FX Daily, September 27: US Debate Lifts Peso, but Leaves the Dollar Non-Plussed

Swiss Franc

Since the monetary assessment meeting, the EUR/CHF is trending downwards. Sight deposits indicate that the SNB is intervening 0.9 bn per week. We emphasized that the preferred intervention corridor is between 1.08 and 1.0850.

FX Rates

The first US Presidential debate may not sway many voters but has lifted the Mexican peso. The peso, which has fallen by about 1.3% over the past two sessions, has stormed by 1.5% today as the seemingly biggest winner of the debate. Snap polls immediately following the debate gave the edge to Clinton.

FX Performance, September 27

Source Dukascopy. Click to enlarge. - Click to enlarge

Asian shares began lower, but also rebounded as the debate progressed. After initially falling almost 1%, the MSCI Asian-Pacific Index recovered to finish 0.7% higher. Although it did manage to push through Monday’s highs, the close near it and on the session high, underscoring the strong intrasession recovers.

Eurozone

European shares, however, have been unable to follow suit. After opening higher, shares have reversed lower, with energy and financials leading the way.  Germany’s largest banks remain under pressure and are extending yesterday’s losses. Italy’s bank share index is also pressure for the third running. The widely publicized bank woes in Germany are not having a significantly negative impact on the euro, which has remained in about a quarter cent range in the European morning. One possible explanation is that to address the challenges will likely require the sales of foreign assets and this repatriation is supports the currency. Capital inflows and a current account surplus may help explain the euro’s resilience.

Eurozone Private Sector Loans

Click to enlarge. Source Investing.com - Click to enlarge

Eurozone M3 Money Supply

Click to enlarge. Source Investing.com - Click to enlarge

United States

Press reports note that since the early 1990s, US stocks rally about 0.85% following the first debate. It may be difficult to match that average today. The S&P 500 gapped lower yesterday after gapping higher last Thursday after the Fed decision. The two-day island top has bearish technical developments. Yesterday’s gap is also important because it appears on the weekly bar charts as well as the daily. That gap is important for the near-term outlook. It is found between 2158.5 and almost 2164.

Bonds are firm, with benchmark 10-year yields mostly 1-3 bp lower. The 10-year JGB yield slipped a single basis point, which puts the yield at minus 8.5 bp, the low for the month.    The US 10-year yield had risen to 1.75% toward the middle of September is now 1.57%, the low since September 8. It has averaged 1.63% this month. Separately, note that the UK’s corporate bond purchase program is launched today.

Tomorrow’s calendar is more active, with both Draghi and Yellen scheduled to speak and  OPEC meets. Today’s North American session features Case-Shiller house prices, and Markit’s preliminary service and composite PMI. The Conference Board’s measure consumer confidence and the Richmond Fed manufacturing index rounds out the calendar. The Vie Chairman of the Federal Reserve Fischer speaks before midday (ET). His topic is why study economics, and hence may not shed much light on the recent debate over US monetary policy.

U.S. S&P CS HPI Composite - 20 n.s.a.

Click to enlarge. Source Investing.com - Click to enlarge