US Dollar May Rise on PCE Data, Thin Trade May Boost Volatility

Talking Points:

• US Dollar May Edge Higher as PCE Data Boosts December Rate Hike Bets
• Kneejerk G10 FX Volatility May Be Amplified in Thinning Pre-Holiday Trade
• Australian, NZ Dollars Rebound in Asia After Yesterday’s Underperformance

A quiet economic calendar in European trading hours is likely to put a busy US data docket in the spotlight. October’s Core PCE figures may prove most interesting. The Fed’s preferred measure of inflation is expected to put price growth at 1.4 percent, the highest in 10 months. That may help boost an interest rate hike at December’s FOMC meeting, which may offer a near-term boost to the US Dollar. Follow-through may be limited however considering traders already see the probability of a 25bps increase at 77.5 percent (according what is priced into Fed Funds futures), the highest yet this year.

Traders would be wise to keep in mind that liquidity is likely starting to drain ahead of the upcoming Thanksgiving holiday that will keep the US markets offline on Thursday. This could make for a period of directionless drift in the G10 FX space into the week-end. However, thin trading conditions may amplify knee-jerk volatility in the event that an unexpected event risk spooks the markets. Seemingly potent moves generated under these circumstances may struggle for follow-through and unravel once liquidity returns.

The Australian and New Zealand Dollars moved higher in otherwise quiet overnight trade. The moves appeared corrective after the two currencies lagged their G10 counterparts in the prior session. The Kiwioutperformed, which may have reflected pre-positioning ahead of a 2020 government bond auction. Demand swelled at a bill sale yesterday compared, seemingly speaking to investors’ desire for NZD-denominated paper. This is a highly speculative hypothesis however.

New to FX? START HERE!

Asia Session

GMT	CCY	EVENT	ACT	EXP	PREV
23:50	JPY	PPI Services (YoY) (OCT)	0.5%	0.5%	0.5%
23:50	JPY	BOJ October Meeting Minutes	-	-	-
00:00	AUD	Skilled Vacancies (MoM) (OCT)	0.6%	-	1.1%
00:30	AUD	Construction Work Done (3Q)	-3.6%	-2.0%	2.1%
01:45	CNY	Westpac-MNI Consumer Sentiment (NOV)	113.1	-	109.7
05:00	JPY	Small Business Confidence (NOV)	49.9	-	48.7
05:00	JPY	Leading Index (SEP F)	101.6	-	101.4
05:00	JPY	Coincident Index (SEP F)	112.3	-	111.9

European Session

GMT	CCY	EVENT	EXP/ACT	PREV	IMPACT
07:00	CHF	UBS Consumption Indicator (OCT)	1.60 (A)	1.56	Low
09:30	GBP	BBA Loans for House Purchase (OCT)	45500	44489	Low
09:30	EUR	ECB’s Honohan Speaks in Dublin	-	-	Low
10:00	EUR	ECB Releases Financial Stability Report	-	-	Medium
10:20	AUD	RBA's Debelle Speaks in London	-	-	Low

Critical Levels

CCY	Supp 3	Supp 2	Supp 1	Pivot Point	Res 1	Res 2	Res 3
EUR/USD	1.0539	1.0592	1.0618	1.0645	1.0671	1.0698	1.0751
GBP/USD	1.4894	1.4996	1.5040	1.5098	1.5142	1.5200	1.5302