Currency Updates:
AUD/USD Europe lifted the pair after it failed to make headway below 0.8760. The profit taking rise had the pair near 0.8795 as NY got going. Early NY saw the pair spike down to 0.8759 on the headline GDP miss. No further losses were possible though after the market realized the GDP internals weren’t that impressive. Upon that realization US yields and the USD slipped from their highs. AUD/USD quickly recovered its footings and rallied back above the 200-HMA. A period of consolidation near that MA ensued and it eventually resolved higher. US equity markets and JPY was sold on talk of a Nikkei report on the GPIF reallocating investments. AUD/USD lifted to a 0.8841 high as AUD/JPY ran up near 96.65/70. Little pullback was seen for either pair and late in the day they both sat just below the session’s high. Aussie Q3 PPI, the BoJ meeting and EZ CPI are the main risks overnight. Technically it appears further gains can be made after the pair bounced off s-t trend line supt, is back above the 10 & 21-DMAs while RSIs are biased up.
EUR/USD Europe made two tries to take the pair through 1.2560 even as econ data out of Europe was a bit upbeat. After the failed tries short covering lifted the pair near 1.2590 as NY walked in. Another try to break lower ensued on the GDP headline miss. EUR/USD spiked down to 1.2545 but T/P bids from those who shorted overnight prevented further losses. The slide then reversed after a second look was taken at GDP’s internals. They didn’t instill confidence that US rates should rise. US yields and the USD gave back the post-GDP gains and EUR/USD quickly recovered ground above 1.2600. Yields slid a bit more and the pair went on to hit a 1.2632 NY high. Some of the gains were given back after talk of a Nikkei report citing GPIF investment allocations sent USD/JPY soaring. EUR/USD slide from its NY high and sat near 1.2610 late in the day. Traders now look to the Oct. EZ CPI due tomorrow. A soft number should see bear pressure applied to EUR/USD. A big downside CPI miss is likely needed to see a serious test of key 1.2500 support.
USD/JPY The big buyer of 1-wk 110s noted in this morning’s Briefing was onto something. USD/JPY surged to 109.47 today with some help from stories about aggressive GPIF reallocations in the NY afternoon, apparently linked to Nikkei. That move to new session highs came after a spike up, then down, as the US GDP report initially encouraged buyers with a HL beat, but then disappointed them upon inspection of the growth components and subdued inflation. While N225 futures and USD/JPY prices made new highs on the GPIF story, USD-JPY 2-yr yield spreads couldn’t come close to doing so, which took some of the wind out of the market toward the close. Exporters remain camped out by 109.50 and ahead of 110 (stops above), but bids from importers and specs have been trailed up to the 108.70-80 range. All eyes now shift to the BOJ tonight, with new econ f/cs, amid a plethora of Japanese economic releases, including CPI. The BOJ are expected to cut GDP f/cs, but are seen holding to their 2% CPI target, though with a less stringent timeframe for achieving it. EUR/JPY got a pip above Wed’s high before slipping back toward the close. Other crosses are firm.
Looking Ahead – Economic Data (GMT)
• JP All Hsehold Spding YY* Sep f/c -4.3%, -4.7%-prev
• JP All Hsehold Spding MM* Sep f/c 1.9%, -0.3%-prev
• JP CPI, Core Nationwide YY Sep f/c 3%, 3.1%-prev
• JP CPI, Overall Nationwide* Sep 3.3%-prev
• JP CPI Core Tokyo YY* Oct f/c 2.5%, 2.6%-prev
• JP CPI, Overall Tokyo* Oct 2.9%-prev
• JP Jobs/Applicants Ratio Sep f/c 1.09, 1.10-prev
• JP Unemployment Rate Sep f/c 3.6%, 3.5%-prev
• JP Construction Orders YY Sep 8.6%-prev
• AU PPI QQ* Q3 -0.1%-prev
• AU PPI YY* Q3 2.3%-prev
• AU Private Sector Credit* Sep f/c 0.4%, 0.4%-prev
Looking Ahead – Events, Other Releases (GMT)
• : JP RBNZ BOJ Monetary policy statement
