Article / 13 October 2016 at 22:01 GMT

US Market Wrap: Noise just a distraction from solid greenback demand

FX Consultant / IFXA Ltd

  • Japan: Foreign Investment                                             2350 GMT 
US Data released:

  • Initial Jobless Claims (Actual 246,000 versus forecast 254,000) 
  • Import Price Index (Actual 0.1% vs. forecast 0.2%) 
  • Export Price Index (Actual 0.3% vs. forecast 0.0%) 
  • EIA Crude Stocks Change (Actual 4.9 million barrels vs. forecast 0.650 m/b) 

New York traders inherited a nervous market when they started their day. FX traders were spooked following the release of soft China trade data and those fears reverberated throughout today’s session. Would additional evidence of economic weakness in China be enough to keep the Fed on the sidelines in December? That question led to US dollar selling and the greenback finished the day lower than where it started.

The reality is that today’s US dollar activity is merely “noise”. The price movements are just a modest, almost insignificant disturbance in the force, and that force is US dollar demand. The US dollar has risen 0.186 points against the euro since October 3. USDJPY has risen from ¥101.36 to ¥103.62 in the same period.

The US jobless claims data continues the string of strong reports and keeps the door to a US rate hike in December ajar. That may be what US equity traders decided as the sold stocks on Thursday morning. But while US equity indices closed in the red, they were off their worst levels of the day.

Crude prices firmed in early trading on Thursday but then moved lower. The Energy Information Administration's report of a 4.9 million-barrel increase in US crude inventories triggered a bout of volatility. WTI dropped to $49.34/barrel from $50.20/b, and then soared back to $50.56/b where it ended the day on Thursday. The rally was predicated by traders concluding that the build in crude stocks is more of a refinery maintenance issue and that the drop in diesel and petrol supplies offset the crude build.

  Fears that the release of additional soft China trade data could prompt the Fed to rethink any planned rate hike spooked FX traders, and helped push the USD slightly lower. Photo: iStock


The Federal Open Market committee may be inching toward a rate hike in December according to TradingFloor contributor Neil Staines in: The Fed's divided house

– Edited by Robert Ryan

Michael O'Neill is an FX consultant at IFXA Ltd. Follow Mike or post your comment below to
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