U.S. Session Forex Recap – Nov. 2, 2016

  • U.S. ISM manufacturing PMI up from 51.5 to 51.9 vs. 51.8 forecast
  • U.S. construction spending down 0.4% vs. projected 0.5% gain
  • New Zealand GDT auction yielded 11.4% jump in dairy prices
  • Westpac hiked Fonterra payout forecast to $5.80
  • New Zealand employment up 1.4% in Q3 vs. 0.6% forecast
  • New Zealand unemployment rate down to 4.9% in Q3 vs. 5.1% forecast
  • New Zealand Q2 jobless rate revised from 5.1% to 5.0%
  • New Zealand labor cost index at 0.4% as expected

The Greenback was off to a terrible start for the month as U.S. elections jitters dragged the currency lower across the board.

Major Events:

Mixed U.S. data – Uncle Sam’s reports were far from impressive this time around, as the October ISM manufacturing PMI simply came closely in line with expectations. The reading climbed from 51.5 to 51.9 to reflect stronger industry growth for the month, just a notch above the 51.8 consensus.

Components of the report indicated that the index for new orders saw a significant drop from 55.1 to 52.1 to suggest subdued demand. Meanwhile, the index for employment returned to expansion, as it rose from 49.7 to 52.9. The index for prices also saw a gain from 53.0 to 54.5, hinting at upward inflation pressures down the line. U.S. construction spending, on the other hand, posted a surprise 0.4% decline versus the estimated 0.5% uptick.

U.S. elections, pre-FOMC, and NFP jitters – U.S. markets are on edge leading up to the elections, as stock indices closed in the red for the third day in a row this week. News of the FBI’s probe into Democratic nominee Hillary Clinton’s private email server has dampened her credibility and caused her lead against Republican nominee Donald Trump to keep narrowing in the polls.

Apart from that, the upcoming FOMC statement and NFP release also sending a fresh wave of jitters in Wall Street, leaving traders hesitant to hold on to their dollar holdings with all these major catalysts lined up.

Upbeat reports from New Zealand – New Zealand’s economy appears to be turning a corner, with all of its latest reports printing impressive results. First up, the Global Dairy Trade auction yielded a whopping 11.4% surge in dairy prices, leading Westpac to upgrade its Fonterra payout forecast to $5.80. Keep in mind that the dairy industry makes up a huge chunk of New Zealand’s economy so improvements in this sector would likely translate to stronger growth down the line.

Next up, the country’s quarterly jobs figures also came in the green, with employment change up 1.4% versus the projected 0.6% increase, marking its fourth consecutive quarterly gain. This was enough to bring the unemployment rate down to 4.9% for the quarter while the previous period’s rate was revised from 5.1% to 5.0%. To top it all off, the participation rate climbed from 69.7% to 70.1% to imply stronger confidence in the labor market.

Major Market Movers:

USD – The Greenback took huge hits from its major counterparts, with traders lightening up on their holdings before the outcome of the elections is announced.

EUR/USD climbed from 1.1021 to a high of 1.1069 (+0.44%), USD/CHF plummeted from .9852 to a low of .9728 (-1.25%), USD/JPY retreated from 104.83 to 103.79 (+0.99%), and AUD/USD fell from .7694 to .7650 (-0.57%).

CHF – The franc was one of the strongest performers for the day, as forex junkies likely transferred their risk-off holdings to this European safe-haven currency.

EUR/CHF broke below the major support at 1.0800 on its drop from 1.0836 to a low of 1.0763 (-0.67%), GBP/CHF is down from 1.2002 to 1.1920 (-0.68%), and CHF/JPY popped up from 106.50 to a high of 106.93 (+0.40%).

Watch Out For:

  • 12:30 am GMT: Australia building approvals (-2.8% expected, -1.8% previous)
  • 2:00 am GMT: New Zealand inflation expectations q/q (1.7% previous)
  • 5:00 am GMT: Japanese consumer confidence (42.8 expected, 43.0 previous)

See also:

London Session Recap

Asian Session Recap

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