The Dollar is holding steady and the Canadian Dollar is awaiting today’s BOC meeting and interest rate decision
The US Dollar was steady, finishing mixed against a basket of currencies. Prospects for fresh Fed leadership and further signs that the US economy strengthened this month boosted bond yields. The Euro rallied on market expectations that the ECB would announce a taper in their meeting tomorrow. The Kiwi slumped to a fresh 5 months low against the Greenback. New Zealand’s Labour led government said it has plans to review and reform the Central Bank act.
German Flash Manufacturing PMI rose to 60.5 against a forecast 60.1 while Services slipped to55.2 from 55.6.
In the Euro Zone, manufacturing PMI rose to 58.6 from 58.1. Euro Zone services PMI missed at 54.9 against a forecast of 55.7 and a previous 55.8.
US Flash Manufacturing PMI rose to 54.5 from 53.1. US Services PMI also improved to 55.9 from 55.3 and a forecast of 55.2.
Global bond yields rose. The yield on the benchmark US Ten Year Treasury rose 5 basis points to 2.42%. Germany’s Ten Year Bund yield rose to 0.47% from 0.43% while Japan’s 10 year JGB yield closed at 0.06%, unchanged from yesterday.
Strong US earnings reports propelled the DOW up 0.72% to fresh record highs.
USD/DXY – steadies, up 0.07% to 93.928 (93.846 yesterday).
EUR/USD – rallies 0.2% to 1.1762 at the close (1.1750 yesterday)
USD/JPY – higher to 113.82 from 113.50.
GBP/USD – falls to end at 1.3126 from 1.3202 yesterday
AUD/USD – lower at close to 0.7782 (0.7807 yesterday)
NZD/USD – slumps to 0.6903 from 0.6968.
Outlook: The Dollar managed to hold near two-week highs ahead of central bank meetings which begin today. Markets are focussed on the narrative of the Fed Chair position where 5 candidates are in the running. Hopes that the US Congress will pass a package of tax cuts were dimmed on reports that 3 Republican senators may not back Trump’s plan. Markets will focus on the economic data which will pick up today. The Bank of Canada, Norway’s Norges Bank, and Sweden’s Riksbank all have their policy meetings later on today.
Events and economic data releases today:
Australia Headline and Trimmed Means CPI (Q3): (GMT 12.30 am, Oct 25, 11.30 am, Oct 25): forecast for Headline Q3 CPI (Q/Q): 0.8% from 0.2%; forecast for Headline Q3 CPI (Y/Y): 2.0% from 1.9%; forecast for Q3 Trimmed Means CPI (Q/Q): 0.5% from 0.5%; forecast for Q3 Trimmed Means CPI (Y/Y): 2.0% from 1.8%
UK Preliminary Q3 GDP: GMT 8.30 am/Local Time 7.30 pm, Oct 25): forecast for Q3 GDP (Q/Q): 0.3% from 0.3%; forecast for Q3 GDP (Y/Y): 1.4% from 1.5%
US September Headline and Core Durable Goods Orders: (GMT 12.30 pm, Oct 25/Local Time 11.30 pm, Oct 25): forecast for Headline DGO: 1.0% from 2.0%; forecast for Core DGO: 0.5% from 0.5%.
Bank of Canada Policy Meeting, Rate Statement and Monetary Policy Report: (GMT 2 pm, Oct 25/Local Time 1 am, Oct 26): The Bank of Canada is expected to keep it’s benchmark Overnight rate at 1.00%.
Bank of Canada Press Conference: (GMT 3.15 pm, Oct 25/Local Time 2.15 am, Oct 26)
Trading View: Ahead of the economic data releases tonight we can expect the Dollar to remain steady. Position adjustments will dominate trade. Markets will keep their focus on the Fed chair issue as well as US lawmakers and tax legislation. US yields continue to drive higher but the politics remain a risk.
The Dollar Index (USD/DXY) traded to an overnight high of 93.992. The technical resistance at 94.00/20 needs to be overcome for a test higher.
EUR/USD – closed higher at 1.1763 from 1.1750 yesterday. The overnight low traded was 1.17428 yesterday which is higher than Monday’s low of 1.1725. Markets are expecting an announcement from the ECB to taper. Spain’s political woes receded to the background once again. Some analysts are predicting that the impact on the Euro from political uncertainty in Spain and Italy will be nowhere near to that of what it was with France. That remains to be seen. We may see a squeeze higher as the strong support level at 1.1730 held. Immediate resistance lies at 1.1790/1.1800 while immediate support can be found at 1.1740. The Euro remains a sell on rallies, ideally above 1.1800. Likely range today 1.1740-1.1800.
AUD/USD – fell under the weight of its southern cousin the Kiwi and strong US Dollar. Today sees the release of Australian Q3 Headline and Trimmed Means CPI data. The RBA’s preferred inflation reading is the Trimmed Means CPI, the quarterly reading is expected flat at 0.5%. Annual Trimmed Means CPI is forecast to rise to 2.0% from 1.8%. Headline CPI (Q/Q) is forecast to rise to 0.8% from 0.2%. A rise in the annual Trimmed Means CPI above 2.0% would see the Aussie trade higher. If the numbers come out as expected or even lower, the pressure will remain on the downside of the Aussie. AUD/USD has resistance at 0.7810 and then 0.7840. Immediate support lies at 0.7770 (overnight low) and then at 0.7740. Likely range today 0.7770-0.7820. Look to sell rallies in the Aussie.
NZD/USD – slumped to an overnight low of 0.6886, fresh five-month lows. Reports that the Labour-led Coalition government would review and reform the Central Bank Act to include employment alongside inflation as a dual target sunk the Kiwi. NZD/USD has lost almost 5% since Labour came to power. Concerns have risen that the new government would have a harder stance on
foreign investment and immigration. While concerns are real, this remains to be seen. The Kiwi has immediate support at 0.6885 and then at 0.6850. Immediate resistance can be found at .6950 and 0.6980. Likely range today 0.6890-0.6940.
GBP/USD – continues to slide lower toward the 1.30 area. Hopes of a rise in UK interest rates have faded with the rhetoric from officials less hawkish of late. Brexit negotiations remain a risk until the actual results are in. GBP/USD has immediate support at 1.3090 and at 1.3050. Immediate resistance can be found at 1.3150 and 1.3190. Likely range 1.3110-1.3160. Look to sell rallies.
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