Asia AM Digest: US Dollar Extends Rebound, British Pound Drops
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The US Dollar continued to rise as Fed rate hike speculation regained momentum. Tellingly, the currency rose alongside front-end Treasury bond yields while gold prices declined. The priced-in policy outlook implied in Fed Funds futures now puts the probability of a December rate increase at 80.2 percent, up from 76.5 percent one week ago.
The British Pound suffered outsized losses, losing ground against nearly all of its G10 FX counterparts as Brexit-related worries overshadowed supportive news-flow on the monetary policy side. CPI data showed inflation accelerated to on an on-year rate of 3 percent and BOE Governor Carney said a rate hike “may be appropriate” in the coming months.
DailyFX Economic Calendar: Asia Pacific (all times in GMT)
The economic data docket is decidedly bare in Asia Pacific trading hours, leaving markets without an obvious focal point. An announcement from NZ First party leader Winston Peters on whether he will support the incumbent National or opposition Labour to form New Zealand’s next government may come across the wires, but nothing explicitly suggests it will.
On the sentiment front, a tepid lead from Wall Street doesn’t seem to offer strong risk on/off conviction. Australia’s benchmark S&P/ASX 200 index is little-changed in early trade and futures tracking Japan’s Nikkei 225 are pointing to a quiet open in Tokyo. On balance, all this might may translate into a quiet session. Still, the absence of a clear-cut catalyst might make for heightened sensitivity to stray headline risk.
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IG Client Sentiment Index Chart of the Day: Gold
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Retail trader data shows 77.6% of traders are net-long gold, with the ratio of traders long to short at 3.47 to 1. The number of traders net-long is 10.3% lower than yesterday and 13.0% lower from last week, while the number of traders net-short is 4.9% higher than yesterday and 29.4% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests spot gold prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current gold price trend may soon reverse higher despite the fact traders remain net-long.
Five Things Traders are Reading
- USD/JPY Stalls While Nikkei 225 Advances; One Trend Likely Reverses by Jeremy Wagner, CEWA-M
- Trading the Majors - Price Action Setups (Oct. 17, 2017) by James Stanley, Currency Strategist
- FX Week Ahead: Global Inflation Data, Central Bank Policy in Focus by Christopher Vecchio, CFA, Sr. Currency Strategist
- EUR/USD Standing Head-and-Shoulders above the Restby Paul Robinson, Market Analyst
- USD Finds Further Bids As GBP Drops and CAD Remains Weak by Tyler Yell, CMT
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