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US Dollar, Yen May Rise as Commodity FX Suffers in Risk-Off Trade

US Dollar, Yen May Rise as Commodity FX Suffers in Risk-Off Trade

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Aussie Dollar may struggle to find follow-through on CPI-inspired rally
  • British Pound down as markets rethink response to Carney commentary
  • Yen, US Dollar may rise as commodity currencies suffer in risk-off trade

The Australian Dollar outperformed in Asian trading hours after third-quarter CPI figures topped economists’ expectations. The outcome appeared to weigh against RBA rate cut expectations but traders had already discounted the probability of further near-term easing ahead of the release, suggesting upside momentum may struggle for follow-through.

The British Pound traded broadly lower as traders digested yesterday’s comments from BOE Governor Mark Carney. The UK unit sank alongside front-end bond yields before the central bank chief of due to speak in the House of Lords. It swiftly recovered after Carney said there are limits to policymakers’ willingness to look through an overshoot of the CPI target on the back of Brexit-inspired GBP weakness.

Within that context, overnight losses may reflect the realization that Carney didn’t say anything particularly earth-shaking. Most critically, he almost certainly did not mean to signal monetary stimulus reduction is anywhere on the horizon in the near term (an interpretation that investors seemingly extracted judging by Sterling’s reaction).

Looking ahead, a quiet economic calendar may put sentiment trends at the forefront. Stock index futures tracking major European and US equity benchmarks are pointing sharply lower, pointing to a risk-off mood. This may translate into losses for higher-yielding currencies including the Australian, Canadian and New Zealand Dollars while boosting anti-risk alternatives like the US Dollar and the Japanese Yen.

Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

PPI Services (YoY) (SEP)

0.3%

0.2%

0.2%

00:15

AUD

RBA CIO Girn Gives Speech

-

-

-

00:30

AUD

CPI (QoQ) (3Q)

0.7%

0.5%

0.4%

00:30

AUD

CPI (YoY) (3Q)

1.3%

1.1%

1.0%

00:30

AUD

CPI Trimmed Mean (QoQ) (3Q)

0.4%

0.4%

0.5%

00:30

AUD

CPI Trimmed Mean (YoY) (3Q)

1.7%

1.7%

1.7%

00:30

AUD

CPI Weighted Median (QoQ) (3Q)

0.3%

0.4%

0.5%

00:30

AUD

CPI Weighted Median (YoY) (3Q)

1.3%

1.4%

1.5%

01:45

CNY

Westpac-MNI Consumer Sentiment (OCT)

117.1

-

115.2

05:00

JPY

Small Business Confidence (OCT)

48.3

-

47.7

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

06:00

EUR

German Import Price Index (MoM) (SEP)

0.0%

-0.2%

Low

06:00

EUR

German Import Price Index (YoY) (SEP)

-1.9%

-2.6%

Low

06:00

EUR

German GfK Consumer Confidence (NOV)

10

10

Low

08:30

GBP

BBA Loans for House Purchase (SEP)

37350

36997

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.0774

1.0828

1.0858

1.0882

1.0912

1.0936

1.0990

GBP/USD

1.1850

1.2011

1.2099

1.2172

1.2260

1.2333

1.2494

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

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