- Forex today had the greenback on the defensive yet again while sentiment remains fragile in the aftermath of last week's rout.
- US retail sales disappointed with a muted 0.1% increase.
Analysts at TD Securities note that the US retail sales surprised to the downside in September with a muted 0.1% increase (TD: 0.9%, market: 0.6%). "Motor vehicles made a sizeable contribution on a 0.8% gain but gasoline sales were a drag, which could be partly explained by hurricane effects. Core retail sales were less downbeat with the control group posting a 0.5% increase (TD: 0.5%, market: 0.4%)."
Currency action
EUR/USD was higher despite the adverse political developments in Germany, with the Merkel coalition damaged by the Bavaria elections. Instead, a lower dollar was enabling the euro bulls to step up to the key resistance zone once again up at the 1.16 handle. US retail sales missed on the headline and the dollar remains out of favour, threatening to break and hold below the 95 handle. However, the dollar firmed later in the North American day and the pair was unable to capitalise below the 21-D SMA. Cable was recovering from the bearish gap made at the start of the week in Asia and rallied to 1.3182 although the highs were shortlived as Brexit angst continues to weigh. There was the news that Theresa May was unable to offer political sign-off on the draft. "Accounts vary, but it looks like the EU is willing to accept the UK's proposal of a UK-wide customs union backstop, but only as a secondary backstop to the originally-proposed Irish backstop. The UK opposes this, though we note that it could be a compromise that gives the EU coverage to agree to a time limit in the original backstop," analysts at TD Securities explained. GBP/USD ending in NY pretty much flat on the day at 1.3150, having travelled with the range of 1.3182-1.3127. The cross was ending the same session higher by +0.17% at 0.8802 and within the day's range of between 0.8796-0.8823. USD/JPY was all about derisking yet again with a new short-term low scored down at 111.60 which is a significant technical level turned supportive, made up of the August low and the 61.8% of the Aug-Sept rise. As for the Aussie, the commodity complex was performing well and the dollar not so. AUD/USD rode the greenback's weakness all the way to 0.7150, extending its recovery down at 0.7040. The pair was initially buoyed by broad US$ weakness but was also taking its cues from weakness in USD/CNH - eyes turn to the RBA minutes and Chinese CPI.
Key notes:
Wall Street fails to stick to recovery gains, ends day lower
Key events ahead:
RBA minutes and Chinese CPI. "A rise in pork prices will be counterbalanced to some extent by lower vegetable prices. However, underlying inflation pressure remains on an upward trajectory and we expect September CPI to rise to 2.4% y/y from 2.3% y/y in August. Despite the increase we expect PBoC to continue with its policy of targeted easing," analysts at TD Securities explained.
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