Good Morning All;
we’ll see now a new daily currency analisys.
The Euro was confined to narrow ranges ahead of the New York open with a stronger reading for the Euro-zone trade surplus providing some slight Euro support as exports recovered ground, but gains were limited. The headline September US retail sales increase was in line with expectations at 0.6% while the underlying gain was slightly higher than expected at 0.5%, but the control group reading was lower than expected. The dollar edged lower after the release, although the overall impact was limited. There was also a weaker than expected reading for the University of Michigan consumer confidence index, although the current conditions index was stronger on the month. US Treasuries gained ground immediately after the data, but were also unable to sustain the gains and dipped back into negative territory. Fed Chair Yellen made no comments on the immediate economic outlook or monetary policy in her speech after the European close. US bond yields moved higher in late trading and the Euro dipped convincingly below 1.1000 later in New York with the dollar’s trade-weighted index back above the 98.00 level. The latest CFTC data recorded an increase in net dollar longs to the highest level in eight months with a small increase in net Euro shorts. The Euro remained below 1.1000 on Monday, although the dollar was unable to gain further momentum.
The dollar moved sharply higher against the yen in European trading on Friday with aa break back above the 104.00 level. Although the US currency dipped lower against the yen after the US sales data, losses were limited and there was a fresh move higher late in Europe as US 10-year yields moved above the 1.80% level for the first time since the beginning of June. There was no move to call China a currency manipulator in the latest US Treasury currency report. The latest COT data recorded a sharp decline in long yen positions to below 50,000 contracts although there is still scope for a further shift in positioning if US yields increase further and a sustained shift in sentiment. A monthly Japanese manufacturing Tankan index gain to a six-month high of 10 from 5 the previous month was offset by further deterioration in the services sector. Bank of Japan Governor Kuroda stated that policy will be adjusted as needed to achieve its 2% inflation target, although expectations of further easing appeared slightly lower with the dollar holding steady.
Sterling failed to sustain a move above 1.2250 against the dollar and dipped below 1.2200 as the Euro held 0.9000 support. There were comments from Bank of England Governor Carney that the bank would tolerate a bit of an overshoot in inflation above the 2.0% target, maintaining expectations that there would be a very loose bias to monetary policy. He also commented that the bank is not indifferent to the value of Sterling, although the concern related to the impact on inflation and not the actual currency level. The main feature was a move in 10-year bond yields to fresh four-month highs. The latest CFTC positioning data recorded only a slight decrease in net short non-commercial positions from record highs. German Chancellor Merkel maintained a tough stance on EU negotiations with comments that the UK could not get concessions on freedom of movement while retaining full access to the single market. There were also reports over the weekend that UK Chancellor Hammond was looking to slow the pace of Brexit while the ITEM club forecast 2017 GDP growth at 0.8% from 1.9% this year on weak investment. Sterling held below 1.2200 on Monday with sentiment still very weak.
The Euro was unable to make any impression on the franc during Friday, eventually retreating to lows near 1.0860 towards the European close. The dollar tested resistance above the 0.9900 level without being able to break higher. Global bond yields moved higher which should tend to undermine franc support given that Swiss yields remain very unattractive. The US Treasury added Switzerland to its monitoring list due to currency interventions which may discourage aggressive National Bank intervention to weaken the Swiss currency.