Market Drivers November 12, 2019
Dollar remains bid
Cable gives up gains
Nikkei 0.81% Dax 0.44%
UST 10Y 1.94%
Europe and Asia:
UK GBP Average Earnings 3.6% vs. 3.8% eyed
EU GE ZEW -2.1 vs. -13.2
USD Trump Speech 13:00
The dollar was slightly higher in steady Asian and European trade today as FX markets awaited President Trump’s speech at 1800 GMT today.
Cable gave up a big chunk of yesterday’s gains as the pair slid back towards the 1.2800 figure in the wake of softer than expected UK wage gains and news that Nigel Farage snubs Tory calls to stand down in Labor marginal districts. After yesterday’s euphoric reaction to Mr. Farage’s announcement that he was going to stand down in Tory districts, the market is reconsidering his impact on the race as the true battle in UK elections will be in the marginal districts where Mr. Farage’s influence may be weak.
Earlier in the night, kiwi dropped hard losing 40 pips in overnight trade after inflation expectations came in cooler than expected and set off speculation that the RBNZ may cut rates yet again in tonight’s interest rate announcement. The market probability of a rate cut increased to 76.4% from 64% prior.
If the RBNZ cut by another 25bp the kiwi may test the key bottom at the .6200 figure, but unless the RBNZ suggests that there are further cuts to come most of the downside has already been priced into the pair and we would not be surprised if it snaps higher post-meeting.
In North America today, the focus will be on POTUS with markets keenly interested in what Trump has to say about trade with both China and Europe. Most specifically traders are very concerned about the prospect of additional tariffs on European cars, and Trump sidesteps the issue risk assets could see a relief rally on the news. For now, the key level is 109.50 in USDJPY which needs to clear that hurdles in order to re-establish an unambiguous bullish trend. If the pair can close above that resistance then the longs will have the ammunition to run the 110.0 level as the week proceeds.