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Returning to normal

The past (shortened) week has seen some choppy activity in markets and especially in FX, as the thinner liquidity conditions combined with lack of news flow. That dynamic should dissipate as this week goes on, as liquidity and people return to work after the Christmas and New Year break. After a sluggish Asia session, the start of European trading has seen the dollar catch a mild bid, especially against the yen where the 118.00 level is being tested, putting the mid-December high of 118.66 back into focus. The better than expected PMI data seen in China (Caixin measure) gave a mild boost to risk currencies, notably the Aussie and kiwi, which both retain their firmer stance against the US dollar.

We see further PMI, more specifically ISM, data in the US later today, together with PMI data in the UK at this morning at 09:30 GMT. In general, we’ve seen fairly decent numbers globally over the past couple of months, with the US measure rising for the past 4 consecutive months. The UK measure has been has fallen for the past two readings, although this after a notably firm rise in the previous two months, so remains higher overall over the same 4 month period. Clearly though we are headed for a year of change, both political and economic, which is likely to lead to greater volatility and opportunities over the coming year. Before then, we have Friday’s jobs data in the US, although as I mentioned last month, it’s not been the economy that has been driving the dollar of late and that’s been evident in market reactions to the employment report in recent months.

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