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  • Forex today was somewhat subdued as traders await the next impetus that will likely be the FOMC outside of any unexpected twists in the sagas that are boiling away on the backburner with respect to Brexit, trade, White House politics EMs and the Italian budget.  

There is still no sign of a thaw in US-China trade relations, although it was interesting that Trump said nothing new in his address to the UN General Assembly – instead he was having a pop at the Iranian regime and OPEC considering the value of Oil.  

There was the focus once again on China, (high-beta FX mostly lower/ Commodities slightly higher on the fragile greenback and high oil), and the value of the yuan supporting a mixed dollar that was bought on dips while rates continued to climb higher and data flow keep on impressing with consumer confidence beating big-time:

“Another 18-year high in September. The Conference Board measure lifted to 138.4 (mkt: 132.1; last: 134.7) in September with both current and expectations on the rise. The labour differential is at an eye-watering 32.5 (last: 30.2), quickly approaching the all-time high in the early 2000s. The inflation average was steady at 4.7%. All up the data suggests consumption should remain a key pillar for GDP growth in Q4,” analysts at ANZ  explained.  

Currency action

EUR/USD was in consolidation mode awaiting the outcome of the FOMC. The pair ranged between 1.1792/60 in NY and was up from the Europen lows down at 1.1734 whereby ECB’s Praet conflicting remarks, ( ECB not planning to speed up normalisation), and wider DE-US spreads help to sink the single unit. However, there was some optimism around the Italian budget which held the bulls out heading into the NY session as the dollar slipped below the 94 handle to a low of 93.84.  Cable was oscillating between the ever conflicting Brexit narrative and traded between a 70 pip range in European trade that narrowed to 1.3144/85 in NY trade. The risk is that Labour could support the second referendum and the possibility of early election creates additional uncertainty. The cross was slipping again down to a low of 0.8921 Ny lows from 0.8951 European highs where dollar strength in North America weighed more so on the single unit following Praet’s conflicting statements, (Growth accident’ means that growth cycle will stop – May come from rising protectionism or emerging markets slowdown). USD/JPY pushed to the line, breaking the neckline resistance while US data keeps the bid alive despite trade war risks – (consumer confidence best since Sep 2000). The spread between the JP/US is compelling and a 4th rate hike form the Fed gives the greenback the advantage and should Japan and the US show signs of confrontation as far as trade talks go, the dollar will likely garner the upper edge. The Aussie traded heavy, pressured by lower copper prices due to the trade war spat saga – A sign of more to come and hanging over the currency like a knife on a thread.  The pair traded within a modest 20 pip range during the European morning between 0.7237-0.7257, slightly in from Asia’s range but lower. NY traders attempted the upside but long wick shadows leave a bearish bias into Asia, potentially taking its cues from a weaker Kiwi following the big trade data miss that sent the bird lower towards the bears immediate objectives as the 38.2% retracement fib at 0.6624 and 50% fib at 0.66 the figure.  

Key notes from US sessison:

Key events ahead: