USD hardly reacts to swings on other markets
|The global risk-off repositioning continued with vigour yesterday as investors feared a flaring up of US China trade-tensions. Initially, the risk-off trade had only moderate impact on EUR/USD or USD/JPY. At the start of the US session, US yields and the dollar faced another forceful (temporary) setback. US 2-year yields spiked lower and the dollar suffered. The move was probably the result of both of modest ADP job growth and cautious comments from Fed's Kaplan. However, part off the risk-sell-off was reversed later. At the same time, US yields and the dollar also showed signs of intraday bottoming. EUR/USD closed at 1.1374 (from .1344). USD/JPY also closed off the intraday low at 112.68 (from 113.19 on Wednesday). Overnight, Fed's Powell in a speech maintained a positive assessment on the economy and on the US labour market. The direct impact on US yields and the dollar was modest. Most Asian equity markets try a cautious rebound after recent sell-off, but it is much too early to draw firm conclusions. The dollar is gaining marginal ground against the euro and the yen. The eco calendar contains the US payrolls today and, of lesser importance, the Michigan consumer confidence. US November payrolls growth is expected to ‘ease' to 198k (from a strong 250k). Wage growth is expected at 0.3% M/M and 3.1% Y/Y. Maybe risks are for a slightly softer payrolls report. Question is whether a mildly soft figure should cause a further decline in US yields and/or the dollar. The jury is out, but if the decline in US yields and the USD slows, it might be an indication that enough growth uncertainty is discounted after recent repositioning. This might be marginally USD supportive. That said, the repositioning in the first place occurred in the equity and interest rate markets. For now, we don't see a trigger for EUR/USD to start a new directional trend. More technical driven trading in the 1.12/1.15 range might be on the cards. The political debate preparing next week's Brexit vote in Parliament continued yesterday. All kinds of proposals/options are aired, including a delay of the vote. However, for now, visibility on the outcome of the process remains very low. In this context we expected more erratic directionless EUR/GBP trading going into the weekend. For now, we see no trigger for a sustained sterling comeback.
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