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  • Forex today was fixed on the outcome of the US elections and Trump’s rhetoric in his post-election speech and presser in the NY session.  

The dollar staged a partial comeback while US yields  initially fell in the case of the ten years from 3.23% to 3.18% in response to the US elections only to partly retraced to 3.21% in NY late.  The 2yr yield was hardly changed, by 1bp higher than pre-election at 2.94%. The Fed fund futures yields are pricing in the chance of another rate hike in December at 80% – (Fed expected to stay put on Thursday, and there will be no Summary of Economic Projections (SEP), and this will be the last FOMC meeting without a post-meeting press conference).

Currency action

EUR/USD gave up its gains in a resurgence of the DXY following investor’s relief that sent stocks through the roof on Wall Street. The DXY picked up to a high of 96.21 from a low of 95.68 while the euro fell from 1.1499 and European peaks down to a low of 1.1425 printed in NY.  The euro close in NY at 1.1439 as investors get set for the FOMC outcome of the two-day meeting that started on Wednesday looking to see whether the Fed remains hawkish. GBP/USD was resistant to the dollar’s gains and was ending NY +0.3% at 1.3140 having travelled within a  North American range of between 1.3167-1.3120. The UK is seen to be getting closer to a Brexit deal, and that is underpinning the pound in anticipation of a positive outcome. EUR/GBP, for that matter, is suffering and was ending the NY session down by just less than 0.5% at 0.8713 having moved with a range in the North America shift of between 0.8746-0.8712. USD/JPY was recovering throughout European and NY markets with global stocks riding a wave of green following the wave of Blue that swept through the House. However, the markets take was that it was an outcome to be expected and Trump’s rhetoric was upbeat on the domestic economy and unnerved over the results. USD/JPY rallied from a low of 112.94 to a high of 113.60 where it ended in North America at 113.54. AUD/USD was pretty much sideways and only gave back around 70 pips despite the rally in the greenback while US stocks propped up the risk on feel that supports the antipodeans and commodity complex while AUD/JPY also acted as a buffer, rallying on positive risk appetite. AUD/USD fell from 0.73 the figure to a low of 0.7227. Eyes will be back to China and US trade relations and the Yuan. The Kiwi was mixed on the RBNZ that seems as though will allow the economy to run hot before acting despite a series of positive data turnouts of late that include CPI, GDP and unemployment all beating expectations. The Kiwi climbed from 0.6773 to a high of 0.6810.  

Key notes from US session:

  • Trump’s Mid-Term Election press conference fresh rolling comments: We will work together with Democrats
  • Wall Street closes within a sea of green, and Trump didn’t seem so ‘blue’ after all
  • RBNZ: let the economy run hot   – TDS

Key events ahead; (analysts at Westpac offered their outlook for the day ahead):

“China’s Oct trade balance has plenty of potential to surprise, given potential distortions from the timing of US tariffs and the week-long holidays at the start of October. The Sep surplus was $31.7bn, with both imports and exports up sharply. We will also see Philippines Q3 GDP (f/c 6.2%yr) and see the Bank Negara Malaysia policy decision, which should be no change, at 3.25%.

The FOMC decision is fully expected to be a steady hand at 2.00-2.25% and there is no press conference nor updated forecasts. This leaves the interest in any changes in the wording of the fairly brief and formulaic statement. The meeting was scheduled a day later than usual due to the elections.”