CPI and Retail Sales Figures Both Miss and the Loonie Falls Across the Board.

Key Movers

The US Dollar Currency Index (DXY) continued its bullish run this week climbing a further 0.35% overnight as it extends its legs to test the 96.00 handle overnight for the first time since October 10th. Driven by the bullish release in the latest federal reserve meeting minutes on Thursday, the Philly Fed Manufacturing Index was also active as regional manufacturing activity continued to grow in October. Despite being slightly weaker than the September reading of 22.9, the text showed the factory sector is steady and has been uplifted this year by fiscal stimulus.



United States unemployment claims dropped to 210,000 for the week, a decrease of 5,000 for the week ended October 13th. Claims continue to fall to levels not seen since 1973.



With equities down across the board, USD/JPY fell overnight from weekly highs of 112.73 to 112.18 as investors moved back into safe havens assets with volatility continuing to be seen on Wall St. Existing Home Sales numbers for the US are out at 10 am EST.


The EUR fell 0.4% against the greenback overnight as Italy’s budget woes continue to weight on the shared currency. Italy was sent a “, please explain” note from the European Commission regarding the proposed Italian budget which showed a more significant deficit than previously indicated. The commission has given Italy 3 days for changes to be submitted. German 10-year yields shed four basis points on the news with the Italian 10-year also falling by 14 basis points with the spread on the two now at its highest level in over five years at 327 basis points.







The EUR/USD is now trading at weekly lows below 1.1460 as it slipped through key technical support over the last 24 hours. There is also an element of USD strength to this fall after the FOMC minutes yesterday, and US equity markets continue their slide. Italy concerns will continue to drive sentiment for the EUR and traders will be watching the delicate budget disagreement closely.








Pretty quiet on the data front, we have the Eurozone current account release which is not expected to move markets. The Euro will continue to take its cues from the Italy situation as well as offshore risk events which include China’s Q3 GDP read and a speech by BOE governor Carney out of the UK. From a technical perspective, key supports can be seen at October lows at 1.1430 while any topside moves are expected to meet resistance at 1.1480. If we do see a push through this resistance, look for the EUR to test the weekly high of 1.153


The Great British Pound edged lower through trade on Thursday falling through 1.31 as tensions surrounding a workable Irish Border solution escalate. Prime Minister May fuelled Brexit doubters declaring the EU proposal for the Irish border untenable. Falling through 1.31 and 1.3050 the pound touched 10-day lows at 1.3020 as investors’ confidence a compromise will be found wanes.



Cable remains at the mercy of headline risk and volatility, fluctuating on expectations a divorce deal will be struck in due course. While optimism surrounding the current summit has all but evaporated, there is still hope that an agreement will present itself before the March deadline. Until then we expect sterling upside to be muted with investors wary of extending gains ahead of definitive evidence a hard Brexit will be avoided.



Attention today remain with the ongoing EU summit and any signal negotiators are closing the gap in demands.


The AUD/USD pair reached a weekly low of 0.7096 by the end of the US session as risk aversion took over the market. US equities fell for a second straight day, with the selloff accelerating overnight as markets continued to assess whether the US Federal Reserve will tighten monetary policy at a faster rate than expected.





On the local data front yesterday, Australian employment report for September showed the economy added a total of 5.6K new jobs, missing the market's expectations of 15.0K. However, full-time employment was up by 20.3K, with a decline in part-time employment. Australia’s unemployment rate fell to the lowest since April 2012, printing 5.0% vs. the previous 5.3%, with the participation rate down to 65.4% from 65.7%. There are no scheduled releases for today.





From a technical perspective, the AUD/USD pair is currently trading at 0.7140. We continue to expect support to hold on moves approaching 0.7130 while now any upward push will likely meet resistance around 0.7200.


Risk-off sentiment prevailed in overnight markets, pushing the USD and JPY higher against a number of currencies. Against this backdrop, the New Zealand Dollar remained fairly resilient, sliding only marginally downwards. Opening this morning at 0.6538, the Kiwi was mostly spared of following the Chinese Yuan lower and remains well supported moving into the end of the week.