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Global market watch - 16th October 2018

The Greenback continues to trade mixed but soft in relatively tight ranges against most of its rivals this morning as it remains well supported by its elevated underlying yield combined with the strong domestic economy, while under pressure from the recent drop in US equities, the escalating US-China trade war at this time, along with vast political uncertainty ahead of the key Congressional election next month. The worse than expected Retail Sales MoM numbers from yesterday also weighed on the Dollar despite the fact that annual data remains firm along with generally strong US economic data over the year.  The better than expected Empire State Manufacturing Index was a modest bright spot as well.  The Buck is trading just a hair stronger with the generally weaker  single currency on worse than anticipated German and EU ZEW Economic Sentiment Survey data, fell to a one-week low versus the broadly stronger Loonie this morning, while falling to a four-day low against the generally firmer Sterling today, is largely sideways in its pairing with the Aussie Dollar but fell to a fresh two-week low against the Kiwi overnight on firmer gold and risk appetite, along with matching its fresh seven-day low yesterday versus the Mexican Peso today.  The Dollar improved versus the faltering safe-haven currencies on firmer market risk tolerance as it improved to a four-day high versus the Yen after USDJPY touched a 33-day trough yesterday while also ticking up against the Swiss Franc after USDCHF touched a 13-day low yesterday as well.  Industrial Production MoM is on tap for release alter this morning simultaneously with the Capacity Utilization Rate, with the Treasury Currency Report again tentatively set for today after not being released on Friday or Monday as market wait to see if the US will officially label China a currency manipulator for the first time in 14 years amid the administration pushing a trade war with the second largest economy in the world at this time.  

The Canadian Dollar is trading firmer against most of its counterparts on a combination of increased risk appetite, the generally positive Bank of Canada (BoC) Business Outlook Survey released yesterday, along with higher gold prices bolstering the Commodity Currencies in general despite another drop in oil prices this morning.  The Loonie hit a one-week peak in its respective pairings with the Dollar, Euro, Yen, is at a five-day peak versus the also commodity based Australian Dollar, but did fall to a four-day trough versus the firmer Sterling overnight. The BoC Fall Business Outlook Survey reflects that prospects are robust for the foreseeable future as a result of strong demand, highly elevated capacity pressures as labor shortages are at nearly record levels for Canada at the moment, along with firm credit conditions despite the fact that interviews were conducted before the new USMCA trade deal which should actually significantly improve the situation mitigating vast uncertainty. This is a positive indicator in reference to further BoC policy tightening in the near future.  On the data front, the market largely ignore the disappointing Canadian Foreign Securities Purchases at a seven month low of 2.56B this morning compared to 12.65B previous on the back of +10.05B forecast consensus.  Given the quality of the key survey yesterday traders will be eyeing the key CPI MoM and Retail Sales MoM releases on Friday morning for potential acceleration of the next BoC rate increase which is widely expected before year end. 

The unified currency is trading a bit softer on the miss this morning on both the Eurozone and German key ZEW Economic Sentiment Survey along with the miss on German Import Prices MoM, despite an upward surprise to the regional Trada Balance figure. The Euro is a bit softer in its pairing with the Dollar, is at a nearly one-week low versus the Loonie, fell to a four-day low against the generally firmer British Pound, but improved in its respective pairings with the broadly weakening safe-haven currencies of Japan and Switzerland on firmer risk appetite. The key German ZEW Economic Sentiment Survey was released matched the -24.7 for June which is the worst in six years. 

The British Pound manged to benefit from a +0.1% upside surprise to the key Average Hourly Earnings 3m/Y number at +2.7% this morning which is also +0.1% to the reading for last month.  The UK Unemployment Rate stayed at the key 1975 low of 4.0% per market expectation despite the worst Claimant Count Change release since May at actual of +18.5K on +4.5K forecast with a negative revision to 14.2K for previous which would also have made that the worst level since the troubling 31.2K May number which was the worst in over five years. Sterling managed to rally to a four-day high versus the Dollar, Euro, Loonie Yen, along with Swiss Franc this morning on the jobs data. While overall the sentiment over Brexit has improved significantly recently, the UK is far from out of the woods, with Prime Minister Theresa May also facing some uncertainty as well, ahead of the key European Union Economic Summit beginning on Thursday as the UK deal is definitely expected to be discussed. As has been the case for some time the EU Customs Union along with Irish Border Issue are the difficult sticking points.  There is more UK data scheduled for tomorrow with CPI YoY and FPC Meeting Minutes as the headliners but also RPI YoY, PPI Input and Output MoM, and HPI YoY as key inflation indicators also.

The Dollar is largely sideways versus the Aussie after AUDUSD touched a 13-day high yesterday while it touched a fresh two-week low against the New Zealand Dollar today on higher gold prices and stronger risk appetite. The Aussie Dollar was not as strong as its Kiwi cousin as the Reserve Bank of Australia (RBA) Monetary Policy Meeting Minutes expressed their belief that the weaker AUD is helping the economy, while confirming their next move would be an increase they also made it clear this would not be likely in the near future. The Kiwi benefited from better than anticipated New Zealand CPI QoQ at +0.9% today compared to +0.7% forecast consensus and +0.4% for the previous month.  The key Australian Employment Change is scheduled for this evening.  For New Zealand the GDT Price Index is scheduled for this afternoon. 

The Japanese Yen is broadly softer on firmer risk tolerance in the overnight session.  The Yen softened to a four day low versus the Dollar, Euro, Pound along with a one week tough against the Commodity based Loonie and Aussie today after rallying on Friday and yesterday on broadly lower equities.  The Japanese Trade Balance is due tomorrow night with Bank of Japan (BoJ) Governor Haruhiko Kuroda also speaking in the overnight session followed by National Core CPI YoY is scheduled for Thursday.

The Swiss Franc was softer against most rivals on firmer risk tolerance after worse than anticipated PPI MoM yesterday and ahead of the Trade Balance number on Thursday early.

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