Forex today: dollar 2% higher, carving out bullish H&S across most majors

Forex today was driven by a stronger dollar again with some of the US rates higher while the STIR curve steepened. The US dollar index is 0.2% higher on the day.

The 2yr yields moved the most, rising from 1.53% to 1.56%. The US 10yr treasury yields moved between 2.30% and 2.33% to close unchanged at 2.30%. The market is pricing in a Fed hike for December and the chances of a more hawkish Fed Chair. The Fed fund futures yields firming and the chance of a December rate hike now at 92%.

For data, the import/export prices were both higher than expected. US industrial production rose in line by 0.3% for September. Homebuilder sentiment climbed from 64 to 68 against 64 expected.

Ears are out for Fed speak this week, while Yellen's comments from Sunday are still a factor. On Tuesday, FOMC member Harker argued that the labour market had little slack nationally but there were soft patches regionally.

While the dollar firmed across the board, carving out a bullish H&S across most major's the euro was also weighed by European yields that dropped again after the German ZEW miss. EUR fell from 1.1780 to 1.1736 before rebounding to 1.1775 late in NY. Sterling was knocked by more Brexit woes. GBP/USD fell from 1.3287 to 1.3154 the low before recovering to 1.3180 the close.  USD/JPY rose from 112.10 to 112.48 and remains under pressure below the 113 handle, closing at 112.15 with eyes on N.Korean headlines. The higher beta currencies are heavy on the back of higher US rates, but managed to correct early in NY. The Kiwi dropped to 0.7147 before retracing to 0.7173, but was not kocked off its perch due to the disappointing GDT dairy auction. AUD/USD moved back from 0.7818 lows to 0.7849. Copper consolidated after yesterday's spike on a better macro outlook, while Gold dropped further on the back of a firmer greenback.

Key events in Asia

Analysts at Westpac noted the forthcoming events for the Asian session:

"Australia: Sep Westpac-MI Leading Index was last at -0.19%. The index has swung sharply in recent months from well above trend to back below trend.

China: The 19th National Congress begins where five of the seven Politburo Standing Committee members are scheduled to retire. Key agenda items are President Xi’s political power and development (Belt & Road Initiative)."

Key notes from US session

• Wall Street backs off record peaks, closes day slightly higher
• US Trade Rep. Lighthizer: NAFTA is lopsided, needs to be rebalanced
• Market wrap: dollar outperforming all currencies - Westpac
• US: September Industrial Production Points to Steady Expansion - Nomura
• US Treasury yields rise as Trump favours Taylor - UOB
• US: Homebuilder sentiment shakes off storm worries - Wells Fargo
• Fed's Harker: Very little slack in labor market nationally, but masks regional disparities
• Trump likely to name Fed chair by early November - Reuters
• WTI plummets to fresh daily lows below mid-$51s as production in Kirkuk restarts
• US Industrial Production:  Small gain In September - Wells Fargo
• US: Builder Confidence rises four points in October - NAHB
• US: Industrial production rose 0.3 percent in September
• US: Import prices rise 0.7% in Sept on higher fuel prices; export prices increase 0.8%