USD / DXY eases, Euro bounces, Asian / EMFX close is mixed
Summary: The Australian dollar held above the 0.7500 (0.7517) mark ahead of the RBA’s monetary policy meeting and rate announcement today (Sydney, 2:30 p.m.). Australia’s central bank is the first of two other major central banks (Federal Reserve and Bank of England) to meet on interest rates this week. While the RBA has said it will not raise interest rates until 2024, many analysts and traders have disputed this claim.
Elsewhere, the Dollar Index (USD / DXY), which measures the value of the greenback against a basket of 6 major currencies, fell 0.25% to 93.87 (94.14 yesterday). Over the weekend, the Dollar Index hit its highest level since mid-October. US data released yesterday saw the US ISM Manufacturing PMI in October decline to 60.8 from 61.1 in September. Traders took profits on their net speculative long USD positions as the position adjusted. The euro rebounded to 1.1607 from 1.1562 despite a larger than expected drop in German retail sales. The British pound dipped to 1.3660 from 1.3692. USD / JPY was stable at 114.00 after trading overnight and nearly two weeks high at 114.44. Against Asian and emerging market currencies, the dollar was mixed. At the New York close, USD / SGD was at 1.3480 versus 1.3485 yesterday. USD / CNH closed at 6.3945 (6.4055). The USD / THB (US dollar-Thai baht) held steady at 33.28. Global bond yields have stabilized. The yield on the US 10-year benchmark note was 1.56% (1.55% yesterday). The 10-year German Bund yield rose 3 basis points to 1.06%. After rising sharply yesterday by 25 basis points to 2.08%, the Australian 10-year Treasury bond rate fell to 1.89%. Wall Street shares were mixed. The DOW climbed to 35,912 from 35,852. The S&P 500 was little changed at 4,612 (4,610).
Data released yesterday saw AIG Australia manufacturing PMI fall to 50.4 in October from 51.2 in September (no forecast was given). The Australian Commonwealth Bank’s October PMI index rose to 58.2 from 57.3 previously, and the forecast is 57.3. Japan’s October Jibun Bank Manufacturing PMI was up to 53.2 from 53.0 previously. Australian September mortgage loans fell to -2.7%, the missing estimate to -2.0%. Australian ANZ job advertisements climbed to 6.2% in October, from 2.8% in September. China’s Caixin October manufacturing PMI was up to 50.6, beating estimates at 50. Germany’s September retail sales fell (m / m) to -0.9% from 0. 4% and (y / y) at -2.5% against 1.1%. UK October Manufacturing PMI hit 57.8, beating previous estimates and 57.7. The October Markit US Manufacturing PMI fell to 58.4 from 59.2 previously, lower than estimates at 59.2. Construction spending in the United States in September fell to -0.5% from 0%, which is lower than the median forecast at 0.5%.
- AUD / USD – The Australian dollar settled with little change at 0.7517 from 0.7520 yesterday. Overnight AUD / USD traded at 0.7536 while overnight low was 0.7486. On Friday, the Aussie Battler hit a high of 0.7555 after a sharp rise in Australian bond yields, which all fell overnight.
- EUR / USD – the shared currency rebounded 0.5% to 1.1607 from 1.1562 yesterday. Overnight, the euro traded higher at 1.1609. EUR / USD fell to an overnight low of 1.1546 following the publication of weaker-than-expected German retail sales.
- USD / JPY – The dollar ended flat against the Japanese yen at 114.00. The overnight high traded for USD / JPY was at 114.44, a 2 week high. The combination of the risk position of the market and higher US bond yields supported this currency pair.
- GBP / USD – The British pound plunged to 1.3660 against the greenback from 1.3692 yesterday. The British pound traded low at 1.3642 before settling higher against the weaker US dollar overall. UK October Manufacturing PMI broke the median forecast, providing support to the pound.
On the lookout: The focus is on the RBA monetary policy meeting and the rate announcement today. It is also the annual Melbourne Cup, Australia’s most famous thoroughbred horse race. Last year (November 3, 2020), on the day of the Melbourne Cup, the RBA reduced the Cash Rate to a record low of 0.1%. Today, many analysts and traders expect the RBA to signal a pullback from its ultra-losing monetary policy. Australian growth and inflation have picked up. Last week, the RBA’s preferred inflation indicator (Trimmed-Mean CPI) hit an annual rate (y / y) of 2.1%, beating the median forecast. Which is just above the 2-3% RBA CPI band.
Data released earlier today was New Zealand’s September construction consents, which fell on the am / m basis to -1.9% from the previous 3.8%. The Bank of Japan publishes the minutes of its monetary policy meeting (10:50 a.m., Sydney). The RBA is expected to keep its spot rate unchanged at 0.105 after its monetary policy meeting today. The RBA rate statement follows (2:30 p.m. Sydney). RBA Deputy Governor Guy Debelle is due to speak at a roundtable on climate investment (4:50 p.m., Sydney). Switzerland launches European data with its October CPI report (m / mf / c 0.1% from 0.0%; y / yf / c 1.1% from 0.9%). Swiss retail sales for September follow (y / yf / c 1.4% vs. 0.5%. Italy publishes its Markit Manufacturing PMI for October (f / c 59.7 vs. 59.7). France follows with its Markit Manufacturing PMI for October (f / c 53.5 vs. 55.0).). Germany publishes its October manufacturing PMI Markit (f / c 58.2 vs. 58.2). Canada is starting North America with its September building permits (f / c 2.2% vs. -2.1%). The United States rounds off today’s economic calendar releases with its IBD / TIPP Economic Optimism Index (f / c 49.3 vs. 46.8).
Commercial perspective: This week’s crucial central bank meetings will set the tone for currency markets. Following the RBA today, the US Federal Reserve’s FOMC meets on interest rates that follows with the traditional press conference (Thursday, 5:00 a.m. Sydney time). The Bank of England’s MPC meets on interest rates later today (Thursday, 11 p.m. Sydney time). A big week in terms of risk events awaits us. The U.S. and Canada wage reports are also expected to be released on Friday as we wrap up this week. Traders will be watching closely for forward policy indications regarding a decrease in asset purchases and the likely timing of any interest rate hikes. A huge week ahead for all, tin helmets on!
- EUR / USD – The shared currency rebounded as weak shorts rushed to hedge. The overnight high traded was 1.1609. Immediate resistance today stands at 1.1610. The next resistance level is found at 1.1640 and then at 1.1680. 1.1700 is a strong and enormous resistance. On the downside, immediate support can be found at 1.1550 (overnight low at 1.1546). The next level of support is found at 1.1520 and then 1.1500 (also huge). In the meantime, look for a consolidation between 1.1550-1.1620. Trade the range today.
- AUD / USD – The Aussie continues to trade above the 0.75 cent mark. Overnight AUD / USD hit a high of 0.7536. Immediate resistance today can be found at 0.7540. The next level of resistance is at 0.7570 and then 0.7600. Immediate support can be found at 0.7500, 0.7480 (overnight low traded was 0.7486). The next level of support is at 0.7450. Expect the Aussie to consolidate in a likely range today between 0.7480 and 0.7540. Prefer to sell rallies.
- GBP / USD – The British pound weakened against the greenback to end at 1.3660 against 1.3692 yesterday. For today immediate support can be found at 1.3640 (overnight low traded was 1.3642). The next level of support is at 1.3610. On the upside, immediate resistance can be found at 1.3700 (overnight high at 1.3693). The next resistance level is at 1.3730. Expect the UK currency to consolidate in a likely range today of 1.3610 to 1.3710. Waiting for the BOE.
- USD / JPY – The dollar stood at 114.00, unchanged from yesterday. Overnight, USD / JPY traded to a peak at 114.44, near two week highs. Today’s immediate resistance can be found at 114.20 followed by 114.50. Immediate support stands at 113.80 and 113.50. Expect the dollar to trade today in a likely range of 113.85-114.55 Japanese yen.
All eyes are on the RBA and the Melbourne Cup. Will the favorite Incentivize beat the 23 other horses in contention today for the Melbourne Cup?