Commodity currencies hit new lows into the London fix

Odd fixing time this week

The London fix this week hits right at noon in New York because the UK changes clocks a week before NY. That might have left the market a bit thinner, especially ahead of the Fed tomorrow.
In any case, the commotion currencies are getting hit hard today, especially the antipodeans. AUD and NZD are down about 1.2% while CAD is down 0.4%.
However in the past few minutes, USD/CAD has run to a session high so that bears watching, especially with WTI extend its loss to $1.
Odd fixing time this week

Eurozone October final manufacturing PMI 58.3 vs 58.5 prelim

Latest data released by Markit – 2 November 2021

The preliminary report can be found here. A slight revision lower but it just reaffirms the loss in momentum in manufacturing output and new orders as supply chain issues weigh. Of note, supplier lead times lengthened drastically, pushing cost inflation to a new record. One would expect the ongoing issues to persist further in the months ahead.
Markit notes that:

“Eurozone manufacturers reported a worsening of the supply chain situation in October, which curbed production growth sharply during the month. Average delivery times for raw materials lengthened at a rate exceeded only twice in almost a quarter of a century of survey data as companies reported demand once again running ahead of supply for a wide variety of inputs and components. Production constraints at suppliers were reported alongside a growing list of logistical issues. These include a lack of shipping containers and inadequate freight capacity, port congestion, driver shortages and broader transport delays linked mainly to the pandemic.

“These shortages have led to the weakest rise in factory output since the recovery began in July of last year, and also pushed inflationary pressures to new survey highs, raising further questions about just how transitory the recent spike in inflation will be.

“Business confidence also lost some ground to hit a one-year low in October, as increasing numbers of producers grew concerned about the supply situation and the impact of rising costs and prices, adding to the indications that manufacturers face some challenging months ahead.”

Lower bond yields weigh on yen pairs to start the session

2-year Treasury yields down over 3 bps to 0.48%


Meanwhile, 10-year yields are also down 2.2 bps to 1.55% and that is weighing on the mood in yen pairs as USD/JPY is down 0.3% and trading at the lows near 113.60.
There is still some hints of pushing and pulling since the start of trading yesterday with the market continuing to count down to the FOMC meeting tomorrow. That will inevitably set the tone for the remainder of the week as highlighted in this post yesterday.
The RBA already did its part by ruling out a rate hike in 2022 – at least for now – but opened the door for one in 2023 as it drops the previous forward guidance of not foreseeing a scenario in which it will hike rates until 2024 at least.
The Fed is arguably also going to offer some pushback to rate expectations by making clear that tapering will not necessarily mean immediate rate hikes to follow.
But again, the market reaction may not be as straightforward considering the train of thought that a policy accident is in the works. Thus, we’ll only get more clarity on things once the dust settles later in the week.
For now though, yen pairs are feeling some pressure with AUD/JPY in particular falling back below 85.00 for the first time in over a week:
AUD/JPY D1 02-11
The 22 October low around 84.60 may offer some reprieve after the failure on buyers’ part to hold a break above 86.00 but below that, there isn’t much stopping a further drop/retracement lower in the pair.

AUD/USD eases to fresh one-week lows post-RBA

A dovish RBA weighs on the aussie today

The pair is down 0.6% to its lowest since 25 October, with the low hitting 0.7471 as sellers start to explore further downside potential on the day.
AUD/USD H1 02-11
The post-RBA drop also sees price action fall back below both key hourly moving averages, with the 200-hour moving average (blue line) seen @ 0.7506. This sees the near-term bias shift back to being more bearish now.
There is still some minor support from the region around 0.7460-80 in general, with the 23.6 retracement level of the October swing higher sitting at 0.7464.
That may help to limit the downside for now but break below that and it could be a quick drop back towards 0.7400 for the pair with little else in the way.
But for any real momentum to be sustained, it needs confirmation from the dollar side of the equation and that will only come after the FOMC meeting tomorrow.
For now, the technicals are starting to side with sellers but we’ll see if that can continue until the end of the week as the Fed looms just around the corner.

South Korea October core inflation data the highest since December 2015

CPI data out of South Korea a few minutes ago.

Headline +3.2% y/y
  • prior +2.6%
  • highest since January 2012
  • +0.1% m/m (prior 0.5%)
Core inflation +2.4% y/y
  • prior +1.5%
  • highest since December 2015
SK’s central bank has a 2% CPI target, October’s rate is the 7th consecutive month above target
  • oil product prices, fresh foods and housing rentals continued to rise

$120 oil may be only seven months away

Bank of American and Goldman Sachs with some bullish comments

Bank of American and Goldman Sachs with some bullish comments
The OPEC+ decision is on Thursday and another 400k/bpd is expected to be added as OPEC sticks to the script. There’s some tail risk they could add more as the US and others lean on them.
WTI is up 51-cents to $84.08 and rose as high as $84.88.
One note that’s getting some attention today is from Bank of America, where analysts say $120 oil could arrive by June.
They cite a potential for surging gasoline demand along with jet fuel.
Goldman Sachs also highlights an increasingly bullish backdrop.
“We estimate that oil demand is nearing 100 million b/d, its pre-COVID level, with winter seasonality and the recovery in international jet demand set to bring demand to record highs by early next year,” they wrote today.
The biggest tell might be the increasing backwardation in the crude market. That’s a sign that oil is being rapidly pulled from inventories.
On another commodity front, European wheat is challenging the 2008 all-time high.

One day this might be tradable data

Global warming is still an abstraction for markets

At some point, maps like this could matter to markets. Warming is universal for the globe but how it impacts different countries is widely varied.


Looking at the big picture, leaders were trying to lean on India to do more at the climate conference with little success. It seems the stakes are pretty high there though, while much of the developed world would be spared. Of course, none of this takes into account things like sea levels or extreme weather.
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