Pound Rallies; CHF, JPY Slide; Inflation Debate Grows

Summary: The Euro slid further against the US Dollar to 1.1611 from 1.1643 in choppy overnight trade. However, trading in other currencies was slower with the Greenback finishing mixed against its rivals. Sterling rose slightly to 1.3767 (1.3760) as markets continued to speculate on a rate hike by the Bank of England at it’s meeting on November 4. The Australian Dollar jumped against the Greenback to 0.7493 (0.7467), up 0.50%, and finishing as best performing FX. Ahead of tomorrow’s Australian Q3 CPI report, the antipodean Battler’s strength gained momentum. Traditional low yielders, the Japanese Yen and Swiss Franc slid against the US Dollar. The USD/JPY pair settled at 113.72 from 113.57 while USD/CHF was last at 0.9198 (0.9165 yesterday). The Dollar Index (USD/DXY) which measures the value of the Greenback against 6 major currencies edged higher to 93.82 from 93.60 yesterday. Against the Asian and Emerging Market currencies, the Dollar finished with modest losses. USD/SGD (US Dollar- Singapore Dollar) dipped to 1.3469 from 1.3475 yesterday. The Dollar slid against the Thai Baht (USD/THB) to 33.05 from 33.35. Against China’s Offshore Yuan, the Greenback (USD/CNH) was edged higher to finish at 6.3835 (6.3785). There was little in the way of economic data released yesterday. Germany’s IFO Business Climate Index for October dropped to 97.7 from 98.8, and modestly lower than median expectations at 98.0. Former US Treasury Secretary’s Larry Summers and Janet Yellen exchanged remarks on inflation in social media. Janet Yellen, the first woman to serve as the US Treasury secretary said that Summers was incorrect in the issue of inflation. Summers had earlier sounded the alarm on inflation. The benchmark US 10-year Treasury bond yield closed flat at 1.63%. The 2-year note settled with a rate of 0.43% (0.45%). Germany’s 10-year Bund yield was last at -0.12% from -0.11% yesterday.
The only other data released yesterday of note was the US Dallas Fed Manufacturing Index for October which was up 14.6 from September’s 4.6 (ACY Finlogix).

  • EUR/ USD – the shared currency extended its slump, sliding to finish at 1.1611 at the New York close. Yesterday, the Euro opened at 1.1643. Overnight the Euro fell to a low at 1.1591, while the overnight high traded was at 1.1665.
  • AUD/USD – Australia’s Battler outperformed, jumping 0.50% to 0.7494 (0.7466 yesterday). Speculative Aussie short bets continued top chase the currency higher. Australia releases its Q3 CPI report tomorrow.
  • GBP/USD – Sterling settled with modest gains at 1.3767 from 1.3760 yesterday. The British currency continued to trade sideways ahead of the Bank of England’s November 4 monetary policy meeting. Overnight the GBP/USD pair hit a high at 1.3792.
  • USD/JPY – The Dollar edged higher against the Japanese Yen to 113.72 from yesterday’s opening at 113.57. While the US 10-year bond yield was unchanged, the Greenback was stronger against the low yielding Japanese Yen.

On the Lookout: The economic data calendar remains light today. Japan kicks off today’s reports with the release of its Bank of Japan Core CPI (forecast unchanged from a previous 0.3% - Forex Factory). The UK releases its Confederation of British Industry (CBI) Distributive Trades for October (f/c 14 from previous 11). The US rounds up today’s light calendar with its US S&P Case Shiller Home Price Index for August (m/m f/c 1.5% from 1.5%; y/y f/c 20.1% from 19.9% - ACY Finlogix), US September New Home Sales (f/c 0.755 million from 0.740 million) and finally US Conference Board Consumer Confidence for October (f/c 108.8 from previous 109.3 – ACY Finlogix).

Trading Perspective: The Dollar finished mixed as it continued its sideways trade ahead of several central bank policy meetings this week. Early Thursday morning (1 am Sydney, 28 October) the Bank of Canada has its Monetary Policy meeting and Interest Rate decision. The European Central Bank meets on policy and follows with its ECB Press Conference after. There are also key economic data releases scheduled tomorrow (see above). Meantime the latest Commitment of Traders/CFTC report saw speculators continue to decrease their net-long US Dollar exposure. However, with the Fed’s tapering cycle drawing closer, expect support for the Greenback to pare any further losses.

  • AUD/USD – The Aussie Battler’s bounce failed at the 0.7500 resistance threshold despite climbing to an overnight high at 0.7505. The AUD/USD pair settled at 0.7493, up 0.5% from yesterday’s 0.7467. Speculative Aussie short bets have continued to drive the Aussie. Immediate resistance lies at 0.7505 followed by 0.7525. On the downside, support can be found at 0.7460, which was the overnight low traded. The next support can be found at 0.7430. Look to sell rallies in a likely range today between 0.7450-0.7510.
  • EUR/USD – slip sliding away. The Euro continues to underperform. European and Eurozone data of late have mostly missed forecasts and the market remains decidedly bearish on the shared currency. Immediate support for the EUR/USD pair lies at 1.1590 (overnight low traded was 1.1591). The next support level is found at 1.1570. Immediate resistance can be found at 1.1635 and 1.1665 (overnight high). Look for the Euro to consolidate in a likely range today between 1.1575-1.1655. Prefer to sell rallies.

(Source: Finlogix.com)

  • GBP/USD – Sterling bounced back from yesterday’s 1.3760 to finish at 1.3767 in late New York trade. On the day, the British Pound has immediate support at 1.3735 followed by 1.3700. Immediate resistance lies at 1.3790 (overnight high traded was 1.3791). The next resistance level is found at 1.3810. Look for the British Pound to trade in a likely range today of 1.3720-90. Sell rallies on the GBP/USD pair today.
  • USD/JPY – The Dollar rallied to close at 113.72 Yen in New York, up modestly from 113.57 yesterday. Overnight the USD/JPY pair hit a high at 113.92. Immediate resistance lies at 114.00 followed by 114.30. On the downside, immediate support can be found at 113.40 followed by 113.10. For today, expecting the USD/JPY to consolidate in a likely 113.40-90 trade. Look to trade the range on this currency pair today.

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