North American Summary and Highlights 15 October
Overview - More strong US data had little impact with the reversal of Wednesday’s post-CPI USD bounce persisting.
North American session
The US delivered more strong data, PPI up 1.3%, 0.7% ex food and energy and 0.5% ex food, energy and trade, with retail sales up 0.8%, 0.9% ex auto, but a modest 0.2% ex auto and gasoline. Initial claims remained low at 199k. A weaker 20.9 Philly Fed index and a firmer Empire State index of 25.5 both imply solid manufacturing expansion.
Despite the strength of the data, and even with oil firmer, there was little response from the markets, with the bond market’s reversal of the post-CPI yield bounce persisting. The USD was little changed overall, USD/JPY near 158, EUR/USD near 1.1220. EUR/GBP and EUR/CHF lost a little ground. USD/CAD saw marginal losses but AUD/USD found support at 0.69.
European session
‘Sell the fact’ and exhaustive failed dollar extensions remain the theme into Europe, extending the turn-arounds through Asia, led by the swift U-turn in bonds, along with the ongoing regional tech and Kospi (-7%) led equity pressure. US10yr yields are now some 25bp off the post CPI highs, showing that strong demand is surfacing at these 5.25-30%+ levels.
Dollar-led action has EUR/USD back clear of 1.2, with 1.1250/75 area as bounce resistance. USD/JPY again saw strong supply on the test towards 159, and back onto the 157-handle with the regional pressure and yield turn.
French short end auctions pass by fine, albeit with slightly tepid bid/covers. Cable also puts into a good bounce from the YTD lows test. UK GDP continues to show better resilience than expected with a 0.1% gain, defying expectations for a 0.1% correction and with yr/yr back above 2%. AUD the big underperformer on the day, after the employment report comes in weaker than expected at -39k vs mkt +20k, if led by part-time.