FX market outlookPosted on Wednesday, November 1 2017 at 10:17 am GMT+0000
US dollar awaits barrage of key risk events; kiwi soars on strong employment numbers
The dollar was little changed ahead of a very heavy calendar the next three days, while the kiwi staged an impressive rebound following the release of strong employment numbers out of New Zealand overnight.
The US dollar was definitely going to be in focus for the rest of the week due to the Fed meeting that ends later today, the announcement of the Fed Chair nominee by President Trump tomorrow and the October employment report to be released on Friday. Starting with the Fed meeting, it is expected to give a signal that a December hike is a very strong possibility and it is even possible that certain Fed voters might dissent and ask for an immediate hike, which could boost the greenback further. A terrorist attack in New York that left 8 people dead did not have much market impact although it was the deadliest attack in the city since 2001.
The dollar managed to post strong gains against the yen as it moved towards challenging the 114 level once more and was last at 113.92. However, against the euro and the pound it was struggling to make headway as the euro managed to rise to 1.1647 in early European trading on Wednesday and the pound crossed above the 1.33 threshold to 1.3307.
The pound seems to be boosted by signs that Brexit talks are getting down to serious business, while the Bank of England is expected to hike rates tomorrow. The euro from its part is benefitting from the fact that the Catalan independence crisis seems to have been dealt for now and that Eurozone growth is strong despite inflation remaining contained.
In New Zealand, a very strong set of employment numbers helped the kiwi recover from its recent depressed levels, which were the result of worries about the incoming government’s economic and immigration policies. The unemployment rate fell to a low 4.6% in the third quarter compared to 4.8% during the second quarter, while the participation rate climbed to 71.1% from 70%. Signs of a strong economy could provide some relief from the political woes that the kiwi is suffering from. The kiwi climbed above the 69 cent level to 0.6918, having traded not far from the 0.68 mark the previous day.
In other currencies, the loonie appeared to stabilize just below the 1.29 level, after the US dollar’s rally on Tuesday against the Canadian currency following a surprise contraction in monthly Canadian GDP during August. The Governor of the Bank of Canada also appeared cautious not to give a hawkish view in a speech the previous day.
Looking ahead, the Fed meeting statement during late US trading eclipses all other events on Wednesday. October manufacturing ISM out of the US will also be watched as will the ADP employment numbers, which are sometimes seen as a precursor to the nonfarm payrolls (due on Friday). It will be relatively quiet during today’s European trading, with the only data point of note scheduled being the UK’s manufacturing PMI.