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US Open Preview – Dollar holds above 114 vs yen as US bond yields soar; US factory orders pending
October 4, 2018 12:26 pmVideo
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Here are the latest developments in global markets:
Day Ahead: US Factory orders eyed for further dollar rally; Brexit and Italian budget to remain in the spotlight
Upbeat data releases out of the US combined with hawkish comments delivered by the Fed chairman Jerome Powell on Wednesday were enough to enhance hopes for further rate hikes in the future and thus boost the dollar. On Thursday, while a few data releases are pending in the remainder of the day, investors will keep a close eye on US factory orders due at 1500 GMT. According to analysts, new purchase orders placed with manufacturers are expected to have expanded by 2.1% month-on-month (m/m) in August, posting a spectacular recovery after decreasing by 0.8% in July. Should the measure print stronger growth than expected, the dollar could unlock fresh highs, while US government bond yields will be in focus as well, as the 10-year bond yields are currently at their highest since 2011. Emerging market currencies might come under pressure once again if the dollar continues to gain ground.
Earlier at 1230 GTM, initial jobless claims for the week ending September 29 may come under review as well, though the market reaction on the data is typically limited.
In neighboring Canada, where trade fears substantially receded after the US, Canada and Mexico managed to reach a new trilateral agreement, attention will turn to the Ivey PMI readings for the month of September later in the day (1400 GMT). Yet the numbers could have a minimal impact on the loonie as investors may be more interested about Friday’s employment figures out of Canada and the US. Fluctuations in oil prices may also affect the commodity-linked loonie.
Elsewhere, Japan is scheduled to publish September’s household spending figures at 2330 GMT. Forecasts are for consumption to have eased to -0.1% on a yearly basis. In July the measure marked a soft increase of 0.1%. Meanwhile the International Monetary Fund judged that downside risks to the Japanese economy have increased in the past year due to trade barriers which threaten to pressure demand for Japanese exports. Moreover, the IMF sees rises in sales taxes planned for next year weighing on growth momentum too, messaging that monetary policy should stay accommodative for now.
Early on Friday, Australian retail sales could move the aussie at 0130 GMT. Analysts believe that retail sales in August increased by 0.2% m/m after showing no growth in the preceding month.
Brexit will remain under the spotlight as markets eagerly await the UK to unveil new proposals on the Irish border before EU summit on October 17-18.
In the Eurozone, Italy’s fiscal policy will continue to limit upside movements in the euro. On Wednesday, the Italian Prime Minister confirmed that the deficit target for 2019 will be 2.4% of GDP, while the goals for 2020 and 2021 would fall to 2.1% and 1.8% respectively versus the 2.4% reported earlier for both years. Yet the government still needs to send full details of its spending plans to the Italian parliament before it submits a budget draft to the European Commission in mid-October.
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