FX market outlookPosted on Monday, October 30 2017 at 9:20 am GMT+0000
US dollar off Friday’s best levels as market awaits key data and events week
The US dollar faced some profit-taking against other majors, after receiving a boost the previous week on tax reform hopes in the US and strong third quarter growth while the euro was hit by the political uncertainty in Spain.
Euro/dollar climbed above the 1.16 level to trade around 1.1615, as markets will be focusing on Catalonia and how the region is going to function during the week after the central government in Madrid has taken over control of the region and sacked the regional government. The tense situation seems to be weighing on the euro, which was further hit the previous week after Draghi pledged that the ECB’s asset purchase program is likely to be extended further than the 9 months of 2018 and that rates would also not rise next year.
The dollar also failed to hold the 114 mark against the Japanese yen as it dipped to as low as 113.50 before recovering to 113.72. 10-year Treasury yields were lower at 2.40% (compared to a high of 2.48% on Friday), which took away some support from the greenback.
In the session’s notable movers, the New Zealand dollar fell once more after its attempt to recover from Friday’s lows. The kiwi traded at 0.6845 against the greenback, significantly down on the session but off Friday’s low of 0.6817. The kiwi has been plagued by worries that the country’s new incoming coalition government could undertake economic reforms that might lead to lower interest rates and less foreign investment.
In today’s economic news, German retail sales for September missed expectations by coming in at 0.5% month-on-month against analyst forecasts of 0.7%. This had an initial negative effect on the euro, but the currency quickly recovered from those losses in an indication perhaps that some traders were willing to buy the euro at its current levels.
A little later in the European session, October business climate and consumer confidence surveys out of the European Commission will come out and in the United States, personal income and spending together with the Fed’s favorite inflation indicator will also be published. In Europe the clocks turned back to winter time over the weekend, which means that the time difference with the US is smaller by one hour during this week, until the US also switches to winter time next weekend.