Market Drivers for November 11, 2019
USDJPY back below 109.00
UK GDP misses forecast
Nikkei -0.26% Dax -0.35%
UST 10Y 1.94%
Europe and Asia:
UK GBP GDP 0.3% vs. 0.4%
It’s been a generally quiet start to the week in FX with most pairs remaining in tight ranges, but the dollar was slightly weaker across the board and USDJPY dropped below 109.00 on escalating tensions in Hong Kong.
In Hong Kong, the continued clashes between police and protesters resulted in more violence with HK police admitting that they fired 3 live rounds of ammunition, injuring several protesters. The latest round of tension has taken the look of a low-level guerilla conflict as the clashes are now between small bands of protesters and the police rather than the massive rallies we saw earlier in the summer.
For now, markets remain generally unconcerned, although the 6-month conflict has certainly taken its toll on the HK economy, it hasn’t had any impact on the geopolitical front as Chinese authorities have not militarily interfered to end the conflict. Still, the situation is certainly coming to a slow boil and could become a much greater point of concern if China decided to impose martial law.
Elsewhere the UK GDP printed at 0.3% versus 0.4% but this was still better than the -0.2% contraction in Q2 of this year and has allowed the country to skirt a technical recession. Cable recovered above the 1.2800 level post the news and has remained quiet for most of London morning dealing. With the UK now in the midst of an election and Brexit news off the stage, trading in the pair has become extraordinarily quiet with daily ranges compressing by 30%. For now, the 1.2750 support continues to hold and sterling remains in consolidation mode.
In North America today the bond markets are closed for Veteran's Day but equities are open so the half-holiday atmosphere is likely to lead to muted trading. If equities see some profit-taking after record highs on Friday, USDJPY could slide further towards 108.50 as the day proceeds.