Market Drivers October 25, 2019
IFO in line
Brexit at a standstill
Nikkei 0.22% Dax -0.22%
UST 10Y 1.77%
Europe and Asia:
EUR IFO 94.6 vs. 94.6
It’s been a very quiet night of trade on the last session of the week with most pairs at a standstill as newsflow was minimal while economic releases were sparse.
The only data point of note was the IFO sentiment survey which came in line and provided support for the EURUSD which rose about 20 pips off Asian session lows. As we noted yesterday the news out of Europe is not good but stopped getting worse which was good enough for euro bulls to stage a minor relief rally in the pair.
In the UK the Brexit mess remained unsettled as EU officials have yet to grant an extension to the UK insisting that Parliament call an election, while the majority of Parliament is looking for an extension offer before considering a snap election. The situation remains muddy and continues to weigh on cable which could once again test the 1.2800 figure if no progress is made today.
In North America the calendar is very quiet with only the U of M data on the docket. We think the market is much too complacent about the state of the US consumer who has shown far worse weakness in both sentiment and spending than the consensus forecast. Last night’s warning from AMZN regrading the holiday season should be a clarion call for the market that US economy is slowing far worse than expected. USDJPY has held bid above the 108.50 level on assumption of US exceptionalism but that thesis is being challenged by the data every day. Once the consensus view begins to understand that there will be no rebound in spending the pair could quickly drop to the bottom of its range. As long as it stays below 109.50 level the downside pressure will remain in place.