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US FX Market Open – Tuesday, October 18, 2016: Broad based Sterling gains through Europe

Posted by Marge Maresca on Oct 18, 2016 8:04:22 AM

 

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Overnight Events

• GBP/USD +0.45%, EUR/USD +0.15%, USD/JPY +0.15%
• EUR/GBP -0.6%, GBP/JPY +0.75%, GBP/CHF +0.65%
• DXY -0.05%, DAX +1.1%, Brent +0.6%, Iron -0.7%
• UK Sept CPI +1.0% y/y vs 0.6% prev, 0.9% exp
• UK Sept Core CPI +1.5% y/y vs 1.3% prev, 1.4% exp
• UK Sept RPI +2.0% y/y vs 1.8% prev, 2.0% exp
• UK Sept Core output prices +1.4% y/y vs rvsd 1.4% prev, 1.4% exp
• Brexit ‘threatens $590bn US investment in UK’ –FT
• Govt lawyer-UK Parl. Will very likely have to ratify agreement with EU when exits
• EU-UK could agree that any deal would come into effect without parl. approval
• Jpn FinMin Aso – Closely watching FX moves
• Aso-  Excess volatility, disorderly moves  would hurt economy – Rtrs
• RBA Gov Lowe – Economy adjusting well, end in sight for mining slump
• Lowe -  Commodity prices rising, weighing jobs-household debt
• Lowe - further AUD rise to complicate adj process, AUD levels suitable – Rtrs
• RBA October meeting minutes – Q3 inflation important for November rate call
• China growth has stabilized but debt still of concern – Rtrs
• Gold may regain ground in ’17 but bumpy road ahead – Reuters poll

Currency Summaries

EUR/USD  
• EUR/USD side lined today but in a slightly higher range
• Europe 1.1005-1.1024 range after 1.0986-08 in NA yesterday
• EUR/GBP long liquidation weighing
• Easier US rates underpinning: http://reut.rs/2ebT2pr
• US CPI today. Larger USD longs held into the event
• Taper talk sees bund yields up ahead Thursday's ECB meeting

USD/JPY
• USD/JPY layers of bids keeps spot afloat, 103.69-104.14 range so far
• Japanese investors & importers bids downside, exporters above
• Technical accounts continue to soak up supply
• Bids remain in size below ahead of 103.50, especially from tech accounts
• More large bids said to be ahead of 103.00 also
• Stops clustered above Fri's 104.48 high, if hit will unmask 105.00 barriers
• Ichimoku cloud props market, spans 102.35-103.52 region

EUR/CHF
• EUR/CHF back to the 1.0895 daily cloud base
• Risk on sentiment underpinning cross
• Technical support from lower 30DMa Bollinger at 1.0852
• USD/CHF consolidation at marginally lower levels
• Spot plays 0.9866-0.9893and 0.9882 into NyY
• Chart: 1) http://reut.rs/2ecomVi  2) http://reut.rs/2ec8hPh

GBP/USD
• GBP/USD rose to 1.2300 in reaction to headline from UK govt lawyer
• ‘Parliament will “very likely” have to ratify agreement with EU when UK exits’
• MPs ratifying an EU-UK agreement different to MPs voting on A50
• 1.2278 was knee-jerk high after slightly above f/c UK CPI data 4.30am ET
• 1.2273 = Asia high. 1.2220 & 1.2230 = pullback lows from 1.2273/78

USD/CAD
• USD/CAD elicited support circa 1.3065 during the European am
• 1.3065 was Monday’s very early Asia low. More bids tipped 1.3030/50
• 1.3048 = Sept 29 low. 1.3030 = Sept 23 low. 1.3084 was Asia low

AUD/USD     
• AUD/USD extended north to 0.7690 early Europe after China loans data beat
• 0.7676 was Asia high. Stops tipped above 0.7705/10 (0.7711 = Sept 29 high)

NZD/USD
• NZD/USD has extended north to 0.7207 pre-Fonterra auction
• 0.7207 = 38.2% of 0.7485 (Sept 7 high) to 0.7035 (Oct 13 low)
• Stops mooted above 0.7215-20 (0.7221 was Sept low)
• Fonterra auction result due circa 10am ET, healthy milk price rise expected

Today’s events

An expiring FX option heading into the New York Cut, if close enough to the strike price, can act as a magnet for selling/buying.  If the option is large, it can generate enough trading to move the market.  

Option Expirations(Source:ThompsonReuters)

• Vols mostly heavy as ranges hold and risk events awaited
• EUR/USD Thursday vol (ECB) 12.25/80 pips. 2.2bln 1.10 expiry today
• GBP gamma performing well of late to limit vol setbacks here
• AUD curve near 2yr lows. NZD vol preferred on RBNZ cut fears
• USD/JPY encased by big 103-104.00-50 expiries this week, vols lower

Looking Ahead - Economic Data (GMT) - (Source:ThompsonReuters)

• 12:30 CA Aug Mfg Sales mkt 0.2%, 0.1% prev
• 12:30 CPI Sep mkt +0.3% m/m, +1.5% y/y; prev +0.2%/1.1%
• 12:30 CPI ex-Food/Energy mkt +0.2% m/m, +2.3% y/y; prev +0.3%/2.3%
• 12:30 Real Avg Wkly Earnings Sep mkt +0.2% m/m, prev -0.4%
• 12:55 Redbook Wkly Same-Store Sales Index prev +0.5% y/y
• 14:00 NAHB Housing Market Index Oct mkt 63, prev 65
• 15:30 Cleveland Fed Median CPI Sep prev +0.2% m/m
• 20:00 Treasury International Capital Statistics Aug

Looking Ahead - Events, Other Releases (GMT) - (Source:ThompsonReuters)

• 15:45 FedTrade ops 30-yr Fannie Mae/Freddie Mac max $2.750 bln
• 18:00 Discount Rate meeting minutes

 

Topics: US FX Market Open

 

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