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Euro May Be the Clean-Up Trade to Watch Next Week

11/10/2017 11:06 am EST


Robert Savage

Partner & CEO, CCTrack Solutions

The main focus overnight beyond the yen not moving was the British pound. The problem is that it’s not the USD that matters here but the euro and its 0.2% gain isn’t enough to break the tightening triangle, writes Bob Savage, CEO of Track Research Friday.

Politics and policy still dominate the daily market moves even as the fears of a bigger reversal in risk fizzle into the Friday clean-up mood. This is US Veteran’s Day and we would all do well to remember those who gave their lives for their country – particularly the sadness of the war to end all wars.

What didn’t happen matters more than what did – as the Japanese yen (JPY/USD) holds easily over 113, as U.S. rates remain stuck with 10Y over 2.31%, as oil holds bid over $57 and as equities wobble but don’t’ crash.

There were plenty of tidbits for those hungry for more news to trade but not enough to move volatility outlooks:

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1. The New Zealand dollar (NZD/USD) bounce stalls as doubts return after New Zealand Finance Minister Grant Robertson that central bank’s dual mandate may see looser RBNZ policy in some instances and the 2% inflation focus could be up for discussion.

2. China bonds remain under pressure despite the PBOC adding to money markets today – first injection in 8-days – 10Y yields are up 34bps since September 15 with 4% next in play.

3. The Philippine peso (PHP/USD) weaker after the BSP left rates unchanged – as expected – with Trump the next story ahead of the ASEAN meetings.

4. The Australian dollar (AUD/USD) lower - RBA SOMP cuts inflation forecasts – and politics continue to drag.

5. The British pound (GPB/EUR) better – despite the ongoing focus on Brexit problems with Ireland the big issue there is hope for talks still. UK industrial production and trade both were better and drove with rates higher lifting forex. The lack of bigger pain trades in bonds and equities leaves forex quiet and the main focus overnight beyond JPY not moving was GBP.

The problem is that it’s not the USD that matters here but EUR and its 0.2% gain isn’t enough to break the tightening triangle and that may be the clean-up trade to watch for into next week.

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