US Dollar ends year near 12-year high, appreciation likely to continue

Enrique Díaz-Álvarez04/Jan/2016Currency Updates

In a quiet week in the financial markets the Greenback once again rose against every one of its peers.

The rally ranged from a marginal 0.01% against the Japanese Yen to a significant 2% against the Norwegian Krona, weighed down by continued weakness in the price of oil. This rally gives Dollar sellers a good opportunity to take advantage of favourable market conditions.

Beyond the currency markets, commodities again showed signs that a bottom has been reached, while stocks drifted lower, albeit without much conviction.

We expect activity to pick up gradually this week.

Major currencies in detail:


In a week marked by the complete absence of economic or policy news out of the UK, Sterling tracked almost tick by tick the moves of the Euro versus the US Dollar to end down a bit over 1% against both currencies.

This week we’ll pay very close attention to the key PMI business sentiment indices for manufacturing, construction and services. We expect all of them to remain near their recent levels, which would validate our view of steady 2.5-3% growth during 2016.


The Eurozone also had an extremely quiet week in terms of economic releases. This week we expect the final estimate of the PMI business surveys for December, Eurozone unemployment and, critically, inflation data for December. These will be key indicators with regard to the state of the Eurozone economy as we move into 2016.

The Spanish data released last week came in at a lower-than-expected -0.1%, which seems to introduce some downside risk for the aggregate number out next week. This would add to the pressures on the European Central Bank to opt for more aggressive policy measures to bring inflation back up to its target, and would therefore weigh down the common currency.


The US was the only major economic area to release news of some importance during the last week of 2015, although none of the indicators that came out were quite first tier.

The trade deficit came out more or less as expected, home prices continued the kind of single-digit subdued appreciation that the Federal Reserve likes to see, and weekly jobless claims ticked up modestly, although it is not clear to what extent this has to do with holiday calendar effects.

All in all, not much to change our view of steady growth and expected quarter-point rate hikes per annual quarter by the Fed for the next two years. Therefore, the Dollar is likely to continue to gradually appreciate against its major peers.


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Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.