Wednesday, October 31, 2018

The Dollar outperforms as European data miss their marks, equities recover further

Tags
  • Dollar
  • Gold
  • Yen
  • Euro
  • Pound
  • Stocks

MORNING BRIEFING

Mixed European data and a stronger than expected US Consumer Confidence report are sending the Euro towards the 1.13 area. The US Dollar enjoys gains across the board supported by the higher US bond yields while the US equities continue to recover, removing any risk-off bias in the markets. Gold suffers dropping to new lows as risk sentiment improves and Oil tries to carve a bottom.

The US Dollar continues to trade higher versus all of its peers with the exception of the AUD and NZD. The US Consumer Confidence report printed stronger than expected helping the greenback push higher while at the same time, an uptick in the US Treasury yields supported the rally. There's nothing significant on the calendar today so the Dollar will take its cue from the equities' markets while the focus remains on the NFP report scheduled for release on Friday. Analysts are expecting a strong rebound in the number of jobs added so the Dollar should continue trading with a positive bias towards Friday's data.

The Euro will remain front and center today in light of the German retail sales and Eurozone inflation data pending for release. Yesterday, the GDP and confidence reports coming from Germany and the Eurozone missed their marks and, combined with investors' disappointment regarding Chancellor Merkel's decision to step down at the end of her term, sank the shared currency. The Euro is on a bearish trajectory and if today's data also miss analysts' expectations then we may see the Single currency testing its 1.13 lows by the end of the day.

Commodities traded with a bearish bias yesterday. Gold moved further to the downside as a result of the risk-off tone receding since the start of the week. Safe haven demand for the yellow metal has disappeared and this is forcing prices lower: there's significant support for Gold around the $1,214 area and if this level holds we may eventually see a consolidation, however a break to the downside will drive prices towards the $1,200 round figure. Oil initially moved lower yesterday but encountered some support as it tested the $66 area and now the momentum has again diminished suggesting that we may see a retest of the $67.50 highs.

Equities had a rather positive day yesterday with the US markets posting strong gains and the Asian bourses also ending the day above the water. However, the European equities are struggling to sustain these gains and are currently expected to open in a mixed manner as investors are skeptical of the recent deterioration in the domestic data. Having said that, the US futures are painting a brighter picture so we should be in for a mixed day of trading ahead.

MARKET EVENTS TO WATCH

  • German Retail Sales - 11am
  • Euro-Zone Consumer Price Index - 2pm
  • U.S. Crude Oil Inventories - 6.30pm

All times are GMT +4.

Written by Konstantinos Anthis, Head of Research

 
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