Dollar Dips Despite Robust US Retail Sales Data and Higher Yields

Aussie Soars on Hawkish RBA Minutes, USD/JPY Nears 150.00

Summary:

Robust US Retail Sales in September, up 0.7%, beating forecasts at 0.3% initially boosted the Dollar Index (USD/DXY) to 106.53, before dipping lower to finish at 106.20.

Against the Japanese Yen though, the Greenback continued to grind higher toward the 150.00 level, to 149.75 from 149.55. The Euro (EUR/USD) edged higher to 1.0575 from 1.0535 yesterday.

Hawkish RBA minutes boosted the Australian Dollar (AUD/USD) to a 0.6365 finish against 0.6297 previously. The RBA was seen as keeping the door open for a November rate hike, with the focus now on Q3’s inflation report.

Treasury bond yields rose, led by the US 10-year Treasury rate, which closed at 4.84% against 4.61% previously. Other global bond rates also climbed, limiting the Greenback’s advance.

Germany’s 10-year Bund yield climbed to 2.88% from 2.73%. The UK 10-year Gilt yield finished at 4.51% (4.38%). Australia’s 10-year Bond yield rallied 8 basis points to 4.54%.

The British Pound (GBP/USD) climbed to 1.2182 from 1.2120 despite a fall in the UK Average Earnings Index to 8.1% from 8.5%. Questions remained whether the Bank of England was done raising rates.

Against the Asian and Emerging Market Currencies, the Dollar closed mixed. The USD/CNH pair (Dollar-Offshore Chinese Yuan) rallied 7.3250 from 7.3130. USD/SGD (Dollar-Singapore Dollar) eased to 1.3680 (1.3700) while USD/THB (Dollar-Thai Baht) rallied to 36.35 from 36.25.

Other economic data released yesterday saw the Eurozone ZEW Economic Sentiment Index rise to 2.3% from -8.0% previously. Germany’s ZEW Economic Sentiment Index soared to -1.1 from -11.4 previously.

US Headline September Core Retail Sales climbed to 0.6% (m/m), beating estimates at 0.2%. August’s Core Sales were revised higher to 0.8% from 0.6% initially.  US Industrial Production rose to 0.3%, up against forecasts at 0.0%. US Capacity Utilization was also up, to 79.7% from 79.5% previously.

USD/JPY – Against the Japanese Yen, the US Dollar rallied, soaring to an overnight high at 149.83 before easing to finish at 149.55 at the New York close. Concerns on intervention by Japanese authorities kept the USD/JPY from trading to the 150.00 level. For now.EUR/USD – The shared currency edged higher against the Greenback to 1.0575 (1.0535). In choppy trade, the overnight peak traded was at 1.0595. The Euro saw an overnight low at 1.0533 before rallying at the close. AUD/USD – The Aussie Battler soared against the US Dollar to close at 0.6365 from 0.6297 previously. In choppy trade, the overnight high recorded was at 0.6380. The overnight low traded for the Aussie was at 0.6336. GBP/USD – The British Pound jumped to an overnight high at 1.2216 US Dollars before dipping to finish at 1.2182. The overnight low traded for Sterling was at 1.2133. Against the other major currency pairs, the British Pound finished mixed.On the Lookout:

Asian markets today will be in focus with the release of China’s trifecta of economic data. Annual Industrial Production in the world’s second largest economy is forecast to ease to 4.3% from 4.5% previously – ACY Finlogix.

China’s Annual Retail Sales is expected to climb to 4.9% from 4.6% previously -ACY Finlogix. China’s September Fixed Asset Investment is forecast unchanged at 3.2% - ACY Finlogix. China also releases it September Unemployment Rate (f/c 5.2% from 5.2% - ACY Finlogix) and Annual Chinese Foreign Direct Investment (f/c -6.8% from -5.1% - ACY Finlogix).

The UK kicks off Europe with its UK September Inflation Rate (y/y f/c 6.6% from 6.7%; m/m f/c 0.5% from 0.1% - ACY Finlogix), UK September Core Inflation Rate (y/y f/c 6% from 6.2%; m/m f/c 0.5% from 0.1% - ACY Finlogix).

The Eurozone releases its September Final Inflation Rate (m/m f/c 0.3% from 0.5%; y/y f/c 4.3% from 5.2% - ACY Finlogix) and Eurozone September Final Core Inflation Rate (y/y f/c 4.3% from 5.2% - ACY Finlogix).

The US rounds up today’s data releases with its September Housing Starts (f/c 1.38M from 1.283M – ACY Finlogix) and US Preliminary September Building Permits (1.45M from 1.541M – ACY Finlogix). Federal Reserve Heads Waller, Williams, Harker, and Cook are scheduled to speak at various events.

Trading Perspective:

The US Dollar finished mostly lower against the major currencies despite a rise in US bond yields. Other global bond rates were also higher, limiting any significant Greenback gains.

Sentiment turned to risk-on which also kept the US Dollar’s topside limited. At the close of trade in New York, the Greenback finished lower, at 106.20, following its initial rally.

Today, expect more position adjustments in FX ahead of speeches from several Federal Reserve officials (see above). Volatility will stay elevated.

USD/JPY – The Dollar stopped short of the 150 Yen resistance level as the possibility of intervention from Japanese authorities kept traders from pushing it higher. On the day, look for immediate resistance at 149.85 (overnight high) to cap. The next resistance is at 150.00 and traders will be watching that level closely. Expect nervous and choppy trade as we approach that level. Immediate support can be found at 149.50, 149.20 and 148.90. Look for a choppy trading day today, likely range 149.20-150.20.AUD/USD – The Aussie Battler rebounded against the US Dollar as the latest RBA meeting minutes suggested that the RBA was keeping the door open for a November rate increase. Markets and the RBA will be watching for the release of Australia’s Q3 Inflation report (due Wednesday week, 25 October). Today, immediate resistance lies at 0.6380 (overnight high). The next resistance level is found at 0.6410 and 0.6440. Immediate support lies at 0.6330, 0.6300 and 0.6270. Look for more choppy trade, likely range: 0.6300-0.6400. (Source: Finlogix.com)

EUR/USD – The Euro jumped to finish at 1.0575 against 1.0535 previously. In choppy overnight trade, the shared currency saw a high at 1.0595 before easing. The overnight low recorded was 1.0533. Look for the EUR/USD pair to consolidate in a likely, albeit choppy range today of 1.0520-1.0620. Preference is to sell Euro rallies.GBP/USD – Sterling rallied to finish at 1.2182 against the US Dollar, up from 1.2120 previously. On the day, look for immediate resistance at 1.2220 (overnight high traded was 1.2216). The next resistance level lies at 1.2250. On the downside, look for immediate support at 1.2150 followed by 1.2120 and 1.2090. Look for the British Pound to trade a likely range today between 1.2120-1.2220. Trade the range.

Happy Wednesday and trading all.

This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.