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Trump to choose new Fed chair, beware

Trump to choose new Fed chair, beware

GBP
Sterling remained above 1.3200 handle in the early morning session but the bullish move struggled to gather momentum against the Dollar. 

Cable also continues to find support from the UK Prime Minister Theresa May’s optimistic comments on the Brexit negotiations delivered yesterday, and EU Chief Brexit negotiator Barnier’s comments also help keep the buoyant tone intact around Sterling.

Meanwhile, optimists are likely to wait on the sidelines ahead of tomorrow’s Q3 Gross Domestic Product (GDP) release. A weak print may potentially reduce the probability of a November rate hike from the Bank Of England (BoE).

USD

After recent short-term gains, the Greenback’s upside, against a basket of major currencies, seems to have met a tough barrier in and around the 94.00 level as measured by the US Dollar Index.

The healthy recovery in the index has been in tandem with a strong rebound in the US 10-year yields, although the 2.40% level has so far proven to be quite a significant hurdle. In the meantime, the Dollar stays focused on the upcoming decision by President Trump on the next Federal Reserve Chief, with hawkish candidate J.Taylor still being the front-runner ahead of the Federal Open Market Committee’s (FOMC) J.Powell and former FOMC Governor K.Warsh.

There is a good chance that the House of Representatives will vote on the Senate’s fiscal year 2018 Budget Resolution on Thursday, which will set the stage for a tax package that can be passed via a simple majority in the Senate. House Republicans could announce their tax bill as soon as next week and move onto the process of committee. However, there are many steps between now and the President signing his name on the dotted line.

Today we will see Markit’s advanced manufacturing/services PMIs, followed by the Richmond manufacturing index and the American Petroleum Institute’s (API) weekly report on US crude oil supplies.

EUR

It was a very quiet day yesterday for the Eurozone in terms of economic data as the single currency fluctuated against its peers but closed the day with no net loss or gain. The fluctuations were governed by speculation over what has turned out to become a big Thursday.

Catalan President Puigdemont set up the Thursday as he called for a parliamentary session with the potential of declaring independence as he currently mulls Madrid’s plans to take over the region. This session also coincides with President Draghi’s Interest Rate Decision.

Brexit uncertainties also continue to loom as Donald Tusk, in a speech yesterday, told the European Parliament how the UK would be the catalyst for whether smooth transitions prevail and if there is a “good deal, no deal, or no Brexit”.

In the market today, flash manufacturing and services activity in the form of French business confidence, preliminary Eurozone PMI readings, and European Central Bank ‘s (ECB) bank lending survey are all out.

Data To Watch:

08:30 EUR Markit PMI Composite (Oct) – Germany
08:30 EUR Markit Services PMI (Oct) – Germany
08:30 EUR Markit Manufacturing PMI (Oct) – Germany
09:00 EUR Markit Manufacturing PMI (Oct)
09:00 EUR Markit Services PMI (Oct)
09:00 EUR Markit PMI Composite (Oct)
14:45 USD Markit Manufacturing PMI (Oct)
14:45 USD Markit Services PMI (Oct)
14:45 USD Markit PMI Composite (Oct)

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