Canadian Inch Up During Uncertainty Over Trump Travel Ban

On Monday, the Canadian dollar inched higher against its U.S. counterpart, however, the gains were plugged as weakness in oil prices and doubt over a travel ban executed by U.S. President Donald Trump measured.

USD/CAD declined 0.18% at 1.3094, not far from intra-day lows of 1.3118, 1:51 AM (EST).

After Trump signed an executive order on Friday, the greenback stayed on the back foot that restricted immigration from seven predominantly Muslim countries, emphasizing concerns over the destabilizing effect of the new administration’s protectionist policies.

The directive prompted legal challenges, international criticism, extensive protests and confusion over its implementation at airports.

On Friday, sentiment on the dollar was also hit by data, presenting a sharp decline in U.S. fourth quarter progresses, driven speculation that the Fed Reserve will avoid hiking interest rates too fast.

Fed will hold its next policy meeting on Wednesday,  isn’t expected to increase interest rates, however, investors are eager  to hear how it views the economy and the future trail of interest rates.

Data on Monday indicated that U.S. consumer spending increased solidly in December, rising 0.5% after a 0.2% surge  in November.

Personal income increased 0.3%  the previous  month after edging up 0.1% in November.

Another  report  presented that U.S. pending home sales increased by 1.6% in December, ahead of predictions for a 1.1% increase.

In the meantime, prices of oil, a major Canadian export, stayed sluggish after a report presenting an increase in the number of active U.S. oil rigs the previous week,  added to worries about glut at a time when major producers are reducing production in a bid to support the market.

Statistics from Baker Hughes presented U.S. drillers added 15 oil rigs the prior week, taking the total to its highest since November 2015.

On Additional News

On Tuesday, the yen increase against the dollar as the Bank of Japan left its monetary policy and raised its growth predictions.

The greenback was off  0.11% at 113.65 yen at 02:15 ET.  The dollar index was off 0.03% at 100.39.

The Bank of Japan kept its excess reserve rate at minus -0.1%; 10-year bond yield goal at close to zero.

The greenback weakened as President Trump moved to sack the acting Attorney General, as she failed to endorse his travel ban.

The euro and sterling  were steady. The Bank of England is also anticipated to leave policy on hold on Thursday.

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Oil Extends Decline as Rising U.S. Production Weighs

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On Monday, oil prices prolonged declines, pulled down by indications of growing production in the United States that  would partially offset output cuts by the Organization of Petroleum Exporting Countries and other producers.

After President Donald Trump presented immigration curbs that generated criticism at home and abroad, uncertainty over the outlook for U.S policy also broadly influenced  the financial markets.

Oil trading was quiet with some Asian countries, including China, on holiday for the Lunar New Year. After the opening bell on Monday, the delivery of NYMEX crude for March declined 27 cents at at $52.90 a barrel.

Global benchmark Brent crude oil prices declined 25 cents at $55.26 a barrel at 1010 GMT, while U.S. crude futures fell 8 cents to $53.09.

The number of active U.S. oil rigs increased to the highest since November 2015 the previous week, according to Baker Hughes data, indicating  that drillers are taking advantage of oil prices above $50 a barrel.

The Organization of the Petroleum Exporting Countries and other producers, including Russia, agreed to reduce production by nearly 1.8 million barrels per day in the first half of 2017 to relieve a two-year supply overhang.

“We are in wait-and-see mode, I suspect at the moment. Oil has reached a fair value equilibrium level given the current supply and demand outlook,” said Ric Spooner, chief market analyst at CMC Markets in Sydney.

“Until we get anything to really disrupt that, we may not see too much change,” he said, adding the market may draw some comfort from official OPEC figures for January production.

However,  U.S. oil output has been increasing, with the International Energy Agency forecasting total U.S. production growth of 320,000 barrels per day (bpd) in 2017 to an average of 12.8 million barrels per day bpd.

“The rise in U.S. output should not be unexpected,” ANZ bank said in a note.

“However, we expect the reductions being made by OPEC will far exceed any rise in the U.S. and quickly reduce the global inventory that has been built up over the past two years,” it added.

Hedge funds and money managers boosted bullish wagers on U.S.crude oil to the highest level since mid-2014, the Commodity FuturesTrading Commission (CFTC) data showed on Friday, as agreed output cuts by the world’s top producers began to eat into a global glut.

In addition, on Sunday, President Donald Trump justified  his move to ban entry of refugees and people from seven Muslim-majority nations and stated the United States would continue issuing visas for all countries in the next 90 days as he faced increasing criticism at home and abroad and new demonstrations in U.S. cities.

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Dollar Remains near 7-Week Lows vs. Other Majors

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On Thursday, the greenback struggled near seven-week lows  compared to the other major currencies, as worries over U.S. President Donald Trump’s protectionist strategies, including an executive order to build a U.S.-Mexican border wall weakened dollar.

Trump on Voting Investigation

The greenback was generally weaker in spite of U.S. shares gaining and the Dow Jones Industrial Average  closing atop the 20,000 spot for the first time The dollar index, which tracks the dollar against a basket of major currencies, previously down 0.2% at 99.839. It plunged to 99.835 on Wednesday, its lowest level since Dec. 8.

The greenback destabilized after U.S. President Donald Trump stated on Twitter that he would seek a “major investigation” into assumed voter fraud, concentrating on two states and illegal voters.

The call came in spite of Republican elected representatives in key states saying they have found no evidence of deceitful voting.

The National Association of Secretaries of State said on Tuesday,  it had confidence in the “systemic integrity of our election process” and was not aware of any evidence related to Trump’s statements.

Since Trump’s inauguration last Friday, the greenback has been under pressure and worries about the lack of  transparency on his economic policies and doubts that his protectionist trade stance could hit corporate incomes and act as a strain on growth.

Against the Majors

EUR/USD inched up 0.10% to 1.0742, not far from Tuesday’s six-week high of 1.0775.

In Asia, 4th quarter inflation in New Zealand increased 1.3% year-on-year and 0.4% quarter-on-quarter, both beyond expectations with the NZD/USD down 0.12% to 0.7284 after the data, although Japan reported the corporate services price index increased 0.4% in December as projected.

In Japan, data on Wednesday indicated that exports increased for the first time in 15 months in December.  USD/CHF inched down 0.14% to trade at 0.9994.

On Wednesday, the Australian Bureau of Statistics reported that the consumer price index increased  0.5% in the 4th quarter of 2016, disappointing prospects for an increase of 0.7%.

President  Trump wants to renegotiate the North American Free Trade Agreement (NAFTA) with Canada and Mexico.

Temporarily, USD/CAD retreated 0.49% to trade at 1.3093, the lowest since January 18. After Trump tweets  “we will build the wall” the Mexican peso is increasing. It is up by 0.4% at 21.4400 per dollar as of 8:08 a.m. ET.

In pairs, USD/JPY increased 0.04% to 113.31, while GBP/USD gained  0.08% to 1.2644. AUD/USD traded at 0.7572, down 0.04%. The pound established support as investors expected the government’s bill to activate Article 50 and start the formal procedure of exiting the EU.

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January 2 – 6 Forex Weekly Outlook

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On Friday, the greenback dropped against a basket of the other major currencies as traders gain profits in the wake of a late year rally that propelled the dollar to 14-year peaks.

The U.S. dollar index, which gauges the greenback’s strong point against a trade-weighted basket of six major currencies, declined 0.28% to 102.29 late Friday, off the 14-year peak  of 103.65 hit on December 20.

For the year, the index increased approximately 3.7% after rallying in the 4th quarter on the back of anticipations for a quicker pace of rate hikes from the Fed Reserve and surged fiscal spending under the incoming Trump administration.

The euro pressed higher in holiday thinned trade, with EUR/USD  ending at 1.0517, increase 0.29% for the day. The euro temporarily hopped as high as 1.0653 during Asian trade, the strongest level in two weeks, before retracing gains.

The single currency ended the year down 3% against the dollar, its 3rd consecutive yearly dropped.

The pound was also higher, with GBP/USD is advancing 0.71% to 1.2350 in late trade.

Sterling declined approximately 16% against the greenback  for the year during concerns over the economic fallout from the June 23 vote to leave the European Union.

The greenback was higher compared to the yen, with USD/JPY increased 0.34% at 116.95. On the year, the greenback posted its first yearly loss against the yen in five years, declining approximately 2.9%.

In the week onward, investors will be looking forward  to Friday’s U.S. employment report for December together with Wednesday’s minutes of the Fed’s December meeting.

U.S. data on manufacturing and service sector activity will also be in emphasis.

Market observers will also be in anticipation of euro zone inflation data on survey data from the UK on manufacturing, service and construction sector activity.

On Additional  News

On January 2, financial markets around the globe will be closed for the New Year holiday.

On January 3, financial markets in New Zealand and Japan will stay closed for holidays.

China is to post,it’s Caixin manufacturing PMI. In the euro zone, Germany is to release preliminary inflation statistic and a report on the adjustment in the figure of people unemployed.

The U.K. is to release survey statistic on manufacturing activity.  The Institute for Supply Management is to publish data on manufacturing activity.

On January 4, the U.K. is to publish survey data on construction activity.  The euro zone is to post preliminary data on inflation.

The Fed Reserve is to post, it’s December minutes of the meeting.

On January 5, China is to post, it’s Caixin services PMI. The U.K. is to publish survey data on service sector activity.

The U.S. is to publish the ADP nonfarm payroll report and statistic on unemployed privileges. The ISM is to report on non-manufacturing activity.

On January 6, Australia is to publish trade data. Germany is to report on factory orders and retail sales.

Canada is to post its monthly jobs report together with trade data.

The U.S. is to round up the week with the closely observed report on nonfarm payrolls along with data on trade and factory orders.

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Gold Prices Decline in Asia on Investor Caution

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Gold prices decline in Asia as investors implement  caution on expectations of Fed rate hikes the approaching year and a likely stronger greenback.

On the Comex division of the New York Mercantile Exchange, delivery of gold in January dropped 0.23% to $1,140.05 a troy ounce. Silver futures plunged 0.13% to $16.068 a troy ounce, while copper futures dropped 0.24% to $2.496 a pound.

As the Bank of Japan held steady on Tuesday, as expected and indicated a little uptick in the economy.

Earlier, the Reserve Bank of Australia on Tuesday in the minutes of its recent board meeting stated “it is ready to lower the cash rate again, if needed, by assessing the benefits of lower interest rates with potential risks to household balance sheets.”

Suddenly, gold prices for February delivery established lower on a stronger greenback and residual sentiment on an expected three Fed rate hike in 2017. On Monday, Fed Chair Janet Yellen stated she sees wage development picking up and a strong job market for recent college graduates.

“While I expect workers will continue to face some challenges in the coming years, I believe, … that the job prospects and career opportunities for new graduates at this time are very good,” Yellen said in remarks prepared for the University of Baltimore’s Midyear Commencement.

Fed Chair Janet Yellen did not mention latest monetary policy or other economic conditions in her  statements that concentrated on the current situation of the job market facing the new graduates.

On Additional News

On Tuesday, crude oil prices floated weaker as investors taken profits on current gains led by plans for OPEC and non-OPEC producers to trim production by approximately 1.8 million barrels per day (bpd) and cast an eye on U.S. shale producers.

On the New York Mercantile Exchange, crude futures for February delivery drop 0.17% to $52.97 a barrel. Global benchmark Brent crude drops  0.27% to $54.88 a barrel on London’s Intercontinental Exchange.

Suddenly, crude prices dropped as U.S. oil production was poised to grow as American energy companies the previous week continued to add oil rigs, extending a seven-month drilling comeback sufficient to substitute planned production cuts by OPEC, Russia, and other producers early next year.

Delivery of Brent oil futures for February were down by 24 cents, or 0.4%, at $54.97 a barrel just before noon. U.S. West Texas Intermediate crude for January increase 6 cents, or 0.1%, to $51.96 per barrel.

“Implied U.S. output increases…will offset a significant portion of the planned OPEC production cuts especially since we don’t anticipate sustained strong compliance,” Jim Ritterbusch, president of the noted Chicago-based energy advisory firm Ritterbusch & Associates, said in a research memo to investors.

“While adherence to (OPEC) cutbacks could be quite high initially, we will be surprised by compliance much above 60% by the end of the first quarter as (U.S.) shale responds to a higher price environment.”

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