Forex Weekly

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Pier-Luigi Bonelli Foreign Exchange Advisor
José-Manuel Luna Foreign Exchange Advisor
Ugo Biancaniello Foreign Exchange Advisor


The US Dollar remains strong as ever even though on last Friday the US Non-Farm Payrolls report missed its mark by a wide margin with both the number of jobs added and wage growth components printing in a significantly soft fashion. Even though the report was undoubtedly a bearish one, investors were not willing to sell off the Dollar and instead the US currency ended the day stronger versus the majority of its peers. It seems that the market consensus is that regardless of the soft figures printed on Friday the Fed is on track for raising rates in December and there's virtually nothing that can change that hence the bias for the greenback is positive.

Next year's composition of the FOMC board is another reason for investors to be holding a positive outlook for the US currency. With traditionally dovish members like Kashkari and Evans coming out of the voting rotation in the next year and more hawkish voters like Williams and Mester joining the voting committee expectations are set for continued tightening. Finally, Jerome Powell's nomination to succeed Janet Yellen is considered a non-event in terms of policy change as he's expected to remain on the same path of gradual tightening as Yellen.

RBA kept the policy rate on hold as widely expected for a 15th consecutive month. There were little changes to the post-meeting statement. The bank's central forecast remains for inflation to pick up gradually as the economy strengthens, but low inflation means there is little urgency to tighten policy soon.

The new NZ government stated that the RBNZ's independence won’t change and that it will retain the existing 1-3 percent inflation goal. The new government however also confirmed that it was looking into instituting a dual mandate for the RBNZ by adding a full employment target. The weakness in NZD is overdone and some take profit on NZD/USD under 0.69.