European Outlook: The dollar has rallied across the board, up 0.3% versus the euro and by 0.6% against the yen, following news that the U.S. Senate had passed a budget blueprint that will help push forward the Republican party’s planned $1.5 tln tax cut. The news came after the close of Wall Street, and sparked a rally in U.S. equity index futures while lifting bourses across the Asia-Pacific region. USDJPY rallied to a two-week high of 113.30, gaining over 60 pips from the pre-news levels. EURUSD tumbled to a 1.1804 low from levels just above 1.1850. The relative underperformance of the yen, which is typical during bursts of risk-on sentiment in global markets, saw EURJPY and other yen crosses climb, as the dollar post gains versus the euro and most other currencies. Market participants will monitor the budget’s passage in the House. The budget, if passed, will open the door to expanding the federal deficit by $1.5 tln over 10 years, which will pay for the tax cut. This won’t be pleasing to fiscal conservatives in the House. Rand Paul was the only Republican to vote against in the Senate vote, and while there may be more opposition from House Republicans, the desire for a political has fostered a change in priorities.
U.S. reports: revealed an October Philly Fed surge to a 5-month high of 27.9, and a 22k initial claims plunge to a 44-year low of 222k in the Columbus Day and BLS survey week, with little evidence of distortion from Nate and the California fires. The ISM-adjusted Philly Fed rose to a 6-month high of 59.7 in October from 59.0, and the employment index surged to an all-time high of 30.6 from 6.6. Monday’s Empire State rose to an 8-year high of 30.2 that was also seen in September of 2014. Rebuild activity should support continued sky-high producer sentiment levels into early-2018, and we face substantial upside risk for all the employment, GDP, and factory-sensitive measures into early-2018.
Main Macro Events Today
- UK Public Borrowing – Expectations – at 5.7B from 5.1B last month.
- Canadian CPI and Retail Sales – Expectations -0.2% increase in September’s CPI and 0.1% increase in September’s Retail Sales.
- US Existing Home Sales – Expectations – Existing Home Sales Change (MoM) to increase by 0.7% up to -1.0% from -1.7% last month.
- FOMC – Fed’s Mester due to speak at 18:00 GMT and Fed’s Yellen at 23:30 GMT
Charts of the Day
Support and Resistance Levels
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