Record setting cold weather and expectations of lower oil inventories caused oil prices to jump over $61 USD a barrel, even as Iran’s Revolutionary Guard Corps said it had ended any further anti-government demonstrations. The record cold snap on the East coast has some power plants to start running low on oil supplies. While oil is not a major contributor in to the day to day supplies of electricity demands, the unprecedented cold snap has more than exceeded any expectations. Oil is expected to range between $55-$65 USD over the near term.
USDCAD 1.2512, 1.2505, 1.2498 1.2548, 1.2555, 1.2568
The Dollar has reversed course today and is higher against nearly all its major counterparts, supported by better than expected manufacturing data that highlights the continued strength of the economic cycle. The ISM manufacturing PMI rose to 59.7 last month, from 58.2 in November, boosted by a surge in new orders growth. Still to come are the minutes from the FOMC’s meeting last month that is expected to maintain an upbeat tone on the US economy.
The Pound hit a fresh 3-month high above 1.36 versus the US Dollar early in the European session, before sliding almost one percentage point due to a stronger USD and caution over a lack of catalysts for GBP strength. Construction data showed growth slowed unexpectedly for the firm since September last month.
The Euro is marginally lower across the board today with the strength of the Dollar an apparent catalyst. Comments from ECB rate-setter, Ewald Nowotny, stated that the ECB may end its stimulus program this year if the Eurozone economy continues to grow strongly to limit short-term declines occurring in Germany (see highlight).
The Canadian Dollar is relatively quiet, holding firm against its US counterpart and is supported by high oil prices.
The Oz Dollar is consolidating its recent gains and is one of the few currencies that is marginally higher against the Greenback as commodity prices continue to rally. Friday’s trade data is the only domestic release this week.
The Chinese central bank set the Dollar’s daily midpoint at 6.4920 Yuan, its highest level in more than a year and a half as the Dollar’s slide continued overnight. There are also those who believe the Chinese authorities have an additional motivation for guiding the currency higher to stop its citizens wanting to transfer money out of the country due to its depreciation in 2015 and 2016.