FX round-up: Dollar on the front foot for fifth day, sterling lower after wage data

Alexander Bueso WebFG News | 18 Oct, 2017 20:01 - Updated: 20:01 | | |


The greenback continued to strengthen on Wednesday as higher U.S. Treasury yields triggered a squeeze on investors who have been broadly bearish on the greenback in recent weeks, while the pound fell again as investors considered the latest wage data.

The dollar, as measured against a basket of currencies, rose 0.06% to 93.540, extending a rebound from Friday's 2 1/2-week low of 92.749.

"There is a nervousness squeeze on USD shorts underway related to Fed chair uncertainty, so medium-term USD sellers are being forced to stand aside," said Stephen Gallo, European head of FX strategy at BMO financial group.

Closer to home, sterling was under further pressure, facing off against a strngthening dollar, despite favourable wage data.

The three month average earnings index came in at 2.2%, beating expectations of 2.1%. A move higher was seen upon the release of the data, taking cable to a day high of 1.3216, but was short lived as heavy selling persisted into the afternoon.

BY 1700 BST the pair settled, trading 0.07% lower to 1.3182.

"The fact that (the data) was better is what created the initial surge but on second looks it just wasn't good enough to really change the outlook very much at all," said Rabobank currency strategist Jane Foley.

The euro seemed to be un-fazed after a speech given by European Central Bank (ECB) President Mario Draghi titled "Structural reforms in the Euro area."

Summing up his speech, Draghi said, "Reforms have to take into account equity as well as efficiency. Vested interests have to be tackled and those who have lost out given proper support." adding, "With monetary policy being accommodative, we now have a window of opportunity to take these measures. I hope the insights at this conference can move this agenda forward."

EUR/USD managed to notch up a slight move higher to 1.1768, 0.02% firmer on the day.

Speaking to German weekly Die Zeit, ECB Governing Council member Francois Villeroy de Galhau said, "There should be an adequate reduction of our net asset purchases, towards their possible end, while we will keep in place a substantial degree of accommodation, through all our other instruments."

Reuters reported last week that policymakers are broadly in agreement about extending asset purchases at a lower volume, with views converging on a nine-month extension.

Against the pound, the single currency faired a little better, climbing 0.15% to 0.8934.

Euro trader attention will now shift to a key ECB policy meeting next week.

Dollar strength was clearest to see against the Japanese yen, with the latter being the biggest loser of the day, as the pair traded 0.66% higher to 112.94, facing stiff resistance at 113.

The Canadian dollar edged higher against it's US counterpart, boosted by higher oil prices and data showing a surprise rise in domestic manufacturing sales.

Canadian factory sales grew by 1.6 percent in August from July as sales increased in motor vehicles, and petroleum and coal, Statistics Canada said. Analysts had forecast a decrease of 0.1 percent.

"Today's figures are modestly positive for the Canadian dollar and negative for the front-end of the bond curve," Nick Exarhos, an economist at CIBC Capital Markets, said in a research note.

By 1715 BST, USD/CAD was trading 0.3% lower to 1.2485, continuing it's move down from Tuesday after hitting a near month high of 1.2585.

More news

16:33 Eurozone consumer confidence jumps in November

Consumer confidence in the single currency bloc shot higher in November, according to the executive arm of the European Union.

16:24 Thursday preview: UK GDP, ECB minutes, results from Centrica, Cineworld, Severn Trent

Thursday's market volumes will be thinner as the US gets fatter on Thanksgiving, while the UK chews over the second reading for gross domestic product and likely further analysis of the Chancellor's Budget, while corporate results include Centrica, Severn Trent and Cineworld.

15:52 Budget: New tax breaks aim to revive North Sea oil and gas producers

Chancellor Philip Hammond has announced new tax breaks to encourage investment in North Sea oil and gas producers.

15:47 Budget: Hammond targets first-time buyers as growth forecasts are cut

Philip Hammond scrapped stamp duty on almost all first-time property purchases as he sought to inject good news into his Budget after a series of cuts to the outlook for the economy.

15:38 Treasury facing £300m phone bill after mobile network court challenge

The Treasury was facing the prospect of a rather expensive mobile phone bill on Wednesday, after a £300m appeal against a significant increase in annual license fees was upheld.

15:30 Gfinity losses widen as it invests in product

Esports entertainment business Gfinity saw revenue increase 64% to £2.37m in the year to 30 June, it reported on Wednesday, with its loss before tax widening to £5.3m from £3.1m.

15:25 Rambler installs Scott Britton as manager at Ming Mine

Rambler Metals and Mining announced the appointment of Scott Britton as its new general manager at the Ming Copper-Gold Mine in Baie Verte, Newfoundland and Labrador, Canada on Wednesday.

15:20 Ferrum Crescent granted three-year extension at Toral

Europe-focussed lead-zinc explorer Ferrum Crescent announced on Wednesday that, following a formal application to the Director-General of Mines of the Province of Leόn, its exploration licence on the Toral lead-zinc project has been renewed for a further three-year term to November 2020.

15:16 Totally acquisition Vocare wins contract extension with NHS Vale of York

Out-of-hospital services provider Totally has been awarded a two year contract extension ‘in-principle’ to 31 March 2020 with NHS Vale of York Clinical Commissioning Group, it announced on Wednesday.

15:30 Budget: Chancellor unveils stamp duty cut, housebuilder's planning probe

A range of new housing policies were proposed by Chancellor Philip Hammond in his Budget statement, including more funds for smaller housebuilder, a probe into potential holding of land by major housebuilders and a stamp duty cut for first-time buyers.