- US December ISM Manufacturing PMI and Construction Spending beat forecasts
- FOMC minutes has left door ajar to gradual rate increases
- Oil prices surge because of cold weather and supply fears based on unrest in Iran
By Michael O'Neill
US economic reports were the focus in the morning and the release of the minutes of the December 14, 2017 Federal Open Market Committee
meeting provided the entertainment in the afternoon. The net result was that the US dollar finished the day with modest gains against the majors. Only the Australian dollar gained, but its gains were tiny.
The FOMC minutes did not provide much in the way of fresh insight. In fact, they were a rehash of what we already knew, which was US interest rates would rise gradually.
The ISM Manufacturing index recorded its highest level since September, and that gave a momentary lift to the US dollar. EURUSD
dropped to 1.2002 from 1.2030 on the news and then bounce in that range until the close.
never recovered from the weaker than forecast Construction PMI released before the New York open. GBPUSD opened at 1.3578, and dropped to 1.3496 after the release of US data. The subsequent bounce was weak.
rallied after the release of economic data, then
retreated, and finally rallied anew after the FOMC minutes were released.
flirted with support at 1.2500, a level where good-sized option expires are rumoured to be lurking. Even a steep rally in oil prices could not entice USDCAD sellers, and it traded higher most of the day.
prices rallied. WTI climbed to $61.93/barrel in after-hours trading when the American Petroleum Institute (API) appeared to confirm the earlier rumour of a large draw-down in crude inventories. Cold weather and concerns about supply disruptions from Iran underpinned crude prices.
Cold weather and fears of supply disruptions from anti-government protests in Iran have underpinned a rally in crude prices. Photo: Shutterstock
Thursday Focus: Eurozone December PMI Services data (forecast 56.5) and UK Mortgage Approvals, Services PMI as well as November Consumer Credit data will be the focus in Europe. Unfortunately, concern ahead of Friday’s US employment report may limit trading.
The post-Christmas decline in USDX stalled in the 91.45-91.50 area. The subsequent rally needs to break above 92.02 or else the decline may resume.
USDX one hour chart
Michael O'Neill is an FX consultant, currency strategist and author of the Trade of the Day at Loonieviews.net. Follow Mike or post your comment below to engage with Saxo Bank's social trading platform.