Asian equities modestly higher while geopolitical tensions still linger. We’re still positive on the week in Nikkei, Dow, S&P and today’s FOMC minutes will most likely dictate the next move. The market is now pricing in a 75% chance of a rate hike in December and is evidently long USD. We will need continuous support from data/speakers to keep this ball rolling. As the bandwagon fills, it gets easier to disappoint the crowd.
Beyond the USD, Kiwi was in the spotlight after Fronterra saw a steep decline in whole milk powder prices, which dropped 11%. This fits with earlier declines in milk futures and suggests ongoing drag on the economy which should add to risk for RBNZ easing early next year. Why is Kiwi not weaker? Partially because the USD is pulling back ahead of FOMC minutes; partially because the bad news was expected.
Looking ahead: it is quiet data-wise today (just US housing starts and South African CPI and retail sales) but the Oct FOMC Minutes are due and we also have a wealth of central bank jawboning: the ECB’s Mersch, Lautenschlaeger and Coene, the BoE’s Broadbent, the Riksbank’s Floden and the Fed’s Dudley, Mester, Lockhart and Kaplan – though of those Fed speakers, only Kaplan is speaking on monetary policy.
No charts for today – want to see more evidence of further USD strength or temporary weakness before taking another swing.
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