It’s been a “risk-on” day with markets shunning the Dollar and the Yen. The Yen, which had surged a remarkable 5.2% since 11thDecember, is down about 0.6% today. The more risk-sensitive Australian and Kiwi Dollars and high-yielding emerging market currencies are outperforming and have extended their gains. The AUD/USD and NZD/USD crosses, under pressure over the Christmas and New Year period, are back up to their mid-December levels around 0.71 and 0.674 respectively.
The Dollar weakened to its lowest point since 22nd October despite a very strong increase of 312,000 in non-farm jobs in December, with investors seemingly more focussed on the prospect that the Federal Reserve may have little room to further hike rates and may even eventually be forced into cutting rates (markets are currently pricing in 15bp of Fed rate cuts this year).
The EUR/USD cross has inched higher to 1.141 but the Euro has ultimately underperformed most other major currencies and the trade-weighted index has weakened to a one-month low. The larger-than-expected fall in Eurozone headline CPI-inflation to 1.6% yoy in December from 1.9% yoy in November is again shinning a spotlight on the judiciousness of the ECB’s decision to end its QE asset purchases last month.
Sterling is up for the second consecutive session, helped by slightly better than expected macro data with the service sector PMI rising to a higher-than-expected 51.2 in December from 50.4.
