Strong US Q3 GDP could not extend USD gains

USD gains, but looks to be no more than near term exhaustion. More gains set vs JPY, but may have run its course vs EUR and CAD for now.  GBP could not recover on healthy growth stats – consolidation at best here.  

Much of the action has been in the latter part of the week, but with some developments coming through in the early stages. All of this has been to the eventual benefit of the USD, but all with the prospect of the US Q3 GDP figures underscoring a rate hike from the Fed by the end of year. US yields have been well bid throughout, pushing against highs seen earlier in the year to see the greenback clawing steady gains against its major counterparts.  However, once the growth stats revealed a higher than expected 2.9% read (vs 2.5% consensus), the USD reaction was all but bemusing pulling back off better levels, though tentatively so as yet.  USD/JPY looks to have run out of steam ahead of 105.50, but not before taking out strong selling interest either side of 105.00. USD/CAD also reversed sharply from 1.3400+. EUR/USD eventually based out at 1.0850, and after some hesitation, managed to reclaim 1.0900, maintain the focus on 1.0950 resistance despite Friday’s numbers.  Bunds have been pulling back to warrant this to a degree, but once again, overstretched levels have been largely behind the fresh upturn. For GBP, the impact of the healthy growth stats have shown that the Pound is unlikely to get any respite unless we get some form of softening in the prospective EU negotiations ahead. Rising by +0.5% vs 0.3% expected, we saw Cable push through 1.2250, but extend a mere 20 ticks before sellers were back in force. We have since tested down to 1.2110-15, and this was down to news that the North Ireland High Court has rejected the govt right to vote on Article 50. Bids held firm, but it looks just a matter of time before we do test lower, with EUR/GBP finding strong bids into .8900 and now setting up for a move back through .9000 and beyond.  The BoE next week is not expected to produce any change in policy as the MPC will be pleased on the latest data run, but it will be interesting to hear any comments on currency levels due to the undesirable effect on inflation and therefore a heavily led consumer economy.  The midweek FOMC meeting will arguably be the main event of the week, but various members have been quick to suggest that a move on rates will likely (have to) be accompanied by a press conference, which has effectively switched the focus onto Dec.  The BoJ and RBA are also due to meet next week, with both expected to stay on hold, though some (very) outside calls for the RBA to ease given the core inflation data remained low. The headline rate was higher than expected, promoting AUD to rise to .7700, but selling interest just above here has been quick to hammer home the true value of the data – especially in light of the weak jobs report last week.  Data wise, US payrolls dominate at the end of the week, but ISM manufacturing PMIs, EU CPI, UK services PMIs and Canadian GDP (and unemployment) all stand out also.