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Volatile Equities Prompt Two-Way USD Flow, NZD Remains G10 Underperformer

FOREX
  • Despite the firmer US data and higher US yields on Tuesday, two-way swings for major equity benchmarks left the USD index close to unchanged for the session.
  • Initially, the higher-than-expected retail sales figures from the US prompted some greenback strength, however, the subsequent bounce for US equities following the soft-landing thesis sapped the greenback momentum and saw the USD index fall to session lows.
  • Amid the volatile swings, EURUSD traded from as low as 1.0539 to highs of 1.0595 but was unable to consolidate these gains ahead of the close as equities once again fell back into mid-range.
  • NZD remains the weakest performer in G10, with NZD/USD looking set to close below the 0.5900 handle following the below-forecast NZ CPI, which saw the Q3 Y/Y rate slow to 5.6% from 5.9% previously. Initial focus for the pair is on 0.5859, the September low and lowest since November of last year.
  • Similar weakness has been felt for GBP, which trades poorly following this morning's pay data: average weekly earnings for August came in below expectations at +8.1% vs. exp. +8.3%. Although, the focus quickly shifts to Wednesday's inflation release. GBPUSD trend conditions remain bearish, and the recent recovery is considered corrective. A continuation lower would refocus attention on support and the bear trigger, at 1.2037, the Oct 4 low.
  • Kicking off Wednesday’s APAC schedule is DRBA Governor Bullock, due to participate in a fireside chat about the current economic climate at the Australian Financial Security Authority Inaugural Summit. Chinese GDP and activity data then takes focus before the aforementioned UK September inflation release.
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