Bullet Report: The Dollar Train Carries on its Course

Today is another quiet day in terms of data. Standing out from Germany is the IFO release which could send the same signal like the PMI data did yesterday (optimism). Yesterday, Fed member Charles Evans said that the FED should raise rates only 3 times between now and the end of 2017, as long as inflation expectations and employment continue to improve.

Currencies: The Dollar continues to remain strong, hovering near 9 month highs against a basket of other currencies as Data that US manufacturing is improving and Comments from Evans helped boost confidence in the economy and the prospective or interest rate rises. The USD Index has risen 3.6% so far in October. Against the EUR, which has come under renewed pressure after the ECB meeting, the USD is trading at 1.0880. Speculation for 1.07 and 1.05 for the pair has risen in the past few days as important technical levels have been breached. The USD also gained against the JPY, rising 0.3% to 104.48, just below a 2-1/2-month high of 104.63 set earlier this month. Against other pairs, the USD was stable without any significant breach of the ranges of the last days. Notable exception was the USDCAD which saw increased volatility this week and last night in particular. USDCAD crashed from 1.3380 to 1.3280 on speculation the Central Bank would not alter its interest rate policy for a while. USDCNY continues to weaken.

Stocks: Asian stocks are mixed following the release of data pointing to a South Korean Slowdown. Korea’s Kospi was down 0.8% while Hang Seng and Shanghai were down -0.12% and -0.16% respectively. Nikkei is trading 0.76% at time of writing, following a strong session from the US which saw stock markets close with strong gains.

Oil and Gold: Oil prices continued to drift lower yesterday, reaching as low as 49.60 after hitting 15 month highs last week. Weighing on the price is the diminishing possibility that the OPEC members would not deliver anything in their meeting next month following Iraq’s withdrawal from any supply cut discussions. GOLD prices have settled lower yesterday on renewed USD strength. GOLD price is measured in USD, so when the Dollar strengthens the yellow metal usually drops in value.

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