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Risk aversion was evidently in play for stocks and commodities, but the forex picture painted a different story with the dollar behind the pack and the comdolls in the lead.

  • U.S. headline CPI up 0.1% vs. projected 0.2% gain in Sept
  • U.S. core CPI also printed 0.1% uptick vs. 0.2% consensus
  • Initial jobless claims at 214K vs. 207K forecast
  • EIA crude oil inventories up 6M barrels vs. 2.3M forecast
  • PM May reportedly briefed her cabinet that Brexit deal is close
  • Rumors of formal meeting between Trump and China’s Xi dismissed by Kudlow
  • New Zealand Business NZ manufacturing index down from 52.0 to 51.7

Major Events/Reports:

Downbeat U.S. data

Uncle Sam’s reports all came in the red but surprisingly, the disappointing figures generated a sigh of relief from the markets as these led tightening expectations to take a step back.

Headline CPI for September came in at a meager 0.1% versus the estimated 0.2% gain and the earlier 0.2% increase while the core figure also came in at 0.1%. Components of the report revealed that slowing costs of rent and lower energy prices weighed on inflation.

On a year-over-year basis, this translates to a 2.3% headline CPI reading for the month, down from August’s 2.7% figure. Core CPI is up 2.2% from the same period last year, just a couple of notches above the Fed’s inflation target.

Meanwhile, initial jobless claims accelerated from the earlier 207K reading to 214K for the latest reporting week, also higher than the consensus at 207K.

Bond yields spike, equities sink

Investors continued to price in more Fed rate hikes, leading to another selloff in bonds and therefore more gains in bond yields. Wondering what the heck is going on? Here’s a primer on government bonds for you.

Wall Street was actually in a cheery mood early in the session as rumors swirled that Trump will have a formal meeting with Chinese President Xi, possibly clearing up trade issues. However, the optimism faded when economic adviser Larry Kudlow mentioned in an interview that no such meeting has been arranged.

  • Dow 30 index is down 545.91 points to 25,052.83 (-2.13%)
  • S&P 500 index is down 57.31 points to 2,728.37 (-2.06%)
  • Nasdaq is down 92.99 points to 7,329.06 (-1.25%)

Analysts also pointed out that part of these declines were spurred by profit-taking ahead of the release of quarterly earnings from a handful of financial companies. Gold was able to take advantage of safe-haven flows and dollar weakness while crude oil took more hits.

  • The precious metal climbed to $1,224.01 per troy ounce (+2.36%)
  • WTI crude oil dipped to $70.85 per barrel (-3.85%)

Major Market Mover(s):

AUD & NZD

The Aussie and Kiwi held on to their gains during the U.S. session even as risk-off flows weighed on other higher-yielding assets. Perhaps higher gold prices lifted the positively-correlated Aussie while the Kiwi is playing its anti-dollar card.

AUD/USD popped up from .7090 to a high of .7130; AUD/JPY climbed from 79.52 to a high of 80.15 but retreated to 79.90; EUR/AUD is down to 1.6273, and GBP/AUD fell to 1.8567.

NZD/USD advanced from .6488 to .6533; NZD/JPY climbed from 72.85 to a high of 73.37 then fell back to 73.17; EUR/NZD is down to 1.7760, and GBP/NZD is down to a low of 2.0275.

USD

The scrilla was stuck at the bottom of the forex heap, along with its lower-yielding buddies, the franc and the yen. In usual Trump fashion, the POTUS reiterated his bit on how the Fed’s hikes are “out of control” while Kanye praised him for being the best president of all time. Of all time!

USD/JPY pulled up to 112.54 after the CPI release then resumed its slide to a low of 111.83; USD/CHF hit a high of .9923 then fell back to .9900; EUR/USD ticked higher to 1.1592, and GBP/USD bounced off 1.3200 to 1.3233.

Watch Out For:

  • 12:30 am GMT: RBA Financial Stability Review
  • 12:30 am GMT: Australian home loans m/m (-0.9% expected, +0.4% previous)
  • Tentative: Chinese trade balance (smaller surplus of 85B CNY from earlier 180B CNY expected)
  • 4:30 am GMT: Japanese tertiary industry activity index (0.3% increase expected, 0.1% previous)