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Forex today: risk sentiment remain elevated

  • Risk sentiment remains elevated.
  • Focus on Washington, a risk for the greenback.

Forex today was lacking drivers and instead, the market was in wait and see mode with respect to the House of Senate and tax legislation developments.

It was rumoured later in the shift that two sources familiar with the matter, that Senate Republicans were planning to unveil a new version of the tax bill that harbours significant differences from the House GOP's plan. According to sources, GOP leaders will have a conference at 11:30 (EST) on Thursday morning, at which they are going to share the details of their long-awaited tax overhaul legislation.

Other than that, there was little fresh news. Risk sentiment remained elevated though with a bounce on Wall Street and in US yields. Higher betas got a lift and the DXY was unchanged. However, the idea that corporate tax cuts will be phased in or even delayed weigh on the dollar and gold catches a bid to fresh highs before a slight correction of November's rally took place. 

US 10yr treasury yields moved higher from 2.30% to 2.33%, and 2yr yields climbed from 1.63% to 1.64% making for another a fresh high since Oct 2008. Fed fund futures yields continued to point to a Fed hike in December.

EUR/USD stuck to a narrow 1.1580-1.1610 range while sterling attempted to recover, in a minor correction, from 1.3086 up to 1.3121. Again,  UK politics weigh on sterling with the resignation of Priti Patel, (UK aid minister resigns instead of getting the sack). This all was a boost to the cross that rose from 0.8797 to 0.8862, a move starting out in European trade. Meanwhile, the next round of Brexit negotiations is scheduled for Thursday and Friday.

USD/JPY was two way business between 113.80 to 113.40. The antipodeans started to recover from yesterday's high beta sell-off with the  Aussie extending from 0.7660 to 0.7685 while the Kiwi drifted higher from 0.6920 to 0.6938 before dropping back. 

Key events in Asia:

"Australia: Sep housing finance is expected to show the number of owner occupier loans up by 2.0%. Sep’s result for investors will be interesting with the value of loans surprisingly rising by 4.3% in Aug but this is likely related to refinancing activity.

China: Oct CPI annual inflation is expected to rise to 1.7%yr from 1.6%yr with food prices holding the pace down."

Key notes: 

  • Wall Street looks to close day slightly higher as technology leads
  • Watching for developments tax reform and President Trump’s trip in Asia - UOB
  • Senate Republicans to present new version of tax bill on Thursday morning - Politico
  • Trade Weighted USD to continue to decline - Wells Fargo
  • U.S. Senate Republican tax bill still on track for Thursday release - Reuters
  • US Tsy Sec. Mnuchin: Part of USD strength reflects US economy
  • US Tsy Sec. Mnuchin: Aim is to get tax bill to Pres. Trump inDecember
  • WTI tumbles to lows near $56.50 on EIA
  • EIA: US commercial crude oil inventories increased by 2.2 mln barrels

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