FOREX: US Dollar to Extend Gains on Risk Aversion in European Trade
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- Australian Dollar Finds No Lifeline in RBA Meeting Minutes
- Euro, British Pound Fail to Gain Traction on Rebound Attempt
Critical Levels
| CCY | SUPPORT | RESISTANCE |
| EURUSD | 1.3495 | 1.3681 |
| GBPUSD | 1.5970 | 1.6115 |
The Euro and the British Pound were little changed in overnight trade. A corrective bounce took both currencies higher against the US Dollar in early Asian hours but the rally faltered toward the end of the session, yielding a nearly flat result for both sterling and the single currency. We remain short EURUSD and have now entered long USDJPY.
Asia Session Highlights
| CCY | GMT | EVENT | ACT | EXP | PREV |
| JPY | 23:50 | Housing Loans (YoY) (3Q) | 3.6% | - | 3.6% |
| JPY | 23:50 | Tertiary Industry Index (MoM) (SEP) | -0.9% | -0.5% | 0.1% (R+) |
| AUD | 0:30 | Reserve Bank of Australia Nov Meeting Minutes | - | - | - |
| CNY | 2:00 | Conference Board Leading Econ Index (MoM) (SEP) | 0.6% | - | 0.7% |
| CNY | 2:00 | Actual FDI (YoY) (OCT) | 7.9% | 10.4% | 6.1% |
| JPY | 6:00 | Machine Tool Orders (YoY) (OCT F) | 71.0% | - | 70.9% |
Minutes from November’s Reserve Bank of Australia monetary policy meeting generated little interest, with the central bank reiterating its statement at the time of the announcement to argue that “the balance of risks had shifted to the point where a modest tightening of monetary policy was prudent.” Policymakers went on to say that although this month’s rate hike was preemptive, the recent moderation in inflation was likely now “largely complete”, opening the door for a move higher after a couple of quarters at current levels.
Perhaps most significantly, the RBA reiterated that the recent appreciation of the Australian Dollar has helped contain price growth, hinting at a limited scope for continued monetary tightening in the near term. Indeed, markets are pricing in a mere 3 percent chance of another rate hike in December according to a Credit Suisse gauge of traders’ expectations. The Aussie declined against all of its major counterparts in overnight trade, down 0.2 percent on average.
Euro Session: What to Expect
| CCY | GMT | EVENT | EXP | PREV | IMPACT |
| EUR | 7:00 | EU 25 New Car Registrations (OCT) | - | -9.6% | Low |
| EUR | 7:45 | French Non-Farm Payrolls (QoQ) (3Q P) | 0.2% | 0.2% | Low |
| EUR | 7:45 | French Wages (QoQ) (3Q P) | - | 0.4% | Low |
| EUR | 8:00 | ECB's Constancio Speaks in Frankfurt | - | - | Low |
| EUR | 9:00 | Italian CPI - EU Harmonized (YoY) (OCT F) | 2.0% | 2.0% | Low |
| EUR | 9:00 | Italian CPI - EU Harmonized (MoM) (OCT F) | 0.7% | 0.7% | Low |
| EUR | 9:00 | Italian CPI (NIC incl. tobacco) (MoM) (OCT F) | 0.2% | 0.2% | Low |
| EUR | 9:00 | Italian CPI (NIC incl. tobacco) (YoY) (OCT F) | 1.7% | 1.7% | Low |
| GBP | 9:30 | DCLG UK House Prices (YoY) (SEP) | 8.3% | Low | |
| GBP | 9:30 | Retail Price Index Ex Mort Int.Payments (YoY) (OCT) | 4.6% | 4.6% | Low |
| GBP | 9:30 | Consumer Price Index (MoM) (OCT) | 0.2% | 0.0% | Medium |
| GBP | 9:30 | Consumer Price Index (YoY) (OCT) | 3.1% | 3.1% | High |
| GBP | 9:30 | Core Consumer Price Index (YoY) (OCT) | 2.6% | 2.7% | Medium |
| GBP | 9:30 | Retail Price Index (OCT) | 226 | 225.3 | Low |
| GBP | 9:30 | Retail Price Index (MoM) (OCT) | 0.3% | 0.4% | Low |
| GBP | 9:30 | Retail Price Index (YoY) (OCT) | 4.6% | 4.6% | Low |
| EUR | 10:00 | Euro-Zone Consumer Price Index (YoY) (OCT F) | 1.9% | 1.8% | Medium |
| EUR | 10:00 | Euro-Zone Consumer Price Index - Core (YoY) (OCT) | 1.0% | 1.0% | Medium |
| EUR | 10:00 | Euro-Zone Consumer Price Index (MoM) (OCT) | 0.3% | 0.2% | Medium |
| EUR | 10:00 | Euro-Zone ZEW Survey (Economic Sentiment) (NOV) | 2 | 1.8 | Medium |
| EUR | 10:00 | German ZEW Survey (Current Situation) (NOV) | 75 | 72.6 | Medium |
| EUR | 10:00 | German ZEW Survey (Economic Sentiment) (NOV) | -6.0 | -7.2 | Medium |
UK Consumer Price Index figures are set to show the annual inflation rate held at 3.1 percent in October, printing above the upper threshold of the central bank’s target range for the seventh consecutive month. The outcome may prove supportive for the British Pound, reinforcing the unexpectedly hawkish quarterly inflation report published last week and weighing against bets the Bank of England will follow the Federal Reserve down the path of renewed quantitative easing (QE).
Germany’s ZEW Survey of investor confidence is expected to show economic sentiment narrowly improved for the first in seven months in November. Likewise, the region-wide Euro Zone ZEW gauge is set to tick slightly higher, marking the first improvement since August. While these outcomes may offer the Euro a bit of a lifeline after the single currency dropped to the lowest in seven weeks over the five days through last Friday, lingering sovereign risk concerns are likely to cap gains. Indeed, traders may prove more concerned with the outcomes of today’s Spanish and Greek bond auctions, with a disappointing uptake pointing to lingering fears of contagion and likely reviving selling pressure.
Turning to sentiment, risk aversion looks likely with stock index futures tracking the FTSE 100 and the S&P 500 deep in the red in late Asian trade, down 0.8 and 0.5 percent respectively and pointing toward gains for the safety-linked US Dollar at the expense of most of its major counterparts.
