FX market outlook

FX market outlook

US dollar recovers from lows following FBI warrant for Clinton emails.

The US dollar was off the lows hit on Friday after revelations that new evidence had surfaced in the Clinton email investigation, which brought fresh uncertainty for the US elections.

Euro / dollar dipped back to 1.0960 whereas dollar / yen recovered close to 105 yen at 104.90.  Euro / dollar had reached just below 1.10 in the aftermath of the news that compromised Clinton while dollar / yen reached as low as 104.36.  Economic news out of Japan was not supportive of the yen, as industrial output for September disappointed and retail sales for the same month were also slightly lower-than-expected.

News that the FBI had unearthed fresh evidence in the Clinton email case hit risk sentiment and also caused some selling in the US dollar.  The two currencies that were hurt even more than the greenback was the Mexican peso and the Canadian dollar.  Dollar / peso briefly climbed above 19 while against the Canadian dollar the US dollar traded above 1.34 to a near 8-month high.  Canada and Mexico could face some uncertainty with respect to trade, investment and border controls in the event that Republican candidate Donald Trump wins the election.

Sterling / dollar was steady at 1.2185 following press reports that Bank of England Governor Mark Carney was ready to serve out his full 8-year term.  There was some speculation that due to criticism he could step down earlier – in 2018 rather than 2021.

The week ahead is a heavy one in terms of planned central bank meetings, with the Federal Reserve, the Bank of England, the Bank of Japan and the Reserve Bank of Australia all scheduled to meet.  None are expected to make any policy changes, although their statements will give clues as to their future plans.

In the day’s economic calendar, flash Eurozone inflation for October will be a key release.  Later US personal income and consumption expenditure statistics will also be watched, together with the PCE price index.  Earlier today, German retail sales disappointed by coming much lower than economists expected.