Geo-Political Risk and the Greenback Remain in Focus

Earlier in the Day:

Economic data released through the Asian session this morning included August current account figures out of Japan, September business confidence numbers out of Australia and September retail sales figures out of the UK.

For the Japanese Yen, the current account surplus narrowed from ¥2.010T to ¥1.838T on a non-seasonally adjusted basis in August, which was worse than a forecasted narrowing to ¥1.897T. On a seasonally adjusted basis, the current account surplus narrowed from ¥1.48T to ¥1.43T, which was worse than a forecasted widening to ¥1.52T.

The Japanese Yen moved from ¥113.135 to ¥113.041 against the Dollar upon release of the figures, before rising to ¥113.03 against the Dollar at the time of writing, up 0.18% for the session.

For the Aussie Dollar, the NAB Business Confidence Index rose from 5 to 6 in September, coming in ahead of a forecasted hold at 5.

• The uptick in the month was attributed to an improvement in the employment index that was partially offset by a minor decline in trading conditions, while profitability was reportedly unchanged.

The Aussie Dollar moved from $0.70734 to $0.70745 upon release of the figures, before rising to $0.7079 at the time of writing, up 0.01% for the session, the Aussie Dollar finding some respite following last week’s sell-off.

Elsewhere, the Kiwi Dollar was also on a better footing through the early hours, up 0.05% at $0.6451, though sentiment could shift quickly should risk aversion plague the Asian markets later in the morning.

The Day Ahead:

For the EUR, it’s another relatively quiet day on the data front, with key stats scheduled for release limited to August trade data out of Germany.

Following disappointing industrial production figures out of Germany on Monday, the EUR could be in for another fall should the stats fail to meet forecasts, the trade surplus forecasted to widen from €15.8bn to €16.4bn in August.

Outside of the stats, we can expect geo-political risk to remain front and centre, with Italy and the rising tensions between the U.S and China to influence.

At the time of writing, the EUR was down 0.01% to $1.1491, geo-political risk the key driver, while today’s trade data will likely influence at the time of release.

For the Pound, it’s another quiet day on the data front, with no material stats scheduled for release to provide direction for the Pound, leaving the markets to focus on Brexit chatter through the day and a BoE MPC member Broadbent speech scheduled for this afternoon.

A combination of positive news on Brexit negotiations and hawkish MPC member chatter would certainly revive the Pound, though until the EU and Britain finalize any deal, the BoE may hold back on any optimism, the latest updates on Brexit negotiations suggesting there is still some way to go for Britain to garner a favourable deal.

In the early hours of the day, the September BRC Retail Sales Monitor figures were released, which reflected a 0.2% fall in retail sales, reversing August’s 0.2% rise.

• The weakest sales figures in 5-months was attributed to increased uncertainty over Brexit, tepid wage growth and rising consumer prices.
• Total sales eased from 1.3% to 0.7% in September, with a shift in weather conditions and an end to the 2018 World Cup weighing on consumption.

The Pound moved from $1.30907 to $1.30926 upon release of the figures, before easing to $1.3090 at the time of writing, flat for the session.

Across the Pond, there are also no major stats scheduled for release, leaving the Dollar in the hands of Trump and chatter over trade and market risk appetite in general, with the less influential Redbook numbers likely to have some influence at the time of release later this afternoon.

While we will expect geo-political risk to be the key driver, FOMC member Evans speaking in the afternoon could provide some direction, the recent rise in Treasury yields coming as the market begins to consider the need for a more aggressive rate path.

At the time of writing, the Dollar Spot Index was down 0.01% to 95.75, with Oval Office chatter the key driver through the day.

For the Loonie, key stats scheduled for release are limited to September housing start numbers that will provide the Loonie with some direction, with forecasts being positive, though we will expect direction to ultimately come from crude oil prices and chatter from the Oval Office through the day, risk aversion likely to continue weighing in spite of market sentiment towards BoC monetary policy.

The Loonie flat at C$1.2965 against the U.S Dollar at the time of writing.