Article Highlights

  • U.S. core PCE price index up 0.1% vs. 0.2% consensus in Sept
  • U.S. personal spending and income up by 0.1% vs. 0.2% consensus
  • U.S. UoM consumer sentiment index downgraded from 92.1 to 90.0
  • U.S. employment cost index up by 0.6% in Q3 as expected
  • Chicago PMI up from 48.7 to 56.2 in Oct vs. 49.5 consensus
  • Canadian economy grew by 0.1% in Aug as expected
  • Chinese official manu PMI steady at 49.8 vs. 50.0 consensus
  • Chinese official non-manu PMI down from 53.4 to 53.1
  • Chinese Caixin manu PMI to climb from 47.2 to 47.7?
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What a disappointing day for dollar bulls! The U.S. currency was forced to return its recent forex wins when economic data came in mostly below expectations. Personal spending and income posted feeble 0.1% gains for September, lower than the projected 0.2% increase, while the University of Michigan consumer sentiment index was downgraded from 92.1 to 90.0. The core PCE price index, which is considered the Fed’s preferred inflation gauge, also printed a meager 0.1% uptick instead of the estimated 0.2% rise in price levels.

On a more upbeat note, the U.S. employment cost index for Q3 came in line with expectations of a 0.6% gain, much stronger than the previous period’s 0.2% increase, hinting that higher labor costs could eventually translate to a pickup in wages and overall price levels. Also, the Chicago PMI jumped from 48.7 to 56.2 in October, surpassing the consensus at 49.5 and indicating a return to industry expansion.

USD/JPY retreated from a high of 121.47 to a low of 120.27 before ending the week at 120.56, EUR/USD popped up to a high of 1.1072 then closed near 1.1050, GBP/USD surged to 1.5467 then capped off the day at 1.5420.

Canada released its monthly GDP reading for August and showed a 0.1% growth figure as expected, slower than the previous month’s 0.3% expansion. Components of the report revealed that manufacturing output picked up the pace while wholesale trade posted another monthly contraction. Even so, the Loonie had a bullish forex reaction to the release, taking USD/CAD below the 1.3100 major psychological support and pushing CAD/JPY to a high of 92.46.

Forex traders seem to have woken up on the right side of the bed in today’s Asian session, as risk appetite appears to be on. Either that or market participants are showing less love for the safe-haven Greenback, still doubting that the Fed can hike interest rates before the end of the year.

Another factor that might be keeping the markets’ spirits up is the upcoming Caixin manufacturing PMI release from China, which might show a rise from 47.2 to 47.7 in October and reflect a slower pace of contraction in the industry. Over the weekend, official PMI readings from China came in below expectations, as the manufacturing index held steady at 49.8 instead of climbing to 50.0 while the non-manufacturing index dipped from 53.4 to 53.1. Better be on the lookout for any huge surprises that could affect Mr. Market’s mood for the rest of the day!

Good luck and good trading!

See also:

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