We enter the penultimate month of 2014 and the Dollar strength that had been expected to play out this year and predicted by many a year ago as being the trade of the year, is turning out to provide lucrative returns for those that have been on the right side of it.
The dollar index has gained 8.7% this year with the Euro being one of the majors to suffer the most, down nearly 10%, but one of the outliers bring the Swedish Krona which is down 15% against the US dollar. The divergence in central bank policy around the world is becoming ever clearer cut, especially following the BOJ’s bombshell last week.
We have also seen a good start to the month for indices which have recovered strongly, surprising many how quickly they’ve bounced from the October lows. The final two months of the year are historically bullish for indices, in particular December, but a week full of important data releases might scupper the earlier bullishness so far in November.
Today sees PMI manufacturing data from the Eurozone which will be keenly watched as it is expected to bounce just has EURUSD has done so far this morning as it sits below 1.2500 having been much lower earlier, hitting a 26 month low. Then later in the day we get US manufacturing data which is expected to decline and so a low figure here might lead to some dollar profit taking.
As mentioned this is a busy week with RBA, BOE, ECB making rate decisions and then the crescendo of nonfarm payroll on Friday.