Trading news

USD strengthen amid NFP report, Swiss sight deposit slightly declined

- US better-than-expected NFP data did not trigger a dollar rally, suggesting that a December liftoff is already fully priced in
- Today's worst performers verses the USD have been NZD, NOK, AUD and CAD. The commodity currencies got hit after the OPEC decided to maintain production close to current levels
- RBNZ is expected to cut the OCR on Wednesday as the economy struggles with weak global demand and persistently low commodity prices
- The New Zealand dollar is currently trading at $0.6705. We expect the Kiwi to depreciate further against the greenback as monetary policy divergence is adding downside pressure on NZD/USD
 
Released on Friday, the US nonfarm payrolls greatly surprised to the upside. The US economy added 211,000 nonfarm jobs in November versus 200k expected and an upward revision of 298k in October. The average earnings stayed stable at 0.2% on month, matching expectations. The unemployment rate remained stable at 5%, while the participation rate rose to 62.5% from 62.4% in the previous month. Finally, the underemployment rate climbed to 9.9% from 9.8% previous reading, showing that there is still slack in the US labour market. However, the better-than-expected data did not trigger a dollar rally, suggesting that a December liftoff is already fully priced in. US treasury yields spiked on the news before returning to pre-NFP levels. The 2-year held ground at 0.9550%, the 5-year stayed around 1.7170%, while on the long end of the curve, the 10-year was trading slightly below 2.30%. EUR/USD stabilised between 1.08 and 1.10 after surging 3.30% amid disappointing ECB.
 
Today's worst performers verses the USD have been NZD, NOK, AUD and CAD. The commodity currencies got hit after the OPEC decided to maintain production close to current levels (around 32 mbarrel/day). West Texas Intermediate fell 5.60% from Friday’s high to $39.65 a barrel, while its counterpart from the North Sea slid 4.60% to $42.80. The Kiwi fell 1.25% from its Friday peak amid NZ Treasury said the growth outlook is weaker than anticipated. Moreover, the RBNZ is expected to cut the OCR later this week (on Wednesday) as the economy struggles with weak global demand and persistently low commodity prices. The New Zealand dollar is currently trading at $0.6705. We expect the Kiwi to depreciate further against the greenback as monetary policy divergence is adding downside pressure on NZD/USD.
 
In the equity market, Asian regional markets are trading in positive territory, following Wall Street’s lead. In Japan, the Nikkei 225 gained 0.99% and the Topix rose 0.71%. In mainland China, the Shanghai and the Shenzhen Composites are up 0.34% and 1.26 respectively, while in Hong Kong, the Hang Sang edged up 0.11%. In Europe, futures are pointing to a higher open with the Footsie up 0.57%, the DAX up 0.74%, the SMI up 0.23% and the Euro Stoxx 600 up 0.78.%.
 
***Yann Quelenn, Market Analyst, Swissquote: Switzerland: The new data that came in this morning showed sight deposits – corresponding to the cash that commercial banks hold with the central bank – showed us that the Swiss National Bank is clearly not intervening to maintain a stronger EURCHF. The amount declined slightly from last week even if the amount of deposit trend remains positive since the floor was abandonned last January.
 
The Swiss economy mainly depends on the health of its main partner, Europe. Last week’s ECB meeting took markets by surprise as Mario Draghi appeared largely less dovish than expected. Draghi has refused to increase the amount of stimulus, which had already been priced in by financial markets. Accordingly, monthly purchases will remain at €60 million. As a result the EUR pumped higher against the greenback on a quasi-hawkish ECB. In addition, the EUR kept on trading around 1.0850 against the Swiss Franc. Indeed, the Helvetic currency is still suffering, in other words appreciating, from its safe haven status and global uncertainties - lingering low commodity prices and high geopolitical risks.
 
However in the near future, we remain bearish on EURCHF and think that the single currency is heading downwards due to growing unemployment, lack of growth and above all the political uncertainties amongst European countries. For the time being, the SNB still has some room to act against a strengthening CHF. We think that the sooner the better as the ECB QE results are likely not to have the desired effect and will send the EURCHF lower.”***
 
Today traders will be watching domestic sight deposits from the SNB; budget balance from Sweden; industrial production from Norway; the ECB will publish the weekly and monthly details of the QE; Mark Carney will testify before the European Parliament; in the US Fed Chief Bullard will speak on monetary policy.

Monday, 07 Dec, 2015 / 1:01

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Source : http://en.swissquote.com/fx/news

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