FX Update Ahead of Trump Speech


The Dollar has firmed back some after declining moderately yesterday, which followed a phase of rising against most of the other main currencies (which started at the release of the unexpectedly robust October US Payrolls report). The narrow trade-weighted USDIndex (DXY) was a pip off the day’s high at 98.35 heading into the New York interbank open, up from yesterday’s 98.13 low and 5 pips off the one-month high seen on Friday. The index is up 1.3% from the low seen at the start of the month, ahead of the October jobs report release. USDCAD printed a fresh one-month peak at 1.3255, expecting the rally seen on Friday in the wake of the Canadian employment report, which missed expectations. EURUSD has been plying a narrow range below 1.1050 and above the one-month low seen last Friday at 1.1016, ebbing back towards the latter in the current phase. The Yen took a rotation lower during pre-Europe trading in Asia as stock markets steadied after wobbling yesterday. A report in Politico saying that EU officials are expecting President Trump to confirm that he will delay hiking tariffs on EU cars and auto part imports for another six months, according to an EU source, gave investor spirits a boost after the president had said over the weekend that the media had exaggerated US willingness to roll back tariffs on China. Trump is scheduled to speak on trade before the Economic Club of New York today, (14:00 GMT) where markets will be on tenterhooks, looking for confirmation of the EU tariff story and a positive update on the China trade front. USDJPY lifted from sub-109.0 levels and above yesterday’s high in making a peak at 109.29. This swings the five-month high seen last week at 109.48 back into scope. Yen crosses also traded firmer as the Japanese currency weakened. The Pound steadied today after vaulting higher yesterday on news that the Brexit Party will not be contesting PM Johnson’s Conservative Party in the 317 seats they won at the previous general election in 2017. This will greatly reduce the risk of splitting the pro-Brexit vote at the December 12 election.

The UK unemployment rate fell back to 3.8% in the three months to September 2019, matching the lowest levels in 45 years. The median expectation had been for an unchanged 3.8% outcome. The drop in headline unemployment belies a more concerning picture. The number of employed people falling by 58k to 32.75 mln, the biggest decrease since the three months to May 2015, while total pay growth slowed to 3.6% y/y from 3.8% y/y previously, disappointed the median forecast for an unchanged 3.8% reading. The two dissenters favouring a rate cut on the BoE’s Monetary Policy Committee at last week’s meeting argued that the labour market had turned, while a monthly survey from the UK’s Recruitment and Employment Confederation and accountants KPMG found that its monthly index of jobs vacancies declined to 51.7 in October from 52.6 in September, its lowest level since January 2012.

GBPUSD moved off early lows at 1.2815 but remains constrained by election news and under the daily pivot point at 1.2845 and the 200-period moving average at 1.2850. Support sits at 1.2800-1.2790, and S2 down at 1.2730.

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Stuart Cowell

Head Market Analyst

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