Article / 12 October 2017 at 21:53 GMT

US Market Wrap: Sterling volatility keeps forex traders on their toes

FX Trade Strategist / www.Loonieviews.net
Canada
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Watch list
  • Japan: Foreign Investment                               2350 GMT 

US data released
  • Producer Price Index-September (Actual 2.6% vs August 2.5%, y/y) 
  • Producer Price Index-ex Food and Energy (Actual 2.2% vs August 2.0%, y/y) 
  • Initial Jobless Claims (Actual 243,000 vs forecast 251,000) 
  • EIA Weekly Crude Stocks change (Actual -2.747 m/b vs forecast -1.99 m/b) 

It was Sterling’s turn in the front car of Mr Toad’s Wild Ride, and the name lived up to the billing. GBPUSD opened complacently at 1.3218 and plunged to 1.3123. The drop was due to the EU chief negotiator Michel Barnier warning of a “disturbing deadlock” to negotiations because of the UK’s reluctance to put a number on what they would pay for Brexit exit fees.

Prices drifted up from the low and accelerated just before noon when Germany’s Handelsblatt newspaper reported that Barnier would offer the UK a two-year transition period if London agreed to settle its obligations, according to Reuters. GBPUSD soared after that, rising to 1.3289.

NZDUSD had a good day, rallying from 0.7100 to 0.7140 on broad US dollar weakness and stop loss buying with the break of resistance at 0.7120. AUDUSD traded in a similar fashion, but closed unchanged on the day.

European Central Bank President Mario Draghi said the ECB doesn’t see sufficient progress in wage gains. He also reiterated that rates would remain low for an extended period. Those comments contributed to the soft EURUSD tone.

Federal Reserve speakers didn’t add any fresh insight. St Louis Fed President James Bullard said that “If you say you are going to hit the inflation target then you should try to hit it and maintain credibility". USDJPY bounced inside a ¥112.13-¥122.44 range as December rate hike expectations conflicted with lower Treasury yields.

WTI oil prices traded erratically in a $50.18-$50.88/barrel range, thanks to uncertainty surrounding supply/demand forecasts for 2018. The International Energy Agency forecast that rising demand and non-Opec supply could act as a ceiling on prices in 2018. Later on, the Weekly Energy Information Administration Crude oil stocks data showed US inventories declined more than had been expected.

Wall Street failed to post another record close. Instead, markets lost ground following the release of results by two leading financial services companies: JPMorgan Chase (JPM: NYSE) and Citi (C: NYSE).

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WTI prices traded erratically on Thursday, thanks to uncertainty about forecasts for both supply and demand forecasts for 2018. Photo: Shutterstock
 
– Edited by Robert Ryan

For more on forex, click here.

Michael O'Neill is an FX consultant, currency strategist and author of the Trade of the Day at Loonieviews.net. Follow Mike or post your comment below to engage with Saxo Bank's social trading platform.
Missed a day? Here’s what we had to say during our Asia session, our regular European Morning Markets, From the Floor and Mid-session Europe.
12 October
Market Predator Market Predator
@Michael: "front car of Mr Toad’s Wild Ride"?
LOL, fortunately Google helped me :)
12 October
Michael O'Neill Michael O'Neill
I applaud your initiative. Consider the US market wrap an interactive article, best read with a cold beer and Google.
13 October
Market Predator Market Predator
:)
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