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The US dollar gained some support on Thursday, but for now, it still remains in a lateral and quite narrow range according to the dynamics of the ICE index.
The reason for the strengthening the American currency was the publication of data on retail sales in the United States and the index of manufacturing activity from the Federal Reserve Bank of Philadelphia. Both indicators showed a noticeable increase in values compared with the figures of the previous reporting period.
The base retail sales index rose sharply in December by 0.7% compared to the November increase of 0.1% and growth expectations of 0.5%, which may indicate that US GDP in the fourth quarter may show growth above 2.0%, and this, in turn, will be a strong incentive to increase demand for risky assets in world markets in general and in the US stock market in particular. This probability is underscored by yesterday's publication of data on the index of industrial activity from the Federal Reserve Bank of Philadelphia. The indicator rose sharply in January to 17.0 points, while an increase of only 3.5 points was expected from 2.4 points in December. This news also fits well into the forecast for higher fourth quarter GDP, as previously anticipated.
In addition to this news, the data on China's GDP for the fourth quarter, presented early this morning, are good. Both the annual value of the indicator and its quarterly figures showed that the growth rate remained at 6.0% and 1.5%, respectively. However, the data on the volume of industrial production and retail sales turned out to be more impressive, which added in annual growth to 6.9% and 8.0%, respectively.
As a result, Asian markets reacted to this news by the rapid growth of stock indices. On the currency exchange market, the Japanese yen, which received an impulse to grow on Thursday in the wake of positive data on the US economy, continues to rally, and it looks like this trend will continue on Friday.
As for the behavior of the main euro / dollar currency pair, it is consolidating in a quite narrow range. A factor constraining its growth is the lack of certainty about what the ECB policy will be in the near future. The published protocol of the December meeting of the regulator clearly demonstrated this. In addition, an additional constraining factor is the topic of Britain's exit from the EU. The Parliament will vote on this issue on January 31.
We expect that a similar situation will be observed in the pound / dollar pair before voting in the British Parliament. We believe that the final decision on the country's exit from the EU, as well as the increase in expectations of interest rate cuts by the Bank of England will have a noticeable negative impact on the pair.
As for the dynamics of commodity and commodity currencies, they will still fully depend on the demand for oil and commodity assets. We believe that the Canadian, Australian, and New Zealand dollars will move in the ranges soon.
Forecast of the day:
The USD/JPY pair remains in a short-term upward trend. It is trading above the level of 110.10 in the wake of strong data on the US economy. Fixing the price above this level may stimulate its further growth to 111.00.
The USD/CHF pair is consolidating in the range of 0.9630-0.9650. It will continue to decline to 0.9575, if it does not grow above the level of 0.9650 and, conversely, decline below the level of 0.9630.
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