Daily Forex Commentary

09 October 2017 - North Korean Tensions weigh on otherwise buoyant Greenback

By Benjamin Hiscox

New Zealand Dollar:

 

The New Zealand Dollar dropped below critical support at 0.71 against the US Dollar for the first time since June on Friday evening. Stronger than expected wage growth and a drop in unemployment rate in the United States saw the Kiwi close at 0.7090 US Cents. With an unexpected drop in GDT Dairy prices last week and continued uncertainty for the balance of power to form a coalition government, The Kiwi could remain under pressure over the coming week. On open this morning, the Kiwi has dropped to 0.7060 with a quiet day expected in markets with a United States and Japanese Bank Holiday.

 

We expect a daily range today of 0.6980 - 0.7130

 

Australian Dollar:

 

The Australian Dollar opens this morning at 0.7776, unable to keep up the pace with a stronger Greenback. The local unit felt the pressure for most of last week as weakness in local Australian data dragged the pair lower. Building approvals slowed as well as the AIG manufacturing and services sectors. Retail Sales also reported a fall and with the RBA concerned over the outlook for household spending the future on a near interest rate rise has lowered. When valued against the worlds reserve currency the Aussie touched a three-month low of 0.7733 and a high of 0.7798. Aiding Greenback strength was Friday’s U.S jobs report for the month of September, the unemployment rate fell and the average hourly earnings rate rose driving the expectations of a Fed rate hike. The AUD/USD is now facing resistance-turned-support at around 0.7700. A break through this trend line could bring the price to the next support level at 0.7535. Resistance is sitting at 0.7800.

 

We expect a daily range today of 0.7730 - 0.7830

 

Great British Pound:

 

Political instability has driven the Cable down more than 300 pips over the last week as the Sterling feels the pinch of PM Theresa May’s deteriorating leadership. The Pound opens this morning languishing at 1.3086, down 2.5% for the week as May’s speech at the Tory party conference raised more questions than answers. Her speech incited calls for her resignation, amidst falling confidence in her cabinet and revealed the stark absence of a clear Brexit strategy. The Brexit issue was further exacerbated by Germany and France’s clear refusal for any talks on a post-Brexit transition deal before the divorce bill had been resolved. The woes of the GBP were also hit by continued US strength over the last week despite a small pull back from the Greenback. Opening, this week a little worse for wear, the Great British Pound now turns to Tuesdays Manufacturing Production numbers for guidance.

 

We expect a daily range today of 1.8380 - 1.8560

 

Majors:

 

The U.S dollar enjoyed mixed fortunes through trade on Friday pushing its longest weekly winning streak in nearly 12 months. Despite a disappointing non-farm payroll (NFP) print the Greenback found support following stronger than expected wage growth data and jumped to touch two month highs against both the Yen and Euro. Investors largely shrugged aside the soft NFP read as Hurricanes Irma and Harvey leave thousands of Americans temporarily displaced and unemployed and instead focussed on the uptick in average hourly earnings. The indicator tracking wage growth encouraged those betting on a December rate hike as higher wages typically bolsters appetite for consumer spending and increases price pressures. Wage growth and Inflation have been key concerns for the FOMC and perhaps the most significant road block ahead of planned monetary policy amendments. Having forced the Euro through 1.17 and pushing through 113 JPY the US dollar then shifted lower as fears of conflict between the US and North Korea continue to escalate. Suggestions North Korea is preparing to test a long-range missile heightened concerns leading into the weekend that some form of military intervention was imminent. Opening this morning marginally lower attentions turn to key Retail sales and inflation data Friday for direction amid geo-political turmoil. 

 

Data releases:

AUD: 

NO Data

NZD:

 No Data

JPY: 

Bank Holiday

GBP:

 BRC Retail Sales Monitor

EUR:

 German Industrial Production and Sentix Investor Confidence

USD:

 Bank Holiday

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