Ivan Delgado
Independent Analyst
Main market focus
US President Trump pays a visit to Seoul. Financial markets will be closely watching the President's rhetoric towards North Korea, as it could further inflame tensions with North Korean leader Kim Jong Un.
The US Dollar ends Monday as the weakest currency amid a slide in US Treasury yields, with 10y-2y yield curve also flattening. Added USD pressure derived from a strong appreciation in both gold and oil.
The RBA is set to release its latest monetary policy decision today. Overall, the risk appears to be skewed to the downside on weaker household consumption, reflected in the latest Aus retail sales data; inflation figures have also lagged behind, which when combined with a cooling of the housing market in Sydney, suggests the RBA has no justification to adjust rates for the foreseeable future.
The appearance of ECB President Draghi, due to deliver opening remarks at the ECB Forum on Banking Supervision, in Frankfurt, will be the main event during European hours.
A make-or-break week for Trump's tax reform bill as the US House of Representatives begins a frantic week, in which lobbyists and lawmakers will revise the bill, to ultimately make the necessary amendment and vote on it.
Market participants should monitor Oil prices, at the highest since mid-2015, after a robust 3% rise following graft probes against Saudi elites, which has resulted in higher uncertainty for the interest of foreign investment.
Major forex market movers
EUR/USD: It was a low key day for the pair, with volatility suppressed to a mere 40-pip range. While Friday's bearish outside day post US NFP hints at risks for further downside pressure, the trajectory in the 10y DE vs US yield spread/curve does not seem to justify lower prices at this stage.
GBP/USD: The rise in the Pound, the strongest currency on Monday, has eased the bearish outlook for the week. However, further climbs from current levels will prove a tougher challenge as the pair meets the 200-hourly MA and 50% fibo retrac from the BoE-led sell-off. While the yield curve between UK vs US remains supportive of higher prices, the 10y UK vs US yield spread remains fairly subdued, likely to help cap further gains.
USD/JPY: A major bearish outside day at a critical level of resistance places immediate risks back to the downside. The setback for bulls occurs after the trajectory of both US vs JP yield spreads/curve suggested that further rises in the pair were far from justified. The area of support at 113.00 could be exposed in coming days now.
AUD/USD: The Aussie saw a recovery towards the 0.77 round number, where the 200-day MA happens to intersect as well. The RBA rate statement will be the main mover today, with risks skewed to the downside as per the latest developments in the Australian economy, with a disappointment in the most recent retail sales and inflation figures
What happened?
US Oct Employment trends came at 135.6, 132.9 prev
CA Oct Ivey PMI, 63.5, 68.6 prev
CA Oct Ivey PMI SA, 63.8, 59.6 prev
Economic calendar
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