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Last week recap
United States Dollar
US Dollar Index managed to fall below the 95 mark, hitting a low of 94.79 early this morning. It seems yesterday’s disappointing retail sales data weighed down the greenback overnight against most it’s G10 peers (excluding CHF and JPY). The FOMC Meeting Minutes are due to be released tomorrow at 2PM EST. With recent US economic data missing expectations and falling equity prices, it seems the market is expecting a bearish tone.
Having said that, this morning JOLTS (Job Openings and Labor Turnover Survey) reported a 7.14M job openings which beat expectations of 6.9M and surpassed the previous month of 7.08M.
Asides from tomorrow’s Minutes Meeting, today we have FOMC Member Daly due to speak about the economic outlook today at 4:15 EST.
USD / CAD
USD / CAD Expected Range:
The Bank of Canada released its 3rd quarter Business Outlook Survey yesterday which showed Canadian businesses were optimistic for future growth. This helped the CAD get a boost of recovery across its G10 peers. At the time of the release yesterday, USD/CAD traded from 1.3051 to 1.2936 where the pair is trading around today.
We did have 2nd tier data (Foreign Securities Purchases) release this morning and missed target at 2.82B vs 10.05B expectations, but the CAD remained resilient.
The market is currently pricing in a 25BPS hike for Bank of Canada’s interest rate decision next week Wednesday and also a possibility 25BPS hike for March. Tomorrow we will only have one 2nd tier data releasing, which is Manufacturing Sales m/m.
EUR / USD
EUR / USD Expected Range:
So it has been confirmed that Italy has finally submitted its budget to the European Commission for 2019. We can all now breathe a sigh of relief and put this saga behind us. Wait, I just remembered this is only the beginning and the ramifications are likely to escalate and in all likelihood turn ugly. The European Commission is likely to reject the draft proposal and the next risk event for Italy and the Euro comes from global credit rating agencies S&P and Moody’s both of which are set to re-evaluate the status of the country’s sovereign debt. Currently this debt sits two grades above junk and it’s unlikely given Italy’s current form that the agencies will be upgrading these outlooks. But what does this mean to the Euro? Well to reiterate, Italy is hugely important to the EU. Not only is it the 2nd largest manufacturer on the continent (behind Germany) it also contributes 12% of the populations and 12% of the EU’s GDP. Unlike Greece, Italy plays a major role. On the fundamental front, Eurozone ZEW Survey in October printed at -19.4 while German ZEW Survey Expectations printed at -24.7.
GBP / USD
GBP / USD Expected Range:
Theresa May spoke in front of Parliament yesterday in an event watched by many but failed to excite anyone watching or the currency markets. Sterling jumped as much as an ECG measuring the heartbeat of a lifeless Brexit as May told the House of Commons that there had been a lot of inaccurate information about the weekend’s negotiations and that real progress had been made regarding Northern Ireland. A lot of rhetoric but not a lot of substance hence the muted reaction from sterling.
However, it’s not all misery and woe for Brexit as Theresa May meets her cabinet today to drum up more support for her Brexit Chequers plan. The latest reports are that no resignations are imminent and after today’s cabinet meeting eyes will shift to Europe for the EU Summit. On the fundamental front, Average Weekly Earnings in August printed better than expected at 2.7%, Unemployment Rate held steady at 4.0% as expected, but Employment Change in August printed worse than expected at -5K.
AUD / USD
AUD / USD Expected Range:
The Aussie dollar suffered once again yesterday and only lies around 1% off its yearly lows that we saw recently. The Reserve Bank of Australia is in no rush whatsoever to raise its interest rates and the latest minutes show the central bank holds the view that a weaker currency is likely helping economic growth. The next move in rates is likely northwards but there is ‘no strong case’ for a hike in the short term. In the meantime, the Aussie dollar will be linked to the performance of the Chinese Yuan.
Tomorrow we have Aussie employment change and unemployment rate numbers.
New Zealand Dollar
NZD / USD
NZD / USD Expected Range:
The Kiwi found itself in the green late yesterday as it surged off the back of the latest inflation figures which beat expectations. This is good news for the Kiwi as there was always a small prospect that the next action from the central bank could be a cut however these inflation numbers will shorten these chances.
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