Forex news for NY trading on October 31, 2019.
- No records today. Major indices close lower
- Big moves down in US yields today
- Expect USD firming into year-end with EUR/USD likely falling to 1.08 - BAML
- October forex seasonal scorecard: Was no one expecting cold weather?
- WTI crude oil futures settle at $54.18
- Fed Chairman Powell signaled two things yesterday and they're both hurting USD/JPY
- Pres Trump: UK trade with US could be 4 to 5X higher than it is now
- White House/GOP discuss a new tax reduction/Economic measure plan
- Dallas Fed trimmed mean PCE 1.6% vs 1.8% in August
- SNB's Jordan: Exemptions to negative rates would reduce their effectiveness
- US House has votes to back deeper impeachment measures
- The initial estimate for 4Q growth from the Atlanta Fed GDPNow model is 1.5%
- Trump takes another shot at the Federal Reserve
- Gold on the upward track again
- Markets don't yet appreciate the total paradigm shift from Powell
- Trump says working on new site to sign Phase One deal
- JPMorgan model gives Conservatives majority of 60
- US Q3 employment cost index +0.7% vs +0.7% expected
- Initial jobless claims 218K versus 215K estimate
- US personal income +0.3% versus 0.3% est. Spending +0.2% vs +0.3% est.
- Canada August GDP +0.1% vs +0.2% m/m expected
- The JPY is the strongest and the AUD is the weakest as NA traders enter
In other markets, the snapshot near the end of the day is showing:
- Spot gold is up $16.63 or 1.12% at $1512.40
- WTI crude oil is down -$0.95 ore -1.73% at $54.10
Yesterday, US yields and the USD was spooked by the Fed decision. Today the market remaiined scared of lower inflation. The core PCE - a favorite measure of inflation by the fell, dipped to 1.7% from 1.8% last month. The headline number was even lower at 1.3% (from 1.4% last month).
There IS no inflation. The Fed is failing in its mandate to target inflation (at 2%). The subtle - but clear - comments from Fed Chair Powell said as much yesterday. Adam pointed that fact early in the day in his excelent post (CLICK HERE).
As a result, the Fed is likely to be more inclined to ease than to tighten for a long, long time - even if growth - and inflation - picks up (the Fed will likely tolerate 2% to 2.5% inflation). The opposite can also happen. That is growth and inflation can remain sub 2%. Depending on how much, could lead to more cuts down the road.
So the topside on rates seems limited. That helped to send yields tumbling lower today.
Taking a snapshot of the yield changes across the curve, the 5 year was the biggest decliner at -9.8 bps on the day, but the other yield changes were also material. The yield curve - as measured by the 2-10 spread - narrowed a bit as well (to 16.64 bps from 17.39 bps).
In addition to the scare lower in yields, the USD was also spooked to the downside.
For the greenback today, the largest decline was vs the JPY at -0.78%. The greenback also fell vs the GBP (-0.36%), NZD (-0.38%) and the CHF (-0.28%). It eked out small gains versus the CAD and AUD and was virtually unchanged vs the EUR.
Below, is a snapshot of the percentage changes for the major currencies vs each other. Overall, the JPY on a flight to safety bid is ending as the strongest, while the AUD was the weakest.
In the US stock market, today the scare was also helped by some bearish signals from China with regard to the prospects for Phase II and III of the trade deal. That helped to keep a lid on the US stocks, althought they did rally off the lows for the day. Today was the end of the month and major indices all closed the month in the black led by the Nasdaq's 3% gain.
For the month in the forex, the GBP took top honors with strong gains vs. all the major currencies. The biggest gainer was the GBPUSD which advanced by 5.35% on the month. The USD was the weakest, just nudging out the JPY for that distinction.
