FX Daily Wrap: Nzd/Usd teetering above 0.7000

NZD/AUD

Kiwi losses are now approaching 2% vs the US Dollar, with the pair looking ripe to pick off bids at the psychological 0.7000 handle having broken through a series of key levels (including October’s previous low at 0.7060) and filling stops on a break of 0.7050 following confirmation that Labour secured the support of the NZ first party to form a new Government. Technically, Nzd/Usd has nothing material in the way of a downside target until the next big figure (0.6900), though a market holiday next Monday may provide a reprieve via short covering. However, Aud/NZD has now breached the 78.6% Fib level (1.1176) of the move from 2015 peak to 2016 trough, with the Aud getting an independent lift from forecast beating employment data.

GBP

Sterling undermined by much weaker than expected UK retail sales data (and back month downward revisions), which raised more doubts about a BoE rate hike as early as November, not to mention comments from Haldane highlighting that the inflation outlook is very unclear due to the strong jobs/weak pay dichotomy. Cable capped just below 1.3200 and Eur/Gbp holding near 0.9000, but hefty expiry options could weigh on the cross (almost 1 bln due on Friday between 0.8950-0.8940).

JPY   

Risk-off trade early in the European session helped the Jpy recoup overnight losses, and the safe-haven currency (along with Chf) continued to benefit from stock market weakness. Usd/Jpy retreated from 113.00+ highs to the low 112.00 area.

EUR

The single currency largely shrugged off reports that the Spanish Government is planning to invoke Article 155 and effectively strip Catalonia of its powers after the region’s PM failed to meet another independence deadline. Eur/Usd rallied to 1.1850, with desks reporting flow and positioning for the October 26th ECB policy meeting. On that note, more speculation circulated about a QE taper to Eur30 bn and extension for 9 months.

19 Oct 2017 - 15:30- Fixed IncomeBank Speaker- Source: RANsquawk

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