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Dollar traders priced in the likelihood of a less hawkish FOMC after policymaker Dudley announced his retirement while the Loonie drew support from an upbeat Ivey PMI.

  • Canadian Ivey PMI up from 59.6 to 63.8 vs. 60.2 forecast
  • FOMC member Dudley to retire by mid-2018
  • Dudley: 2% inflation is not a ceiling, U.S. close to full employment
  • Dudley: Newly-nominated Chair Powell and official Quarles will do fine
  • Australia’s AIG construction index dipped from 54.7 to 53.2

Major Events/Reports

Dudley shares retirement plans

New York Fed head William Dudley confirmed his plans to retire by mid-2018 to ensure that a successor is in place before he steps down. His term officially ends in January 2019, which marks the end of his 10-year stint in the role.

During his speech and Q&A, Dudley acknowledged that the U.S. economy is close to full employment but that inflation remains a puzzle. Still, he expressed optimism that price levels will continue to drift higher and that the 2% target is not a ceiling.

As for the changes in the Fed, Dudley noted that the currently stable economy marks a good time for transition. He also sounded confident that newly-nominated Chairperson Powell will do fine, along with new member Quarles.

Of course this isn’t surprising to hear from one of the cheerier and more hawkish members of the Fed, so market participants were left with the question of how the committee shakeup could impact the overall bias of the central bank next year.

Upbeat Canadian Ivey PMI

Following through on its strong jobs report released last week, Canada printed another figure in the green in the form of its Ivey PMI.

The reading rose from 59.6 to 63.8, outpacing the consensus at 60.2 and chalking up its highest reading since January 2016. Underlying data revealed that prices and inventories actually led the gains while employment and deliveries lagged.

Oil up, risk up

Risk-taking remained in play with commodities leading the way on higher crude oil prices. As it turns out, the “political purge” in Saudi Arabia is shoring up market confidence in the region.

  • WTI crude oil up to $57.35 per barrel (+3.10%)
  • Brent crude oil up to $64.11 per barrel (+3.30%)

U.S. equities were also in the green as Wall Street is partying after the launch of iPhone X and at the same time looking forward to upcoming earnings data.

  • Dow 30 index is up 9.23 points to 23,548.42 (+0.04%)
  • S&P 500 index is up 3.29 points to 2,591.13 (+0.13%)
  • Nasdaq is up 22.00 points to 6,786.44 (+0.33%)

Bond yields, on the other hand, were in the red as investors worried that Dudley’s retirement would mean one less hawk in the committee.

  • U.S. 10-year bond yield is down to 2.318% (-0.08%)
  • U.S. 30-year bond yield is down to 2.795% (-0.04%)

Major Market Mover(s):

USD

The dollar was hit by a double-whammy of less hawkish Fed expectations and risk-taking.

USD/JPY fell from a high of 114.21 to a low of 113.69, EUR/USD bounced back to 1.1615, GBP/USD climbed from a low of 1.3097 to 1.3170, and USD/CHF is down to .9977.

Watch Out For:

  • 12:00 am GMT: Japanese average cash earnings y/y (0.6% expected, 0.7% previous)
  • 12:01 am GMT: U.K. BRC retail sales monitor (1.9% previous)
  • 3:30 am GMT: RBA interest rate statement (no change from 1.50% expected)