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Early USD Index Declines Reverse Course, CNH Underperforms On Housing Data

FOREX
  • Following the late knock to risk sentiment on Tuesday following reports of a missile strike crossing the Ukrainian border into Poland, the market fallout looks more contained Wednesday with the greenback initially resuming its most recent weakening trend before the USD index reverted back to unchanged levels approaching the APAC crossover.
  • The stabilisation of markets follows firm intelligence reports that the errant missile strike was Ukrainian in origin, rather than Russian, leaving the triggering of NATO's collective defence far less likely after an emergency meeting this morning. Nonetheless, the sharp moves continue to underpin the fractious nature of markets at present, with front-end implied vols generally higher across G10.
  • The late strength for the USD was partially underpinned by a firmer US retail sales report for October where the 1.3% overall retail sales gains included positive M/m readings in most categories. However, the dollar’s intra-day recovery could also be attributed to currency markets taking pause for breath, further evidenced by the mixed performance across G10.
  • CNH was the worst performer, falling 0.8% against the greenback as data showing a continued decline in China's new home prices facilitated the upswing in USD/CNH. The value of new residential properties fell 0.37% M/m last month, which was the fastest pace of decline since Feb 2015.
  • Faring better were both the Euro which consolidates just south of 1.04 and GBP which tracked either side of the 1.19 mark ahead of tomorrow’s awaited Autumn Statement.
  • Overnight, Australian CPI will hit the wires before Philly Fed and Housing starts headline the US docket.
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