Intraday Market Thoughts

Another Dull Bounce, Debate Looms

by Ashraf Laidi
Oct 17, 2016 22:51

Like on Thursday, there was an attempt to beat back dollar strength but once again it was lackluster. The New Zealand dollar was the top performer while the pound sterling lagged. One spot to watch in the day ahead is leaks related to the US election. NZD is firmer after Q2 CPI slowed to a higher than expected reading. A 3rd NZD trade has been issued on NZD.

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Another Dull Bounce, Debate Looms - Nzdusd Weekly Oct 17 (Chart 1)

Last week we wrote about the inability for any asset to sustain a bounce against the US dollar. It was underscored on Friday as the dollar rallied with EUR/USD hit especially hard. Monday was a similar story.

The US dollar sagged but it was such a small move compared to recent gains that it only highlights the firm hands buying dollars. One catalyst was the Empire Fed as it fell to the lowest since April at -6.8 vs +1.0 expected. Industrial production met estimates at +0.1% m/m.

A speech from the Fed's Fischer didn't touch on the current outlook for monetary policy but highlighted a growing Fed theme: That beyond a December hike, rates will stay low. He said a small overshoot in employment wouldn't be a problem. Coming from a sometimes-hawk like Fischer, it's notable.

An out-of-the-box theme that could grab headlines in the day ahead is Wikileaks and the US election. Internet for Julian Assange was cut off at the Ecuadorian embassy and the organization said contingencies have been activated. Assange has said the most-damaging leaks to Clinton were coming last and there is the potential he could upend the election.

New Zealand CPI slowed to 0.2% y/y and q/q vs exp 0.0% q/q and 0.1%.

Act Exp Prev GMT
CPI (q/q)
0.2% 0.0% 0.4% Oct 17 21:45
 
 

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