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MARKET DEVELOPMENT – GBP AND NZD SHINE, USD BULLS AT RISK

GBP: Sterling rose to session highs after the latest employment report with UK wages beginning to show some signs of life. The BoE focussed wage components rose above analyst estimates with the ex-bonus figure rising to the highest level since January 2009 at 3.1%. This also backs up recent commentary from BoE Chief Economist Haldane, who stated that wages are a growing source of inflationary pressures and as such will monitor closely. Elsewhere, Brexit rhetoric ahead of the EU summit continues to suggest that while progress has been made, key issues, most notably the Irish border, are still yet to be resolved.

USD: Risk sentiment is firmer this morning with US equity markets trading higher, consequently, this has seen high beta currencies favoured over the USD, which has now made a firm break below the 95.00 handle. A close below the 23.6% Fibonacci retracement of the 2018 low to 2018 high could spell trouble for the crowded bullish bets.

NZD: The Kiwi is flying high this morning after NZ inflation figures rose above analyst estimates with the headline reading rising to 1.9% from 1.5%. A large factor behind the jump had been the higher energy prices, coupled with the falling exchange rate in the third quarter.

DailyFX Economic Calendar: Tuesday, October 16, 2018 – North American Releases

NZD Firms on Inflation Jump, Strong Wages Buoy GBP - US Market Open

DailyFX Webinar Calendar:Tuesday, October 16, 2018

NZD Firms on Inflation Jump, Strong Wages Buoy GBP - US Market Open

IG Client Sentiment: NZDUSD Chart of the Day

NZD Firms on Inflation Jump, Strong Wages Buoy GBP - US Market Open

NZDUSD: Retail trader data shows 83.0% of traders are net-long with the ratio of traders long to short at 4.87 to 1. In fact, traders have remained net-long since Sep 20 when NZDUSD traded near 0.65728; price has moved 0.4% lower since then. The number of traders net-long is 2.3% higher than yesterday and 4.8% higher from last week, while the number of traders net-short is 2.0% lower than yesterday and 3.9% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests NZDUSD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger NZDUSD-bearish contrarian trading bias.

Five Things Traders are Reading

  1. US Dollar Erases Gains as Italy Secures Budget Deal, Brexit News Looms” Christopher Vecchio, CFA, Sr. Currency Strategist
  2. Risk Aversion Still Dominating Markets | Webinarby Martin Essex, MSTA, Analyst and Editor
  3. Bitcoin (BTC) Price: Driven by Fidelity and Tether (USDT)by Nick Cawley, Market Analyst
  4. Trading Outlook for EUR/USD, EUR/AUD, EUR/JPY, Gold Price & More” by Paul Robinson, Market Analyst
  5. GBPUSD Boosted on Highest Wage Growth Since 2009” by Justin McQueen, Market Analyst

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX