Powell & Mnuchin Comments to Drive Dollar

Powell's confirmation hearing and comments from Treasury Sec Mnuchin are in focus today and will drive the dollar's strength.

Previous Day's Market Highlights

Sterling made gains yesterday amidst a largely quiet calendar. The pound briefly broke back above 1.1200 against the euroSterling-dollar met resistance around 20 pips shy of 1.3400, its highest levels since 29 September. Euro-dollar held above 1.1900 but met resistance around 1.1960, a new two-month high.
 
US New Home Sales surprised to the upside but had limited immediate impact on the dollar, which regained ground against both the pound and the euro in the afternoon session after the rates met resistance. The euro had received support due to the reduced political uncertainty in Germany after the SPD agreed to coalition talks with the CDU.
 
The pound regained 1.7500 against the Aussie and 1.7000 against the Canadian dollarbut fared less well against the New Zealand dollar, holding below 1.9400.
 
The South African rand rallied against the pound as investors expressed relief that South Africa had avoided a debt rating cut to junk by Moody’s, which instead put the country’s debt on review for a downgrade.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP / EUR 1.1207 1.1451 1.1092 3.14%
GBP / USD 1.3323 1.3384 1.3039 2.58%
EUR / USD 1.1888 1.1961 1.1553 3.41%
GBP/AUD 1.7532 1.7560 1.6894 3.79%
GBP / NZD 1.9242 1.9537 1.8787 3.84%
GBP / CAD 1.7017 1.7171 1.6589 3.39%

Today's Market Highlights

This morning’s sterling weakness stems in part from the press conference on the Financial Stability Report and Bank Stress Test results after the BoE emphasised the risks Brexit poses. Economic releases are of secondary interest, but include the US Goods Trade Balance, housing price index, and consumer confidence figures (13:30, 14:00, 15:00 GMT).
 
The main event is the Senate confirmation hearing of incoming Fed Chair Jerome Powell. Powell is widely expected to favour continuing the Fed’s gradual rate hikes but to be more supportive of easing financial regulations. Key will be whether Powell comes across as more dovish or hawkish than expected on 2018’s policy path, which in turn would likely see the dollar weaken or gain.
 
Other Fed speakers include Dudley (14:15 GMT), who is to give the opening remarks at the NY Fed’s annual conference on the US treasury market’s evolving structure, and Harker (15:15 GMT), who will speak about financial safety for the aging population. Traders will keep an eye on the remarks for any additional insight into the board’s thoughts on hikes in both December and 2018.
 
Treasury Secretary Mnuchin speaks this evening (20:45 GMT), also at the NY Fed’s treasury market conference. Traders will watch closely for any progress in the Trump administration’s attempts to pass tax reform measures, which could support the dollar.   

Today's Economic Calendar

Time Currency Release Consensus Previous
13:30 USD Goods Trade Balance (Oct) $-65.00B $-64.14B
13:30 CAD Raw Material Price Index (Oct) 0.4% -0.1%
14:00 USD Housing Price Index MoM (Sep) 0.6% 0.7%
14:00 USD S&P/Case-Shiller Home Price Indices YoY (Sep) 6.1% 5.9%
14:15 USD Fed Member Dudley Speaks
14:45 USD Fed Member Powell Speaks
15:15 USD Fed Member Harker Speaks
15:30 CAD Financial System Review
16:15 CAD BoC Governor Poloz Speaks
20:00 NZD RBNZ Financial Stability Report
20:45 USD Treasury Sec Mnuchin Speaks