Geo-Political Risk Eases, with Carney and the Pound in the Spotlight This Afternoon

MarkCarney

Earlier in the Day:

There were no material stats released through the Asian session this morning as the markets continue to monitor whether there will be rising prospects of a military strike on North Korea following last Friday’s missile tests.

It’s certainly clear that North Korea have little regard for world peace and the imposition of more stringent sanctions as it looks to ruffle the feathers of the U.S administration and create more friction between the world’s largest economies, that of China and the U.S.

The U.S President had watered down its sanction proposals last week, but will now likely rue such a decision as the administration continues to threaten with the possibility of a military strike, something that the markets are unlikely to buy into just yet, with China having already been clear on how it would intervene should the U.S make the first move.

While there were no stats and Capitol Hill continues to flex its muscles over North Korea, the weaker retail sales figures out of the U.S had weighed on the Dollar on Friday and, following the disappointing stats out of China last week, both economics now expected to have a softer 3rd quarter, though how much of an affect Hurricane Harvey has remains to be seen.

For the morning session, it was risk on with Asian equities making ground and appetite for the safe havens on the decline ahead of Trump’s attendance to the UN on Tuesday.

For the week ahead the Kiwi Dollar will be in the spotlight as election polls suggest that it’s too close to call on the likely winner of this coming Saturday’s general election, the markets looking for status quo, with the Kiwi Dollar feeling the heat with the Labour Party in with a chance of taking over.

The Day Ahead:

It’s a pretty quiet day on the economic calendar, with key stats through the day limited to prelim September inflation figures out of the Eurozone, with sentiment towards the EUR standing its ground following the jump in 2nd quarter wage growth last week. Forecasts are for year-on-year core inflation to be in line with August, with any pickup supporting the EUR ahead of a busy week of central bank commentary.

While inflation figures will influence, focus through the European session will be on BoE Governor Carney, scheduled to speak today, with Carney having already followed last week’s more hawkish BoE statement, saying that the probability of a first rate hike in a decade had significantly increased in a TV interview.

The probability of a rate hike will be data dependent, which will make the Pound all the more sensitive to stats in the coming week, with markets looking towards the November MPC meeting to lift rates should stats out of the UK continue to remain positive.

At the time of the report, the Pound was down 0.27% at $1.3557, with a return to $1.36 levels now dependent upon the stats, though Carney is always able to spur a rally.

The quiet day will likely be a positive for the Dollar, with August inflation figures expected to support a more hawkish FOMC on Wednesday, with the probability of a December rate hike having climbed to above 50% following Thursday’s data.

At the time of the report, the Dollar Spot Index was up 0.14% at 92.002, with no material stats out of the U.S to consider through the day, while the markets will continue to look towards Capitol Hill and Trump noise over North Korea, any risk off sentiment being a negative for the Dollar. At the time of the report, it was risk on with Dow futures pointing to a 57 point gain and gold falling back to sub-$1,320 levels going into the European session.

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