Morning Commentary: All Hallows Eve closes Red October

Foreign Exchange - Morning Commentary

All Hallows Eve closes Red October

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David Atkinson
David Atkinson
Foreign Exchange Sales Manager
As an eventful October comes to a close, stocks around the world rallied overnight and coming into today's equities trading session.  No doubt the parlor game of saying, "OK, now we have hit the bottom…..oh…ok…wait…NOW we have finally hit bottom….."  will continue.  This comes in the backdrop of what my colleagues at City National Rochdale believe is a pretty good earnings season, although they have concerns about pressure on those earnings next year.
 
While we are focused so much on stocks, oil has posted its biggest percentage drop in price in two years.  WTI futures lost over 10 percent after touching $76 early in the month, but is trading today in the low $66 range.  The drop is partly due to global growth concerns but also we had plenty of supplies from Saudi Arabia. 
 
I saw an interesting discussion this morning led by an economist who thinks the U.S. is in for a string of economic data disappointments due to the effect of tariffs.  The big debate then becomes whether or not the Fed keeps plowing ahead with rate hikes.  The near-certainty of a December rate that was priced in the markets just a couple of months ago has dropped to around 73% certainty this morning. 
 
Speaking of data, the ADP employment data showed a strong 227K increase for this month against market expectations of 187K.  That should be taken with a large grain of salt though as correlation with the official government data coming out Friday has been spotty.
 
The U.S. dollar is in very tight ranges among the majors this morning, although the Mexican peso continued its slide from yesterday and the South African rand is off 1.5 percent on worse-than-expected trade data.
 
Today is not only Halloween but it is also the last day of City National's fiscal year.  I also call this day "Finance, Accounting and HR Colleague Appreciation Day" as those individuals are putting in heroic efforts required to close the books on one year and get going on the next.
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
  • The Bank of Japan left policy unchanged, as widely expected, and continues to keep the short-term rate at -0.1 percent and 10-year target rates at 0 percent.  The bank did trim its inflation forecast, which was a bit of a surprise.
  • Eurozone headline inflation data was in line with expectations of an increase of 2.2 percent YoY.
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