Forex news for North American trading on October 20, 2021.
- The classic carry trade continues to run as reflation bets continue
- CADJPY stays above the 100 hour MA on the dip today
- Sinema may block any tax increases in US reconciliation package - report
- Russia orders a one-week lockdown with covid cases at record high
- WTI crude oil futures settle at $83.87
- Manchin denies report that he mentioned the possibility to Biden of leaving Democratic party
- Beige Book: A majority of Districts indicated positive growth in consumer spending
- Belief in an aggressive Bank of Canada rate hiking cycle grows
- Fed's Quarles: It's clear we met test for taper
- The U.S. Treasury sells $24 billion of 20 year bonds at a high yield of 2.10%
- Dow Jones industrial average reaches a new record high
- European equity close: Moderate gains led by Italian shares
- Commodity currencies run as US dollar slackens and oil pops
- US weekly oil inventories -431K vs +1.857K expected
- Bitcoin trades at a new all time high. Trades above $65,000.
- Putin: Worried about consequences from gas crisis in Europe, plans to support households in EU
- Canada Sept CPI +4.4% vs +4.3% expected
- The AUD is the strongest and the GBP is the weakest as NA traders enter for the day
- ForexLive European FX news wrap: Weidmann steps down, dollar mixed amid steady markets
- US MBA mortgage applications w.e. 15 October -6.3% vs +0.2% prior
The forex market for the day (and the US session) saw the USD move lower along with the JPY (the JPY crossed especially the NZDJPY and CADJPY are moving up quite smartly). The NZD and AUD are ending as the strongest.
The dollars move to the downside came despite Beige Book where the majority of districts indicated positive growth, with most districts report reporting significantly elevated prices, fueled by rising demand for goods and raw materials. Although fears of inflation are higher, the Fed seems content to simply start the taper November and lay off findings until later in 2022.
Although the RBA is not looking to tighten soon, the RBNZ is on a tightening path after starting the process with a 0.25% hike at their last meeting. Although the CAD is ending the day with mixed results, it did see gains vs the JPY and the USD. Adam lays out the increasing belief in a more aggressive BOC rate hike cycle that is starting to brew (CLICK HERE). The CADJPY has been up for 6 consecutive days and is up over 800 pips in the last 22 trading days. The USDCAD is down above 590 pips in 22 days.
The markets are certainly reacting to those countries that are looking to hike. The BOE is another central bank which is leaning to tightening sooner vs later and it's pair has been up about 430 pips in the last 16 trading days (and testing the 100/200 hour MAs in the process).
In other markets today:
- Spot gold rose in reaction to the lower dollar. The price is up $12.35 or 0.72% at $1781.50.
- Spot silver is also moving higher with a gain of $0.66 or 2.78% at $24.29.
- Crude oil futures moved higher today after the Department of Energy announced a surprise drawdown inventories of -431K barrels. That was below the expected 1.857K gain and the private data surprise from last night that showed a 3.29M barrel surge.
- Bitcoin continue to move to the upside after the SEC decision to allow ETF's on bitcoin futures to trade. The price of bitcoin moved to a new all-time high price of $67,016 before rotating back toward $65,885 currently. The price is still up $1643 on the day.
In the US stock market, the five day win streak in the NASDAQ was snapped today with a decline of -7.4 points or -0.05% at 15121.69. The tech heaavy NASDAQ is getting concerned about the inflation fears. The S&P index kept its win streak alive (now up to 6 days) with a 16.56 point gain or 0.37% at 4536.20. The high price and the S&P reached 4540.87 which was within five points of the all time high at 4545.85.
The Dow industrial average did reach a new record today at 35669.69 surpassing the prior high at 35631.19. The index did move lower but still closed higher on the day by 152 points or 0.43% at 35609.35.
In the US debt market, the treasury auctioned off $24 billion at 20 year notes at a high yield of 2.10%. That was 2.5 basis points above the WI level at the time of the auction. Although international demand was stronger than the 6 month average, it took the larger than expected tail of 2.5 basis points to get their attention. The tenure yield is trading up 2.4 basis points on the day. The 30 year yield is up 5.0 basis points.
