Market Drivers October 7, 2015
GBP through 1.5300 as better data and M&A help
Risk on fuels rallies in Commodity dollars
Nikkei 0.75% Europe 1.11%
Europe and Asia:
JPY BOJ stays on hold
EUR GE IP -1.2% vs. 0.3%
GBP IP 1.0% vs. 0.3%
CAD Building Permits 8:30
Cable came to life today breaking through the 1.5300 barrier in early London session trade as combination of renewed M&A news and better Industrial Production data helped to fuel a rally in the pair.
Ab InDev renewed its offer to buy SABMiller this time for 104 Billion dollars as the beer giant made another play to consolidate its business. The massive deal if consummated would merge the number 1 and number 2 players in the industry to create a massive conglomerate that would dominate the beer business. More importantly from an FX point of view such a transaction would create massive capital flows into cable and could support the currency for weeks to come.
The pound also benefited from better economic data as UK Industrial Production and Manufacturing Production both beat their mark printing at 1.0% vs. 0.3% and 0.5% vs, 0.4% respectively. Both of these gauges have turned up after sliding lower for the past few months suggesting that UK manufacturing may be benefiting from improved demand and better currency exchange rate.
Cable which has been badly beaten over the past few weeks dropping 8 out 9 days in a row appears to have finally found a bottom near the 1.5100 level and could begin to stage a recovery rally towards the 1.5500 level over the next few weeks.
Elsewhere the news for euro was not nearly as favorable with German Industrial Production sliding down -1.2% versus 0.3% and that may be only the start of bad news for the engine of Europe as the VW troubles are sure to weigh on data in the months to come. Euro drifted towards the 1.1225 level as the bad economic news and better risk appetite drove it lower.
Better risk flows also helped to move the commdollars with Aussie clearing 7200 kiwi rising above 6600 and loonie testing the key 1.3000 support Commodity dollars have been the stars of the show this week so far as commodity price have firmed markedly with crude trading near the $50/bbl level this morning. If equites see further gains in North American session today that rally could extend as short covering will begin to kick in in earnest.
With no data due on the US calendar today, risk flows are likely to dominate trade once again. With currencies appearing to come out of their torpor the challenge to recent range highs and lows could very well be in play as the day proceeds.