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U.S 3rd Quarter GDP Numbers and the USD in the Spotlight

Risk aversion hits the Asian markets ahead of U.S GDP numbers later today, with the Aussie Dollar and Kiwi Dollar joining the equities in a slide.
Bob Mason
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Earlier in the Day:

Economic data released through the Asian session this morning was on the lighter side, with stats limited to October inflation numbers out of Japan.

For the Japanese Yen, the annual rate of core inflation for Tokyo held steady at 1%, which was in line with forecasts, with headline inflation picking up from September’s 1.3% to 1.5% in October, which was also in line with forecasts.

Looking at the numbers:

  • A 4.4% rise in prices for fuel, light and water, a 1.8% rise in prices for culture and recreation and a 1.3% rise in prices for medical care provided support to the annual rate of core inflation, while prices furniture and household utensils fell by 1%, the only drag in October.
  • For headline inflation a 3% rise in food prices also contributed.
  • Month on month, consumer prices rose by 0.1%, with core inflation also sitting at 0.1%.

The Japanese Yen moved from ¥112.385 to ¥112.391 against the U.S Dollar, upon release of the figures, before rising to ¥112.24 at the time of writing, up 0.16% for the session.

Elsewhere, the Aussie Dollar saw a reversal of Thursday’s gains with interest in the early part of the day, down 0.58% to $0.7039, with the Kiwi Dollar also struggling, the Kiwi Down 0.44% to $0.6495, risk aversion hitting the Asian markets in the early part of the day.

In the equity markets, the Asian markets failed to follow the U.S into positive territory this morning, with the majors in the red at the time of writing, led by the Hang Seng, down 0.87%, while the ASX200 and Nikkei were down 0.42% and by 0.22% respectively. For the CSI300, a 0.60% fall came from a choppy start to the session that saw all the majors in positive territory before hitting reverse, a slide in the U.S futures weighing on sentiment.

The Day Ahead:

For the EUR, there are no material stats scheduled for release through the day, leaving the markets to consider Thursday’s ECB press conference and what lies ahead for the Eurozone, weaker economic indicators of particular concern as the U.S – China trade war rages on.

While there are no stats to consider, ECB President Draghi is scheduled to speak later in the day, with any more dovish chatter supporting a gradual pullback to $1.12 levels, FED monetary policy and the U.S economy supporting a Dollar bias.

At the time of writing, the EUR was down 0.04% to $1.1371, with Draghi and geo-political risk the key drivers through the day.

For the Pound, it’s also a quiet day on the economic calendar, leaving the Pound in the hands of the UK government and Brexit chatter through the day.

The Pound found some early support this morning, following the week’s reversal, supported by Theresa May’s continuing survival at the helm, though concerns over a no-deal scenario will remain the Pound’s nemesis near-term, as negotiations look set to drag into November and possibly beyond.

At the time of writing, the Pound was up 0.03% to $1.2821, with Brexit the key driver.

Across the Pond, it’s a big day for the Dollar and U.S President Trump’s Tweeter account, with 1st estimate GDP numbers for the 3rd quarter scheduled for release, alongside the GDP price index numbers, with finalized October consumer sentiment figures due out shortly after likely to be ignored by the markets.

With the U.S economy forecasted to grow by 3.3% in the 3rd quarter, down from a 2nd quarter 4.2%, the U.S economy continues to outpace its peers, China excluded, supporting the continued divergence in monetary policy.

Trump will likely take credit and attribute the momentum in the U.S economy to foreign policy, trade terms in particular and the actions of the U.S administration since taking office, a swipe at the FED’s current policy goal also on the cards, which is unlikely to pin back the Dollar should the numbers impress.

At the time of writing, the Dollar Spot Index was down 0.06% to 96.617.

For the Loonie, a quiet day on the data front leaves the Loonie in the hands of market risk sentiment through the day and direction in crude oil prices.

The Loonie was down 0.26% to C$1.3108 against the U.S Dollar at the time of writing, risk off sentiment weighing in the early part of the day.

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