End of Month Flows Send FX Separate Ways

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Market Drivers November 29, 2016
Dollar recovers in EU trade
UK Lending data better
Nikkei -0.27% Dax -0.00%
Oil $46/bbl
Gold $1186/oz.

Europe and Asia:
EUR EZ Business and Consumer Survey 106.50 vs. 107
GBP UK Mortgage Approvals 67.5K vs. 65K

North America:

It’s been a subdued night of trade in the currency market with most of the majors contained to the same tight ranges as yesterday, but with little economic data to move prices, end of month flows were the dominant trends so far.

The euro hovered on either side of 1.0600 for most of the night as it remains near multi-month lows ahead of the marquee US NFP report due later this week. With only some business confidence data on the docket and a smattering of EZ CPI releases the eco data played no part in trading today but the pair was weaker against cable slipping below the key .8500 support once again.

In UK the lending data was better than expected with Mortgage Approvals rising to 67.5K from 65K as the housing market remains robust despite fears that Brexit would put a clamp on real estate activity. Cable was well bid in the wake of the data eyeing the 1.2500 level as the morning London dealing wore on.

Aside from US labor report, the key focus this week is the OPEC meeting tomorrow which remains shrouded in uncertainty as Saudis and Iranians grapple to come to terms on an output quota. As a result oil was lower by 2% dropping to $46/bbl while sending USDCAD to 1.3450 as the night wore on. The loonie remains one of the weakest pairs in overnight trade and should an oil deal fail to materialize it could rally to 1.3600 by the end of the week. But the pair is notoriously volatile and could quickly drop to 1.3300 on news of any agreement.

Meanwhile in US the eco focus today will be on GDP data which is forecast to come in at 3.0% versus 2.9%. This is the second revision of the data and is unlikely to have much of an impact on trade unless the adjustments deviate strongly from the forecast. USDJPY has been trading firmer in EU session rising to a high of 112.70 from a low of 111.61 hit in Tokyo dealing. Positive GDP reading along with better consumer confidence numbers could push the pair back towards the 113.00 level but it remains stalled there after a near vertical two week climb from 101.00. For now the 111.50 level remains a key support and USDJPY could push to test long term resistance at 115.00 if US data proves supportive, but with sentiment so clearly skewed to the upside and bit more corrective action may be due.

Boris Schlossberg
Managing Director

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