It’s a Back Foot Dollar as Sentiment towards FED Policy Shifts

Earlier in the Day:

Economic data released through the Asian session this morning included October current account and 3^rd quarter GDP numbers out of Japan and October new home loan figures out of Australia.

For the Japanese Yen, the numbers were on the disappointing side, with the economy slowing more than had been estimated, with finalized 3^rd quarter numbers showing the economy contracted by 2.5% year-on-year. Forecasts were for a 1.9% contraction following the 1^st estimate 1.2% contraction.

Quarter-on-quarter, the economy shrunk by 0.6%, which was worse than a forecasted 0.5% and 1^st estimate 0.3% contraction.

Japan’s current account surplus also narrowed, with the unadjusted surplus narrowing from ¥1.822tn to ¥1.310tn, coming in below a forecasted ¥1.384tn.

The Japanese Yen moved from ¥112.475 to ¥112.56 against the U.S Dollar upon release of the figures. At the time of writing, the Japanese Yen stood at ¥112.28, up 0.36% for the session, the numbers brushed aside as risk aversion returns at the start of the week.

For the Aussie Dollar, new home loans jumped by 2.2% in October, coming in well ahead of a forecasted 0.5% rise and September’s 1% fall.

According to figures released by the ABS, the number of commitments for construction of dwellings rose by 3.2% and by 2.2% for the purchase of established dwellings. Dragging on the headline figures was a fall in the number of commitments for the purchasing of new dwellings.

Based on value of dwelling commitments, loans for owner occupied housing rose by 3.5%, driving the headline figure, while loans for investment housing increased by just 0.6%.

The Aussie Dollar moved from $0.71875 to $0.72003 upon release of the figures, before rising to $0.7214 at the time of writing, a gain of 0.08% for the session.

Elsewhere, the Kiwi Dollar was also on the rise, up 0.33% to $0.6889, with the upside coming in spite of the risk off sentiment at the start of the week, with trade war jitters weighing heavily on the Asian equity markets early on, with the U.S futures pointing to a slide later in the day.

At the time of writing, the Nikkei was down 1.84%, with the ASX200 down 1.97%, while the Hang Seng and CSI300 fared better through the morning with losses of 1.37% and 0.67% respectively, the CSI300 holding up well in spite of rising tensions between China and North America.

The Day Ahead:

For the EUR, economic data is limited to October trade figures out of Germany that will likely garner more attention to normal, with Germany on U.S President Trump’s hit list.

There was little talk of car tariffs last week as Germany’s car manufacturing big wigs met with the U.S administration in a bid avoid the introduction of tariffs that would come at a bad time for the EU.

China’s economy has eased back and the global economic outlook is not great and, with a possible Brexit event on the horizon, the U.S market is going to be an area of focus for the likes of VW.

On the geo-political front, the Italian coalition government may be demonstrating an early willingness to conform to the EU Commission’s requirements, though whether there is a willingness to go all the way remains to be seen, with the EU capable of turning the screw and dashing the spending hopes of the coalition.

At the time of writing, the EUR was up 0.48% to $1.1434, with today’s stats the key driver through the day.

For the Pound, it’s a busy day on the data front, with key stats scheduled for release including October industrial production and manufacturing production figures, trade data and GDP figures, with the NIESR GDP Tracker numbers due out later this afternoon.

While the numbers would traditionally have a material influence on the Pound, we would expect the Pound to show little interest in the numbers today, with focus being on tomorrow’s Brexit vote in Parliament, a rejection on the cards.

At the time of writing, the Pound was up 0.18% to $1.2749, with Brexit chatter the key driver through the day.

Across the Pond, it’s a quiet day on the data front, with key stats through the day being limited to October’s JOLTs job openings.

Following last week’s weaker than expected nonfarm payroll figures and the recent uptrend in the initial jobless claims figures released each week, the market will be looking for some decent figures for October to ease any immediate concerns over labour market conditions.

While we will expect the Dollar to respond to the numbers, Oval Office chatter and sentiment towards FED monetary policy will likely remain the key drivers, with more U.S – China rhetoric expected to continue on trade and Hua Wei CFO Meng Wanzhou’s arrest.

At the time of writing, the Dollar Spot Index was down 0.13% to 96.389.

For the Loonie, economic data is limited to housing sector numbers, with October building permit and November housing start figures scheduled for release.

Following a more dovish than normal BoC last week, we can expect some sensitivity to the numbers, though direction through the week ahead will likely boil down to market risk sentiment and how China responds to the Meng Wanzhou arrest in Canada. The Canadian government was in no position to deny the U.S request when considering the country’s trade dependencies, but Canada could face punitive consequences at a time that the BoC is already raising concerns over the economic outlook.

The Loonie was up 0.15% to C$1.3302 against the U.S Dollar at the time of writing.