Current Market Sentiment | US Bank Holidays

With the US on holiday due to Thanksgiving, and given the large proportion of volume that US-based traders provide to financial markets, we will likely see directionless price action and thin volumes for the day, and potentially into the week’s close.

Current Market Sentiment:

The highlight of yesterday’s NY session was a concurrent release of US Consumption and Durable Goods data. Durable Goods Orders increased 3.0% during October while the Ex-Transport figure increased by 0.5%, both above expectations. The market was impressed by the Durables figures however the more important consumption components were lacklustre; Personal Income was in line at 0.4%, Personal Spending was at 0.1% versus expectations of 0.3%, and crucially, the Core PCE price index for the month showed zero inflation, while expected at 0.1%. Core PCE remained at 1.3% since 12 months prior. The Core PCE figures are vitally important for the Fed and, as outlined in the risk event report, a miss on the October numbers is going to make the December 16 rate decision difficult. The Fed watch Core PCE as their preferred inflation measure, and they have also stated they need to be confident that inflation is trending back towards 2% before raising rates. Their current level of confidence should be gauged in the context of y/y Core PCE remaining at 1.3% for three consecutive months, and October showing the first 0% m/m change in inflation since January. Although the dollar saw some slight upside after the release, due to the Durables beat, the monthly Core PCE figure is likely to cause some mixed trading on the buck in the near term.

Australian Private Capital Expenditure was released during the Asian session, and missed estimates by a wide margin. Total Cap.Ex. declined 9.2% (SA) during the third quarter, much more than the expected 3.0% decline and exceeding the lowest economist estimate of -6.0%. Please see here for the breakdown. The AUDUSD immediately dropped 40 pips, but since recovered to the 61.8% fib of the move downwards.

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