Mon, Oct 03, 2022 @ 08:57 GMT
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Market Overview

Sterling Broadly Lower after PM May’s Defeat in Lords

Sterling weakens broadly yesterday and is trading as the second weakest major currency for the week at the moment. The House of Lords in US passed an amended bill on Brexit yesterday after having the highest turnout since 1831. The vote was passed by 366 to 268 to add addition condition to the so called "European Union (Notification of Withdrawal) Bill". That demands a guarantee of "meaningful vote" by the Parliament on the outcome of Brexit talks. And it's seen by analysts as securing veto power on any final agreements. The bill will now return to the House of Commons for deciding whether to accept the Lord's amendments. The debate could probably held on next Monday.

Dollar Maintains Gain Despite Jump in Trade Deficit, Sterling Suffers

Dollar maintains overall gain in early US session in spite of weak trade data. Trade deficit widened to USD -48.5b in January versus expectation of USD -47.0b. That's a 9.6% rise from December's USD -44.3b and the largest figure in five years. Imports jumped 2.3% totalling USD 240.6b. Export, one the other hand, rose 0.6% to USD 192.1b. From Canada, trade surplus widened to CAD 0.81b in January. In the currency markets, Aussie remains the strongest major currency for today but momentum is unconvincing. Fresh selling is seen in Sterling as markets are starting to position for the Brexit negotiation, which should be triggered by the end of the month by prime minister Theresa May.

Aussie Higher after RBA Stands Pat, AUD/NZD Soars

Yen pared back some gains and turned mixed as risk aversion recedes. Dollar also trades mixed as traders await fresh directions. On the other hand, commodity currencies recovered in general and sentiments stabilized. Mild weakness is seen in Sterling into European session but that's yet to be confirmed. In other markets, Nikkei stays soft for most of the day and ended down -0.18% at 19344.15. That followed profit taking pull back in US overnight as DJIA closed down -0.24% at 20954.34. Gold stabilized at around 1225 and turned sideway after dipping from 1264.9 since last week. WTI crude oil also stabilized at around 53.

Yen Maintain Gains, Followed by Dollar, Politics Prevail Economics for Now

The markets trade in mild risk aversion today and the sentiments sent Yen broadly higher. Meanwhile, Dollar regains some ground from Friday's profit taking pull back. The greenback stays supported by firm expectation of a March Fed hike. Nonetheless, the moves in the forex markets are relatively limited. Politics has been a stronger drive in the forex markets, as well as others since late last year. This view is shared by the BIS too as seen in it's quarterly report. For the moment, US fiscal policies, French elections, Brexit negotiations, as well as some geopolitical development like North Korea's firing of missiles will stay as important market drivers. Dollar will look into Friday's job report for sealing the case for a Fed hike..

Yen Jumps as North Korea Fires Ballistic Missiles

The Japanese Yen jumps broadly in Asian session today on risk aversion as North Korea fired four ballistic missiles into nearby waters. Some analysts pointed out that the missile tests reminded the markets of the unpredictability of Kim Jong Un leadership. Japan prime minister Shinzo Abe warned that the missile launches "clearly show that this is a new level of threat" from North Korea". Nikkei responded by trading down around -0.5% at the time of writing and stays in red for the whole session. Yen surges against all most currencies today. In particular, USD/JPY's rejection from 114.94 near term resistance since last Friday maintains it's neutral outlook for the moment. Released in Asia, Australia TD securities inflation dropped -0.3% mom in February. Australia retail sales rose 0.4% mom in January, in line with consensus.

Dollar Jumped on March Hike Expectations, But Overwhelmed by Euro on Politics

Dollar strength dominated the forex markets most of the time last week as speculations of a Fed hike in March heated up. Markets were also relieved as US president Donald Trump's first address Congress didn't deliver anything dramatic. Stock indices surged to new record high, taking yields and Dollar up too. Nonetheless, as most of the positive factors in greenback were priced, traders took profit on Dollar long positions after Fed chair Janet Yellen's comments. And more importantly, Euro staged a U turn after polls showed that far-right French president candidate Marine Le Pen lost ground, thus reducing Frexit risks. Euro has indeed ended as the strongest major currency, followed by Swiss France and Dollar. On the other hand, Canadian dollar ended as the weakest on the sharp pull back in oil price.

Dollar Maintains Bullishness, Except Versus Euro

Dollar stays firm against most major currencies on speculations of Fed March hike. Nonetheless, the greenback trades lower against Euro as EUR/USD defended 1.0493 near term support. Fed fund futures are pricing in more than 77% chance of a March hike after a wave of hawkish comments from Fed officials. The focus will now turn to Fed chair Janet Yellen's speech, as well as that of vice chair Stanley Fischer today. Traders would be eager to get confirmation on their expectations. Meanwhile, next Friday's non-farm payroll report could be the final piece of data policymakers would watch before FOMC meeting on March 14/15.

Dollar Stays Firm as Hawkish Chorus Continued, Fed Yellen Watched Next

US equities pared back some gains overnight on profit taking after a strong run. DJIA closed down -112.58 pts, or -0.53%, at 21002.97. S&P 500 dropped -14.04 pts, or -0.59%, to close at 2381.92. Treasury yields, on the other hand, extended the rally with 10 year yield hitting at high as 2.505 before closing at 2.489. 30 year yield hit as high as 3.101 before closing at 3.082. While yields staged a strong rebound this week, it should be noted that both 10 year and 30 year yield are still bounded in medium term range set since December.

Dollar Extends Rally after Solid Job Data, Rate Speculations Continue

Dollar strengthens further in early US session after strong employment data. Initial jobless claims dropped -19k to 223k in the week ended February 25, below expectation of 245k. More importantly, that is the lowest level since March 1973 and indicates persistent healthiness in the job market. The four-week moving average dropped to 234.25k, down from 240.50k, hitting lowest since April 1973. Continuing claims rose 2k to 2.07m in the week ended February 18. The greenback is boosted by increasing speculations of a rate hike by Fed this month. Technically, the greenback took out near term resistance level against Sterling and Canadian Dollar earlier this week. While it's still limited below corresponding resistance against Euro and Yen, AUD/USD is following and broke a near term support level today.

Strong Risk Appetite Pushed Stocks to Record, Dollar Strengthened with Hesitation

Strong risk appetite boosted US markets to new record highs overnight. DJIA jumped 303.31 pts, or 1.46%, to close at 21115.55. S&P 500 rose 32.32 pts, or 1.37%, to close to 2395.96. NASDAQ also gained 78.59 pts, or 1.35%, to end at 5904.03. All three indices closed at records. Positive sentiments also pulled treasury yields higher with 10 year yield rose 0.105 to close at 2.463 and revived underlying bullishness. Dollar was boosted by increased speculation of March Fed hike as the Dollar index hitting at high at 101.97. The break of 101.76 in the dollar index confirmed resumption of recent rebound from 99.23. However, development in the currency markets doesn't warrant decisive momentum in the greenback yet. EUR/USD is held above 1.0493 support, AUD/USD above 0.7605 support. USD/CHF is limited below 1.0140 resistance and USD/JPY is held below 114.94 resistance. The strength in the greenback is more apparent in GBP/USD and USD/CAD only. More evidence is needed to confirm bullishness in the greenback.

Dollar Extends Rally as Positive Sentiments Continue

Dollar continues to ride on speculation of March rate hike and positive response to president Donald Trumps' Congress address. Released from US, personal income rose 0.4% in January while spending rose 0.2%. Headline PCE accelerated to 1.9% yoy but missed expectation of 2.0% yoy. Core PCE was unchanged at 1.7% Yoy, below expectation of 1.8% yoy. ISM manufacturing will be a key piece of data to look at and strong reading could give Dollar's rally more fuel. Fed will also release Beige Book economic report in the afternoon. For the time being, the greenback will like stay firm. Technically, 1.0493 support in EUR/USD and 114.94 resistance in USD/JPY should be watched.

Dollar Lifted by Trump Optimism and Fed Speculations

Dollar strengthens broadly as markets took US president Donald Trump's address to Congress positively. Dollar index is back at 101.60, comparing to yesterday's low at 100.78 and is having key near term resistance at 101.79 in sight. Strength in greenback is most notable against Canadian Dollar, which was dragged down by oil price yesterday. On the other hand, the Japanese Yen is sold off broadly today on return to risk appetite. Asian indices are generally higher with Nikkei gaining nearly 1.5% at the time of writing. Focus will now turn to economic data from you, including personal income and spending, and ISM manufacturing, to solidify the strength in Dollar's rebound.

Dollar Stays Mixed and Trump Awaited

Dollar continues to trade mixed in early US session. The greenback is seen weaker against European majors and Yen. Nonetheless, Dollar trades mildly up against Canadian Dollar thanks to pull back in oil price. Released from US, Q4 GDP growth was unrevised at 1.9% annualized in Q4, below expectation of 2.1%. GDP price index was revised lower to 2.1%. Trade deficit widened to USD -69.2b in January. Wholesale inventories dropped -0.1% in January. From Canada, IPPI rose 0.4% mom in January while RMPI rose 1.9% mom. Focus will turn to US president Donald Trump's address to Congress.

Dollar Unmoved by Increased March Hike Pricing

The talk of a March rate hike by Fed is heating up this week. It's reported that based on Bloomberg's world interest rate probability tool, the markets are pricing over 50% chance for a March hike. Sharply higher than around 34% a week ago. This is seen as a reaction to recent hawkish comments from Fed officials. However, reactions in markets in general are not that apparent. US equities stayed cautious with DJIA closing up 15.68 pts or 0.08% at 20837.44. S&P 500 rose 2.41 pts or 0.1% to close at 2369.75. Treasury yields recovered with 10 year yield closing up 0.052 at 2.369, but stays near to bottom of recent range. Dollar index also rose slightly, back above 101 handle but stays far enough from 101.79 near term resistance. Dollar is also trading mixed, down against Euro and Aussie for the week.

Dollar Mixed as Markets Look Past Durable Orders

Dollar continues to trade mixed after weaker than expected data. Durable goods orders grew 1.8% in January, below expectation of 1.9%. Ex-transport orders dropped -0.2% versus expectation of 0.5% growth. Traders are staying cautious ahead of the highly anticipated address to Congress by US president Donald Trump tomorrow. Trump would likely provide details on dismantling the Affordable Care Act, or so-called Obamacare. However, market's attention will be on other economic related issues. That include the long-awaited tax reform that boosted stocks to new records highs. Traders started to reposition late last week as seen in the divergence in major indices. Also the greenback pull backed back following sharp fall in yields. The greenback could be vulnerable to selloff if Trump fails to live up to expectations again.

Sterling Dips as PM May Preparing for Scottish Referendum Call

Sterling dips notably against other major currencies in an other wise rather quiet Asian session. Selloff in the Pound is seen as a reaction to news that Prime Minister May is preparing for Scotland to call for another independence referendum. And that would come as May triggers the Article 50 for Brexit negotiation with EU by the end of March. It's reported that May could agree to the vote on condition that it happens after completing the Brexit process. While Sterling weakens broadly, it's so far kept well in range against Dollar and Euro. The larger move is seen in GBP/JPY which is heading back to 138.53 support.

Yen Jumped on Falling Yields and Risk Aversion, Euro Suffered

Yield treasury yield suffered sharp selloff on Friday. 30 year yield closed below 3.000 handle at 2.955, down -0.068. 10 year yield also lost -0.071 to close at 2.317 and carried near term bearish implications. Markets are getting increasing dissatisfied on the lack of progress from US president Donald Trump's administration regarding fiscal stimulus. There was no detail on the so called "phenomenal" tax reform yet. Instead, Trump just continued his attack on media, intelligence agencies and other countries like China. There were talks that Trump could eventually deliver virtually no fiscal stimulus that has an impact of this year's growth. All eyes will turn to his address to Congress on February 28. And reactions could be even more apparent if Trump fails to deliver anything concrete. Dollar also suffered and ended the week mixed.

CAD Surges on Strong Inflation Reading

Canadian dollar surges in early US session after stronger than expected inflation data. Headline CPI jumped 0.9% mom and 2.1% yoy in January. That's way above expectation of 0.3% mom, 1.6% yoy. Meanwhile, BoC CPI core also rose 0.5% mom and pushed the annual rate higher to 1.7% yoy. The Loonie was mildly troubled by WTI crude oil's breakout failure. But much support is seen from the inflation reading. Released earlier today, UK BBA mortgage approvals rose to 44.7k in January.

Euro Recovers Mildly in Directionless Markets

Euro recovers mildly today but remains the second weakest major currency for the week, next to Swiss Franc. Dollar, on the other hand, lost momentum again. Dollar index was repelled from 101.96 resistance and is back below 101 handle. Overall, the financial markets are losing their directions. DJIA closed at another record high overnight, up 34.72 pts or 0.17%, at 20810.32. S&P 500 jumped to new high at 2368.26 but pared gains to close at 2363.81, just up 0.99 pts, or 0.04%. NASDAQ dropped for the second straight days and closed down -25.12 pts, or 0.43%. Treasury yields closed lower as recent sideway consolidation extends. Gold, however, extended recent rise to as high as 1254.8 so far today. WTI failed to break out from recent range and gyrates lower to 54.24.

Dollar Drifts Lower after Treasury Mnuchin’s Comments

Dollar drifts lower in early US session after comments from US treasury secretary Steve Mnuchin. Regarding the long awaited "phenomenal" tax overhaul, Mnuchin just said that the administration is "primarily focused on a middle income tax cut and a simplification for business." He also reiterated that "any tax cuts for the wealthy getting canceled out with closed loopholes." Mnuchin is aiming to pass the reform before Congress' recess in August. However, some analysts doubt the possibility of this due to the complex agenda of Congress. Regarding the economy, he noted that Trump's administration is aiming for "sustainable growth of 3% or more". And the he's exploring 50- and 100-year debt with "very slight premium".