The U.S. Dollar is trading in familiar ranges following news of an OPEC deal to curtail production. Economic data released this morning pointed to strong labor growth and increase in wages, but with traders already pricing in a hike by the Fed on December 14 the greenback saw no added benefit. Now that oil prices are surging, commodity-based currencies will mount a bit of a comeback. MXN and CAD are certainly on the rise.
ADP Employment Change revealed an added 216K payrolls over the estimated 170K while Personal Income increased by 0.6% in October. Nevertheless, Personal Spending did not meet expectations. Pending Home Sales will be out at 10AM with a low forecast of 0.1%. This week’s slew of indicators is only solidifying the case for the FOMC to increase rates before 2016 comes to a close.
The Euro fell by 6.2% in the month of November based on the challenges behind Brexit negotiations, worrisome prospects of rightist anti-union populism across member nations, and anemic economic growth. However, there are finally signs of much needed inflationary growth with Consumer Price Index figures coming in at 0.6% expansion year-over-year for the month of November.
The European Central Bank will meet on December 8 to discuss whether to maintain QE purchases until March 2017 as planned or to extend beyond that period. This weekend’s upcoming Italian constitutional referendum may change the tone of statements in the build-up to the meeting causing further volatility in the next few weeks.
The Yen had its worst monthly performance against the greenback since 2009. U.S. Treasury bond yields are up, attracting more dollar buyers since yields in Japan are in negative territory. The Bank of Japan will meet on December 20th and we will monitor to see if this somehow ends up appreciating the Yen.
Thus far, regardless of the policy position the central bank has decided on, the Yen has gone up in value. Infrastructure spending, policy divergence with the U.S., and markets flourishing after a Republican administration takes over could hurt Yen further as we enter 2017.