The U.S. Dollar climbed overnight as markets look for normalization after low levels of liquidity and trading over the holiday season. 2017 starts strong with the greenback up by over half a percent on average against most of its counterparts. Nevertheless, commodity-based currencies may be on the rise today after oil and metals prices rose with China posting its best Purchasing Managers Index reading since 2012.
December Manufacturing figures will be released at 9:45AM and 10AM. Both Markit US Mfg. PMI and ISM Mfg. figures are expected to show an expansion from the month prior, 54.2 and 53.8 respectively. Stock markets are likely to flourish from Chinese economic optimism and the “buck” could improve on stellar data.
The Euro reversed gains in earlier sessions resulting from French and German PMI figures hit multi-year highs. French’s manufacturing registered its best growth since June 2011 and in Germany the best since July 2014. Anemic growth continues to plague the euro-zone, but the lower cost Euro is aiding the manufacturing sector. The shared currency is still trading around rates last seen in 2002. The ECB will meet on January 19th.
The Yen fell by half a percent on rising equity markets and a cautious Japan. A source familiar with internal policy discussions reported that the Bank of Japan seems willing to extend its loan support program to commercial banks in order to encourage further credit.
The expansionary stance follows a similar move done at the end of 2015. With risk-appetite the current mood, expect JPY to dwindle. BOJ to announce policy on January 31st.