European Open

DXY saw a downtick on a quiet Asian morning marked by a holiday in THB and partially closed markets in Hong Kong due to the impact from typhoon Kompasu. China trade balance data surprised, coming in at USD 66.7bn (vs USD 45.0bn consensus, and USD 58.3bn prior). This came in despite expectations of a slowdown due to the power crunch affecting production. KRW saw unemployment creep up by 0.2% to 3.0% in September, in line with expectations. However, 671k jobs were added YoY, a 7 year high. USDKRW retreated 0.4% today, away from the 1200 level, alongside a rise in Korean equities.

Markets eye the US CPI (13:30 BST), trading mostly on broader US themes today. Inflation is back in focus after the job goal for tapering was met last week. We also look forward to FOMC Meeting Minutes (19:00 BST) & Fedspeak from Brainard at Fed Listens Event (21:30 BST). EUR will see German CPI (07:00 BST) and Eurozone Industrial Production SA MoM (10:00 BST). GBP’s IP, GDP & Trade data (07:00 BST) and AUD’s Speech by RBA’s Debelle (23:00 BST) are not expected to move markets. Instead, we look to BoE’s Cunliffe speaking (15:30 BST).

USD saw a downtick, with an absence of notable drivers. UST held steady during the Asian morning as well. This followed a mixed NY session which saw USD eventually finish mostly bid alongside G10 peers.

JP Morgan


Quieter day yesterday with recent moves consolidating before another key US CPI print today, although the dollar did briefly make new highs versus the euro and jpy. The previous couple of prints have validated the view that elevated elements of CPI have started to ease, thus providing some comfort to the transitory argument from policymakers. With higher commodity prices sure to put some upward pressure on inflation going forward, any sort of strong number today could cause a decent sell off in the front end of the US curve given what’s gone on in other rates markets globally, and in that environment it would be tough to maintain dollar shorts anywhere.

Consequently, I think it’s prudent that whilst long commodity currencies has worked well in recent sessions to reduce a touch into today’s session with some flexibility to trade the data. I still have cad longs, a decent underperformance yesterday in the BA market spurring that trade on the crosses, but mainly now against the euro for the time being. Aud longs have been trimmed, would be quick to buy back on a softer print. If there is a surprise to the topside, I think the euro move lower may accelerate, usdjpy would depend a bit more on the equity reaction although that’s not where the correlation has been recently, in EM would look to buy usdzar again.

The euro did touch new lows for the year last night so now we have a double bottom for the moment around 1.1525, so a break below there and subsequent test of 1.15 would likely bring more selling as people have been generally bored of euro shorts on the week, although any mini rally has been stopped by first resistance so has done nothing wrong. Above 1.1610 and 1.1665 is where danger lies for shorts.