Morning Commentary: A Teflon Coating

A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.

A Teflon Coating Share this story: Alan Rose Foreign Exchange Head Trader

U.S. PPI inflation for September rose for the first time in three months, causing U.S. interest rates to move higher again today. PPI rose by 0.2%, which was the consensus forecast and brings the YoY rate to 2.6%. Ex-food and energy saw PPI also rise by 0.2%, bringing that YoY rate up from 2.3% to 2.5%. The initial reaction for the U.S. dollar was a short and quick spike higher but that has faded away.   The euro, which is the second most important currency to the U.S. dollar and is a bell weather currency for the market, has been consolidating since June. This is in the face of a rather rapid rise in U.S. interest rates seeing U.S. – German interest rate differentials continue to widen to historic levels. Adding more fuel to the fire is the Italian budget overshoot creating more EU political drama and undermining the euro’s confidence. Yet in the face of both of these factors, the euro remains remarkably resilient as if it has a Teflon coating to shield it from negative factors and news.   Markets are always looking forward. Perhaps there are long term investors who see the euro’s levels as attractive and also see a potential end-game to the Fed’s tightening playbook and want to diversify out of U.S. dollars. More time will be needed to explore this rationale, but for now, the euro continues to deflect a lot of negative news and remains steadfast in its most current range defying many forecasts for a weaker euro. HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT: The U.K. reported August trade data, industrial production, and monthly GDP. All three numbers came in pretty close to market expectations but the British pound (GBP) remains better bid going back to last week. Commentaries and press reports suggest a Brexit compromise might be within reach regarding the Irish border situation fueling demand in the short term.

If we can help you with any Foreign Exchange needs, please email foreignexchange@cnb.com or call (800) 447‑4133. Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!

Follow City National Bank on social media:

Investment and Insurance Products: • Are Not insured by the FDIC or any other federal government agency • Are Not deposits of or guaranteed by a Bank or any Bank Affiliate • May Lose Value This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. The Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.

Unsubscribe from this list  |  Update email preferences This message has been sent to bank@banking.offers.report. Please do not reply to this email. To ensure the delivery of future emails, please add foreignexchange@emails.cnb.com to your email address book or safe sender list. Copyright ©2018 City National Bank – All Rights Reserved. 350 South Grand Avenue, Los Angeles, CA 90071 City National Bank is a subsidiary of Royal Bank of Canada. TERMS & CONDITIONS  |  PRIVACY STATEMENT NMLSR ID# 536994 | CNB MEMBER FDIC