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US Dollar at Risk on FOMC Minutes, Aussie Down on Jobs Data Revisions

US Dollar at Risk on FOMC Minutes, Aussie Down on Jobs Data Revisions

2014-10-08 07:01:00
Ilya Spivak, Head Strategist, APAC
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Talking Points:

  • US Dollar Needs Strongly Hawkish FOMC Minutes to Regain Momentum
  • Australian Dollar Sinks as ABS Hints Recent Jobs Data Vastly Overstated
  • See Economic Data Directly on Your Charts with the DailyFX News App

The US Dollar launched a broad-based recovery against its leading counterparts in overnight trade, rising as much as 0.3 percent on average. The move appeared to be corrective, following on from the greenback’s broad selloff in the preceding 24 hours, as markets shifted closer toward “neutral” ahead of today’s release of minutes from September’s FOMC meeting.

At the time, the markets interpreted the outcome of September’s Fed policy announcement as broadly hawkish. While the statement accompanying the rate decision and Chair Yellen’s press conference were broadly in line with theretofore established trends, the updated rates outlook from FOMC committee members looked supportive. Indeed, policymakers envisioned a full 25bps more in 2015 rate hikes than they estimated in June.

On the face of it, that would seem to assure that minutes from the September meeting will strike a hawkish tone. While that may be the case, it is important to note that the US Dollar has rallied 2.6 percent just since that announcement and through the post-payrolls peak registered last Friday. A further 4.6 percent advance was already in the books preceding last month’s FOMC outing. Taken together, the dramatic extent of recent buying has put speculative net-long USD positions at a record high (according to data from the CFTC).

In practice, this means that a large degree of the Fed’s latest hawkish inclinations may have been priced in at this point. If the Minutes document does not offer anything materially novel to advance the case for a sooner-than-later interest rate hike following the end of QE3 this month, the rally may find itself without adequate fodder to continue. This in turn might open the door for profit-taking on seemingly extended long-USD exposure, leading the benchmark unit lower.

The Australian Dollar underperformed, sinking as much as 0.4 percent against its leading counterparts. The Aussie tumbled as the Australian Bureau of Statistics revealed that it will be revising July and August employment figures to remove seasonal adjustments, which would yield far worse outcomes than originally reported. If the originally reported non-adjusted numbers are maintained, the new headline figure for July would reflect an 11.9k drop in hiring compared with the original 4.1k drop reported. The August difference is more dramatic still and is set to show an unadjusted print of 32.1k jobs added versus a whopping 121k released previously.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:01

GBP

BRC Shop Price Index (Y/Y) (SEP)

-1.8%

-

-1.6%

23:50

JPY

Adjusted Current Account Total (¥) (AUG)

130.8B

186.8B

99.3B

23:50

JPY

Current Account Total (¥) (AUG)

287.1B

200.0B

416.7B

23:50

JPY

Trade Balance - BOP Basis (¥) (AUG)

-831.8B

-770.7B

-828.1B

1:45

CNY

HSBC China Services PMI (SEP)

53.5

-

54.1

1:45

CNY

HSBC China Composite PMI (SEP)

52.3

-

52.8

4:30

JPY

Bankruptcies (Y/Y) (SEP)

0.85%

-

-11.23%

5:00

JPY

Eco Watchers Survey: Current (SEP)

47.7

48.5

47.4

5:00

JPY

Eco Watchers Survey: Outlook (SEP)

48.7

-

50.4

5:30

AUD

Foreign Reserves (A$) (SEP)

60.9B

-

60.0B

European Session

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

5:45

CHF

Unemployment Rate s.a. (SEP)

3.2% (A)

3.2%

Medium

5:45

CHF

Unemployment Rate (SEP)

3.0% (A)

3.0%

Medium

7:00

GBP

Halifax House Price (3M/Y) (SEP)

9.6% (A)

9.7%

Low

7:00

GBP

Halifax Plc House Prices s.a. (M/M) (SEP)

0.6% (A)

0.1%

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.2449

1.2547

1.2608

1.2645

1.2706

1.2743

1.2841

GBPUSD

1.5880

1.5982

1.6039

1.6084

1.6141

1.6186

1.6288

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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