Soft Chinese Data Weigh on Asian FX; NZ CPI Jump Lifts Kiwi, DXY Flat
Summary: Softer than expected Chinese economic data weighed on risk appetite and Asian/EMFX in Asian trade. Later in the trading day, US September Industrial Production and Capacity Utilisation both missed forecasts, with weaker reads. The Dollar Index (USD/DXY), which measures the value of the Greenback against a basket of 6 major currencies, ended flat at 93.95 (93.95). Sterling, which hit a one-month high at 1.3773 on the weekend, eased to 1.3730 in late New York. Yesterday the British currency opened at 1.3745. The Kiwi (NZD/USD) settled higher, at 0.7085 from 0.7067 yesterday. A jump in New Zealand’s Q3 CPI to 2.2% from 1.3% in Q2 boosted the Kiwi to 0.7105, near 5-week highs. The Euro edged higher to 1.1610 from 1.1600 after slipping to an overnight low at 1.1572. Oil prices slid back after hitting multi-year highs. Which lifted the USD/CAD (US Dollar vs Canadian Dollar) pair to 1.2378 (1.2363). Weaker-than-expected Canadian Housing Starts also weighed on the Loonie. The Australian Dollar was little changed at 0.7415 (0.7420). Against the Japanese Yen, the Greenback extended it’s advance to to 114.32 from 114.25. Asian and Emerging Market currencies were mostly weaker against the US Dollar. The USD/SGD pair rallied to 1.3495 from 1.3480 while USD/THB (Dollar-Thai Baht) settled at 33.47 (33.37 yesterday). Against China’s Offshore Yuan, the US Dollar (USD/CNH) dipped to 6.4290 from 6.4300.
Wall Street stocks were mixed. The DOW eased to close at 35,250 (35,297) while the S&P 500 climbed to 4,485 from 4,472 yesterday. Global bond yields edged higher. The US 10-year treasury bond rate was up two basis points to 1.59%. Germany’s 10-year Bund yield settled at -0.15%, up two basis points from -0.17% yesterday. The UK 10-year Gilt yield rose to 1.13% (1.10%). Japan’s 10-year JGB yield closed at 0.08% (0.07%). Australia’s 10-year treasury yield jumped 11 basis points to 1.74%.
Data released yesterday saw China’s Annual Q3 GDP fall to 4.9% from Q2’s 7.9%, missing estimates at 5.0%. China’s September Retail Sales rose to 4.4% from 2.5%, beating forecasts at 3.5%. Chinese Fixed Asset Investment in September slid to 7.3% from 8.9% and lower than expectations of 7.9%. Chinese Industrial Production slowed to 3.1% (y/y) in September from 5.3% in August, and lower than median forecasts at 3.9%. Canada’s September Housing Starts (y/y) slid to 251,200 from 260,000 and less than forecasts at 265,000. US September Industrial Production slid -1.3%, missing estimates at 0.3%, and lower than August’s downward revised -0.1%. US September Capacity Utilisation Rate eased to 75.2% from 76.2%, missing estimates at 76.6%.
- NZD/USD – The Kiwi settled at 0.7085 after jumping to a high yesterday at 0.7105, a near 5-week peak before easing in late New York to 0.7085 and a 0.7068 open. The spike in New Zealand’s Q3 CPI report lifted the Flightless Bird higher against the Greenback.
- GBP/USD – Sterling rallied against the US Dollar to 1.3773 after Bank of England Governor Bailey said that the recent surge in energy prices risked higher inflation expectations. Bailey was speaking at a virtual G30 International Banking Seminar. GBP/USD eased to 1.3730 from yesterday’s open at 1.3745.
- USD/JPY – The Dollar extended its advance against the Japanese Yen supported by higher US treasury bond yields. USD/JPY closed at 114.32 (114.25 open yesterday) after hitting an overnight high at 114.45.
- AUD/USD – The Aussie Battler settled at 0.7415 from yesterday’s opening at 0.7420. Overnight the AUD/USD pair slid to a low at 0.7378 before rebounding to its New York close. Overnight high traded for the Aussie was at 0.7437.
On the Lookout: Today’s economic calendar is light. The release of Australia’s RBA Monetary Policy Meeting Minutes (11.30 am Sydney) kicks off today’s calendar. Next, Switzerland releases its September Trade Balance (Surplus f/c +CHF 6.23 billion from previous +CHF 5.06 billion). Bank of England Governor Philip Bailey is scheduled to speak at an online conference on climate change jointly hosted by the Bank of England and Bank of Italy. The US releases its September Building Permits (m/m f/c 1.68 million from previous 1.721 million – ACY Finlogix), and US September Housing Starts (m/m f/c 1.62 million from a previous 1.615 million – ACY Finlogix). New Zealand releases its Global Dairy Trade Price Index early tomorrow morning (2.30 am Sydney). No forecasts given, previous was 0.0%.
Trading Perspective: Risk-on sentiment waned yesterday as the rise in energy prices continue unabated. Equities struggled with Asian stocks falling yesterday. Overnight, Wall Street was mixed with the DOW dipping while the S&P 500 edged up. In the currency markets, the US Dollar was mixed against various Rivals despite a flat Dollar Index (USD/DXY). The Kiwi, Sterling and Euro advanced against the Greenback. The Aussie was unchanged. The US Dollar advanced against the Japanese Yen, and most Asian/EMFX pairs. Today’s economic calendar is light. However various global central bank leaders are scheduled to speak at several international virtual events. That should keep traders occupied in an otherwise light economic calendar day. Consolidation will dominate early FX trade in Asia.
- USD/JPY – The USD/JPY pair continued to grind higher, settling at 114.32 (114.25 yesterday). Overnight, USD/JPY traded to 114.45 highs, which are near 3-year peaks. For today expect immediate resistance at 114.50 to halt any strong advances. The next resistance level can be found at 114.80 and then 115.10. Immediate support lies at 114.00 (overnight low traded was 114.01). The next support level can be found at 113.70. The Japanese currency was also weaker against most majors. So far, Japanese officials have been tight-lipped. However, any further pronounced Yen weakness may invite some form of BOJ verbal intervention. Likely range today 113.70-114.70. Prefer to sell USD/JPY rallies.
- GBP/USD – Sterling settled at 1.3730 US Dollars, modestly lower than yesterday’s open at 1.3745. Overnight the GBP/USD pair traded to a high at 1.3765. For today, we can find immediate resistance at 1.3770 followed by 1.3800. Immediate support lies at 1.3700 (overnight low traded was 1.3709). The next support level can be found at 1.3670. Bank of England Governor Philip Bailey is due to speak at a joint Bank of England, Bank of Italy virtual conference. We could be in for more fireworks. Likely range today, 1.3680-1.3780. Just trade the range shag on this one today. On Wednesday, the UK releases its CPI and PPI data, which could be crucial for the next move in the British currency.
- AUD/USD – The Australian Battler finished little changed against the Greenback at 0.7415 (0.7420 yesterday). Overnight the AUD/USD pair hit a peak at 0.7437. Immediate resistance can be found at 0.7440 followed by 0.7470. On the downside, we can find immediate support at 0.7380 (overnight low 0.7378) followed by 0.7350. Traders will focus on today’s release of the RBA’s last monetary policy meeting minutes. The AUD/USD pair has been trading on the sidelines, gradually advancing against the Greenback and other Rivals. Look for a likely range today of 0.7370-0.7440. Prefer to sell rallies, we may be headed south next on this currency pair.
- NZD/USD – The Kiwi settled at 0.7085 after trading to 0.7105 yesterday following the spike in New Zealand’s Q3 inflation report. New Zealand’s 10-year treasury bond yield jumped to 2.41% from 2.24% yesterday. That’s huge. Yet the NZD/USD pair eased. For today, immediate resistance for the Kiwi lies at 0.7110 followed by 0.7140. Immediate support can be found at 0.7050 (overnight low traded was 0.7049). The next support level lies at 0.7020. The Kiwi will struggle to trade much higher today. Looking to sell rallies in a likely range between 0.7035-0.7105 today.
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