Gold is settling above 1290 and the pound is rising after European comments on Brexit
The US Dollar finished mostly higher against its Rivals after the release of better-than-expected PPI and Jobless Claims data. Although the Dollar Index (USD/DXY) ended with modest gains, the currency divide widened. Sterling was up in choppy trade following the fortunes of current Brexit negotiations. The Euro slipped after Mario Draghi said that the ECB didn’t see sufficient progress on wage inflation. The Australian and New Zealand Dollar rose on stronger metals prices.
US Headline PPI printed at 0.4%, the same as most analysts predicted
US Core PPI rose to 0.4%, higher than the 0.2% most analysts had forecast
US Jobless Claims fell to 243,000 against a forecast of 251,000 and a previous 258,000. The Jobless Claims was the lowest total since the two hurricanes hit the US.
Wall Street stocks slipped on poor earnings. The US S&P 500 was down 0.24%.
Global yields were mostly lower. The yield on the US Ten Year Note closed down 2 basis points to 2.32%. Germany’s Ten Year Bund yielded 0.44% at the close (0.46 % yesterday).
USD/DXY – closed up 0.13% at 93.081 (93.020)
GBP/USD – higher to 1.3262 from 1.32187 yesterday.
EUR/USD – lower, ends at 1.1833 (1.1853)
AUD/USD – rallies to 0.7824 from 0.7785 yesterday.
USD/JPY – little-changed, ends at 112.27 (112.38 yesterday)
NZD/USD – up, finishes at 0.7132 from 0.7077 yesterday.
Outlook: Currencies were all over the place with mixed fortunes in volatile trade. The modest rise in the Dollar Index (USD/DXY) was mainly due to a lower Euro (57.6% weight) and a 0.9% drop in the Swedish Krona (4.2% weight). Sterling was all over the place, reacting to the Brexit negotiation process. GBP/USD slumped on news that Britain’s divorce payment had become deadlocked. The Pound then spiked 100 pips after a report said that the EU may offer the UK a two-year transitional Brexit deal. The Aussie and Kiwi rose after metals prices rebounded.
Traders will turn their focus on the US CPI data due later today for the latest clue on inflation.
On the US political front, the outlook for Trump’s tax reform has become cloudy. The selection for the next Federal Reserve head is also coming into focus.
In Europe, Spain celebrated its national day yesterday as fears on the Catalan independence move subsided.
Events and economic data due today:
Australia – RBA Financial Stability Review: (GMT 12.30 am, Oct 13/Local Time 11.30 am, Oct 13)
China – Trade Balance, Imports and Exports and Direct Foreign Investment: (GMT 2 am, Oct 13/Local Time 1 pm, Oct 13): forecast for Trade Balance: Surplus of CNY 266 billion (USD 38.4 billion) from CNY 287 billion (USD 42.08 billion); forecast for Exports: 8.8% from 5.5%: forecast for Imports: 13.5% from 13.3%; previous Direct Foreign Investment: -0.2%
US Headline, Core CPI, Retail and Core Retail Sales: (GMT 12.30 pm, Oct 13/Local Time 11.30 pm, Oct 13): forecast for Headline CPI: 0.6% from 0.4%; forecast for Core CPI: 0.2% from 0.2%; forecast for Retail Sales: 1.7% from -0.2%; forecast for Core Retail Sales: 0.9% from 0.2%
Trading View: The move lower for the US Dollar following last week’s payrolls data was a natural correction. Markets will look for fresh signals and with the focus on today’s US CPI data. Much of the Dollar’s strong gains in September came on the back of political uncertainty in Europe, New Zealand and Japan. In Japan, the ruling coalition seems to have things under control with recent polls supporting them. In New Zealand, it's a case of no news is good news… for now. In Spain, political fears were put aside with the country celebrating their national day without incident. The secession move has not ceased and the future is still cloudy.
EUR/USD – slipped to close at 1.1833 after trading overnight to strong resistance at 1.1880. Mario Draghi took the wind out of the Euro’s sails on his remarks. Another sign that he is not comfortable with the Euro up here. EUR/USD has immediate support at 1.1820 and then at 1.1800. The bounce off 1.1670 may have ended at 1.1880. Which paves the way for another attempt at 1.1670. Immediate resistance lies at 1.1870 and 1.1880. Likely range today 1.1800-1.1850. Look to sell rallies.
GBP/USD – had a volatile ride before closing higher, prisoner to the fortunes of Brexit negotiations. Sterling slumped to an overnight low of 1.3121 before jumping to a high of 1.3290 and finally settling at 1.3260 at the close. GBP/USD has immediate resistance at 1.3290 and 1.3310. Immediate support lies at 1.3230 and then 1.3210. Expect more choppy trading for the Pound in the days ahead. Keep in mind that the speculative traders are now long of Sterling (for the first time in 2 years). Likely range today 1.3200-80. Selling rallies still the preferred strategy.
USD/JPY – drifting lower after the failure to break above 113.00. USD/JPY trading was slow. The overall range was 40 pips. And there is no reason to expect that to change just yet. Immediate resistance lies at 112.50/60 while immediate support can be found at 112.00 and 111.80. Likely range today 111.80-112.40.
AUD/USD – had a good bounce off the 0.7780 level (0.7783 overnight low) supported by a rebound in metals prices and an overall lethargic US Dollar. The Aussie has immediate resistance at 0.7840/50 (overnight high was 0.7836). Immediate support lies at 0.7800 and then at 0.7780. The speculative market is still long of Aussie. Likely range 0.7790-0.7830. Look to sell rallies.
NZD/USD – strong relief rally pushed the Kiwi back to 0.7146 highs last night. The stronger Aussie and metals prices supported the Kiwi. The political uncertainty from the election seems to have faded for now. There is immediate resistance at 0.7150 and then 0.7170. Immediate support lies at 0.7100/10. Likely range today 0.7105-45. Sell rallies the way to go.
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