Swiss Franc Futures Market News and Commentary
The dollar index (DXY00) on Wednesday fell by -0.290 (-0.30%). Dec euro-fx futures (E6Z9) closed up +0.0038 (+0.34%), and EUR/USD (^EURUSD) rose by +0.0043 (+0.39%). Dec yen futures (J6Z9) closed up +0.0006 (+0.07%), and USD/JPY (^USDJPY) fell -0.13 (-0.12%). The dollar index gave up early gains Wednesday and tumbled to a 1-month low on concern the Fed may need to boost stimulus measures after Sep U.S. retail sales unexpectedly declined by -0.3% and -0.1% ex-autos, weaker than expectations of +0.3% and +0.2% ex-autos and the first decline in 7 months. Comments Wednesday from Chicago Fed President Evans were also dollar-negative when he said, "there is an argument for more accommodation now to provide some further risk-management buffer against potential downside shocks." The Fed Beige Book released Wednesday afternoon was slightly negative for the dollar as information collected by the 12 Fed regional banks in the month through Oct 7 stated that the U.S. economy expanded at a "slight to moderate pace" with some districts reporting that "persistent trade tensions and slower growth weighed on activity." GBP/USD climbed +0.34% to a 5-month high Wednesday on reduced fears of a no-deal Brexit after UK Brexit Secretary Barclay told a parliamentary committee Wednesday that UK Prime Minister Johnson on Saturday will request an extension of the Oct 31 Brexit deadline if a deal hasn't been reached by Saturday, as required by the UK Parliament's Benn Act. UK and EU negotiators have yet to reach an agreement ahead of the Thu/Fri EU Summit but are continuing their intensive negotiations. If a Brexit deal is approved by the EU leaders and the UK Parliament, then the UK will be able to exit the EU on October 31 with a long transition period during which the UK will remain under single-market rules while a UK-EU trade agreement is negotiated. The markets are hoping for an agreement by Oct 31, but a deadline extension seems more likely. The betting odds are low at only 15% for a no-deal Brexit this year. GBP/USD gave up most of its gains Wednesday on tepid price pressures that may prompt the BOE to cut interest rates after today's UK Sep CPI report rose by +1.7% y/y, slightly weaker than expectations of +1.8% y/y. EUR/USD rallied to a 1-month high Wednesday on support from a jump in the 10-year German bund yield to a 2-1/2 month high of -0.379%, which boosted the euro's interest rate differentials. EUR/USD was undercut by concern that slow price pressures that were dovish for ECB policy after Wednesday's Eurozone Sep CPI report was revised downward to a 2-3/4 year low of +0.8% y/y from the originally-reported +0.9% y/y. The Chinese yuan fell -0.16% to a 3-session low Wednesday on increased U.S./China tensions after China's foreign ministry on Wednesday threatened unspecified "strong countermeasures" if the U.S. Congress passes a bill offering support to pro-democracy protesters in Hong Kong. The House on Tuesday passed the "Hong Kong Human Rights and Democracy Act," while the Senate has yet to act. Markets are concerned that Hong Kong tensions may threaten the approval of a U.S./China trade deal. USD/JPY moved lower Wednesday as it consolidates just below Tuesday's 2-1/2 month high as weakness in stocks boosts the safe-haven demand for the yen.