Mid-Terms Driving the USD and the Markets Early

Earlier in the Day:

Economic data released through the Asian session was limited to employment figures for the 3^rd quarter and inflation numbers out of New Zealand, while the markets were broadly focused on the U.S mid-term elections, results rolling out through the session.

For the Kiwi Dollar,

3^rd quarter employment rose by 1.1%, coming in well ahead of a forecasted and 2^nd quarter 0.5% rise, leading to a slide in the unemployment rate from 4.5% to a 10-year low 3.9%.

• The 3^rd quarter employment rate rose to 68.3%, its highest rate in more than 30-years.
• According to NZ Stats, of greater significance is the trend series, where the unemployment rate has been on a downward trend over the last 7-quarters.

The Kiwi Dollar rallied from $0.66746 to $0.66379 upon release of the figures that preceded the inflation numbers.

The RBNZ’s inflation expectations for 2-years ahead in the 4^th quarter held steady at 2%, based on median figures.

• Looking at the outlook for 1-year ahead, inflation expectations rose from 1.85% to 2% between the 3^rd and 4^th

The Kiwi Dollar moved from $0.67347 to $0.67305 upon release of the figures, before sliding to $0.6725 at the time of writing, down 0.21% for the session, the inflation figures unlikely to shift the RBNZ on monetary policy going into tomorrow’s decision.

Elsewhere, the Japanese Yen was down 0.30% to ¥113.77, while the Aussie Dollar slumped 0.44% to $0.7215 through the early part of the day, a slide in commodity prices doing the damage in the early hours, along with the market response to the mid-term election results rolling in.

The Day Ahead:

For the EUR, economic data scheduled for release out of the Eurozone is on the lighter side, with key stats limited to September industrial production figures out of Germany and retail sales figures out of the Eurozone, with focus being on the industrial production figures, which should find some support following August’s jump in factory orders.

Outside of the numbers, we can expect the markets to respond to the U.S mid-terms, with Italy’s coalition government also needing consideration through the day.

At the time of writing, the EUR was down 0.18% to $1.1407, Germany’s industrial production figures the key driver, forecasted to be EUR positive, with geo-political risk also in the mix through the day.

For the Pound, economic data is limited to October house price figures that are unlikely to have a material influence on the Pound through the day.

Support through Tuesday came as Theresa May’s cabinet stood behind the PM and the outline of the deal, with pressure now on the rise for a deal to be hashed out by the end of this month.

At the time of writing, the Pound was up 0.12% to $1.3083, with Brexit remaining the area of focus through the day.

Across the Pond, there are no material stats scheduled for release through the day, leaving the markets and the Dollar to continue to respond to the mid-term election results, as voters vote on Trump’s performance over the first 2-years of his presidency, with Dollar weakness expected should the votes favour a Democratic takeover of the House of Representatives.

At the time of writing, the Dollar Spot Index was up 0.11% to 96.421, with the mid-terms and noise from the Oval Office the key drivers through the day.

For the Loonie, economic data is limited to October’s Ivey PMI that is forecasted to be Loonie positive, a slide in crude oil prices having contributed to the Loonie’s demise in the early part of the week, a hawkish BoC not enough to regain C$1.30 levels against the U.S Dollar.

The Loonie was down 0.17% to C$1.3146 against the U.S Dollar at the time of writing, with market risk sentiment and today’s stats the key drivers through the day.