Last week’s much-improved US inflation data had the desired effect on US rate expectations which have adjusted to indicate a 100% probability of the Federal Reserve raising interest rates in March. Ordinarily, such a revision to expectations would fuel a transfer of hot money into US dollars, yet dollar traders continue to chart their own course, and that course continues to be down.
Aussie dollar (AUD) has made the most of the US dollar’s current malaise, climbing into the high 0.79s against the greenback on Friday – more than 2% higher than last week’s closing rate of 0.7812 – but investors were also preferring the higher-yielding Australian currency to the relative safety of the euro, yen and Swiss franc.
Canadian dollar (CAD) – For 2018 ABN Amro are forecasting a slightly lower CAD/USD rate of 0.7813. The bank sees CAD/EUR rising to 0.6793 (2017 year-end rate: 0.6625).
Euro (EUR) was the best performing G10 in 2017 and was broadly stable in early 2018. In the seven-week period between January 1st and February 15th, EUR/USD threatened 1.25 multiple times – a level not seen since 2014 – but appears to have met resistance at this level. It should be said that much of EUR/USD’s recent rally is a result of broad US dollar weakness, rather than of broad euro strength.
Pound (GBP) exchange rates posted a mixed performance early on Friday as markets reacted to some weaker-than-expected UK retail sales figures.
Kiwi dollar (NZD) extended its fall on Friday as markets reacted to New Zealand’s latest manufacturing PMI report.
US dollar (USD) as mentioned above, continued to flounder on Friday, failing to find support on the recent better-than-expected US inflation readings, the near-full employment labour market statistics and an upbeat Philadelphia Fed business outlook. Instead, ‘Greenback’ bears pushed prices down towards February lows, with the flat US industrial production and manufacturing production readings contributing to its fall.
Bitcoin continued to rally through the weekend as part of a broader upwards trend for most cryptocurrency prices since February 8. Ethereum co-founder Vitalik Buterin warned over the weekend that the crypto market remains risky and the value of all cryptocurrencies could still fall to $0. Ripple took a breather, tracking sideways after an impressive 45% rise in the last week!