Market Drivers Nov 04, 2015

UK PMI Services slightly better
AU Retails spending on track
Nikkei 1.30% Europe 0.57%
Oil $47/bbl
Gold $1116/oz

Europe and Asia:
AUD Retail Sales 0.4% as forecast
AUD Trade Balance -2.32B vs. -2.85B
GBP Services PMI 54.9 vs. 54.6

North America:
USD ADP 8:15

USD Trade Balave 8:30

USD ISM Services 10:00

USD Yellen testimony 10:00

Currencies remained in relatively tight ranges in Asian and early European trade today with the greenback continuing to see some momentum as it gained ground against the euro, the yen and the commodity dollars.

In Asian session trade it was the tale of two cities as New Zealand data missed its mark while reports from Australia came in slightly better than expected suggesting that overall demand Down Under is not showing any signs of collapsing.

In New Zealand the quarter on quarter decline in employment change which came in at -0.4% versus 0.4% eyed came as a shocker to the market and the kiwi was promptly marked down below the 6650 level and has yet to show any signs of recovery in European trade. In contrast, the Australian Retail sales showed a healthy 0.4% gain while the Trade Balance data showed a smaller than expected deficit of -2.32B versus 2.85B forecast.

The Australian economy remains surprisingly resilient despite the collapse in demand from the mining sector which has seen significant slowdown from China. Today’s news lends credence to RBA current monetary view that rates will remain unchanged unless conditions deteriorate markedly In New Zealand however, the RBNZ may consider a rate cut by year end given the fact that dairy auction prices have fallen to their lowest level in three months threatening future income streams and perhaps exacerbating the worsening employment climate.

AUD/NZD has rallied off 1.0600 support over the past few days and today sharp rise towards 1.0800 figure suggest that the pair may push higher to test resistance at the key 1.1000 level over the near term horizon.

Elsewhere, the only data point of note was the UK PMI services report which came in at 54.9 versus 54.6 eyed but cable post news rally quickly fizzled at the 1.5450 level as the pair returned to 1.5400. While growth rate strengthened it remained relatively subdued and the new order sub component remained at 29 month lows indicating that there was little reason for BOE to expedite its plans. On the one true positive note for cable bulls employment rose to its fastest pace since May and it would be interesting to see if that translates into stronger wage growth going forward.

In North America the calendar is packed with ADP, ISM Non -Manufacturing and Fed Chair Yellen’s testimony in front of Congress. Ms. Yellen’s testimony may not have much market impact as it is about regulatory issues and she is likely to dodge questions about policy in this venue. However, both ADP and ISM will provide clues to the all important NFP report this Friday and as such could move currency pairs significantly with USD/JPY testing 121.50 and EUR/USD 1.0900 if the data proves supportive to the buck.

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