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In the Zone
- As Hurricane Irma tears through the Caribbean, what was a Tropical Storm has been upgraded to category 3 Hurricane Jose, which is quickly catching up to Irma.
Yesterday was a big day for the EUR traders as the market anxiously awaited the press conference from ECB President Draghi. The consensus was that he would try and jawbone the market lower and in fairness he did, he failed miserably as the market just did not buy in to what he was suggesting and the EUR traded higher anyway. In hindsight there were stronger forces at play and it doesn’t matter what he said, there was always going to be dollar weakness yesterday.
As we highlighted last week, the devastation caused by Hurricane Harvey is going to cost billions of dollars in funding – and Hurricane Irma will add to that funding. The knock on effect of this is that the Fed will probably have to leave interest rates on hold later this year. FOMC member Dudley confirmed this when the most hawkish member of the committee become somewhat more dovish last night. The result is that the market started unwinding positions in the greenback, and the US Treasury yields also fell as large funds withdrew funds.
The natural flight was to look to higher yielding currencies and the commodity currencies were the biggest gainers this morning. The natural reaction is to wait to fade this move, but I would prefer to wait to see how London reacts on the open this morning as there could be a continuation of this trend later today. I don’t see any obvious set ups brewing at the moment, I am keeping an eye on both the NZDUSD and the AUDUSD but suspect that both may only materialize next week?
For those of you in the market today, good luck. With news just released that there has been a magnitude 8.0 earthquake off the coast of Mexico which could trigger a tsunami to add to the mix, this may be a good day to sit on the side-lines.
Keep an eye out for the afternoon video that tries to tie everything together.
Important Economic Data out today
10:30 AUD RBA Governor Lowe Statement
Effect: More hawkish than expected is good the AUD
10:30 GBP Manufacturing Production
Effect: Actual higher than expected is good for the GBP
14:30 CAD Employment Change
Effect: Actual higher than expected is good for the CAD
14:30 CAD Unemployment Claims
Effect: Actual lower than expected is good for the CAD
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