USD edged higher last week as U.S. data prints to the upside. The U.S. data included October preliminary durable goods orders at +0.6% vs. -0.9% exp with Capital goods orders nondefense +1.2% vs. -0.2% exp. Besides, the U.S. Q3 GDP second reading was also revised higher at +2.1% vs. +1.9% exp. On the trade front, U.S. President Trump has signed the bill in support of Hong Kong protestors, leading to an immediate shift in market sentiment. USD is also benefiting from the risk aversion. This week we will have the ISM Manufacturing PMI as well as two job reports, which can support USD further if both print well.
Pound was able to sustain its rally as the market remains optimistic on the Sterling as recent YouGov polls showed that the Tories are likely to win the general election, fueling the currency’s rally. Looking ahead, investors will be keeping a close watch on the manufacturing PMI, retail sales data though any impact is likely to be short-lived as the focus remains on Brexit and the results of the upcoming general election.
EUR edged lower last week as a slew of PMI data in the Eurozone showed that weakness in the manufacturing sector may be spilling over to the services sector, increasing speculation of further easing ahead by the ECB. Looking ahead, investors will be keeping a close watch on the Eurozone’s Manufacturing and Services PMIs, retail sales, GDP, Industrial Production and Employment numbers where missing estimates could see the currency extend its decline.
JPY was also buoyed as a safe haven after Trump signed the bill in support of Hong Kong protestors, leading to an immediate shift in market sentiment. Safe havens have been on the bid after the HK bill adds to the trade tensions. Domestically, BOJ member Sakurai warned that if the Japanese economy keeps weakening, there will be a need to prepare for further easing. But after all, it is the trade news that JPY is likely to follow in the near term. If the HK bill leads to more confusion in the talk, JPY could rise further.
AUD drifted lower last week. Given that last week’s data release for Australia was mixed. Along with RBA’s Governor speech last week mentioning that RBA has flexible market operations to ensure adequate liquidity, as well as negative interest rates are extraordinarily unlikely. The drop in AUD could very well be to US-China trade talks being impacted by US President Trump possibly jeopardizing the trade talk due to the signing of HK’s human rights act. This week is a heavy week for the AUD with RBA interest rate decision, GDP data and retail sales data. Good data will see the AUD strengthen barring further negative developments in the US-China trade talks.
NZD last week strengthened slightly as RBNZ’s Governor Adrian Orr mentioned that RBNZ is committed to bolstering the long-term resilience of the financial system. Further, domestic data such as trade balance, business confidence and building consents all came out better than expected. The limited strengthening could very well be due to the NZD’s strong correlation with the AUD. While this week will be a light week for NZD in terms of economic data release, investors should continue to keep an eye on developments coming out from the US-China trade talks. Better than expected data will continue to see NZD strengthen further.
The CAD moved mostly sideways last week. However late last Friday, Canada’s GDP data came out unchanged from the previous announcement. While this was not a negative announcement, the signal that this announcement gave was that domestically, Canada’s economy has slowed significantly. This caused the CAD to weaken momentarily. This week, we have both the BOC interest rate decision along with the Ivey PMI index. We expect there to be no interest rate decision change and the sideways momentum from this week could very well carry into this week.
Read more market views from the AxiTrader team: https://www.axitrader.com/au/market-news-blog/.
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Stocks soar, powered by first-rate earnings and a dazzling run of economic data; Gold plays catch as G10 falls flat while oil basks in the afterglow