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US Dollar May Rise on PCE Data, Thin Trade May Boost Volatility

US Dollar May Rise on PCE Data, Thin Trade May Boost Volatility

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • US Dollar May Edge Higher as PCE Data Boosts December Rate Hike Bets
  • Kneejerk G10 FX Volatility May Be Amplified in Thinning Pre-Holiday Trade
  • Australian, NZ Dollars Rebound in Asia After Yesterday’s Underperformance

A quiet economic calendar in European trading hours is likely to put a busy US data docket in the spotlight. October’s Core PCE figures may prove most interesting. The Fed’s preferred measure of inflation is expected to put price growth at 1.4 percent, the highest in 10 months. That may help boost an interest rate hike at December’s FOMC meeting, which may offer a near-term boost to the US Dollar. Follow-through may be limited however considering traders already see the probability of a 25bps increase at 77.5 percent (according what is priced into Fed Funds futures), the highest yet this year.

Traders would be wise to keep in mind that liquidity is likely starting to drain ahead of the upcoming Thanksgiving holiday that will keep the US markets offline on Thursday. This could make for a period of directionless drift in the G10 FX space into the week-end. However, thin trading conditions may amplify knee-jerk volatility in the event that an unexpected event risk spooks the markets. Seemingly potent moves generated under these circumstances may struggle for follow-through and unravel once liquidity returns.

The Australian and New Zealand Dollars moved higher in otherwise quiet overnight trade. The moves appeared corrective after the two currencies lagged their G10 counterparts in the prior session. The Kiwi outperformed, which may have reflected pre-positioning ahead of a 2020 government bond auction. Demand swelled at a bill sale yesterday compared, seemingly speaking to investors’ desire for NZD-denominated paper. This is a highly speculative hypothesis however.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

PPI Services (YoY) (OCT)

0.5%

0.5%

0.5%

23:50

JPY

BOJ October Meeting Minutes

-

-

-

00:00

AUD

Skilled Vacancies (MoM) (OCT)

0.6%

-

1.1%

00:30

AUD

Construction Work Done (3Q)

-3.6%

-2.0%

2.1%

01:45

CNY

Westpac-MNI Consumer Sentiment (NOV)

113.1

-

109.7

05:00

JPY

Small Business Confidence (NOV)

49.9

-

48.7

05:00

JPY

Leading Index (SEP F)

101.6

-

101.4

05:00

JPY

Coincident Index (SEP F)

112.3

-

111.9

European Session

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

07:00

CHF

UBS Consumption Indicator (OCT)

1.60 (A)

1.56

Low

09:30

GBP

BBA Loans for House Purchase (OCT)

45500

44489

Low

09:30

EUR

ECB’s Honohan Speaks in Dublin

-

-

Low

10:00

EUR

ECB Releases Financial Stability Report

-

-

Medium

10:20

AUD

RBA's Debelle Speaks in London

-

-

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.0539

1.0592

1.0618

1.0645

1.0671

1.0698

1.0751

GBP/USD

1.4894

1.4996

1.5040

1.5098

1.5142

1.5200

1.5302

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

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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