Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Sterling Pops, Dollar Struggles

By Kathy LienCurrenciesFeb 23, 2017 20:33,-dollar-struggles-200176664
Sterling Pops, Dollar Struggles
By Kathy Lien   |  Feb 23, 2017 20:33
Saved. See Saved Items.
This article has already been saved in your Saved Items

By Kathy Lien, Managing Director of FX Strategy for BK Asset Management.

The U.S. dollar continued to struggle as investors sold the greenback, taking it lower against all of the major currencies. The problem lies in yields, which extended their losses despite relatively healthy U.S. data. Although jobless claims ticked up to 244K from 238K, the overall level of unemployment claims remains very low and house prices continued to rise in the fourth quarter while manufacturing activity in the Kansas City region grew quickly in February. These reports are consistent with other releases that show widespread strength in the manufacturing sector and continued recovery in the labor market. Unfortunately these releases along with comments from Fed President Lockhart and dollar-supportive comments from Treasury Secretary Mnuchin failed to lift the greenback. Even though U.S. policymakers have been all over the wires talking about the need for tightening, Fed fund futures show that investors are not convinced that the next rate hike will be in March. So while we firmly believe that the greenback will trade higher, it may not catch a bid before President Trump’s joint session before Congress on Tuesday or Yellen and Fischer’s speeches next Friday.

Thursday's best-performing currency was sterling, which traded sharply higher against all of the major currencies. The move was more technical than fundamental as GBP/USD broke quickly after clearing out stops at 1.2500. The only piece of data released from the U.K. was the CBI Retail sales report, which rose strongly in February, signaling a recovery in consumer spending after a particularly dismal January. The “big news” was from Scotland -- with the Scottish government openly discussing another Scottish independence referendum next year -- post Brexit, they are now convinced they could win. The main concern for the Scots is how hard the line for Brexit will be. Scotland voted to stay in the EU in last June’s referendum, but as a part of the U.K., its future lies in the hands of Theresa May. Although a vote wouldn’t be held until 2018, if a second referendum is announced in a few weeks as some politicians are pressing for, the renewed political uncertainty would be negative for the currency. Given the extent of Thursday’s breakout, we would not be surprised to see GBP/USD retrace to 1.25 but breakouts after long periods of consolidation tend to have continuation.

With no fresh political headlines to threaten the currency, the euro extended its gains versus the greenback. Data was benign with German GDP growth confirmed at 0.4% in the fourth quarter. We heard from a number Eurozone policymakers on Thursday including Nowotny, Praet and Weidmann. They all seem to agree that while the Eurozone economy is improving and inflation is on the rise, there’s no need to change interest rates this year. The strength of the euro had more to do with U.S. dollar weakness than inherent demand for the single currency. Although the rally in EUR/USD stalled at the 50-day SMA, the lack of any dollar-positive news on Friday means we could still see near-term gains in the pair. But ultimately, political uncertainty and hawkish Fed policy should limit any meaningful rally.

The Australian, New Zealand and Canadian dollars all gained strength with AUD rallying despite disappointing data. Australian private capital expenditure fell by -2.1% in the fourth quarter, which was a much larger decline than the -0.5% forecast. Gains in the Aussie were led by gains in gold and a lower U.S. dollar. There were no economic reports from New Zealand but the oversold NZD was one of the biggest beneficiaries of U.S. dollar weakness. USD/CAD, on the other hand, tumbled as oil prices moved higher on the back of inventory data. According to the latest report, US crude inventories fell by 884,000 barrels last week. Canada’s consumer price report is scheduled for release Friday and the sharp drop in the price component of IVEY PMI points to a lower release.

Sterling Pops, Dollar Struggles

Related Articles

Sterling Pops, Dollar Struggles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
dharmbir singh
dharmbir singh Feb 24, 2017 13:35
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Can u help how invement
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email