Pound retreating after the turmoil in the government of Teresa May and gold rises to 1287
The New Zealand Dollar jumped in early Asian trade after the RBNZ kept it’s OCR (Official Cash Rate) on hold at 1.75%, which was widely expected. The RBNZ said that “monetary policy will remain accommodative for a considerable period.” However, the New Zealand central bank tweaked it’s OCR slightly higher, shifting from 1.8% in June 2019, to 1.9%. NZD/USD initially rose from 0.6925 to 0.6970 before easing to 0.6960.
Sterling slumped towards one-month lows as PM Theresa May’s cabinet stood to lose a second minister in less than a week. Brexit negotiations are expected to resume today.
The Dollar Index (USD/DXY) slipped as uncertainty on the major US tax bill being passed crept up again.
China’s trade surplus came out less than expected, at CNY 254 billion from CNY 275 billion.
Canadian Building Permits climbed 3.87%, higher than the forecast gain of 0.7%.
US Crude Oil Inventories surprised with a rise of 2.2 million barrels. A fall of 2.5 million barrels had been forecast.
Global stocks and yields were mostly higher. The US S&P 500 was up 0.18% (2595.00).
The yield on the Ten Year US Treasury climbed 2 basis points to 2.33%. Germany’s Ten Year Bund yield was flat at 0.32%. New Zealand’s Ten-year bond yield jumped 7 basis points to 2.87%. The yield on the Australian Ten year bond fell to 2.57% from 2.58%.
Brent Crude Oil prices fell 0.4% on the surprise US Crude Inventory build.
USD/DXY – Index slips to 94.853 from 94.917 yesterday.
EUR/USD – little-changed at 1.1595 (1.1587 yesterday).
GBP/USD – slumps to 1.3112 from 1.3160.
NZD/USD – higher to 0.6965 from 0.6905 yesterday and 0.6925 earlier this morning.
USD/JPY – closes at 113.87 (113.87 yesterday)
AUD/USD – higher, to 0.7679 from 0.7642
Outlook: The focus is back on Washington with the passage of a major tax bill uncertain, which is a risk for the Dollar. While the Greenback is running out of positive catalysts, negatives abroad (UK political scandal) are supportive. And US yields remain firm. Yesterday we saw the Dollar trade in relatively tight ranges and we can expect similar today.
Events and economic data due today:
Japan September Core Machinery Orders, Trade and Current Account Balance: (GMT 11.50 pm, Nov 8/Local Time 10.50 am, Nov 9) forecast for Core Machinery Orders: -1.8% from 3.4%; forecast for Trade Balance (Surplus): JPY 829.5 billion from JPY 318.7 billion; forecast for Current Account Surplus: JPY 2,375.4 billion from JPY 2,380.4 billion
Australia October Home Loans: (GMT 12.30 am, Nov 9/Local Time 11.30 am, Nov 9) forecast 3.% from 1 %
China October Annual CPI and PPI: (GMT 1.30 am, Nov 9/Local Time 12.30 pm, Nov 9) forecast CPI: 1.8% from 1.6%; forecast PPI: 6.6% from 6.9%
Germany September Trade and Current Account Balance (Surplus): (GMT 7 am, Nov9/Local Time 6 pm, Nov 9) forecast for Trade Surplus: EUR 21.1 billion from EUR 21.6 billion; forecast for Current Account Surplus: EUR 25 billion from EUR 17.8 billion.
Euro Zone Economic Bulletin Report: (GMT 9 am, Nov 9/Local Time 8 pm, Nov 9)
Euro Zone Economic Growth Forecasts: (GMT 10 am, Nov 9/Local Time 9 pm, Nov 9)
ECB Coeure Speech: (GMT 10 am, Nov 9/Local Time 9 pm, Nov 9)
US Weekly Jobless Claims: (GMT 1.30 pm, Nov 9/Local Time 12.30 am, Nov 10) forecast: 231,000 from 229,000
Trading View: The uneasiness surrounding the US tax bill is preventing the Dollar Index from breaking above that 95.00/25 resistance barrier. At the same time, the yields of the Ten-year (2.33%) and two-year (1.64%) bonds remain bid.
Two year US yields are at their highest since early 2013. (See chart below)
This will keep the Dollar Index (USD/DXY) supported around the 94.50 level. This see-saw range will stay intact until something breaks.
EUR/USD – traded in a relatively tight range of 1.1580-1.1615. The 1.1615/20 level remains immediate resistance. A break above that would see 1.1640 and then 1.1670. Immediate support lies at 1.1580 and 1.1550. Today sees the release of German trade and current account data as well as the Euro Zone Growth Forecasts. This EU Growth report includes economic forecasts for Euro Zone member states over the next 2 years, covering around 180 variables. The yield differential between German and US Ten years has continued to widen from 1.77 (15 Sept) to 2.01 today. And speculators remain long for Euro. Likely range today 1.1585-1.1615. Sell rallies.
GBP/USD – Sterling slumped as Prime Minister Theresa May faced political turmoil within her government. GBP/USD traded to an overnight low of 1.3086 before rallying to 1.3112 as the US Dollar weakened. Overnight high was 1.3175. The Pound opens up in Asia at 1.3113. Immediate resistance can be found at 1.3140 and then at 1.3180. Sterling has immediate support at 1.3080 and then at 1.3040. Likely range 1.3070-1.3130.
AUD/USD – traded down to 0.76365 lows yesterday after the release of China’s trade surplus which missed expectations. The Aussie rallied on the back of the overall weaker US Dollar and rebound in metals prices. The Australian Dollar is stuck in a wider range between 0.7630 and 0.7730. For today, immediate resistance can be found at 0.7700 and then 0.7730. AUD/USD has immediate support at 0.7650 and then 0.7630. Chinese CPI and PPI data are due today and could be a catalyst for an Aussie move. Likely range today 0.7655-0.7715. Prefer to sell rallies.
NZD/USD – The market viewed the RBNZ’s tweak on the Official Cash Rate as modestly hawkish. This saw the Kiwi soar to a high of 0.6971 this morning. The RBNZ also indicated that is comfortable with the current level of the New Zealand Dollar, and that the Bird was fair value. This puts a short-term bid under the Kiwi. Kiwi Ten Year Bond yields climbed 7 basis points to 2.87% from yesterday. Let’s not forget though that we have a new Labor-led government in New Zealand whose policies are still unclear. NZD/USD has immediate resistance at 0.6990 and 0.7010. Immediate support lies at 0.6930 and 0.6900. Likely range today 0.6940-6990.
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