What you need to know on Thursday, November 18:
The US dollar’s recent charge higher ran out of steam on Wednesday, with the DXY falling back to the 95.80s by the end of the US session having printed fresh 16-month highs at 96.26 in early Asia trade. The White House said a final decision on the Fed chain nominee would be made before Thanksgiving (25 November, or next Thursday).
Mixed US housing data failed to spur the greenback higher as positive retail sales, regional Fed manufacturing survey and Consumer Price inflation data did in recent sessions. US yields pulled back a little, with the dropping 2bps back to 1.60%, eroding the dollar’s rate advantage somewhat.
JPY was the best performing G10 currency, gaining 0.6% versus the buck as US/Japan rate differentials tightened. USD/JPY fell sharply lower from earlier session highs close to 1.1500, the pair’s highest level since Q1 2017, to test 1.1400.
Pound sterling was the second-best performer, gaining 0.4% versus USD, sending GBPUSD through above a key downtrend that has been capping the price action since the end of October. GBP/USD’s gains have been halted for now at the 1.3500 level, but technicians will eye a move towards the next key resistance at 1.3600.
UK inflation data was hotter than expected, with the Consumer Price Index rising at its quickest YoY pace in more than 10 years at 4.2% in October, supporting hawkish BoE bets and the pound. Brexit newsflow has also been positive, with the UK and EU reportedly on the cusp of agreement on the movement of medicine in and out of Northern Ireland.
Consumer Price Inflation data was also released out of Canada and also showed that price pressures growing there too, though this did not come CAD’s aid, which got battered on Wednesday amid a sharp drop in crude oil prices. USD/CAD hit fresh seven-week highs above 1.2600, up 0.4% on the day.
But the loonie wasn’t the worst performing G10 currency on the day. That title went to AUD, with AUD/USD losing 0.6% and hitting fresh six-week lows under 0.7260 as the pair continues to head lower within a bearish trend channel. Subdued Q3 Australian wage growth data supported the RBA’s dovish stance and undermined the case for rate hikes next year, weighing on the Aussie.
EUR/USD was subdued having recovered from its earlier session plunge to 16-month lows at 1.1260 and was set to end the day flat slightly above the 1.1300 level. US equities were mixed, with the S&P 500 dropping back modestly from 4700, but remains very close to the record highs it printed above 4720 earlier in the month.
In EM FX, the standout mover was the lira, which continued to plunge. USD/TRY rose to fresh record levels above 10.60, a gain of 2.6% on the day, as investors continue to dump the lira amid concerns that the CBRT is sleep walking into hyper inflation. The bank is expected to cut interest rates by another 100bps on Thursday to 15%, despite inflation nearing 20% in October.