FX News Today
European Fixed Income Outlook: The December 10-year Bund future opened at 159.29, down from a close of 159.50 on Wednesday. 10-year Bund yields are up 1.5 bp at 0.459% in opening trade, after already moving markedly higher yesterday, as risk appetite returned and stock markets rallied following the US midterm election. US markets may hope that the split congress will reduce the chances of further fiscal stimulus and thus reduce the pressure on the Fed to hike rates again, but for Europe the impact on bond markets, at least for now, doesn’t seem clear cut. Italy will also be in focus today as the European Commission’s updated forecasts are said to put the deficit to GDP ratio at a whopping 2.9% in 2019, clearly above the government’s 2.4% target. ECB’s updated economic report is also due today and already released German trade data showed a narrowing in the sa trade surplus not just in monthly data, but also for Q3, which ups the odds of a negative Q3 GDP number next week.
FX Update:The Dollar has rebound from declines seen yesterday as the US midterms election results spelt out policy gridlock. The re-ascent of the Greenback coincided with strong Wall Street gains, where the S&P 500 closed with a 2.1%, which is the best gain seen for the day of a midterm election since 1982. The USDIndex has gained 0.3% so far today, and is now up 0.6% from yesterday’s two-week low, while EURUSD has concurrently posted a two-day low at 1.1412. The Cable and AUDUSD have seen similar price actions, while USDCAD lifted back above 1.3100. USDJPY has remained buoyant amid the backdrop of rising global stock markets. The pair posted a high of 113.73 to extend the recovery from yesterday’s brief foray below 113.00, though has remained below Tuesday’s 1-month peak at 113.81
Charts of the Day
Main Macro Events Today
- ECB’s economic report – Expectations – It is unlikely to be ground breaking, with the editorial likely to be a close repeat of Draghi’s introductory statement from the last press conference. However, the report could lay the ground for downward revisions to growth projections with the updated set of ECB staff forecasts in December.
- Canadian Housing Starts – Expectations – October housing starts are seen edging higher to a 195.0k unit pace from 188.7k in September. The new home price index is projected to rise 0.1% in September after the flat reading in August.
- Fed’s Monetary Policy Statement – Expectations – FOMC is universally expected to keep policy unchanged at this week’s meeting, while reiterating “the Committee seeks to foster maximum employment and price stability”. See our report.
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