After a strong run, the USD faced some selling pressure and fell against most of the majors, with the USD major currency TWI down 0.4%.
The most interesting part of Friday's trading session was the reaction after headlines hit the screen of the FBI reopening the investigation into Hilary Clinton's emails. This was seen to increase the chance of a Trump victory, resulting in reduced expectations of a December Fed hike, weaker equities, a higher VIX and a weaker USD – a taste of things to come on the off-chance that Trump actually does win.
Before that announcement, the USD was already on a softer path following the release of Q3 GDP figures. Annualised growth of 2.9% was the strongest in two years and slightly ahead of consensus, but the underlying picture was softer. The headline figure was boosted by some measurement issues around the surge in soybean exports and domestic demand was on a weaker trend.
EUR was the biggest beneficiary of a weaker USD tone, with EUR/USD up 0.8% to 1.0985, close to its high for the day and its best level in over a week. Earlier in the session, data showed euro-area confidence rising to a 10-month high while German inflation rose to a 2-year high.
The NZD outperformed, rising by 0.6% to circa 0.7160, close to its high for the session. Last week saw the currency trade in a fairly tight range of about 0.7110-0.7180 and close to our fair value model estimate. There is an abundance of economic data releases and major central policy reviews in the week ahead to move the currency outside of this tight range.
The AUD was only up slightly against the USD, closing around the 0.76 mark. Thus, NZD/AUD continued with its late-week recovery, closing around 0.9430, close to its high for the week.
Much of the strength of the yen came late in the trading session after the Clinton email headline came out and a risk-off tone developed. After spending much of the session hovering around 105.25, USD/JPY closed the week around 104.75.
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