Market Drivers Nov 10, 2015

Chinse price pressure continues to decline
Rangebound trade persists
Nikkei 0.15% Europe -.22%
Oil $43/bbl
Gold $1091/oz

Europe and Asia:
CNY CPI 1.3% vs. 1.5%
CNY PPI -5.9% vs. -5.9%

North America:
USD Import Prices 8:30 AM

It’s been an exceedingly slow night of trade the currency market with most pairs just marking time as traders had no new catalysts to trigger moves. The global economic calendar wa empty for the second day in row and with little fresh information currencies simply tread water in Asian and early European trade.

The only release of note was the inflation readings out of China which showed further downward pressure on prices. The CPI reading came in at 1.3% versus 1.5% eyed while PPI declined by -5.9%. This was the 44th consecutive month of declines for PPI while the month on month CPI contracted by -0.3%.

The inflation figures dovetail with the softer Trade Balance readings over the weekend and suggest that the slowdown in the world’s second largest economy continues. The deflationary pressures are clearly a function of tepid final demand and must be a concern to policymakers in Beijing.

Neither Aussie or kiwi reacted much to the news as much of the Chinese slowdown has already been factored into their prices and both pairs are much more likely to move on domestic news this week as Australia sees the monthly job figures tomorrow while New Zealand will issue its Financial Stability report later today.

The news out of China though limited in its immediate impact on the market may have longer term implications for policy officials here, The Fed is unlikely to fully ramp up its tightening cycle in the wake of deflationary conditions in China and Europe. That’s we continue to believe that the path towards normalization will be excruciatingly slow and will depend as much on growth abroad as in the US. Therefore any hike in rates in December is likely to be tempered with communication that further rate hikes may not come for the foreseeable future.

For the time being however the pro dollar bias remains in place and the market continues to sell any rallies in the majors. Although EUR/USD has managed to hold the 1,0700 level for now, North American traders may want to test support of the figure and could try to run stops there later in the day.

With no major economic set to release in US session another rangebound grind may be in store, but any movement in equities or bonds could shake currencies out of the current topor as the day proceeds.

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