Dollar Wobbles on NK Troubles

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Market Drivers October 10, 2017
Dollar weaker as NK makes noise again
UK data slightly better
Nikkei 0.64% Dax -0.22%
Oil $50/bbl
Gold $1289/oz.

Europe and Asia:
GBP UK IP 1.6% vs. 0.8%
GBP UK MP 0.4% vs. 0.2%
GBP UK Trade -11.5B vs. -11.2B

North America:
CAD Housing Starts 8:15
USD Eco Optimism 10:00

The dollar was slightly weaker across the board today after reports that North Korea told Russia it possessed an intercontinental missile capable of traveling 3000 km which would put it within reach of US territory.

UK/NK tensions continue to dog the dollar, especially in wake of Mr. Trump’s cryptic comments a few days ago about “calm before the storm”. Markets remain on edge ahead of any possible NK missile launch this week and that has kept the lid on USDJPY which stalled ahead of the 113.00 level and dropped to 112.40 on the latest reports. The jitteriness is likely to continue if rhetoric continues to escalate and could overshadow any economic news which remains sparse this week.

Elsewhere, in UK the eco data was surprisingly robust with both Manufacturing and Industrial Production beating their mark. MP printed at 0.4% vs. 0.2% while IP rose to 1.6% vs, 0.8%. UK Construction output increased sharply as well to 3.5% from 0,.2%. The only down note in the data dump was UK Visible Trade Balance which came in at -14.2B versus -11.25B as exports sagged. Over the past three months UK Trade balance widened by more than nearly 3B pounds to -10.8 Billion pounds.

The market, however, ignored the negative trade data and took solace in better than anticipated manufacturing production and construction numbers. Cable took out the 1.3200 figure but was capped in the move ahead of 1.3210 option expiries but would likely run those level as the day progressed if dollar weakness persisted.

With no major economic data on the docket today, the FX market is likely to take its cue from fixed income and equities flows, as US markets see their full first day of trade after the Columbus Day holiday. Any ominous tweets from President Trump could weaken the greenback further with USDJPY testing 112.00 support as risk aversion flows accelerate. For the time being the dollar remains under pressure across the board.

Boris Schlossberg
Managing Director

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