Talking Points:
- US Dollar corrects lower having rallied after presidential election
- RBNZ’s Wheeler says “open” to FX intervention, hurting NZ Dollar
- Stock futures hint at risk-on mood but dangers loom on the horizon
The markets continue to digest the aftermath of the US presidential election after an action-packed 24 hours marked by wild swings across the asset spectrum. The US Dollar corrected lower against nearly all of its major counterparts having finished a tumultuous session on the upside yesterday. This may have reflected returning Fed tightening bets. Traders priced in an 82 percent chance of a December hike by day’s end.
It was the New Zealand Dollar that proved weakest on the session however. Prices popped after a widely expected RBNZ rate cut came bundled with a policy statement that played down the need for further easing. Sellers returned in force after central bank Governor Wheeler said policymakers “always have an open mind on FX intervention”. The Australian Dollar retraced upward having underperformed in yesterday’s trade.
A quiet economic data docket in European and US hours ought to make it easy for the US election outcome to continue dominating the spotlight. S&P 500 futures are pointing solidly higher in late Asian trade, suggesting the risk-on mood that took root yesterday as markets on-boarded an unexpected triumph by Republican nominee Donald Trump is poised to continue.
Sentiment initially crumbled as state-by-state returns began showing Mr Trump edging out Democratic rival Hillary Clinton, as expected. Things began to turn as Trump delivered a conciliatory-sounding victory speech foreshadowing plans to boost fiscal outlays on a large-scale “economic renewal” effort. This appeared to inspire an appetite for bargain-hunting, particularly in the context of deep intraday losses.
A focus on infrastructure projects delivered strong gains for materials and industrials shares. Financial and health care stocks scored the biggest gains however, presumably as traders priced out the probability of a stricter regulatory regime that was expected to be pursued by a Clinton White House.
The Trump-inspired reallocation of portfolios may not be all good news for risk appetite however. Pledges to label China as a currency manipulator, withdraw from some free trade agreements and renegotiate others may begin to worry markets. If this drives up trade barriers, rising import prices may hurt consumption, the largest contributor to GDP. That could bode ill for earnings in related sectors and growth as a whole.
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Asia Session
| GMT | CCY | EVENT | ACT | EXP | PREV |
|---|---|---|---|---|---|
| 20:00 | NZD | RBNZ Official Cash Rate | 1.8% | 1.8% | 2.0% |
| 23:50 | JPY | BOJ Oct Meeting Summary of Opinions | - | - | - |
| 23:50 | JPY | Machine Orders (MoM) (SEP) | -3.3% | -1.5% | -2.2% |
| 23:50 | JPY | Machine Orders (YoY) (SEP) | 4.3% | 4.1% | 11.6% |
| 23:50 | JPY | Money Stock M2 (YoY) (OCT) | 3.7% | 3.6% | 3.5% |
| 23:50 | JPY | Money Stock M3 (YoY) (OCT) | 3.2% | 3.1% | 3.0% |
| 0:00 | AUD | Consumer Inflation Expectation (NOV) | 3.2% | - | 3.7% |
| 0:01 | GBP | RICS House Price Balance (OCT) | 23% | 18% | 18% |
| 0:10 | NZD | RBNZ's Wheeler at Parliament Select Committee | - | - | - |
| 0:30 | AUD | Home Loans (MoM) (SEP) | 1.6% | -1.6% | -2.7% |
| 0:30 | AUD | Investment Lending (SEP) | 4.6% | - | -0.8% |
| 0:30 | AUD | Owner-Occupier Loan Value (MoM) (SEP) | 0.9% | - | -1.0% |
| 2:00 | JPY | Tokyo Avg Office Vacancies (OCT) | 3.64 | - | 3.7 |
| 2:00 | USD | Fed's Williams Speaks in San Francisco | - | - | - |
| 6:00 | JPY | Machine Tool Orders (YoY) (OCT P) | -8.9% | - | -6.3% |
European Session
| GMT | CCY | EVENT | EXP | PREV | IMPACT |
|---|---|---|---|---|---|
| 7:45 | EUR | France Wages (QoQ) (3Q P) | 0.3% | 0.3% | Low |
| 7:45 | EUR | France Non-Farm Payrolls (QoQ) (3Q P) | 0.1% | 0.2% | Low |
| 7:45 | EUR | France Industrial Production (MoM) (SEP) | -0.3% | 2.1% | Low |
| 7:45 | EUR | France Industrial Production (YoY) (SEP) | 0.4% | 0.5% | Low |
| 7:45 | EUR | France Manufacturing Production (MoM) (SEP) | -0.1% | 2.2% | Low |
| 7:45 | EUR | France Manufacturing Production (YoY) (SEP) | 0.4% | 0.7% | Low |
| 9:00 | EUR | Italy Industrial Production (MoM) (SEP) | -1.0% | 1.7% | Low |
| 9:00 | EUR | Italy Industrial Production WDA (YoY) (SEP) | 2.2% | 4.1% | Low |
| 9:00 | EUR | Italy Industrial Production NSA (YoY) (SEP) | - | 7.4% | Low |
Critical Levels
| CCY | Supp 3 | Supp 2 | Supp 1 | Pivot Point | Res 1 | Res 2 | Res 3 |
|---|---|---|---|---|---|---|---|
| EUR/USD | 1.0253 | 1.0646 | 1.0778 | 1.1039 | 1.1171 | 1.1432 | 1.1825 |
| GBP/USD | 1.2050 | 1.2243 | 1.2324 | 1.2436 | 1.2517 | 1.2629 | 1.2822 |
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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