- Forex today saw fresh highs for DXY and a small rise in US yields while US consumer confidence dipped in November to 135.7, matching consensus expectations.
- US equities eeked out a positive day after spending the start of the day in the red, unscathed despite the latest threats from Washington to impose more tariffs on China and tariffs on all foreign imports of auto other than Canada and Mexico.
The FX space on Tuesday was feeling out the barriers on the build-up to Fed Powell’s speech tonight and the anticipated Xi/Trump summit at the end of the week. The greenback was carving out fresh highs to 97.50 while chipping away above the 61.8% Fibo of the mid-Nov decline to recent lows at 97.06, piercing the 78.6% Fibo at 97.34 and ending the North American session there. As for US yields, the US 10yr treasury yield rose from 3.05% to 3.07%, while 2yr yields rose from 2.82% to 2.84%.
In US data, consumer confidence dropped in November to 135.7, as expected. However, this did little to divert attention away from the fact that we have seen five consecutive months of gains that lifted sentiment to 18-year highs.
“US equities were not too ruffled by President Trump’s latest threat to impose more tariffs on China and conflicting comments from US and Chinese officials, the S&P500 up 0.5%. Brent crude again fell below $60 but recovered,” analysts at Westpac explained.
The single currency was under pressure, entering the North American session -0.09% in European trade and fell from 1.1345 to 1.1280. The euro gave out to trade below the 1.1314 61.8% Fibo level, ( 1.1216 to 1.1472 November rise). The move was all related to the dollar’s resurgence and the prospect of a Xi/Trump meeting at the end of the week to discuss trade. There was an initial bid from just above 1.13 the figure on sentiment that the Italian government signalled room to trim the deficit for 2019, but nothing was confirmed. However, conflicting headlines over whether there had already been a confirmation that Xi/Trump will call a truce sent the euro into a tailspin as the dollar picked up the bid. EUR/USD ended the North American session at 1.1284. Cable was under pressure following Trump’s negativity about UK PM May’s Brexit deal proposal which many expect that the Commons will reject on Dec 11th when she seeks approval from UK Parliament. There had been a correction on the way down from 1.2733 to an NY high of 1.2776 but supply came in again and the pair was faded. GBP/USD fell from 1.2816 to a low of 1.2725 and ended NY trade at 1.2744. EUR/GBP was showing some good two-way business once again caught up in dollar flows, geopolitical and European political angst. The cross initially rallied from 0.8849 on the European handover from the Asian session where the cross had been building a bid since levels down at 0.8834 until a high of 0.8887 in late European trade. There, the cross was sold into and sent crashing to a low of 0.8855 before a reversion to 0.8872 played out. However, it was a chop from there on and the cross ranged between 0.8872 and an NY session low of 0.8852. EUR/GBP closed at 0.8859. Once again, the moves were pertaining to political angst and dollar flows. USD/JPY rose from 113.45 to 113.85 while AUD fell from 0.7250 to 0.7200. The commodity sector was in trouble on Tuesday in anticipation of Xi/Trump’s summit at the end of the week which was creating demand for the greenback ahead of Powell’s speech tonight at the Economic Club of New York where traders will be looking to see if he bows to the recently less hawkish sentiment surrounding the Fed’s path of tightening. WTI was continuing to bleed which pressured the CRB index back below the 179 handle and ultimately weighed on the Aussie. However, as stocks corrected, the Aussie managed to squeeze out a bid from 0.7199 to test the 21-hr SMA at 0.7228 where the Aussie closed. Within the sell-off in commodities, metal prices were losing ground. Gold settled on Comex at $1,213.40/oz, down $9, or 0.7% while spot made a low of $1,211 and closed the NY session at $1,214. Meanwhile, the Dow Jones Industrial Average added 108.49 points, or 0.44%, to settle at 24,748.73 and just about headed back into positive territory for 2018 meeting the 23.6% fibo and 10-D SMA confluence.
Key notes from the US session:
Wall Street recovers early losses, closes with moderate gains
Key events ahead:
There is a void slated for Asia but Fed Chair Powell speaks on “The Federal Reserve’s Framework for Monitoring Financial Stability” at the Economic Club of New York in the US sesison and we also have the BoE publishing its Financial Stability Report. the BoE will also be releasing results of its annual stress test of major U.K. banks, followed by Mark Carney who will provide a briefing.