USD/JPY reached a three month high, as yen initially loses safe haven appeal due to Abe re-election, but yen recovers late on, whilst EUR/USD slips as Catalonia issues reappear

Oct 24 • Morning Roll Call • 1691 Views • Comments Off on USD/JPY reached a three month high, as yen initially loses safe haven appeal due to Abe re-election, but yen recovers late on, whilst EUR/USD slips as Catalonia issues reappear

The U.S. dollar initially reached a three month high versus yen on Monday, as a consequence of investors believing that Abe’s re-election in Japan will ensure that the loose monetary policy; of low interest rates and asset purchase/quantitative easing, would now continue. However, yen clawed back its losses, versus many of its peers, deep into the New York trading sessions, whilst the main USA equities sold off late, to post daily losses. Yen’s safe haven appeal has also diminished over recent weeks, as the risk on appetite has propelled USA equities to reach record highs. The U.S. dollar rose marginally versus many of its main peers on Monday, as potential hawkish Fed chairs are once again being associated with the vacancy, if Trump decides not to renew Janet Yellen’s tenure in February.

Yen initially fell versus several of its main peers during Monday’s trading sessions, although the losses were minimal, given that the markets had potentially priced in the Abe victory. Versus GBP, NZD and USD, yen lost circa 0.2%, before reversing the losses to post modest daily gains. Versus EUR, AUD, CHF and CAD, yen initially made modest gains, which were then accelerated late on in New York.

Sterling failed to make any significant gains on Monday, as uncertainty regarding the U.K. Brexit situation dominated the political landscape. News was leaked on Monday suggesting that prime minister May had begged chief E.U. negotiator Juncker to give her some face saving tools and narrative, to enable her posture in front of her cabinet and the U.K. press, to convince anyone who’d listen that negotiations are going well. In terms of fundamental news the various CBI metrics came in below forecast, once again suggesting that the U.K. consumer is both at their limit in terms of credit and unwilling to spend, given the Brexit uncertainty. An example of that consumer dilemma, came courtesy of a car retail firm called Pendragon, whose shares fell on the FTSE 100 by up to 20% on Monday, due to profit warnings. With the UK’s latest quarter’s GDP figure due on Wednesday, sterling investors will doubt the BoE’s intention to announce a base rate rise on November 2nd, if the forecast of 0.3% Q3 growth is not met.

In other European news the Eurozone consumer confidence reading beat the forecast by coming in at -1, whilst the Eurozone bank debt v GDP metric also beat the forecast, coming in at 88.9%, versus the previous 89.2% reading. The euro fell due to anxiety over Madrid’s handling of the civil unrest in Catalonia, as a result of the referendum on the region’s independence on Oct. 1st Madrid is now threatening direct rule. Investors in the single currency were also mindful of the European Central Bank policy meeting on Thursday. Traders were originally betting on a more hawkish narrative and policy from the ECB, despite suggestions that the central bank is in no rush to tighten policy.

EURO

EUR/USD fell by circa 0.3%, breaching S1 at one stage and closing the day out at circa 1.1747. EUR/JPY fell in late trading during the New York session, through S2 to 133.15, having breached R1 in the European morning session. EUR/GBP fell by circa 0.3% on Monday to 0.8901, taking its loss since Friday’s sessions to circa 1%. EUR/CHF ended the day down circa 0.2%, at 1.1574.

U.S.DOLLAR

USD/JPY ended the trading day close to flat at 113.38, after breaching R1 earlier in the day. USD/CHF made gains of circa 0.2%, having initially posted a daily high pushing through R1, price eventually settled below the first level of resistance, at 0.9853. USD/CAD rose by approx 0.2% on the day, closing out at circa 1.2652.

STERLING

GBP/USD ended the day at circa 1.3197, up approx. 0.2% on the day, having at one point reached R1. GBP/JPY closed out the day at circa 149.72, up approx. 0.2%, receding from above R1 and from being up 0.4% earlier in the day’s sessions. GBP/CHF made circa 0.2% gains on the day, closing out at 1.3000. GBP/CAD and GBP/AUD also posted similar 0.2% gains on the day.

EQUITIES AND COMMODITIES SNAPSHOT FOR OCTOBER 23rd

• DJIA closed down 0.23%.
• SPX closed down 0.40%.
• NASDAQ closed down 0.64%.
• FTSE 100 closed up 0.02%.
• DAX closed up 0.09%.
• CAC closed up 0.27%.
• Gold ended the day flat on the day, at $1281 per ounce.
• WTI oil ended the day up 0.1%, at $51.30 per barrel.

KEY ECONOMIC CALENDAR EVENTS FOR OCTOBER 24th

• EUR Markit/BME Germany Manufacturing PMI (OCT P).

• EUR Markit/BME Germany Composite PMI (OCT P).

• EUR ECB Bank Lending Survey.

• EUR Markit Eurozone Composite PMI (OCT P).

• USD Markit US Manufacturing PMI (OCT P).

• USD Markit US Composite PMI (OCT P).

 

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