Eye Watering ISM’s
ISM services sectors report cropped the dollar losses after policy uncertainly overflowed after the Fed chair contenders were finalised. Purportedly the fantastic four include Yellen, Cohn, Powell and Warsh.But I suspect the inclusion of Yellen was viewed dovish, but frankly, most knew this was the case, and the minor dollar sell-off in yesterdays Aisa session was little more than a storm in a teacup
Last nights eye-watering ISM non -manufacturing index was the talk of the town. After a stellar ISM manufacturing print on Monday, the non-manufacturing release overnight was purely astounding bolstering the view for a December US interest rate hike.
However, the currency markets appear to lack confidence or conviction even with the astonishingly bullish ISM prints, and the buoyant ADP data to boot. Dealers look happy to play ” home on the range ” while questioning the possible data misrepresentation due to the hurricane effect
There were few if any developments on the next chair front despite some outlandish rumours that put Kashkari on the seat as the Federal Reserve Board plays out its version of the Game of Thrones.
The rest of the session was spent digesting more bluster, hullabaloo and even fake news after a report surfaced that Secretary of State Tillerson was on the verge of resigning. But the reality is the market is on razor’s edge when it comes to Washington machinations so much so that the that the Secretary of State held an unplanned press conference to quash the rumours
The Non-Farm payrolls are the next focal points.Tail risk is from a stronger print as dealers will most certainly discount any weakness due to the hurricane effect distortions.
The Balance of Risks
Euro
Catalonia referendum fallout has tempered the Euro bulls, but the market is content to sit tight and wait for the October ECB for the next trigger. While today’s minutes are unlikely to shed much light on the balance sheet front, the market’s focus will be squarely on any possible pushback from the ECB on EUR appreciation.
Japanese Yen
Continue to expect volatility with more polls released as we close in on the OCt 22 election date. But with the market on a hawkish Fed lean. ( Most betting Warsh) long USDJPY continues to be the favoured trade despite current ranges likely to persist up to election day.
The Australian Dolar
With the RBA triggered weakness all but retracted, the Aussie becomes little more than a passenger as the border USD movements remain in the driver’s seat. However, it is becoming somewhat apparent that the Aussie is one of the currencies with the most to lose on the stronger USD narrative.
