Dollar rises after progress on tax plan, Gold rises after missile launch by North Korea
The Dollar Index (USD/DXY) ended higher in choppy, headline news dominated trading. Reports that North Korea launched a missile into Japan waters saw the Yen rise while stocks initially fell. Wall Street then rallied to fresh records, the Dollar extended gains while the Yen fell back as the US Senate took a big step toward tax reform. Fed chair-elect Jerome Powell said that the case for a December rate hike is coming together in his confirmation hearing before the Senate. Sterling jumped against the US Dollar and Euro after the UK’s Telegraph reported that the EU and UK have reached a deal on the Brexit “divorce bill”.
The US Conference Board’s Consumer Confidence Index rose to 129.5, higher expectations of 123.9 and the previous 126.2
Wall Street stocks advanced, closing on fresh records. The US Dow was up 1.09% to 23,837 (23,586 yesterday). The S&P 500 rose 0.88% to 2626 (2602).
The yield on the US Ten Year Treasury was steady at 2.33% (2.33% yesterday). Germany’s Ten Year Bund yield was flat at 0.34%. Australia’s Ten-year bond yield was down 3 basis points at 2.49%.
USD/DXY – higher, ends up 0.36% at 93.234 (92.915 yesterday)
EUR/USD – lower, closes at 1.1840 against 1.1900 yesterday.
USD/JPY – settles at 111.38 currently. After initially dropping to 111.185, the Dollar jumped to 111.631 on the tax reform news.
GBP/USD – settled higher 1.3365 after Telegraph report on an agreement of the Brexit “divorce bill” between the EU and UK.
AUD/USD – mildly lower to 0.7597 (0.7608). Metals prices were lower led by a 1.9% decline in Copper prices
Outlook: The Dollar’s turnaround began after a strong US consumer confidence reading (the highest level in 17 years). Federal Reserve Chair Jerome Powell re-affirmed his predecessor’s view on a likely December rate hike. And tax reform took a huge step forward with the Senate budget committee advancing the Republican tax bill. North Korea’s launch of a missile into Japanese waters initially roiled markets with stocks falling and the Yen rising. This was quickly reversed at the New York close as the news of steps toward US tax reform lifted markets. Trading was choppy in the last hour. We can expect more today.
The tax bill faces a marathon debate which begins tomorrow.
Events and economic data releases are light today:
UK October Consumer Credit and Mortgage Approvals: (GMT 9.30 am, Nov 29/Local Time 8.30 pm, Nov 29) forecast for Consumer Credit: GBP 1.5 billion from GBP 1.606 billion; forecast for Mortgage Approvals: 65,000 from 66,000
Euro-Zone Business Climate, Industrial Confidence Index, and Economic Sentiment Indicator: (GMT 10 am, Nov 29/Local Time 9 pm, Nov 29) forecast for EZ Business Climate: 1.53 from 1.44; forecast for Industrial Confidence: 8.7 from 7.9; forecast for Economic Sentiment: 114.6 from 114.0
German Preliminary CPI (GMT 1 pm, Nov 29/ Local Time 12 am, Nov 30) forecast: 0.2 from -0.1; forecast for annual rate: 1.7% from 1.5%
US Annualised Q3 GDP: (GMT 1.30 pm, Nov 29/Local Time 12.30 am, Nov 30) forecast: 3.2% from 3.0%
Bank of England Governor Mark Carney speaks to the Fixed Income, Currencies and Commodities Markets Standards Board in London (GMT 2 pm, Nov 29/Local Time 1 am, Nov 30)
Trading View: The Dollar has caught another bid enabling it to rally against most of its Rivals. The US economy remains on a positive course supported by recent strong data. US Federal Reserve elects Jerome Powell is not about to change the current status quo at the Fed. While the US Senate has taken a big step toward tax reform, it is still a long way from actual realisation. North Korea’s firing of a missile into Japanese territory is the first strike after a two and a half month hiatus. While the Dollar has rallied against most of its Rivals, US bond yields were basically unchanged.
Euro Zone economic data are released later with Euro Zone Economic sentiment and business climate reading. Germany releases its preliminary CPI.
Annualised Q3 US GDP is also released later today.
Trading was choppy into the last hour of New York trading today on the headline news releases. Even Sterling had its own dose of headline trading. We can expect more of the same. The Dollar though is on a more solid footing.
USD/DXY – held the 92.50/80 support area closing just above 93.20. Immediate resistance now lies at 93.50 with support found at 93.00.
EUR/USD – fell against the US Dollar and Sterling. The Euro traded to a low of 1.1827 earlier this morning before steadying at 1.1847 currently. EUR/USD broke through the support at 1.1870/80 which is the immediate resistance for today. Immediate support lies just above this morning’s low of 1.1830. Likely range today 1.1820-1.1860. Look to sell rallies. Speculative positioning will have a strong impact on the Euro moving forward in these turbulent markets.
GBP/USD – turbulent trade within a 1.3221 and 1.3387 range, eventually settling at 1.3355 this morning. Sterling initially fell under the weight of ongoing Brexit negotiation concerns. The British Pound then jumped following the report from the UK Telegraph that an agreement between the European Union and the UK on the “divorce bill’ had been struck. The negotiations have been around the financial settlement which was reported to be in the region of between EUR 45 to EUR 55 billion. A British official has since cast doubt on the report but Sterling has held on to most of its gains. GBP/USD has immediate resistance at 1.3380/90 and then 1.3410. Immediate support can be found at 1.3320 and 1.3300. Likely range today 1.3330-1.3380.
USD/JPY – had its own dose of volatility with the news of the North Korean missile launch affecting late trade. USD/JPY traded down to 110.93 last night, recovering to 111.35 just before the missile news. USD/JPY then dropped back to 111.15. News of the US Senate taking steps toward tax reform saw the Dollar spike up to 111.63 Yen. USD/JPY has immediate resistance at 111.70. Immediate support lies at 111.20. Likely range today 111.10-111.80. Look to sell rallies.
AUD/USD – slip-sliding away but oh so slowly. AUD/USD closed at 0.7598 from 0.7608 yesterday. We can expect more of this grinding move lower. Copper prices fell close to 2 percent last night leading most metals lower. The yield differential between Australian and US yields continues to widen. Last night the yield on the Australian Ten year bond was at 2.49%, three basis points lower. The US Ten Year bond yield was unchanged at 2.34%. That’s narrowed down to 0.15 from almost 0.30 from the beginning of this month alone. AUD/USD has immediate resistance at 0.7640 and 0.7670. Immediate support can be found at 0.7580 and 0.7570. Likely range 0.7575-0.7625. Look to sell rallies.
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