Market Drivers for November 4, 2013
Australian Retail Sales double expectations
UK PMI Construction at best levels since 2007
Nikkei -closed Europe 0.38%
Oil $94/bbl
Gold $1314/oz.

Europe and Asia:
AUD Retail Sales 0.8% vs. 0.4%
CNY PMI Services 56.3 vs. 55.4
GBP Construction PMI 59.4 vs. 58.9
EUR Sentix 9.3 vs. 6.6

North America:
USD Factory Orders 10:00 PM

High beta FX rebounded off its lows at the start of the week’s trade after a stop hunting expedition in early Asia session failed to push the currencies lower and better economic data from Australia, Europe and UK sparked some buying as the day progressed.

It was a generally quiet start of trade in FX this week with Japan markets closed for a holiday and an early attempt to push EURUSD below the 1.3450 mark failed to find additional sellers as bargain hunters swooped in after last week’s relentless selling in the pair. The news from Europe showed some modest improvement with EZ Sentix Investor confidence survey rising to 9.3 from 6.6 forecast and final EZ PMI Manufacturing coming in line at 51.3.

After a near 400 point selloff last week, the euro may find some support at the 1.3450 level as traders prepare for the key events later in the week including the ECB meeting on Thursday and the NFP report on Friday. Market sentiment has definitely shifted towards the dollar on the assumption that the Fed will taper sooner rather than later but data will be key to any further price action from these levels.

In the meantime investors took solace from better economic reports in Australia and UK. In Australia the Retail Sales numbers jumped 0.8% versus 0.4% eyed showing steady improvement in economic demand Down Under. The market now fully expects the RBA to remain stationary for the foreseeable future, given the pickup in consumer demand and much better housing activity data. The Aussie rallied to the 9500 level but so far has been unable to hold that barrier in the morning London trade.

Cable also performed better as the night progressed jumping to a high of 1.5966 in the aftermath of the UK Construction PMI report. The report printed better than expected at 59.4 versus 58.9 as it hit its best levels since 2007. The UK housing market has been on a torrid rise with activity now exceeding the pre-2008 crash levels and although this is the smallest sector of the economy it will nevertheless make a positive contribution to GDP this quarter.

The most important data point for the UK economy will come tomorrow with the release of the PMI Services report. If the number remains near the recent highs above the 60 level it should provide further support for the pound and help push the unit back above the 1,6000 figure.

In North America today the economic calendar is relatively quiet with only Factory orders on the docket. The focus is likely to be on Fedspeak as both Powell and Rosengren due to comment today with markets looking for any clues as to a possible early date for the taper. If both speakers remain fairly non-committal the high beta rebound could continue with EUR/USD probing 1,3550, cable looking to recapture 1.6000 and Aussie rising above 9500 as the day proceeds.

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