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HK Protests Escalate - USDJPY Drops Below 109.00

Market Drivers November 11, 2019

USDJPY back below 109.00
UK GDP misses forecast
Nikkei -0.26% Dax -0.35%
UST 10Y 1.94%
Oil $56/bbl
Gold $1465/oz
BTCUSD $8660

Europe and Asia:

UK GBP GDP 0.3% vs. 0.4%

North America 

No Data

It's been a generally quiet start to the week in FX with most pairs remaining in tight ranges, but the dollar was slightly weaker across the board and USDJPY dropped below 109.00 on escalating tensions in Hong Kong.

In Hong Kong, the continued clashes between police and protesters resulted in more violence with HK police admitting that they fired 3 live rounds of ammunition and injuring several protesters. The latest round of tension has taken the look of a low-level guerilla conflict as the clashes are now between small bands of protesters and the police rather than the massive rallies we saw earlier in the summer.

For now, the markets remain generally unconcerned, although the 6-month conflict has certainly taken its toll on HK economy, it hasn't had any impact on geo-political front as Chinese authorities have not militarily interfered to end the conflict. Still, the situation is certainly coming to a slow boil and could become a much greater point of concern if China decided to impose martial law.

Elsewhere the UK GDP printed at 0.3% versus 0.4% but this was still better than the -0.2% contraction in Q2 of this year and has allowed the country to skirt a technical recession. Cable recovered above the 1.2800 post news and has remained quiet for most of London morning dealing. With the UK now in the midst of an election and Brexit news off the stage trading in the pair has become extraordinarily quiet with daily ranges compressing by 30%. For now, the 1.2750 support continues to hold and sterling remains in consolidation mode.

In North America today the bond markets are closed for Veterans day but equities are open so the half-holiday atmosphere is likely to lead to muted trading. If equities see some profit-taking after record highs on Friday, USDJPY could slide further towards 108.50 as the day proceeds.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Boris Schlossberg

Mr. Schlossberg is a regular contributor to CNBC's Squawk Box and a commentator for CNBC Asia and CNBC Europe. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Mr. Schlossberg has written for SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is the author of Technical Analysis of the Currency Market and Millionaire Traders: How Everyday People Beat Wall Street at its Own Game, both of which are published by Wiley

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