The biggest market impacting event on Friday came just as Europe was setting up for the close and resulted in broad based selling, news filtered out that the FBI would be reopening the case on Hilary Clinton’s email scandal, having uncovered thousands of emails on her aides computers while investigating another issue. A huge potential road bump just weeks before the election resulted in broad based USD selling, with the exception of MXN which weakened itself on the prospect that the presidential race is heating up and may not be as clear cut as the polls suggested. Global sentiment is already somewhat fragile, we’ve seen stocks press high this year on numerous occasions but progress to the topside continues to struggle, weaker earnings across European indices saw stocks close down from fresh weekly highs, while in the US major indices closed lower on the week holding just above recent lows.
Price action across USD pairs was interesting as well on Friday, we mentioned the greenback was looking overbought last week, and we noted several technical indicators point to a weekly reverse into last weeks close, which could see additional USD selling this week, especially should NFP figures on Friday disappoint. Major GBP pairs were little changes last week, despite plenty of volatile trade in that time frame. Sterling continues to remain exposed to Brexit fallout and whether the BOE’s Mark Carney would be extending his term may also play into GBP strength this week. Month end re-balancing today, Barclays figure would suggest USD demand against CAD, AUD, GBP and JPY.
We have a heavy week for data with central banks taking center stage, the BOJ and RBA are due Tuesday, while the Fed and BOE follow up on Wednesday and Thursday with the US labour market report due on Friday. From a central bank perspective, no change in policy is expected from any of the policy makers but attention will be on their forward guidance element. Our attention will be on the USD, Friday’s GDP figures were better than expected but USD buying which saw the USD index look to retest last week’s highs, quickly ran dry as the background data was less attention grabbing, in fact significant declines in the consumption figures would sign some concern about future readings.
Today, CPI inflation figures and GDP figures headline the European session as month end flows will also dominate. We’ll be looking towards the US this afternoon for income and spending figures, as well as some second tier info. The presidential race and the fallout from the FBI’s investigation will likely be taking center stage for many now, and markets will be looking to see how this impacts the future of the race, and the future of the US.