Market Movers of the Day
UK GDP falls –0.3% QoQ as expected
UK Index of services down –0.1%
German Gfk Consumer confidence at 3.7 slightly disappointing
US Durable goods orders fall -0.6% in Oct
US Initial Jobless claims at 466k Vs 500K expected
US Personal consumption expenditures rise 0.7% MoM
US Core personal consumption expenditure rise 0.2% MoM
US Personal consumption deflator at 0.2% MoM
US Personal income rise 0.2%
US New Home Sales strong rising 6.2% MoM
US Reuters/Michigan consumer sentiment at 67.4 largely in line with expectations
EIA Crude oil stocks change at 1M ,lower than expected
The Overall Sentiment
The broad Dollar selloff which started around May this year and seemed to trim itself into range only days ago has finally broken key resistance levels and pushed the Dollar into record lows across the board. The rally was fed mainly by better than expected US economic data with Initial Jobless claims falling under the 500K mark for the first time in more than a year reading 466K which positively surprising investors which were expecting a 500K reading according to various pulls. In addition new home sales which is considered to be closely linked with economic recovery rose strongly by 6.2% MoM mainly attributed to led tax breaks for new home buyers. The combination of the better than expected economic data and the statements coming from the Fed that it is currently not worried by the Dollar “orderly” decline spurred massive outflows from the Dollar and into high yielding assets and currencies alike ,with counter Dollar carry trades continuing to mount. The Dollar fell to as low as 1.515$ per Euro, the Swiss Franc moved beyond parity trading a few points shy of 0.99 CHF to the Dollar and the Yen surprised by moving above a 14 Year high against the Dollar trading below 87 this morning. The Sterling also gained rather strongly against the Dollar trading around 1.67$ as the UK GDP figure was largely in line with expectations. However the Sterling which is highly linked to appetite for risk which was elevated during the trade failed to reach new highs against the Greenback.
The better than expected economic data fueled positive sentiment for Equities. In Europe benchmark indices advanced with the DAX gaining around 0.5% and the FTSE higher by 0.77%.In the US gains were more modest with the S&P higher by 0.45% and the DOW higher by a modest 0.29% but most importantly both indices reached a record for the year. Among the best performers were Caterpillar and Home depot mainly in reaction to the strong homes sales rise.
Heavy Dollar bids, remote rate expectations and moved the Gold to yet another historical record ever so close to the 1200$ mark reaching to as 1195 an ounce marking it as one of the best performing assets for the recent period. Silver also edged higher trading around 18.8$ an ounce but failed to surpass 19$ and in the Energy space oil gained as growth bets were on and EIA crude stocks were lower than expected. The black gold edged around 78$ a barrel just 2$ short of the 80$ mark.
The Day Ahead
The Japanese Yen is expected to be at the centre of attention as the day will be largely loaded with Japanese economic data. Highly important economic figures are due, such as the National CPI ex-fresh foods the main index for inflation in Japan and Japanese unemployment which is expected to rise to 5.4%.The combination of inflation readings which pointed deflation in the last reading alongside the growing debate between the BoJ and the Japanese government over handling deflation and the Yen which is at 13 Years high against the Dollar is expected to bring the Japanese currency to the centre of attention with potential volatility during the Asia session.
Bullish Scenario– A close above 1.0720 would signal the pair is moving to retest the bearish trend line around 1.08
Bearish scenario– A break of 1.04 downwards would generate a bearish swing, targeting the 1.02 support and under.
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