DJIA takes out another record high, kiwi reaches a five month low vs. USD, euro rises, whilst sterling slides on BoE base rate doubts and Brexit fears

Oct 25 • Morning Roll Call • 1382 Views • Comments Off on DJIA takes out another record high, kiwi reaches a five month low vs. USD, euro rises, whilst sterling slides on BoE base rate doubts and Brexit fears

The DJIA posted another record high on Tuesday, on the basis of improved earnings from certain companies, such as Caterpillar Inc. and 3M, despite relatively thin equities’ trading, which indirectly helped to push up values of the 30 company index. The index added over 200 points at one stage and rose by up to 0.84%, as rumors of Trump’s intended corporate tax cuts continued. A more hawkish replacement to Janet Yellen, as chair of the Fed in February, continues to be suggested, this is also helping to increase the dollar’s value versus several peers, whilst the December FOMC meeting, with its 80% chance of a rate rise announcement, continues to cast a shadow on investors’ radar.

The euro experienced a rise versus its peers on Tuesday, despite continuing Catalonia/Madrid tensions, as investors begin to focus on the ECB meeting due to take place on Thursday, the culmination of which should see Mario Draghi the president, announce a program of tapering the €60b a month asset/bond purchase scheme. With the forward guidance already delivered in previous meetings; that the reduction will be down to €30b per month, the ECB is forecast to broadcast that they’ll be prepared to intervene, should the reduction not have the desired effect. Investors will also be searching for any clues, in the accompanying narrative, that the Eurozone central bank would be prepared to raise interest rates in 2018, from the current floor of zero.

Various PMIs for the Eurozone came in close to predictions; all France’s PMIs beat forecast, as did Germany’s and the Eurozone’s manufacturing PMI. However, the Eurozone and Germany’s composite readings, both missed their forecasts.

Sterling fell versus its peers on Tuesday, as the Bank of England deputy governor Sir. Jon Cunliffe, voiced concerns that the U.K. economy may not actually be strong enough to accommodate an interest rate rise, required to cool rising inflation (currently at 3%), as early as November. Sterling has risen versus its peers during recent weeks, on the basis of Mark Carney, the governor of the BoE and other members the MPC, suggesting that a rate rise is imminent. The pound lost circa 1% at one stage during the day versus euro, and circa 0.5% versus the U.S. dollar.

New Zealand’s dollar lost further ground versus its peers on Tuesday, having appeared to plateau on Monday, after the Labour Party had assumed the mantle of power in the coalition, created after the recent general election. Versus the euro and U.S. dollar, the kiwi lost approx. 1%. EUR/NZD reached a high not witnessed since February 2016. NZD/USD reached a low not seen since May 2017.

EURO

EUR/USD ended the day at circa 1.1706, up circa 0.2% on the day, receding after breaching R1 earlier in the day’s sessions. EUR/NZD breached R3 in the New York session, closing the day up circa 0.9% at 1.7032. The single bloc currency made similar gains versus the Australian dollar. Versus Canada’s dollar the euro breached R2 during the day, whilst EUR/GBP breached R3, to slip back to end the day up circa 0.9%, at 0.8953. EUR/CHF provided the biggest gains for the euro currency, up circa 1.3% on the day, breaking through R3, at 1.1655.

STERLING

GBP/USD fell through S2 and by approx. 0.6% on the day, to 1.3128. GBP/CHF was effectively flat on the day, resting on the daily pivot point. Whilst versus: AUD, CAD and JPY, the pound fell by an average of circa 0.2% on the day, only versus the kiwi did the pound make any significant gains, GBP/NZD ending the day up circa 0.4%, at 1.9015.

 U.S.DOLLAR

USD/JPY ended the day up circa 0.3%, resting on R1 at 113.93, USD/CHF rose by circa 0.6% on the day, closing out just above R2, at circa 0.9911. USD/CAD closed the day out at circa 1.2667, up approx. 0.5% on the day, retreating to just below R2.

EQUITIES AND COMMODITIES SNAPSHOT FOR OCTOBER 24th

• DJIA closed up 0.72%.
• SPX closed up 0.16%.
• FTSE 100 closed up 0.03%.
• DAX closed up 0.08%.
• CAC closed up 0.14%.
• WTI oil ended the day up circa 1% at $52.4.
• Gold ended the day down circa 0.4% at $1275.

KEY ECONOMIC CALENDAR EVENTS FOR OCTOBER 25th

• GBP Gross Domestic Product (QoQ) (3Q A).

• GBP Gross Domestic Product (YoY) (3Q A).

• GBP Gross Domestic Product (QoQ) (3Q A).

• CAD Bank of Canada Rate Decision (OCT 25).

• CAD Bank of Canada Releases October Monetary Policy Report.

• CAD BOC’s Poloz and Wilkins Hold Press Conference in Ottawa.

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