FX Insights

The main drivers of markets over the past session have been the stepping up of terror alerts (the Belgian Government has extended its Brussels terror alert for another week and the US Government has issued a global travel alert for its citizens citing “increased terrorist threats”) and the downing of a Russian fighter jet by Turkey near its border with Syria. Despite the heightened geopolitical tension, US equities ended in the positive territory, with US Treasury yields little changed. The 2-year yield maintained its gradual march higher, continuing to hold well above the 0.90%-mark, whilst the 10-year continued to hover around 2.25%. USD was a touch softer overnight but remains near 8-month high amid cautious risk sentiment. Perhaps the major price action was in oil, which was up by 2.8% both in terms of WTI and Brent as markets priced in a modicum of a geopolitical risk premium surrounding events in the Middle East.

    Before the US heads away for the Thanksgiving holiday there will be a deluge of US data. Note that there will be no major US data releases scheduled for Thursday and Friday. The key US economic data for today will be the October PCE headline and core deflator and the October durable goods orders which may see a 1.5%m/m rebound after a 1.2% decline in September. We expect the October PCE headline & core deflator to increase by +0.1%m/m while on a y/y basis, core PCE to rise by 1.3%y/y (unchanged from September). The Fed’s preferred inflation gauge, the personal consumption expenditures (PCE) index, has been well below the Fed’s 2% target for more than three years. As for the services sector (which accounts for more than ? of the US economy), we have the prelim November Markit US PMI services activity & composite surveys. The US housing data on the tap today will include the September US FHFA house price index, 3Q house price purchase index, the weekly MBA mortgage applications and October new homes sales. And to gauge the health of the US consumer, we have the usual weekly initial jobless claims (which will be brought forward to Wednesday instead of the usual Thursday release), the Bloomberg consumer comfort survey, the October personal income and spending data and the final reading for the November University of Michigan consumer confidence survey (which is also brought forward instead of the usual Friday release).