Action Insight

The US markets responded negatively overnight as Senate's version of tax plan confirmed they wanted to delay corporate tax cut by a year. But considering intraday price actions, the reactions were not disastrous. DOW dropped initially to 23310.02 before paring much losses to close at 23461.91, down -101.42 pts or -0.43%. That's close to open at 23492.09. S&P 500 dropped as low as 2566.33 before closing at 2584.62, down -9.76 pts or -0.38%. That's even slightly higher than open at 2584.00. NASDAQ dropped to as low as 6687.28 then closed at 6750.05, down -39.07 pts or -0.58%. That's notably higher than open at 6737.45. After all, US equities has now entered into a consolidation phase after recent record runs. 10 year yield tried to recovery and ended up 0.006 at 2.331. Dollar, on the other hand, stays pressured and is set to end as the weakest one for the week.

Dollar tries to recover today but momentum is weak. The greenback is still trading as the weakest major currency for the week, as weighed down by concerns over the tax plan. But the picture could be cleared up as Senate is set to unveil their version of the bill. Released from US, initial jobless claims rose 10k to 239k in the week ended November 4, higher than expectation of 231K. Nonetheless, the four week moving average dropped -1.25k to 231.25k, lowest since March 1973. Continuing claims rose 17k to 1.9m in the week ended October 28. From Canada, new housing price index rose 0.2% mom in September.

Dollar continues to trade generally weak today on worries of a delay in implementing corporate tax cut. EUR/USD edged lower to 1.1553 earlier this week but is now back above 1.16 as the greenback pared gains. Both USD/CHF and USD/JPY are stuck in tight range below recent high at 1.0037 and 114.73 respectively. Yen tried to stage a breakout yesterday but there was no follow through buying. Meanwhile, AUD/USD is also holding on to 0.7624 support as sideway trading continues. New Zealand Dollar trades slightly firmer after a more hawkish than expected RBNZ statement. But recent price actions in Kiwi remains corrective in nature.

While keeping the OCR unchanged at 1.75%, the tone of November RBNZ statement has turned slightly more hawkish than previous ones. The central bank upgraded inflation forecasts, while describing core inflation as 'subdued' and reiterating 'uncertainties' in the new government's policies. The growth outlook remained largely unchanged from August's, as weaker growth in the housing and construction sector would be offset by greater fiscal spending promised by the new government and higher terms of trade, thanks to NZD depreciation and the rise in oil prices. RBNZ slightly pushed ahead the rate hike schedule. However, given the minimal change, we believe this is rather a symbolic move. The central bank expects more material interest rate movements by 2020. We believe the monetary policy would stay unchanged for the rest of 2018.

Yen trades broadly higher today following a so called flattening yield curve phenomenon globally. 10 year German bund yields extends recent decline and hits a two month low at 0.32 today. 2 year yield was flat at -0.76% and that makings the 108 basis points spread the lowest in two months. Similar situation is seen in US with spread between 2- and 10-year yield at 67 basis points, lowest in nearly a decade. Economists see that as a sign of worry over inflation path. That is, inflation might not be heading up while global central banks begin tightening policies. Meanwhile, sentiments were also weighed down by uncertainty over the US tax plan as there were reports that Senate Republican could delay corporate tax cuts by a year to comply with Senate rules.

Dollar weakens overnight on report that Senate Republicans are considering to delay corporate tax cut by a year. The greenback pared back some of this week's gains and turned mixed for the week. EUR/USD led the way down yesterday but breaking 1.1574 support. But equivalent move was not seen in other dollar pairs. USD/CHF was held below 1.0037 near term resistance. USD/JPY also failed to sustain above 114.44/9 zone. And even AUD/USD is held above 0.7624 support. Dollar is still waiting for inspiration for a firm breakout from consolidations. Meanwhile, Sterling and Yen remains the strongest one for the week so far.

Dollar trades broadly higher today as sentiments are supported by hope on tax cuts in US. In particular, EUR/USD breaks 1.1574 support to resume recent decline from 1.2091 high. Nonetheless, commodity currencies are trading as the weakest ones. In particular, Aussie is under some pressure after the non-eventful RBA rate decision. Economic calendar is lightly today and the main focuses for the rest of the day will be on speeches by BoC Governor Stephen Poloz and Fed Chair Janet Yellen.

As widely anticipated, RBA left the cash rate unchanged at 1.5% in November. As we await Friday' Statement of Monetary Policy, policymakers revealed at today' statement that the macroeconomic guidance has stayed largely unchanged. In short, policymakers remained upbeat about the growth outlook, although they expressed concerns over household spending and soft inflation. Despite recent weakness in the Australian dollar, RBA reiterated the warning that higher exchange rate would lead to slower growth and inflation. Given the overall unchanged tone of the central bank, we retain the view that RBA would keep the policy rate unchanged at least until 1H18.

The financial markets continued to trade with risk appetite this week. DOW managed to make another record high despite a mere 9.23 pts rise. S&P 500 and NASDAQ performed slightly better and gained 0.13% and 0.33% respectively, both at new records. FTSE was also firm yesterday and gained 0.03% to new record close at 7562.28. While that was below intraday record at 7598.99, that was enough to help lift Sterling for a rebound. GBP/USD is temporary safe after failing to break through 1.3026 key support following post BoE selloff. Meanwhile, Aussie trades steadily after RBA left cash rate unchanged at 1.50% as widely expected, with a carbon copy statement.

The direction in the Forex markets is no too clearly today. Yen was initially sold off earlier but there was no follow through selling so far. Instead, Euro is back under some selling pressure despite solid economic data. On the other hand, Dollar is mixed as US President Donald Trump's trip to Asia is no providing any inspiration to the markets. Instead, eyes will stay on the progress of the tax plan in Congress. But for now, in a rather light week, attention will be on RBA rate decision in the upcoming Asian session.

Yen opens the weak generally lower. USD/JPY's break of 114.49 key resistance could now open up further rally to 118.65 key resistance. But more is needed to confirm underlying bullish momentum. BoJ Governor Haruhiko Kuroda sounds quite upbeat in his latest assessment in the Japanese economy. US President Donald Trump started his Asian tour by crying that the US has suffered at hands of Japan for many many years, but markets paid little attention. The forex markets are mixed elsewhere with mild strength in Euro. But the initial focus of the week will on whether Dollar can ride on Friday's strength to resume recent uptrend

It was a week full of high profile events and much volatility was seen. But in the end, most forex pairs and crosses ended inside prior week's range. Canadian Dollar closed as the second strongest, next to Kiwi, thanks to strong October job numbers. In addition, the Loonie was lifted further as WTI crude oil surged through 55.24 key resistance to resume the up trend that started back in February 2016. Sterling was the weakest one as markets responded negatively to the dovish BoE rate cut. But the pound is stubbornly holding on to key near term support against Dollar, Euro and Yen so far. Dollar ended the week mixed after all the events. FOMC delivered a forgettable statement, Jerome Powell was confirmed as President Donald Trump's nomination as next Fed chair, House released the tax bill. Nonetheless, resilience of the greenback after non-farm payroll miss could be seen as hint of underlying strength. And Dollar could be back into driving seat soon.

Dollar weakens mildly in early US session after mixed employment data. Headline job growth as shown in non-farm payrolls report was at 261k in October, below expectation of 310k. But prior months figure was revised up from -33k contraction to 18k rise, roughly makes up the miss. Unemployment rate dropped to 4.1%, below expectation of being unchanged at 4.2%. The biggest disappointment is that average hourly earnings stalled at 0.0% mom, below expectation of 0.2% mom growth. While the greenback is sold off after the report, weakness is so far limited. Also from US, trade deficit widened slightly to USD -43.5b in September.

Fed Governor Jerome Powell was finally confirmed as US President Donald Trump's nomination as the one to succeed Janet Yellen as Fed Chair next year. House republicans also released the tax bill finally. Stock markets responded well to the news with DOW closing up 81.25 pts, or 0.35% at new record high. S&P 500 also reversed earlier loss and closed up 0.02% at 2579.85. But judging from the reactions in bonds, Powell is taken as a dovish Fed chair. 10 year yield lost 0.029 to close at 2.347, notably lower comparing to last week's close at 2.428. Powell is seen as a safe choice that would largely follow Yellen's path of gradual tightening. Focus will now turn to non-farm payrolls report.

BOE voted 7-2 to raise the Bank rate by +25 bps to 0.5%, the first time in over a decade, in November. Two deputy governors, Sir Jon Cunliffe and Sir Dave Ramsden, voted to leave borrowing costs unchanged. BOE voted unanimously to leave the asset purchase program unchanged at 435B pound. Governor Carney declined to comment when the unwinding would begin. Traders have begun to dump British pound ahead of the announcement on profit-taking. The selloff accelerates upon release of the meeting statement and the quarterly inflation report. The rate hike this month is to remediate excessive inflation which has sustainably overshot the +2% target for months.

Sterling dives sharply as respond to BoE's dovish rate hike that suggests it's a one-off. Indeed, selling has already started around 30 minutes ahead of the announcement. At the time of writing, the Pound is still holding above key near term support level against Dollar, Euro and Yen. That is, GBP/USD is holding above 1.3026/68 support zone. GBP/JPY is staying above 148.88 support. EUR/GBP is staying well below 0.9032 resistance. More is needed to confirm underlying weakness in the Pound. For now, while traders will have one eye on Sterling, focus will also turn to US President Donald Trump's expected nomination of Jerome Powell as Fed chair, as well as Republican's release of the tax plan.

Dollar weakens broadly after FOMC rate decision that provides little news to the markets. Instead, traders are keen awaiting US President Donald Trump's announcement on nominating Fed Governor Jerome Powell to take over Fed chair job next year. The announcement is expected at 3pm New York Time today. Also, after a day of delay, House is set to reveal the details of the tax bill. But the greenback could continue to stay in range and wait for tomorrow's non-farm payroll report. Meanwhile, Sterling remains the strongest one for the week as markets await the highly anticipated BoE rate hike.

As widely anticipated, the November FOMC meeting contained few changes from the previous one. The members left the target range of the Fed funds rate unchanged at 1-1.25%. One surprise came from the upgrade of the growth assessment to 'solid' for the first time since 2015, despite disruptions by hurricanes. Inflation stayed below the +2% target and the members acknowledged that core inflation 'remained soft'. However, the encouraging growth outlook and further decline in the unemployment rate suggest that a December rate hike remains on track.

Dollar strengthens mildly in early US after after stronger than expected job data. ADP report shows 235k growth in private sector jobs in October, above expectation of 200k. But upside is limited at the time of writing. There a number of key events for the rest of the week. Fed is widely expected to keep interest rate unchanged today and save the move for December. US President Donald Trump will announce his nomination for the next Fed chair tomorrow. Republicans will also reveal the details of the tax plan tomorrow after a day of delay. Finally, non-farm payroll report will be released on Friday.

Dollar trades mildly firmer today as markets await FOMC rate decision. Nonetheless, that would likely be a non-event. Fed is widely expected to stand pat. And, December is the month for rate hike, not the current one. Also, traders mind are probably more on the path beyond December. And that heavily ties to who US President Donald Trump will nominate to succeed Janet Yellen as Fed chair after February. It's reported that Trump will announce to nominate Fed Governor Jerome Powell on Thursday. Meanwhile, House Republicans are delaying the rollout of the tax bill due to unresolved questions on some key elements. The announcement was originally scheduled for today but is now delayed by one day to Thursday. Economic data to be released today will also be closely watched including ADP employment and ISM manufacturing from US and PMI manufacturing from UK. We're expecting a lot of volatility for the rest of the week.