November construction spending. A gain of 0.5%, as the median forecast has it, would be the second consecutive gain of that magnitude and the fourth in five months. It shows some acceleration from the trend.  The 12-month average 0.3%. The Fed’s speaker calendar is light until the end of the week when both Evans and Lacker take to microphones. Canada’s RBC manufacturing PMI will be released.  It stood at 51.5 in November, which is a four-month high.

U.S. Manufacturing PMI, December 2016

(see more posts on U.S. Markit Manufacturing PMI, )
U.S. Manufacturing PMI, December 2016

Source: Investing.com - Click to enlarge

The ISM measure is expected to rise to 53.7 from 53.2. That would be the highest since January 2015.

U.S. ISM Manufacturing PMI, December 2016

(see more posts on U.S. ISM Manufacturing PMI, )
U.S. ISM Manufacturing PMI, December 2016

Source: Investing.com - Click to enlarge

Graphs and additional information on Swiss Franc by the snbchf team.

Full story here
Marc Chandler
He has been covering the global capital markets in one fashion or another for more than 30 years, working at economic consulting firms and global investment banks. After 14 years as the global head of currency strategy for Brown Brothers Harriman, Chandler joined Bannockburn Global Forex, as a managing partner and chief markets strategist as of October 1, 2018.
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