UK Retail Sales is due during the London session (9:30am GMT). A
deviation from expectations will likely see a move in sterling. We will
be looking to sell against the USD on a negative reading, or buy
against the EUR, NZD or CHF on a positive reading.
Current Market Sentiment:
Early during yesterday’s NY sesssion, October readings for Housing Starts missed estimates, decreasing -11%, down from September’s rise of 6.7%, which marked an 8-year high. Alongside this was Building Permits which beat estimates, showing an increase of 4.1%. The dollar was little changed as a result of the release, but did see strength leading into FOMC.
The FOMC minutes from the October meeting showed most policymakers anticipated US economic conditions and outlook could well warrant a December rate hike. The minutes contained few surprises but clearly left the door open for a move in December, dependent upon data. The reaction was relatively muted with the dollar failing to extend on its recent rally, as the market was likely hoping for a more hawkish surprise. CME FedWatch Fed Fund futures implied probability for December decreased from 72% to 68%. A rate hike in December remains highly likely, however the greenback sold off marginally as a result of position squaring.
Early in the Asian session, Q3 Producer Price Index for New Zealand beat estimates with Input rising 1.6% versus 0.1% expected, and Output rising 1.3% versus 0.2% expected. Kiwi rallied over 115 pips from post-FOMC minutes lows, helped by profit-taking on USD. Although this figure does provide a positive aspect to New Zealand’s inflation expectations, the RBNZ are still likely to cut rates in early December, given the low CPI readings, falling dairy prices and a large miss on Q3 employment.
Later in the Asian session saw the BOJ leave monetary policy unchanged as was widely expected. Their statement contained no major surprises, but did however mention some potential weakness in near term inflation. Again, Kiuchi was the sole hawkish dissenter in the 8-1 vote. Yen saw strength after the release as no further easing was referenced.
