FX market outlook

FX market outlook

Posted on Friday, November 4 2016 at 7:53 am GMT+0000

Dollar rises back above 103 yen as polls show Clinton leading.


US election worries are still pressuring the dollar and supporting safe haven assets but in Friday’sAsian session there appeared to be some easing in risk aversion.

The dollar index moved off yesterday’s three-week low and halted its decline against the yen after two polls had Democrat Hillary Clinton leading Republican Donald Trump in the race for the White House.

While US politics is the biggest driver in the markets these days, the US nonfarm payrolls report out later today will be an immediate risk event for the dollar.

The greenback rose back above the key 103 yen level in the Asian session today and it hit a session high of 103.26 yen.

Gold, which is another asset that usually is in demand in times of financial market uncertainty, turned lower today and fell below the key $1300 level to reach $1295.41.

Sterling held near a four-week high which was reached yesterday against the dollar after the UK High Court ruling that Parliament must vote before Article 50 is invoked. So any Brexit plan has to be approved first by lawmakers before being implemented.

The pound rallied to a high of $1.2493 yesterday and consolidated near this level in Asian trading today.

The euro eased lower against the dollar to fall below the key $1.1100 level and reached a session low of $1.1085. The single currency had a good week though, due to the weaker dollar, and it is on track for a 1 percent weekly gain.

Economic data out of the Asian session included Australian retail sales and the Reserve Bank of Australia’s monetary policy statement. The aussie received an early session boost to a high of $0.7696 after data showed retail sales jumped 0.6% in September month-on-month, above the 0.4% increase expected and higher than the 0.5% gain seen in August. Meanwhile, the RBA statement today indicated that the central bank was more upbeat about the Australian economy and sees economic growth being sustainable. This led markets to interpret that further cuts in interest rates are off the agenda for now.

Looking ahead to the European session, final services PMI for the EUrozone are scheduled to be released. However most of the focus today will be on the nonfarm payrolls data due in the US session.  The US economy is expected to have added 175,000 jobs in October from 156,000 in September.