North American Summary and Highlights 10 November
Overview - The USD picked up as a strong US CPI and hawkish Fed talk raised the risk of a 50bps December FOMC tightening.
North American session
October’s CPI was stronger than expected, up 0.4% overall and 0.3% ex food and energy. Before the release Fed’s Waller had raised the stakes by suggesting that a 0.3% core rate could require the FOMC to deliver a 50bps tightening in December. After the release Fed’s Logan was also hawkish, calling for two more 25bps hikes, though this was not a significant shift from her previously expressed views.
The USD picked up on the data and extended gains through the morning with only a modest afternoon correction as equities came off their post-data lows and a spike in UST yields peaked. USD/JPY advanced to 158.80 from 158.20, while EUR/USD briefly saw lows below 1.1150 from above 1.12, even with EUR/GBP and EUR/CHF stronger. AUD/USD slipped through .69, eventually finding support at .6850. USD/CAD saw highs above 1,42 before a modest correction.
European session
An attempt at a positive start to the week, although it’s still unclear how much traction this latest risk-lift can maintain. US crude’s decline on the back of Trump’s comment downplaying the chances of further strikes takes it back to the recent lows and key support from the Oct lows. If that gives way then the next settlement area is down at $80, late Aug lows.
NOK continues to go along with the wider USD/risk tone but if this further breakdown does happen, it still seems at risk of some unwind of its recent heavy outperformance, by virtue of its status as the oil-strength-hedge trade.
For tech stocks, it’s still a decent attempted bounce now attempting from the post-election selloff, even with Nvidia’s issues, and a move that accelerated back into the prior range - though there is more ground to make yet before this would mark a break of the recent downtrend and so a more convincing turn.