FX market outlook

FX market outlook

US dollar stabilizes following payrolls; Mexican peso helped by Trump recording.

The US dollar managed to hold its ground following slightly disappointing payrolls numbers on Friday, while the Mexican peso gained following the release of a tape containing lewd comments about women by US Presidential candidate Donald Trump.

The US dollar did not extend its losses following Friday’s employment report, which reduced the chances of a rate hike in November.  The case for a rate hike in December did remain strong however.  A holiday in Tokyo led to reduced liquidity in foreign exchange markets, limiting market moves.  The euro was at 1.1178 dollars while the US dollar managed to climb above 103 versus the yen (103.12).

Sterling was a loser during the Asian session following the release of business surveys that showed pessimism and uncertainty about the country’s prospects.  The British Chambers of Commerce Quarterly Economic Survey and a survey of chief financial officers by accountants Deloitte showed only a modest rebound from the post-Brexit blues.  Only consumer spending has been a key driver of the UK economy since the Brexit vote, but the severe drop in the pound could usher in some inflation.  Pound / dollar dropped below 1.24 to 1.2380 while pound / euro scaled the 90 pence level once again to reach 0.9025.

In the United States, a key development concerning the Presidential Election was the release of a tape that featured Donald Trump more than a decade ago speaking privately about women in an offensive manner.  This led to certain senior Republicans denouncing his candidacy and calling for him to step down.  Trump categorically refused to step down and managed to perform relatively well in the second debate with Hillary Clinton that was held last night.  Nevertheless, as a result of the weekend’s events, many pundits see Trump’s chances as seriously diminished.  The Mexican Peso was gaining as much as 2% at some point to 18.90 (pesos per dollar), while stock futures were also higher.  The Canadian dollar also did well as USDCAD fell below 1.33 to 1.3257.

Oil remained under pressure as it stayed below $50 a barrel to $49.40, while gold did better as it climbed to $1264 an ounce.  Gold was as low as $1245 on Friday – a 4-month low.

With Japan and Canada on holiday and the US partially closed due to Columbus Day, today is expected be quiet and no major data is scheduled for release.  Eurozone’s Sentix investor sentiment might attract some attention as it is expected to improve to 6.3 in October from 5.6 the previous month.