The Dollar Dominates the Market

The strength of the dollar was retained in Thursday's trading, news of Janet Yellen being out of the raise for Fed Chair sat well with investors. Candidates for the position of the Fed Chair have now been narrowed down to Jerome Powell and John Taylor. Advance GDP q/q will be released later today, analyst forecast show 2.6% rise. US economic data is quite strong with preliminary GDP at 3% and employment nearing full capacity. All this fuels the likelihood of an interest rate hike despite soft inflation numbers. The US is the first to end Quantitative Easing (QE) with the cleaning up of its balance sheet starting in October 2017. The Asian session saw a continuation of the currency's dominance of all other currency pairs. All eyes will be on advance GDP later today.

ECB's highly anticipated meeting threw the Euro into a downward spiral. The currency has lost 1.55% against the US dollar as at the time of writing. The ECB as expected cut down on its asset purchase by half (from 60bn Euro to 30bn Euro) but extended its stimulus program by 9 months. ECB governor Mario Draghi noted that interest rate will be unchanged till the end of the stimulus program, the ECB also noted that "if the outlook becomes less favorable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the Asset Purchase Program in terms of size and/or duration." Though the stimulus extension was anticipated, investors were uncomfortable with the accompanying statement hence, the fall of the Euro. Though there seems to be no major economic data coming out of the Euro-area today, the coming week will see the release of CPI numbers across Europe.

The British Pounds had a disappointing show on Thursday as poor CBI Realized Sales together with strong economic data coming out of the US changed investors sentiment towards the pound. GBP/USD fell to 1.3123 as at the time of writing. The CBI Realized Sales (a leading indicator of consumers spending) fell to -36 points (the sharpest drop since March 2009) from 42 points in September. High inflation seems to be taking its toll on consumer spending a key driver of economic growth. In its November 2nd meeting, the Bank of England must decide whether or not to increase interest rate for the first time in 10years. Policymakers are divided on this decision, proponents are pointing to the 3% inflation which is higher than the Bank's 2% target inflation, while opponents argue that the economy is showing signs of weakness and a rate hike could curtail economic growth. No major economic data is expected from the UK today.

  

Dovish stance of the Bank of Canada (BoC) coupled with a strong dollar left the loonie in doldrums as USD/CAD traded at 1.2864 during the Asian trading session. The Australian dollar didn't fair any better against the dollar it slipped to 0.7635 early Friday. Q/Q Producers Price Index released earlyFriday morning fell to 0.2% from 0.5% the prior period, way below analyst 0.4% forecast. Trading activities on both currencies will be determined by US advance GDP, positive q/q GDP from the US will push both currencies further down.

Gold continues to trade below the 1,300 psychological levels given the yellow metal's negative correlation with the dollar. Brent crude however rose to $59.43 as Saudi and Russia gives their backing to an extension of production cut beyond March 2018. The extension should be confirmed at OPEC's meeting next month. A confirmation will see oil prices rally.