Euro Rebounds as Week Begins

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Market Drivers October 30, 2017
Euro rebounds as Catalonia risks ease
US Personal Spending on tap
Nikkei 0.01% Dax 0.13%
Oil $53/bbl
Gold $1271/oz.

Europe and Asia:
GBP UK Mortgage Approvals 66.23K vs. 66.05K
EUR Business Sentiment

North America:
USD PI/PS 8:30
USD PCE 8:30

It’s been a quiet start to the week with most of the FX pairs tracing out narrow ranges in early European and Asian trade as the dollar was slightly weaker and the euro mildly bid.

The EURUSD rose steadily towards 1.1640 in early European dealing as a combination of short covering, some bargain hunting and easing of political tensions in Catalonia contributed to the rebound. In Catalonia the Spanish government has started to take over control of government duties as it creates a provisional government until new elections in the region on December 21.

Over the weekend Barcelona saw massive demonstrations against the independence movement and latest polls show that support for Catalan independence has plunged to 33%. The news has given investors confidence that the independence movement will likely fail at the polls and Spanish sovereign yields declined as risk of rupture eased.

On the economic front, the calendar in Asia and Europe was very light with only UK Mortgage approvals and EZ business sentiment on the docket. None of the data was market moving and was generally ignored by the market.

Later in North America, traders will get a look at US PCE numbers and Personal Income and Personal Spending data. The PCE is expected to remain very muted with only a rise of 0.1% and a yearly reading of 1.3% – way below the Fed’s 2% inflation target. To that end Personal income and Personal spending data could prove much more interesting to the market. If Personal Income prints to forecast at 0.4% that would be the second month out of the past three that income has grown at a better than 4% annual rate. That would suggest that wages may finally see a sustained rise which would provide the market with much greater confidence that the Fed rate hike cycle in 2018 will not stall. If the number disappoints, however, US yields will likely drift lower and USDJPY could test 113.00 level as the day progresses while euro rebound moves through 1.1650 resistance.

Boris Schlossberg
Managing Director

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