Wed, Nov 20, 2019 @ 17:37 GMT
Dollar is trading as the weakest major currency for the week. Dovish comments from Fed officials are weighing on the greenback. Also stocks and yield played catch up after holding and suffered notable lost. DOW closed down -1.07% at 21753.31. 10 year yield dropped through last week's low, losing -0.087 to close at 2.070. 2.0 handle is starting to look vulnerable as recent decline extends.
Market sentiments continue to stabilize today with European indices trading mixed. DAX is trading up 0.55% at the time of writing, CAC flat and FTSE down -0.1%. US futures point to a mildly lower open as markets come back from holiday. In the currency markets, Yen is firm against most currency except Aussie and Kiwi. But Swiss Franc is trading broadly lower as risk aversion recedes. Euro and Dollar are trading as the second and third weakest for the day so far. In other markets, gold pares back some gain but maintains near term bullishness for a take on 1350 handle later in the week. WTI crude oil staging a strong rebound and is back above 48. Strength in oil might start to life Canadian Dollar later in the session.
The Japan yen remains firm across the board on mild risk aversion. It's reported that North Korea is quietly moving another intercontinental ballistic missile towards its west coast, readying for another launch by the end of the week. But market reaction is relatively muted. There is no follow through buying seen in neither Yen or Swiss Franc. With the exception of USD/CAD, most pairs are still bounded in familiar range as consolidations continue. Aussie strengthens mildly after RBA stands pat, but similar to most others, AUD/USD is stuck in range trading for the moment. In other markets, Nikkei trades in red again today and is down -0.5% at the time of writing. Gold stays firm at around 1340/5 and could take on 1350 handle later in the week. WTI crude oil is mildly higher but struggles to get rid of 55 day EMA at 47.5.
The news is huge but the reactions in the markets are relatively mild. Quick escalation in North Korea tension over the weekend triggered selloff in global equity markets. Nikkei suffered much by dropping -0.93% to 19508.25, closing close to intraday low at 19479.40. While European stocks follow, FTSE is back at 7410 after dipping to 7404, down -0.37% at the time of writing. DAX dropped to 10050 but it's back at 12118, down only -0.20%. CAC, similarly, dips to 5088.28 but is back at 5109, down -0.28%. In the currency markets, no follow through buying is seen in Japanese Yen and Swiss Franc after initial gap up. The more decisive movement is found in gold, which jumps to as high as 1345.5 and is trading above 1340, up fro than 0.75%.
Yen and Swiss Franc gap up as the week starts while Dollar and Aussie trade broadly lower. Nikkei tumbles in early trading and is down -170 pts at the time of writing. Gold resumes recent rally and surges to as high as 1343.5. Korea tension resurfaces as North Korea conducted a sixth nuclear test on Sunday. It's believed that this one, an advanced hydrogen bomb or a long-range missile, is of a significantly larger scale and more powerful, as an Pyongyang described the underground explosion in a televised statement that it's a "perfect success in the test of a hydrogen bomb for an ICBM". And, "the creditability of the operation of the nuclear warhead is fully guaranteed." It's even claimed that the detonation of the bomb triggered an initial magnitude 6.3 earthquake in the northern part of North Korea. The United Nations Security Council was set to meet later on today to discuss fresh sanctions against the country.
Dollar survived the geopolitical risks in Korea peninsula, damage of hurricane Harvey, and a set of disappointing non-farm payroll data, to end the week "mixed". While the pull back in EUR/USD caught much attention, we'd like the point out that Dollar ended the week lower against Canadian Dollar, Australian Dollar and Sterling. Indeed, the pound ended as the third strongest major currency, next to Canadian Dollar, even though the third round of Brexit negotiations ended with no concrete progress but more verbal exchanges between EU and UK officials. On the other hand, as risk aversion came and went quickly, Yen and Swiss Franc ended as the weakest ones, just next to Kiwi. Traders could take a brief rest on Monday as US and Canada will be on holiday. But three central bank meetings, RBA, BoC and ECB promise much volatility ahead.
Dollar is back under selling pressure in early US session after all the way bad non-farm payroll report. NFP showed only 156k growth in August, below expectation of 180k. Prior month's figure was revised down from 209k to 189k. Unemployment rate rose to 4.4%, up from 4.3%. And more disappointingly, average hourly earnings grew a mere 0.1% mom, below expectation of 0.2% mom and slowed from prior month's 0.3% mom. EUR/USD took out 1.1928 minor resistance and should have completed this week's pull back. Further rise is now in favor through 1.2 handle back to retest 1.2069 high. USD/CAD dives through 1.2412 low and is now resuming medium term down trend. US will also release ISM manufacturing later today but it's unlikely to help the greenback.
Dollar lost some momentum after yesterday's sharp rebound, as markets are waiting employment data from US. Non-farm payroll report is expected to show 180k growth in August while unemployment rate is expected to be unchanged at 4.3%. Wage growth is also a key to watch and average hourly earnings are expected to rise 0.2% mom. It's clearly that Fed will announce the plan to unwind its balance sheet later this month. The main question for all market participants is whether Fed will hike again this year. Fed fund futures are only pricing in 36.9% chance of another hike in December. Stronger than expected NFP numbers might lift the pricing a little. But Fed policy makers would still need to see evidence that inflation is back on track before making another move.
Sharp pull back in Euro and strong rebound in the Dollar are the main themes in the forex markets today. The common currency is weighed down by reports that "unnamed" ECB officials are concerned with its strength. And ECB might opt to "muddle" through the September meeting instead of announcing some solid tapering plan. That's more that offset the supposed positive boost from stronger than expected Eurozone CPI. On the other hand, Dollar continues to regain grounds as supported by positive economic data. Nonetheless, Canadian Dollar is indeed the strongest one today as lifted by stronger than expected GDP growth. New Zealand Dollar stays the weakest but Sterling catching up as another round of Brexit negotiation is concluded without any progress.
Dollar is trading firm is Asian session today and maintains overnight gains inspired by positive ADP and GDP data. That was accompanied mild strength in stocks, with DOW closed up 0.12%. 10 year yield also edged higher by gaining 0.007 to 2.143. Dollar index dived to as low as 91.62 yesterday but seems to be getting strong support fro 91.91/3 key level and rebounded. The key will lie in tomorrow's non-farm payroll report. As risk aversion eased, Yen is trading in red against all other major currencies for the week, except Canadian Dollar. Gold also pares back much of this week's gain and is back pressing 1300, after hitting as high as 1331.9 earlier in the week. The Loonie is weighed down by weakness in oil price which sees WTI dips to as low as 45.58.
Dollar's rebound gathers additional steam in early US session after better than expected job data. AFP report showed 237k growth in private sector employment in August, beating expectation of 188k. Q2 GDP growth was also revised up to 3.0% annualized, up from 2.6% and beat expectation of 2.7%. Besides, US President Trump will finally kick-off his campaign on tax reform today. Trump will deliver a speech in Springfield, Missouri, and will likely tout the tax reform as a way to help the working class as well as the middle class. If the speech is consistent with Trump's usual rhetorics, it will likely focus on the "why" aspects of the reform. However, the markets would be more interested in know the "how" aspects of it. Nonetheless, for now, Dollar selling is likely past a climax and more upside is mildly in favor, at least until non-farm payroll release on Friday.
Risk appetite returned as DOW staged the a 200 points swing in the biggest intraday comeback in near nine months overnight. Major indices ended higher with DOW gained 0.26%, S&P 500 rose 0.08% and NASDAQ added 0.30%. 10 year yield dived to as low as 2.091 but pared back much losses to close down -0.023 at 2.136. Dollar also stabilized and recovered after intraday selloff. Some analysts attributed the rebound to the lack of escalation out of US regarding North Korea's firing of missile over Japan. US President just said that all options are on the table, without any follow up. Nikkei follows by gaining near to 100 pts in Asia at the time of writing. Gold also retreated from intraday high at 1331.9 and is back below 1320.
Risk aversion dominates the global financial markets as geopolitical tension in Korea Peninsula escalates to a tipping point. North Korea fired a missile over Japan to land in the Pacific Ocean. Japan condemned the act as "an unprecedented, serious and significant threat. US warned that "all options are on the table". Nikkei responded by closing down -0.45% at 19362.55. Major European indices are trading deep in red with FTSE down -1.1%, DAX down -1.7% and CAC down -1.3%. US futures also point to sharply lower open. Gold rides on the sentiment and extends this week's rally, accelerating to as high as 1331.9 so far. In the currency markets, Dollar trades as the weakest ones, followed by commodity currencies and Sterling. Swiss Franc is leading the way up, followed by Yen.
Yen surges broadly, together with Swiss Franc, on risk aversion as tension in the Koreas escalates again. North Korea fired a missile earlier today that flew over Japan and landed in the Pacific Ocean. South Korea military official said that the missile was fired around 5:57 a.m. local time, flew for about 2700 km and reached a maximum altitude of 550 km. US Pacific Command projected that the missile splashed down at around 6:29 a.m. local time. The news sent Yen higher as investors there repatriates their overseas investments on fear of market and exchange rate volatility. USD/JPY dives through 108.59 support to as low as 108.33 and recent selloff resumes. Commodity currencies are hit hardest while Euro is mixed. The news also sent gold sharply higher to 1330 after it takes out of 1300 handle firmly yesterday.
Sterling recovers broadly today as markets are looking at the third round of Brexit negotiation between UK and EU in Brussels.. There are talks that selloff of the Pound is overdone, in particular against Euro. Technically that's a valid view as the cross, currently at 0.9240, is reasonably close enough to key resistance level at 0.9304 (2016 high). But the recovery in the Pound is so far rather weak and it's staying near term bearish against Euro, Dollar and Yen. There are still a lot of uncertainties over the outcome of Brexit and we believed that the worst is not priced in yet. There might be renewed selling in Sterling should there be no positive news coming our from the Brexit negotiators.
The forex markets are pretty steady in range as another week starts, as usual. Euro surged to highest in more than two years against Dollar last week as aftermath of Jackson Hole symposium. The common currency retreats mildly today but remains firm across the board. Focus will turn back to economic data this week first, in particular job data from US. So far, EUR/USD is in health up trend to take on 1.2 handle next. Attention will be on UK and EU and another round of Brexit negotiation starts. In response to the criticism on lack of clear positions, Prime Minister Theresa May's government released seven policy papers ahead of the meeting. And officials on both sides would have to expedite their work in order to make enough progress to start the talks on post Brexit trade agreements in October. EUR/GBP is facing 0.9304 key resistance for the moment. Negative news out of the negotiation could power the cross through this level.
Dollar ended the week as a big loser after the highly anticipated Jackson Hole Symposium. It was pointed out before that there were little expectations for comments on monetary policies from Fed Chair Janet Yellen and ECB President Mario Draghi. And the reactions indeed showed that traders were relieved by the lack on cover on monetary policies. And business returned to usual with EUR/USD resuming recent up trend while Dollar was back under pressure. While Dollar still managed to end higher against Yen, near term outlook remained bearish in USD/JPY and it's just a matter of time to see downside breakout in the pair. Focus will now turn to key economic data including non-farm payroll from US but it's unlikely to safe the Dollar. Another focus to watch this week is another round of Brexit negotiation.
Trading remains relatively subdued as markets await speeches of Fed chair Janet Yellen and ECB President Mario Draghi at Jackson Hole symposium today. Yen is trading generally lower following mild come back in risk appetite. Major European indices are in positive zone while US futures point to higher open. On the other hand, dollar is trading broadly lower as comments from Fed officials in the symposium continue to show division on views on December hike. Sterling is trading mildly higher today but remains one of the weakest over the week. Released in US, durable goods orders dropped -6.8% in July, below expectation of -5.8%. Ex-transport orders, however, rose 0.5%, above expectation of 0.4%.
The financial markets are generally holding their breath as speeches of Fed Chair Janet Yellen and ECB President Mario Draghi at the Jackson Hole Symposiums are awaited. The occasion is seen in recent years as a platform to launch monetary policy shifts. But this time, neither Yellen nor Draghi is expected to deliver anything drastic regarding monetary policy in near term. At the same time, this could also be Yellen's last address at Jackson Hole since it's uncertain whether she will be granted another term by US President Donald Trump, after the current one expires in February. Yellen might make use of the speech on financial stability to lay down from ground work for the future and leave some legacy.
The markets are lacking a clear direction for the moment as traders await the highly anticipated Jackson Hole symposium of global central bankers. Sterling is the notably weaker one this week but there is no follow through selling seen today. The pound is trying to recovery against Dollar, Euro as well as Yen. EUR/USD is still staying in range below 1.1908 as recent consolidation extends. Some strength is seen in Canadian Dollar today as USD/CAD dips through 1.2525 temporary low. That could be thanks to WTI oil's recovery back above 48. Gold is also hovering in tight range below 1300.
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