Morning Commentary: Reversal of Fortune

Foreign Exchange - Morning Commentary
Reversal of Fortune
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David Atkinson
David Atkinson
Foreign Exchange Sales Manager
The U.S. dollar is broadly lower this morning against most major currencies.  The advances against the greenback were led by the risk sensitive commodity currencies like the Australian and New Zealand dollars and South African rand.  Australia, in particular, had better than expected trade data come out.  This seems to be more of a snap back to positioning in those currencies combined with a better global appetite for risk.  This bodes well for those looking for a clear bottom in equity markets.

The newsmaker of the morning is the British pound sterling, trading just above 1.29 in the interbank market on news that PM May has negotiated a deal to keep financial services arrangements in tact after Brexit.  Brexit Minister Raab said that there were significant negotiation breakthroughs and even put a date out there – November 21 – as a target for a possible deal. 

There is a decent amount of chatter from overnight about China.  A Reuters report indicated an interesting shift in German attitudes towards China, with words right out of a Trump playbook.  Combined with the same attitude coming from Brazil's President-elect, the shift in a more unified global trade stance continues.  That same Reuters report emphasized, however, how much China is dug in for a long fight and the government is indeed making moves to prop up its economy for the days ahead.  This will be a story that continues to shake markets as we look to 2019.

U.S. weekly jobless claims dropped by 2K to 214K in line with expectations.  Productivity data came in strong as expected as well.  Overall, this is a nice start to November in the U.S. but everything is of course leading up to tomorrow's non-farm payrolls data.
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
  • The Bank of England kept its benchmark interest rate at 0.75% as widely expected.  However, the Monetary Policy Committee (MPC), led by Governor Mark Carney, said that if the U.K. gets past the immediate obstacles of Brexit negotiations, then the economy is more likely to run hot, requiring more rate hikes obviously.  The MPC said it expects inflation to stay above 2 percent for the next two years.
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