Market Watch: The Dollar's Recovery Was Extended

Financial and commodity markets analytics

Yesterday, the dollar recovered from its extreme drop in value. It has continued to recover today through the European session. The Australian dollar was the most heavily affected. It is down more than 1% after the RBA raised the cash rate 25 basis points (to 4.35%).
Taiwan was the only notable exception to the general decline in Asia Pacific stock markets. Europe's Stoxx600 is down marginally. US index futures also trade with a stronger bias.
Gold is under pressure from lower yields and the stronger dollar. It fell yesterday by $14.50 and today is down almost $12 to $1966.
For the first time in late August, December WTI has fallen below $80 per barrel. Geopolitical worries and tight supply appear to be balancing out demand concerns.

Asia Pacific
The Reserve Bank of Australia announced the first rate increase since June. Cash rate increased by 25 basis points to 4.35%. Governor Bullock is scheduled to deliver the monetary statement that updates forecasts at the end the week. The central bank, however, has revised its inflation forecast and reduced its peak unemployment forecast.
In any case, the Australian dollar appeared vulnerable today. In five sessions, it gained two cents. The retreat today has continued a bit below $0.6420.

Japan will report its Q3 GDP data on November 15th. The labor cash earnings today and the household spending are in line with expectations. This is a major challenge.
Yesterday, the dollar's three-day air cushion against the yen ended. In late North American trading, it climbed steadily and a bit above JPY150.

Bloomberg's survey predicted a decline of 0.1%. The German industrial output fell by 1.4%. This is the fifth consecutive decrease. Spain's industrial production increased by 1.1%. Bloomberg's median forecast was for a 0.4% increase. Spain's industrial production has fluctuated between monthly increases and decreases since April, while Germany's is in a clear downward trend.
The euro's recent gains are being pared back and the target for now is around $1.0665. The King will present the legislative and policy programs of the government to the parliament at the opening session.
The Q3 GDP will be released on Friday. Bloomberg's median forecast is for a contraction of 0.1%.
Yesterday, sterling reached a session high of $1.2430 during the early North American trading session and then trended gently lower for the rest of the day. Sterling has fallen below $1.2300 due to follow-through sales.

The US reported the September trade balance. Trade (and inventories), as well as Q3 GDP, are often sources of revision. According to GDP math, trade contributed to US growth in this year. The improvement in the US economy is largely due to a decrease in imports, rather than an increase of exports.

Canada releases its September merchandise trade statistics today. Bloomberg's median forecast is a C$1 billion surplus, the biggest since January. Canada's balance of goods has declined this year. The average monthly deficit is C$0.75 billion, compared to a C$2.37 billion average surplus during the first eight month of last year.
The US dollar dropped to CAD1.3630 - its lowest level for nearly three weeks - and reached session highs near CAD1.37 late in the afternoon. The greenback rose above CAD1.3700 today and reached CAD1.3755.