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Quiet Open in FX

Peter Rosenstreich Chief FX Analyst

Market Brief

G10 Advancers and Decliners vs USD
NZD 0.49
CAD 0.26
AUD 0.18
SEK 0.17
GBP 0.15
NOK 0.14
DKK 0.12
EUR 0.11
JPY 0.08
CHF 0.01
Global Indexes Current Level % Change
Nikkei 225 Index 18438.67 0
Hang Seng Index 22631.73 0.76
Shanghai Index 3290.93 3.38
FTSE futures 6416.16 0.62
DAX futures 10096.6 1.03
SMI Futures 8680.21 0.06
DJIA futures 17804 0
Global Indexes Current Level % Change
Gold 1166.58 0.8
Silver 15.98 0.85
VIX 17.08 -1.96
Crude wti 50.1 0.94
USD Index 94.76 -0.05

Risk appetite opened stronger in the Asian session. Regional equity indices were broadly higher on good Chinese data and expectations for the Fed to delay hikes. The Shanghai composite rose 3.06% and Shenzhen composite increased 4.10%, pulling the Hang Seng up 0.92%. Japanese markets were closed for holidays. In the FX markets, the USD was sold-off as emerging market and commodity currencies continued to attract bargain hunters. Fed Reserve Vice Chairman Stanley Fischer sounded hawkish, stating that policymakers are still likely to raise interest rates this year. He added that this view was contingent on the global economy, which could push the US economy off course. Markets shrugged off Fischer’s hawkish view. EURUSD climbed to 1.1378 from 1.1354 as Mario Draghi suggested that ECB’s quantitative-easing program is working well, decreasing the likelihood of additional easing. As quoted in Bloomberg, ECB president Mario Draghi commented that the ECB QE program was working better than anticipated, despite having taken longer to reach the intended inflation goal. In an interview he stated: “It presently appears that it will take somewhat longer than previously anticipated for inflation to come back to, and stabilize around, levels that we consider sufficiently close to 2%,” and this was due primarily to the sizeable fall in oil prices. The current trend of ECB speak seems focused on breaking the market’s view that more easing is a forgone conclusion. However, subdued European data suggest that an extension of current program is in fact likely.

NZDUSD rose to 0.6707 from 0.6673 as REINZ house sales increased 38.3%y/y, down from previous increase of 41.7%. A softer read but still a very solid number as national median house prices set a new record at NZ$484,650. With markets closed (US bond market holiday) US yields curves were unchanged as the 10yr trsy yields held at 2.08%. Commodity prices remain firm, led by a recovery in copper, gold and oil prices (helped by Glencore's announcement to sell copper mines in Australia and Chile). Sentiment has clearly shifted in the commodity complex as opinion leader are now talking about having hit the bottom in prices.  

Over the weekend, the PBoC announced plans to expand its credit asset pledged lending program. The program would increase from original two to ten provinces. This program creates a procedure for banks to obtain liquidity from the PBoC. The expanded program should limit worries of a liquidity squeeze on banks and support general risk appetite. This move potentially triggered the PBoC deputy governor to indicate that China's stock markets corrections were “almost over.” The PBoC fixed USDCNY 87 pips lower at 6.3406, while USDCNY fell to 6.3218.

With the US on holiday for Columbus Day and a lack of first-tier data, trading activity will be subdued. Participates will be focused on unfolding events in the commodity markets. Despite dire warning, oil prices continue to find demand as US drillers cut oil rig production for a sixth straight week, suggesting that the bull trend might not be finished. In the US markets, we will hear from a batch of Fed members Atlanta Fed President Lockhart, Chicago Fed President Evans and Fed Governor Brainard. The rate markets is now pricing in a March interest rate hike (61% no hike in Dec). With fear of a near term Fed hike now gone investor demand for high yielding beta currencies should continue.

 

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Today's Calendar Estimates Previous Country / GMT
NZ Sep REINZ House Sales YoY - 41.70% NZD / 22:00
AU Aug Credit Card Purchases - 2.47E+10 AUD / 00:30
AU Aug Credit Card Balances - 5.05E+10 AUD / 00:30
SZ 3Q Real Estate Index Family Homes - 447 CHF / 05:09
SW Sep PES Unemployment Rate - 4.30% SEK / 06:00
SZ 09.oct. Total Sight Deposits - 4.65E+11 CHF / 07:00
SZ 09.oct. Domestic Sight Deposits - 3.99E+11 CHF / 07:00
DE Sep CPI MoM 0.30% -0.30% DKK / 07:00
DE Sep CPI YoY 0.50% 0.50% DKK / 07:00
DE Sep CPI EU Harmonized MoM 0.30% -0.30% DKK / 07:00
DE Sep CPI EU Harmonized YoY 0.40% 0.30% DKK / 07:00
NZ Sep Food Prices MoM - -0.50% NZD / 21:45
Currency Tech
EURUSD
R 2: 1.1561
R 1: 1.1330
CURRENT: 1.1305
S 1: 1.1017
S 2: 1.0809

GBPUSD
R 2: 1.5659
R 1: 1.5383
CURRENT: 1.5366
S 1: 1.5089
S 2: 1.4960

USDJPY
R 2: 125.86
R 1: 121.75
CURRENT: 120.15
S 1: 118.61
S 2: 116.18

USDCHF
R 2: 1.0240
R 1: 0.9903
CURRENT: 0.9644
S 1: 0.9513
S 2: 0.9259
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