The US dollar is firm within fairly narrow
ranges that have prevailed this week as the market consolidates its recent
gains. Draghi's comments to the European Parliament are similarly
dovish in tone to the October post-ECB press conference. Sterling posted
outsized gains yesterday, pushing above $1.5200, and those gains were extended
to almost $1.5250 today before sterling was sold back to $1.5175, leaving it
almost flat against the euro.
Japanese machinery orders rose 7.5% in
September, more than twice the Bloomberg consensus estimate, and fully
recouping the 5.7% decline in August. The Nikkei was up
fractionally, led by utilities and tech while the decline in oil prices weigh
on the energy sector. The dollar has been confined to about a third of a
yen range. Thus far it has the makings of the third consecutive lower
higher, and the greenback did make new lows for the week near JPY122.75.
With sizable options struck at JPY123 expiring today through Monday, this area
will be pivotal.
The Australian dollar is easily the best
performing major currency, gaining about 1% against the US dollar today.
The Aussie was lifted to almost $0.7155, highs for the week and the 20-day
moving average by a stellar jobs report. It is true that Australia's
employment report tends to be volatile, and today's report may overstate the
case, but the underlying movement is in the right direction. The RBA
recently recognized improved economic prospects, and specifically cited the
labor market.
Australia grew 58.6k jobs in October, nearly
four times more than expected, and of these 40k were full-time positions.
On top of that, the September series was revised to show less weakness.
The unemployment rate fell back to 5.9% from 6.2%, totally unexpectedly, and
this is despite the rise in the participation rate to 65.0% from
64.9%.
Politics in the Iberian peninsula have
attracted market attention this week. After the
collapse of the minority center-right government in Portugal, a new government
is still awaited. DBRS is the only ECB-recognized rating agency that
gives Portugal an investment grade rating. It is set to review it
tomorrow and at a minimum a cut in the outlook is anticipated. A loss of
its investment grade status, however, could make Portuguese bonds unacceptable
for QE participation and cheap lending by the ECB. Portugal's
10-year yield is off 5 bp today leaving it up about 7 bp over the past
week.
In Spain, the confrontation between
independent-bent Catalonia and Madrid sharpened. Meanwhile, the
latest polls ahead of next month's election shows Podemos support slipping
toward 10%, but the new centrist Ciuadanos at 21%, which is roughly half of
what the PP drew, and leaves the ruling party with 26.5% support. The
Socialists are close with 24%.
The North American focus will be on the
Federal Reserve. Over the course of the day, no fewer than six Fed
officials will speak. Yellen starts the day around the time
the equity market opens, and Fischer finishes the day a little before the Tokyo
open on Friday. NY Fed President Dudley in speaking shortly after
midday. While other Fed officials offer insight, we continue to place
emphasis on the signals from the Fed's leadership. Yet besides them,
Lacker, a voting hawk and Ballard, a non-voting hawk speak. Among
these five officials, we expect a reiteration of the FOMC statement and the
prospect for a move next month. Chicago Fed's Evans has been among the
doves, but he appears to have softened his position recently.
Dollar Firms, though Strong Jobs Lifts Aussie, Awaiting Fed-Speak
Reviewed by Marc Chandler
on
November 12, 2015
Rating:
Reviewed by Marc Chandler
on
November 12, 2015
Rating:
