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Video / 17 October 2017 at 7:42 GMT

From the Floor: Euro dips on 'existential woes' — #SaxoStrats

  • Euro weakness likely related to Austrian vote: Hardy
  • Dax nears 13,000, correction likely: Larsson
  • GBP in focus on macro data, BoE rate hike expectations
  • Kirkuk dispute supporting oil as Iraqi forces retake city
  • Risk sentiment recovering as Trump reassures on Pyongyang

SaxoStratsBy Michael McKenna

We have a busy data session today, and Saxo Bank head of forex strategy John J Hardy says that he expects to see some movement in the major pairs, and particularly in sterling.

"We have September CPI and PPI data out from London at 0830 GMT," says Hardy, adding that Bank of England governor Mark Carney will be out speaking at 1015 GMT. With the odds of a November rate hike from the BoE standing at 82%, Hardy says that GBP is ready to move with any easing of the impasse surrounding Brexit an obvious bonus for GBP bulls.

As far as the European Union is concerned, today sees Eurozone final CPI data at 0900 along with a German ZEW consumer confidence release that Saxo Bank head of equity strategy Peter Garnry calls the key print of the day for European shares.

With the European Central Bank's Praet out at 0930, euro bulls will be looking for policy hints but in Hardy's view the softness seen in major euro pairs like EURUSD, EURAUD, and EURGBP is likely related to a much longer-term existential concern setting in after yesterday's Austrian election saw a stunning victory for right-wing populism.

In stocks, Garnry says that with the German Dax index sitting at highs, a break of the 13,000 level is crucial for this session. According to Saxo technical analyst Kim Cramer Larsson, however, RSI divergence, a narrowing of the Bollinger Bands, and a series of dojis seen over the past eight sessions are signalling end-of-trend in the Dax; "we should see a correction soon,"says Larsson.

Source: Saxo Bank

Risk sentiment is broadly higher on news from Washington that President Trump has not ruled out a diplomatic resolution to tensions with Pyongyang, but in Iraq the retaking of Kirkuk by federal forces trying to prevent the secession of Kurdistan has oil prices edging higher on fears of disruptions.

"Oil is still flowing through the pipeline to Turkey," says Saxo Bank head of commodity strategy Ole Hansen, "but 275,000 barrels/day in production have been temporarily shut down.""

Despite the Kirkuk conflict, Hansen notes, and overhand of hedge fund longs could limit the upside for crude.

For more on equities, earnings, Netflix, the New Zealand dollar, gold, the Chinese Party Congress, and more technical analyses from Kim Cramer Larsson, view today's Morning Call in its entirety via the link above.

Has the Austrian election led euro bulls to falter? Photo: Shutterstock 

Michael McKenna is senior editor at Saxo Bank
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