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Dollar Recovers as Risk Appetite Reduced

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USD

On Monday, the Greenback traded higher vs. the Japanese yen, settling above last week's near 4-month low, as rising tensions between North Korea and the United States are seen as the key to short-term expectations. However, the USD declined vs. a basket of major currencies on Friday as weaker-than-expected U.S. inflation data lowered expectations for a third interest rate hike by the Federal Reserve before the end of the year.

On the release front, investors are also awaiting FOMC Meeting Minutes due later this week.

  • The U.S. dollar index, which measures the Greenback’s strength against a basket of major currencies, fell as much as 0.05% to settle at 93.49.

GBP

No major reports came out the UK economy on Friday and none are due today, leaving traders to factor in expectations for the data releases this week. The Sterling pound touched its lowest rate last week vs. the single currency, when it declined to just €1.096 and against the USD it was little changed with GBP/USD at $1.3002.

Markets are awaiting the UK consumer price index, which measures changes in the price level of market basket of consumer services and retail goods purchased by households, will be released tomorrow. Technically, a lower than expected reading could weigh on the Bank of England’s rate hike expectations and reduce demand for Sterling, while a higher than expected reading should be taken as positive for the GBP. Other than this, market sentiment could also determine which direction the pound takes.

EUR

European data came in a bit of a mixed bag on Friday with German and French CPI readings meeting expectations while the German WPI reading came in slightly worse than expected at with a 0.1% dip against an 0.3% projected increase. French preliminary non-farm payrolls also came out stronger than with a 0.5% uptick against a predicted 0.4% rise. On the tap, we have the euro zone industrial production due in next with a 0.4% decline expected.

JPY

The Japanese yen gained yet again early on Friday but fell at the end of the week on profit taking. Earlier this morning, the yen posted a stronger 1.0% GBP growth compared to the earlier figure of 0.3%. The price index also gained as it as lower by only 0.4% as compared to an earlier 0.8% slide. With no major economic data on the tap, market sentiment based on North Korean headlines is likely to push the yen pairs around.

Gold

Earlier today, Gold prices dipped, as the Greenback recovered from last week's lows, following the U.S. consumer-price index’s rise of 1.7% in July from a year earlier. In addition, traders will closely monitor any developments on tensions over the Korean peninsula, as the geopolitical risks can support demand for gold.

Gold Dec 17 (GC=F) fell as much as -0.12%, to settle at $ 1,292.40, while spot gold was down 0.1%, to trade at $1,287.60.

Oil

Oil prices drifted lower on Monday as a decline in Chinese refining activity growth casts concerns over China's demand for oil, while rising U.S. shale output suggested supplies would likely remain high. On the release front, U.S. crude inventories declined 6.5 million barrels last week, according to the Energy Information Administration.

Light Sweet Crude Oil Futures fell as much as 0.16%, to settle at 48.74, while U.S. West Texas Intermediate (WTI) crude futures fell as much as 0.20%, to settle at $48.78 a barrel.

The most important economic events:

  • EUR Euro-Zone Industrial Production w.d.a. (YoY) (JUN): (GMT 9:00) – Medium – Forecast (2.8%) – Previous (4.0%).
  • French 6-Month BTF Auction: (GMT 13:00) – Medium – Forecast (N/A) – Previous (-0.644%).
  • USD U.S. to Sell USD39 Bln 3-Month Bills: (GMT 15:30) – Low - (GMT 15:30) – Medium – Forecast (N/A) – Previous (1.040%).
  • USD U.S. to Sell USD33 Bln 6-Month Bills: (GMT 15:30) – Low - (GMT 15:30) – Medium – Forecast (N/A) – Previous (1.040%).

Disclaimer
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.

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