iFOREX Daily Analysis : October 28, 2016
iFOREX | Oct 27, 2016 02:49AM ET
The dollar fell against most major currencies on Wednesday, after reaching near nine-month highs, on the back of expectations for a U.S. rate hike, while sterling regained ground as expectations for a rate cut next week diminished.
The dollar has rallied this month as remarks by Fed officials in recent weeks cemented expectations for a rate hike before the year’s end.
The Fed’s next meeting is in November, but a rate hike ahead of the presidential election is seen as unlikely.
Investors are currently pricing a 78.3% chance of a rate hike at the Fed's December meeting according to the Fed Rate Monitor Tool. In addition to Fed and U.S. election uncertainty, recent stronger German business morale and import prices data may have led traders to reduce short positions against the euro.
The Sterling fell on Tuesday to the lowest level since the flash-crash earlier this month, before rebounding after Bank of England Governor Mark Carney said the bank could not ignore the pound's "fairly substantial" drop since the June 23 Brexit vote.
The comments were seen as an indication that the BoE will leave rates unchanged at its meeting next week. For today, the U.K. is to publish preliminary data on third quarter economic growth and the U.S. is to produce report on durable goods, initial jobless claims and pending home sales.
EUR/USD
The euro has gained some ground against the dollar on Wednesday, as selling pressure eased after German business morale and import prices data improved and as uncertainty over the outcome of the U.S. election weighed on the dollar.
The Commerce Department said new home sales increased 3.1 percent to a seasonally adjusted annual rate of 593,000 units last month, pulling them close to a nine-year high touched in July.
However, the pace for the prior three months was revised down by a total of 85,000 units from previous estimates. For today, the U.S. is to produce report on durable goods, initial jobless claims and pending home sales.
Gold
Gold prices gained early on Wednesday, reaching three-week highs as the U.S. dollar pulled back from nine-month peaks, however, following the positive U.S. housing data the precious metal fell later on, to end the day in negative territory.
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The outlook for gold remains uncertain as a recent string of positive U.S. economic data combined with heightened expectations for an interest rate hike before the end of the year add pressure on the precious metal.
The U.S. central bank's next meeting is in November, but a rate hike ahead of the presidential election is seen as unlikely. Instead, traders are expecting a rate hike at the Fed's December meeting. For today, the U.S. is to produce report on durable goods, initial jobless claims and pending home sales.
WTI Oil
Oil prices fluctuated between gains and losses on Wednesday, as prices fell to a four-week low, but a recovery took place after data showed that crude oil inventories in the U.S. fell unexpectedly last week.
The U.S. Energy Information Administration said in its weekly report that crude oil inventories fell by 553,000 barrels in the week ended October 21. Market analysts' expected a gain of 1.69 million barrels, as the American Petroleum Institute reported a supply increase of 4.8 million barrels. Markets are now focusing on the OPEC official meeting in Vienna on November 30.
The possibility that producers could walk away without an agreement is high, as Iraq, Iran, Nigeria and Libya indicated they might not take part in the proposed production cut deal. Russia’s unclear stance is also fueling uncertainty.
US 500
The main U.S. stock indices were mixed on Wednesday, as gains in the Industrials, Oil & Gas and Utilities sectors led shares higher while losses in the Healthcare, Technology and Telecoms sectors led shares lower.
Among the earnings reports, Apple (NASDAQ:AAPL) was a big disappointment, leading the decliners on the Dow with losses of nearly 3%.
The electronic gadget maker reported its third consecutive quarter of declining iPhone sales and forecast weaker expectations for the upcoming holiday season. On the contrary, Coca-Cola managed to report gains of 0.4%. For today, investors will be focusing on U.S. durable goods, initial jobless claims and pending home sales.
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