From TD Bank FX strategy
The first week of trading this year has seen pretty big swings in FX.
The winners in this shuffle have been the growth sensitive currencies – notably, AUD, NOK and JPY, though the latter is more about the reversal in rate differentials. It is probably no surprise that the improvement in AUD dovetails nicely with the improvement Chinese sentiment. This week saw a better-than-expected release in the Chinese manufacturing index and a two-day record low in USDCNH. The composite PMI index marked its highest level since 2013, helping to boost the tone in growth sensitive currencies. Indeed, the past week has seen the USDCNH wipe out all its gains since the US election. This backdrop is favorable for global risk but we don’t expect a sustained downturn in the broader USD.
