The pound has started the new week how it ended the last one: weak. The latest slide has been in response to comments from UK Prime Minister Theresa May at the weekend, when she said Britain’s exit negotiations will “not be about keeping bits of membership.” May’s comments suggest it will be a hard exit from the European Union, as Britain seeks to control immigration and law-making among other things.
The markets picked up where they left off last year. The release of the FOMC minutes from the December meeting and President-elect Trump's tweets impacted prices and almost overshadowed the release of the biggest economic indicator: the non-farm payroll report. The U.S. Federal Reserve published the minutes from its December meeting.
Today's reading certainly did a bit to assuage dollar bears darkest concerns. While the headline jobs figure came in at just 156k (vs. 175k expected), the details of the report were far better. Straight away, the previous two jobs reports were revised up by about 30k jobs, meaning that overall employment actually beat the anticipated number slightly.
This week’s eagerly anticipated fundamental event was the U.S. jobs report for the month of December, which was released today. The report showed a few surprises, but failed to cause any major immediate reaction in the dollar, gold or indices. Although the headline number of jobs gained disappointed at 156,000, the upward revision to the prior month’s total and the stronger-than-expected 0.4% month-over-month rise in average hourly earnings meant that it was a decent report overall.
As China's foreign exchange reserves threaten to tumble below the critical $3 trillion mark, the biggest fear for investors is not whether Beijing can continue to defend the yuan but whether it will set off a vicious cycle of more outflows and currency depreciation.
Gold's stronger showing so far has been in response to several things, including a “risk off” trade that was triggered Tuesday afternoon, but mainly due a weaker dollar. Indeed, something rather odd happened across the financial markets on Tuesday afternoon. Up until 15:00 GMT it had appeared as if it was “risk on” at the start of the New Year: the UK’s FTSE 100 had broken to a new record high, crude oil prices had surged to multi-year highs and the euro/U.S. dollar (EUR/USD) currency pair had dropped to a new 14-year low.
The U.S. dollar slipped on Friday but notched its fourth straight year of gains against a basket of major currencies. The dollar index, which measures the greenback against a basket of six major rivals, gained about 3.7% for the year.
The dollar, crude oil and world stocks rose on Wednesday following upbeat U.S. data that saw the gap between Treasuries and other benchmark global government bonds hit new highs. The dollar also drove higher after U.S. consumer confidence shot to its loftiest in more than 15 years in December on hopes that President-elect Donald Trump will nurture further improvements in the world's biggest economy.
The dollar eased from 14-year highs on Wednesday, giving back some of the gains chalked up since Donald Trump's U.S. election victory, while concerns over banks pulled European shares lower. The markets also looked set to open lower, according to index futures, after the Dow Jones industrial average climbed to within 25 points of the 20,000 mark on Tuesday.
The New Zealand dollar has so far been able to hold its own relatively well against the dollar despite the latter breaking to new multi-year highs against the likes of the euro and Swiss franc, and multi-month highs versus the yen. But the bullish days for the NZD/USD currency pair could be numbered.