The US dollar gives up gains after better economic news in the UK and Australia
Thursday 1 November, 2018
Daily Currency UpdateAfter the US dollar edged up to a fresh 16-month high against a basket of key currencies on Wednesday on the back of continued U.S. economic strength, the US dollar slipped overnight in an explicit correction compared with currencies like the British Pound or Aussie dollar.
The initial job claims came in line at 214,000 and the non-farm productivity for the third quarter was at 2.2%, which was in line with expectations.
The ADP national employment report on Wednesday showed that the U.S. private sector payrolls increased by the most in eight months in October, suggesting overall job growth accelerated this month after Hurricane Florence weighed on restaurant and retail employment in September. However, the USD Chicago Purchasing Manager in October decreased to 58.4 vs. the 60 forecast.
The technical levels to consider for today in the USD dollar index are 96.40 on the downside and 96.85 on the upside.
Key MoversThe Canadian dollar did not have economic data to show yesterday or today; however, the Governor of the Bank of Canada, Poloz, had an opening statement at the Standing Senate Committee on Banking, Trade, and Commerce. He repeated what he said in the House of Commons two days ago: the BoC will need to raise its rate to be neutral to achieve the inflation target.
Poloz said that even with last week’s increase of the policy rate to 1.75 percent, monetary policy remains stimulative. According to him, the policy rate today is still negative in real terms or when adjusted for inflation. Poloz mentioned that the policy rate would need to rise to neutral to achieve the BoC’s inflation target and that an appropriate pace of increase will depend on their assessment at each fixed announcement date on how the outlook for inflation and related risks is evolving.
On the release front, tomorrow will be a busy day with the employment change in October, the unemployment rate in October, the trade balance in September, among other factors.
The technical levels to consider for today in the USDCAD are 1.3060 on the downside and 1.3111 on the upside.
On the release front, there were no German or Eurozone events; it’s a quiet day data-wise from the Eurozone with many countries observing the All Saints Day bank holiday. However, a stronger risk appetite on Thursday has boosted the European stock markets as well as the Euro.
Italian budget concerns continue to weigh on the Euro; however, there is downward pressure on the Euro, which is guided by the news that the German Chancellor, Angela Merkel, will not seek another term in charge after 2021. Merkel has been one of the keenest advocates of holding the Euro together since the financial crisis. The perceived loss of stability in European politics after she departs has worried investors.
The technical levels to consider for today in the EUR USD are 1.1340 on the downside and 1.1425 on the upside.
A few minutes ago, the GBP/USD started to retreat from a rally of over 1.33% after the Bank of England kept its interest rate at 0.75%.
The cable had rallied initially after Britain’s Brexit Secretary, Dominic Raab said that a divorce deal could be reached with the European Union at the end of November.
Dominic Raab will possibly be appearing before a Brexit committee on November 21st if all falls into place.
On top that, a report published in The Times overnight claimed that Theresa May had struck a deal with the EU with regards to the keeping all-important financial services in the UK.
The technical levels to consider for today in the GBP USD are 1.2890 on the downside and 1.2950 on the upside.
On the release side, Australia had good news, and it pushed the Aussie dollar to 0.7183 versus the US dollar; almost a gain of 1.60%. The main catalyst was the trade surplus, which was the third largest on record, printing A$ 3,017 million vs. expected at A$ 1,700 million. This result was on the back of export values rising by 1% with non-rural goods up 3% and rural goods up 1% (import values also fell by 1% with large aircraft orders in August unwinding).
Looking ahead, the Ichthys project has commenced its export of LNG - its ramp-up should support the trade balance over the near-term. Greater fiscal support in China should also support prices. Iron ore has risen by more than 20% since July.
The technical levels to consider for today in the AUDUSD are 0.7119 on the downside and 0.7215 on the upside.
NZD/USD added 1.74% to 0.6631 with gains being driven by links to the Aussie dollar and some related FX derivatives between these two currencies in the FX international markets, according to FX traders based in Asia and Bloomberg.
ANZ job ads gained 5.8% year over year based on three-month moving average, vs. 6% in September. Also, house-price inflation quickens to 5.4% year over year in October from 4.6%
For next week, wage data and RBNZ 2 year inflation expectations are released, including the Reverse Bank of New Zealand’ cash rate announcement.
The technical levels to consider for today in the NZDUSD are 0.6575 on the downside and 0.6695 on the upside.
- USD/CAD: 1.3060 - 1.3111 ▼
- EUR/USD: 1.1340 - 1.1425 ▲
- GBP/USD: 1.2890 - 1.2950 ▲
- AUD/USD: 0.7119 - 0.7215 ▲
- NZD/USD: 0.6600 - 0.6695 ▲