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Daily Market Analysis by Vinson Financials

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Financial News October 6, 2015


Euro area orders to bounce back in August

Euro area August data is early to see any major impact coming from the market turbulence surrounding China but also from the VW story which could have some impact on orders starting in September/October.

For Europe and the U.S., the data flow has continued to signal robust growth which should shelter factory orders to some extent in the coming months.
Following the stronger than expected decline in July (-1.4% mom), factory orders is expected to increase by 0.6% mom in August, says Societe Generale. Domestic orders could see a decline by around 0.5%, having surprised on the upside in July for the first time since March, while foreign orders should see a strong bounce of around 1.5% following the larger than expected decline in July.

USD moderately bullish
There is a widespread view that USD rallies ahead of the first Fed hike and sells off after. While this holds on average, the degree of dispersion suggests it would be unwise to rely on it.

"We remain USD positive into next year, particularly against JPY. The US is better placed than most countries to shoulder currency appreciation. We find global demand is a more important driver for US export growth than the level of USD", argues RBC Capital Markets.

And because much of global trade is denominated in USD, the US sees lower exchange rate pass-through than other countries. That means both on the growth and the inflation front, USD has room to rise.

Market Review October 6, 2015


The Reserve Bank of Australia left the cash rate unchanged at a record low of 2.0 per cent for a fifth straight month. Furthermore, RBA Governor Glenn Stevens signalled he has become more comfortable that a regulatory crackdown on risky property market lending is working. "Regulatory measures are helping to contain risks that may arise from the housing market," Mr Stevens said. He also added that "equity market volatility has continued, but the functioning of financial markets generally has not, to date, been impaired." Moreover, he reiterated that the Australian dollar is adjusting to falling commodity prices. Governor Stevens reiterated his opinion regarding the US Federal Reserve rate decision, saying that he US Federal Reserve would soon end its long period of near-zero interest rates.

Released during the Asian session, Australia’s trade balance fell unexpectedly last month to a seasonally adjusted -3.095B, from -2.792B in the preceding month whose figure was revised up from -2.792B. Analysts had expected Australia’s trade balance to rise to -2.550B last month. AUD/USD climbed sharply above the 0.7100 level reaching as high as the 0.7133 level and currently is trading near the 0.7110 area.

Released during the early European session, German factory orders unexpectedly fell in August in a sign that Europe’s largest economy is vulnerable to weaker growth in China and other emerging markets. More specifically, August Factory Orders dropped 1.8% versus the estimated 0.5% increase. Economy Ministry in Berlin said that weak August orders partly due to holidays, and that orders from the Eurozone are pointing upwards, while Non-Eurozone demand look less reliable. The EUR/USD pair trades lower today near the 1.1180 area with the next support seen at the 1.1149 level.

The key events for the day would be the United Stated and the Canadian Trade Balances, New Zealand GDT Price Index and ECB President Draghi speech.

Additional economic releases would be the Swiss CPI, the Canadian Ivey PMI and ECOFIN and Eurogroup meetings.

Data releases to monitor:

GBP: Housing Equity Withdrawal.

USD: Trade Balance, IBD/TIPP Economic Optimism.

EUR: ECB President Draghi speech, Retail PMI, ECOFIN Meetings, Eurogroup Meetings.

CAD: Trade Balance, Ivey PMI.

CHF: CPI.

NZD: GDT Price Index


Trade Idea of the Day

EUR/GBP


Currently the pair is trading at 0.7391. Traders must monitor the 0.7442 resistance level and the support level of 0.7335 for possible breakouts. A possible scenario would be a movement towards the 0.7419 resistance level where a break may lead to the 0.7440 area. An alternative scenario could be a movement towards the 0.7360 support level, where a break may lead to the 0.7340 area.

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Financial News October 8, 2015


BoJ slow in downgrading its assessment on economy

The latest Q3 BoJ Tankan survey showed that the current business conditions DI for large manufacturers fell mainly because of weak exports to China and ASEAN economies despite a firm economic recovery in the US.

The Q4 outlook DI for large manufacturers fell further, indicating that business conditions are likely to weaken more, states Societe Generale.
With regards to large non-manufacturers, the current DI for Q3 unexpectedly improved, but the Q4 outlook DI for large non-manufacturers shows a significant deterioration. Thus, the latest Tankan survey confirmed that both manufacturers and non-manufacturers are cautious about the business outlook.

In addition, production and export data are also weakening. August production data were weak, showing a second consecutive month of decline mainly due to the unstable export environment, especially to emerging economies including China. As a result, the government revised down its overall assessment on production, explaining that "Industrial Production has weakened", as opposed to "Industrial Production fluctuates indecisively" in the previous assessment. This implies that production is now weakening as a trend.

After seeing the weak August production data, the BoJ could revise down this assessment in the 7 October policy meeting, probably to match with the assessment from October 2014 when it implemented additional QQE measures. Against this backdrop, there is an increased possibility that the BoJ may implement additional QQE measures at its following meeting on 30 October, added SocGen.

No major impulses from BoE?

Following the Fed's hesitant approach the tension about a Bank of England rate decision has also eased. Nobody expects the BoE to go it alone.

"The market has since postponed a first rate hike to 2017.

It will nonetheless pay off to take a look at the meeting minutes to be published together with the rate decision, even though the contents are not likely to suffice to have a major effect on the FX market", says Commerzbank.
Next month would be a more likely point for a change from one or other of those rate setters. It gives time for another PMI reading to confirm or deny the fall in September. And next month's BoE meeting coincides with the publication of a new November Quarterly Inflation Report forecast.
Market Review October 8, 2015


The Asian session this morning had rather insignificant market movement and few economic releases. Released from Japan, core machinery orders fell 5.7% in August versus the estimated 3.3%, as concerns over an economic slowdown in China reduced companies' appetite for new investments. The data follows a Bank of Japan survey showing growth in business investment for the current fiscal year, despite continued uncertainty over the global economy and sluggish growth in household spending in Japan. Moreover, Japan posted its largest current account surplus for the month of August in eight years, as a weaker yen boosted income from overseas investments despite continuing trade deficits. Current Account came in at 1.59T versus the estimated 1.28T and compared to the previous of 1.32T.

Released during the early European session, Switzerland's unemployment rate climbed to 3.4% from the previous of 3.3%, in line with economists' expectations, causing slight impact on the USD/CHF, which is currently trading near the 0.9715 area.

Released from Germany, trade balance decreased to 19.6 Bln Euro versus the estimated 22.5 Bln Euro and compared to the previous of 22.8 Bln Euro. Furthermore, German exports slumped the most since the height of the 2009 recession in a sign that Europe’s largest economy is vulnerable to risks from weakening global trade. Foreign sales declined 5.2 percent in August from the previous month, the Federal Statistics Office in Wiesbaden said on Thursday. That is the steepest since January 2009. Economists predicted a drop of 0.9 percent. Imports fell 3.1 percent. EUR/USD is currently trading near the 1.1260 area with the next resistance seen at the 1.1284 level.

BoE monetary policy decisions and FOMC minutes are the two main events for the day. BoE is widely expected to keep interest rate unchanged at 0.50% and asset purchase target at GBP 375b while during the FOMC minutes the main focus will be on whether Fed will lift interest rates from the current near zero level by the end of the year.

Additional economic releases would be the United States Unemployment Claims and ECB Monetary Policy Meeting Accounts.

View our full economic calendar for a daily roundup of major economic events.

Data releases to monitor:

GBP: MPC Official Bank Rate Votes, Monetary Policy Summary, Official Bank Rate, Asset Purchase Facility, MPC Asset Purchase Facility Votes, BOE Gov Carney speech.

USD: Unemployment Claims, Natural Gas Storage, 30-y Bond Auction, FOMC Meeting Minutes, FOMC Member Williams speech.

EUR: ECB Monetary Policy Meeting Accounts.

CAD: Housing Starts, NHPI.

Trade Idea of the Day

CHF/JPY


Currently the pair is trading at 123.57. Traders must monitor the 124.40 resistance level and the support level of 122.25 for possible breakouts. A possible scenario would be a movement towards the 123.95 resistance level where a break may lead to the 124.20 area. An alternative scenario could be a movement towards the 123.08 support level, where a break may lead to the 122.75 area.

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Financial News October 9, 2015


Neither FOMC minutes nor Williams helpful for the dollar

In the end the FOMC's meeting minutes did not provide any major surprises for the market and therefore no major let-up for the USD. Certainly this morning USD weakness is persisting.

And indeed one does not exactly get the impression that the FOMC members are filled with confidence.
They are referring to too many uncertainties and risks, the fall of the oil price, the appreciation of the US dollar, weaker growth in the Emerging Markets, the fall of market based inflation expectations. Even if things are going well at home and according to the top central bankers the conditions on the labor market have almost reached the Fed's target they prefer to wait a little.

"Clearly they are not certain that domestic conditions are sufficient to bring inflation to 2% in the foreseeable future. So that simply confirms the market's view, the Fed is in no rush to normalize its monetary policy, and certainly not this year", says Commerzbank.

However, a lift off (first Fed rate hike) still this year is not a lost cause just yet. Certainly if one wants to believe John Williams, President of the San Francisco Fed. Williams has tried once again to create some optimism amongst market participants. In his view the global outlook had not deteriorated since the September meeting.

And also the weak US labor market report had not changed his outlook. Just as a few days beforehand he therefore signaled that he would support a rate hike this year. However, he has not been able to get through to the market so far.

Today his colleagues Dennis Lockhart and Charles Evans have the opportunity to underline their colleague's view should they agree with him. Moreover their view is relevant as they are both more moderate or dovish members of the FOMC.


Market Review October 9, 2015


Bank of England governor, Mark Carney, highlighted the strength of the domestic British economy during his speech at the International Monetary Fund meeting, in Lima on Thursday. Moreover, he indicated that he still thought the conditions were right to consider raising interest rates around the end of this year. Governor Carney insisted the BOE had not changed its strategic view that the recovery would soon require the consideration of rate rises, and emphasised that the United States Federal Reserve’s decision on monetary policy was “not decisive” for the bank. Furthermore, the governor repeated that the decision over UK rates “comes into sharper relief around the turn of the year”, saying he would want the trends in growth, credit and inflation all to be consistent with a need for higher rates. UK inflation was at zero, compared with the BoE’s 2%, and Mr Carney pointed out that most of the cause was cheaper oil and other imports. This effect on the inflation rate, he said, would soon begin to disappear from annual comparisons of prices. GBP/USD is currently trading near the 1.5370 area compared to the 1.5260 level reached yesterday.

Elsewhere, Federal Reserve officials held off on raising short-term interest rates at their September policy meeting, as worries that inflation could remain stuck at exceptionally low levels, according to minutes released yesterday. The Fed have two tasks to complete before moving to the next step, which are creating healthy labour market and low, stable inflation. Policy makers concluded at the meeting they were near their goal of “full employment,” but they were not convinced inflation is on its way back to their 2%. The US Dollar remained soft, as the markets perceived the tone of the FOMC minutes released overnight pointed to risk of further delay in rate hike.

Released during the Asian session this morning, Australian Home Loans rose 2.9% versus the estimated 4.9% causing insignificant impact on the AUD/USD, which seems to be heading north and near the 0.7290 area.

Released during the early European session, French Gov Budget Balance came in at -89.7B versus the previous of -79.8B, while French Industrial Production rose 1.6% beating the estimated 0.6%. EUR/USD is currently trading near the 1.1295 area with the next resistance seen at the 1.1327 level.

The key events for the day would be the Canadian employment data, which is expected to show 10.5k growth while Unemployment rate is expected to drop to 6.9% from the previous of 7.0%.

Additional economic releases would be the United Kingdom Trade Balance and Construction Output, the United States Import Prices and BOC Business Outlook Survey.

Data releases to monitor:

GBP: Trade Balance, Construction Output.

USD: Import Prices, OMC Member Lockhart speech, Wholesale Inventories, FOMC Member Evans speech.

EUR: Italian Industrial Production.

CAD: Employment Change, Unemployment Rate, BOC Business Outlook Survey.

Trade Idea of the Day

GBP/CAD


Currently the pair is trading at 1.9948. Traders must monitor the 2.0150 resistance level and the support level of 1.9800 for possible breakouts. A possible scenario would be a movement towards the 1.9975 resistance level where a break may lead to the 2.0025 area. An alternative scenario could be a movement towards the 1.9883 support level, where a break may lead to the 1.9845 area.

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Financial News October 12, 2015


ECBs Coeur says too early to discuss more QE

In an interview with CNBC from Lima where IMF meetings took place last week and over the weekend, ECB board member Coeuré said that the global economy was growing modestly, and the euro area was recovering modestly.

He mentioned that the risk was coming from outside and that the ECB needed to be ready to act should anything happen and endanger the recovery in Europe.

He explained that the existing stimulus was feeding into the economy, at a slow pace, and that it was "too early to measure the full extent" of past measures. Therefore, discussions about more QE is premature, but "it's certainly the ECB's duty to be prepared to cope with all kind of contingencies", notes Barclays.

Market Review October 12, 2015


ECB president Mario Draghi said the ECB's quantitative-easing program is working better than expected, even though it will take longer than intended to reach its inflation goal. "We are satisfied with QE, as it has met and even surpassed our initial expectations," while "it presently appears that it will take somewhat longer than previously anticipated for inflation to come back to, and stabilize around levels that we consider sufficiently close to 2 percent," that is largely because of a drop in oil prices, Mr Draghi said.

Moreover, Mr Draghi cited lower borrowing costs, rising credit volumes and better access to loans for small businesses as signs that QE is having a positive effect. Even so, with the inflation rate below zero for the first time since March, and an emerging- market slowdown posing risks, he said the ECB is ready to expand its asset-purchase program if needed. Furthermore, ECB president, Mario Draghi urged Greece on Saturday to stick to its latest bailout to pave the way for bank recapitalisation and talks on debt relief. In an interview, President Draghi said the second tranche of funds set aside for Greek banks' recapitalisation, worth 15 billion euros, would be disbursed after the first review by lenders and no later than Nov. 15. Greek Prime Minister Alexis Tsipras has said he hopes the first review, expected to begin at the end of the month, will be completed by mid-November. The common currency stayed firm against the US Dollar and other majors with the EUR/USD pair remaining near the 1.1365 area.

Elsewhere, Federal Reserve Vice Chairman Stanley Fischer said on Sunday that the United States central bank is taking a cautious approach in its deliberations about raising interest rates, considering developments overseas as well as the effect of higher interest rates on emerging markets and elsewhere.

Vice chairman Fischer didn’t support the projections that the Fed will raise the interest rates until the end of the year, nonetheless he said the Fed would proceed with caution and cited the employment figures released this month showing a net gain of 143,000 jobs. “Recent employment reports have been somewhat disappointing and, as always, we are closely monitoring developments that could affect our sense of the economic outlook and the risks surrounding that outlook.” In addition, Mr. Fischer said the Fed was aware the United States central bank’s decisions regarding raising rates could ripple worldwide. Higher interest rates in the U.S. could make the dollar stronger and cause money to flow out of emerging markets, leading to higher inflation there.

The economic calendar is rather empty today, as Japan, Canada and the United States are on bank holiday. The main events for the day will be on speeches from some Fed officials including Lockhart, Evans and Brainard and BoC governor Poloz speech.

Additional economic releases would be the United Kingdom CB Leading Index.

View our full economic calendar for a daily roundup of major economic events.

Data releases to monitor:

GBP: CB Leading Index, MPC Member Weale speech.

USD: FOMC Member Evans, Member Brainard and Lockhart speeches.

CAD: BOC Gov Poloz Speech

Trade Idea of the Day

AUD/NZD


Currently the pair is trading at 1.0915. Traders must monitor the 1.1004 resistance level and the support level of 1.0846 for possible breakouts. A possible scenario would be a movement towards the 1.0883 support level where a break may lead to the 1.0855 area. An alternative scenario could be a movement towards the 1.0970 resistance level, where a break may lead to the 1.0995 area.

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Financial News October 13, 2015


QE-speculation not a burden for EUR yet

So far the members of the ECB council have refrained from clear references on QE extension. Instead they use the usual words, as was recently the case with executive board member Yves Mersch, the ECB would not hesitate should the inflation outlook weaken.

At the same time he points out, as some of his colleagues had also done recently, that weaker growth in the Emerging Markets, falling commodity prices as well as the stronger euro had recently increased the downside risks for the economic and inflation outlook.

However, he also points out that it was still too early to be able to tell to what extent these factors would actually affect the development of inflation in the euro zone. So for the time being we will have to be patient.

"The question is, how long will the ECB wait. The weakness of the Emerging Markets is likely to have arrived in Germany by now. The ZEW economic outlook has been pointing in that direction for some time and the October data due today is likely to continue this negative trend", says Commerzbank.

The PMI for Germany as well as the euro zone will slowly begin to show the first signs of weakness. However, the currently robust EUR suggest that the market is not yet expecting a further easing of monetary policy.

However, that could change very quickly as soon as not just the sentiment indicators but also the hard data reflects weaker growth in the euro zone. That means the potential for EUR reversals is high.

Market Review October 13, 2015


During the Asian session traders turn to JPY for safety as the USD was trading near three weeks low against the other majors. We also had some interesting data releases among them the Chinese trade balance that came in at 60.3 billion better than the 46.9 billion forecasted providing some relief nonetheless the economic in China must be closely monitor since over the weekend, the PBoC announced new stimulus measures and extended the pilot program on bank lending that allowed banks to pledge assets to secure the central bank's landing. The program is reported that will be available to nine provinces including Shanghai and Beijing.

On the US, Fed governor Lael Brainard urged FOMC to hold off from rate hike until the risks to recovery from global developments are cleared. She commented that the risks to the economic outlook as tilted to the downside and those risks are making a strong case for continuing to carefully nurture the US recovery. Furthermore she argue against prematurely taking away the support that has been so critical to its vitality. Additionally Chicago Fed Charles Evans said that it's too early to judge a hike in December but the same time he noted that the best choice is middle of 2016 until data are stronger and give confidence to inflation.

Looking ahead UK will release CPI data. EU will release German ZEW Economic Sentiment and volatility is expected.

View our full economic calendar for a daily roundup of major economic events.

Data releases to monitor:

GBP: CPI y/y, BOE Credit Conditions Survey, PPI Input m/m, RPI y/y, Core CPI y/y, HPI y/y, PPI Output m/m

USD: NFIB Small Business Index, Federal Budget Balance

EUR: German ZEW Economic Sentiment, ZEW Economic Sentiment
Trade Idea of the Day

CAD/JPY


Currently the pair is trading at 91.77. Traders must monitor the 94.00 resistance level and the support level 89.56 for possible breakouts. A possible scenario would be a movement towards 91.60 support level where a break may lead to 90.50 and possible to 89.80 area. An alternative scenario could be a movement above 92.20 and a testing of 93.25 resistance level.

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Financial News October 14, 2015


No USD strength without inflation

Also the Fed Board member Daniel Tarullo has now revealed that he is one of the FOMC members who do not consider a rate hike before year-end to be appropriate. Before taking the step he wants to see tangible evidence that inflation is actually rising.

He is likely to have the market on his side, as it too does clearly not believe in rising inflation. Otherwise it would also have to believe in rising interest rates. The next possibility to obtain tangible proof of rising inflation is the publication of the September inflation data tomorrow.

"However, producer price data can give a sneak preview. A proper rise in prices is not expected before October when the fall of the oil price towards the end of last year is increasingly disappearing from the yoy comparison of inflation data", says Commerzbank.

So for the time being it is simply going to be too early to provide the necessary proof for Tarullo and the FX market. While that is the case, a stronger USD will take a little longer, in particular as today's retail sales might also disappoint. Which will be due solely to falling petrol prices and not an easing of economic momentum. So longer term the reasons for a stronger dollar remain in place.


Market Review October 14, 2015


Inflation in the Euro zone might continue to hover around zero in the near term, but could increase towards the end of the year when the base effect falls out, Yves Mersch, a European Central Bank executive board member said on Tuesday. Furthermore, he added, “it is still too early to determine whether factors like slowing growth in emerging markets and a strong euro will affect the inflation target for the Eurozone” and “falling inflation will be a key trigger in any decision by the European Central Bank to beef up its economic stimulus package”.

Moreover, Mr.Mersch said that the Eurozone has shown signs of resilience, but the macroeconomic environment has become "more challenging" and the ECB's recent forecasts indicate a weaker economic recovery and a slower rise in inflation rates and added that “ECB won't hesitate to use all available instruments to achieve the price target if necessary”. EUR/USD posted moderate gains yesterday to reach its highest level in more than three weeks, as currency traders continued to weigh whether the Federal Reserve could raise short-term interest rates at some point this year. The currency pair traded in a tight range between 1.1343 and 1.1411 before settling at 1.1400 area where is currently trading.

Elsewhere, Fed Governor Daniel Tarullo said that "right now, my expectation is, given where I think the economy would go, I wouldn't expect it would be appropriate to raise rates", moreover, he said that “he wants to hasten to add that that is an outlook that changes based on developments in the economy." He also emphasized that "a premature rise might be harder to deal with than waiting a little bit longer." Gold rose yesterday, recovering an earlier 1.0% slide on expectations the Federal Reserve will not lift U.S. interest rates this year. Spot gold reached as high as $1174.57/per ounce and currently is trading near the 1173.20 area

The key events for the day will be the United Kingdom Job Data, where Unemployment Rate is expected to remaining at 5.5% while Average Earnings Index is expected to rise 3.1%.

Additional economic releases would be the United States Core Retail Sales, Producer Price Index (PPI) and the Eurozone Industrial Production.

View our full economic calendar for a daily roundup of major economic events.

Data releases to monitor:

GBP: Average Earnings Index, Claimant Count Change, Unemployment Rate.

USD: Core Retail Sales, PPI, Retail Sales, Core PPI, Business Inventories, Beige Book.

EUR: Industrial Production.

CHF: ZEW Economic Expectations.

Trade Idea of the Day

USD/CAD


Currently the pair is trading at 1.3000. Traders must monitor the 1.3133 resistance level and the support level of 1.2899 for possible breakouts. A possible scenario would be a movement towards the 1.3044 resistance level where a break may lead to the 1.3082 area. An alternative scenario could be a movement towards the 1.2955 support level, where a break may lead to the 1.2910 area.

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Financial News October 16, 2015


New loans picked up on PBoCs monetary easing

China's financial institutions extended trn new loans in September, up from CNY809bn in the prior month and higher than market expectations.

Notably, this is the highest loan extension in September in record, suggesting that the Chinese authorities intend to accelerate credit growth to boost the economy.

In the meantime, aggregate financing was CNY1.3trn in September, also higher than market expected. Data released so far including trade and inflation figures indicate that the growth momentum remains soft, pointing to a sub-7% growth rate in Q3.
"Given the sluggishness of the economy, further monetary easing can be expected. However, the ratio between M2 and GDP has picked up again since beginning of this year and has already exceeded 205%, a record high", says Commerzbank.


Market Review October 16, 2015


The United States consumer prices recorded their biggest drop in eight months in September as the cost of gasoline fell, but a steady pick-up in underlying price pressures should allay fears that a disinflationary trend was reasserting itself. The Labour Department said on Thursday its Consumer Price Index fell 0.2% last month after slipping 0.1% in August. In the 12 months through September, the CPI was unchanged for the first time in four months after rising 0.2 % in August. Moreover, in the 12 months, core CPI increased 1.9 %, the largest increase since July 2014, after rising 1.8 %t in August. The Fed tracks the personal consumption expenditures price index, excluding food and energy, which is running well below the core CPI. Expectations of a lift-off in the United States central bank's short-term interest rate are fading away by an abrupt slowdown in job growth in the last two months and softening economic activity because of a strong dollar, lower oil prices and a weakening global economy.

Elsewhere, the Reserve Bank of Australia said the economic growth outlook for China and emerging economies has deteriorated while domestic conditions in housing pose higher risks in its Financial Stability Review released today. With the Federal Reserve's first tightening since 2006 in prospect there is a risk financial-market volatility may trigger a sharp reprising in markets, moreover these international factors have not a material effect on Australia's financial system, the RBA said. Furthermore, the RBA added that “domestic risks continue to revolve around property markets with risks growing in commercial property and those surrounding housing and mortgage markets are greater than average, however, these risks appear to be comfortably manageable.”

The key events for the day will be the Eurozone inflation report, and trade balance, the Canadian Manufacturing Sales and the United States Prelim UoM Consumer Sentiment, Industrial Production and Capacity Utilization Rate.

Additional economic releases would be the United States JOLTS Job Openings and Prelim UoM Inflation Expectations.

Data releases to monitor:

USD: Capacity Utilization Rate, Industrial Production, Prelim UoM Consumer Sentiment, JOLTS Job Openings, Prelim UoM Inflation Expectations, TIC Long-Term Purchases.

EUR: Italian Trade Balance, Final CPI, Final Core CPI, Trade Balance.

CAD: Manufacturing Sales, Foreign Securities Purchases.

GBP: MPC Member Forbes speech.


Trade Idea of the Day

EUR/USD


Currently the pair is trading at 1.1379. Traders must monitor the 1.1493 resistance level and the support level of 1.1233 for possible breakouts. A possible scenario would be a movement towards the 1.1395 resistance level where a break may lead to the 1.1440 area. An alternative scenario could be a movement towards the 1.1332 support level, where a break may lead to the 1.1290 area.

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Financial News October 19, 2015


USD to continue to ease

A few things would have to change in case of strong commodities increasing possibilty of Fed raising rates. A view such as this would assume, once it became a broad-based market consensus, that a large share of the USD strength seen since mid-2014 was based on incorrect assumptions and would have to be corrected almost completely.

That is still a long way off. Based on the ICE's dollar index approx. ¼ of the dollar appreciation has been corrected. In particular speculative market participants continue to hold net USD longs as Friday's CFTC data suggests.

"Even though there is a trend among these investors to reduce its USD longs this is happening at a snail's pace. No, Fed that is never going to hike interest rates again is not fully priced in. If that was going to be the case (which our Fed watchers do not assume) the dollar would continue to ease", says Commerzbank.


Market Review October 19, 2015


The Bank of Japan maintained its optimistic assessment for all eight of the country's regional economies despite looming external risks such as China's slowdown, suggesting that it saw no immediate need to expand monetary stimulus further. Moreover, the BOJ said that "all regions saw their economies recover or recover gradually." Furthermore, four economic regions, including western and central areas home to big Japanese auto and electronics goods exporters, offered a depressed view on output than three months ago, reflecting soft emerging market demand. The Japanese government cut its assessment of the economy last week, warning that some parts of the recovery have declined due to weak overseas demand, such weak signs in the economy have kept alive market expectations that the BOJ may expand its already massive stimulus program at its rate review next week. BOJ Governor Haruhiko Kuroda sounded unfazed, maintained his optimism on the prospects for achieving his ambitious 2% inflation target. USD/JPY remained well below the 120.00 level and is currently trading near the 119.36.

Released during the Asian session this morning, GDP growth in China slowed to 6.9% below government's target of 7.0%, however slightly better than the expectation of 6.8%. Retail sales rose 10.9% versus expectation of 10.8% and industrial production slowed to 5.7% versus expectation of 6.0%. In addition, fixed asset investments slowed to 10.3% versus expectation of 10.8%. The Australian dollar rose sharply against its US counterpart after Chinese economic growth figures beat estimates, projecting a slightly better picture of the outlook for Australia. China has for a long time been Australia's top export destination, and the slowdown in China has had a huge impact on the Australian economy, particularly in the resource sector. AUD/USD pair is currently trading near the 0.7290 area with the next resistance seen at 0.7381 level.

The key events for the day will be the German Buba Monthly Report, NAHB Housing Market Index and FOMC Member Brainard speech.

Additional economic releases would be the Canadian Federal Election and FOMC Member Lacker speech.

View our full economic calendar for a daily roundup of major economic events.

Data releases to monitor:

USD: Capacity Utilization Rate, Industrial Production, Prelim UoM Consumer Sentiment, JOLTS Job Openings, Prelim UoM Inflation Expectations, TIC Long-Term Purchases.

EUR: Italian Trade Balance, Final CPI, Final Core CPI, Trade Balance.

CAD: Manufacturing Sales, Foreign Securities Purchases.

GBP: MPC Member Forbes speech.


Trade Idea of the Day

EUR/JPY


Currently the pair is trading at 135.55. Traders must monitor the 136.96 resistance level and the support level of 134.79 for possible breakouts. A possible scenario would be a movement towards the 136.13 resistance level, where a break may lead to the 136.70 area. An alternative scenario could be a movement towards the 135.30 support level, where a break may lead to the 134.90 area.

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Financial News October 20, 2015


CNY is no longer significantly undervalued

The U.S. Treasury dropped its view that China's currency is "significantly undervalued" while saying that the forces driving appreciation in the longer term remain and China needs to allow such strengthening eventually.

The CNY remains "below its appropriate medium-term valuation," the department said yesterday in its semi-annual report on foreign-exchange policies. The "core factors" that have driven the appreciation of CNY in recent years remain in place, such as a large and growing current-account surplus, and net inflows of foreign direct investment.

Even so, the department refrained from characterizing China's currency as significantly undervalued, as it has in each foreign-exchange report since May 2012. The Treasury also recognized that with an economic slowdown and stock-market volatility, "market factors are exerting downward pressure" on CNY.

The International Monetary Fund, by contrast, adopted the view in May that CNY is "no longer undervalued."

"To a large extent, both statements appear in line with the fact that market expectations of continuous CNY appreciation are gradually diminishing. Given the economic slowdown, CNY is under pressure to weaken in the next 12-18 months", says Commerzbank.

October ECB bank lending survey, credit standards to ease

Euro area banks reported low investment decisions in H1 15, in Q2, the fixed investment contribution on firms' demand for credit represented 11pp, whereas the contribution from inventories stands at 10 and the contribution from other financing needs (LBO, M&A.

..) stands at 12.

"The October ECB bank lending survey that was conducted in September is likely to show signs of continued easing in credit standards, especially for households. Consumer demand for credit is likely to remain relatively buoyant with ongoing strength in demand for housing credit (49% in Q2, up from 30% in Q1) as interest rates remain low", says Societe Generale.

The picture is more uncertain for firms. Uncertainty over global demand and high corporate debt levels means reluctance by firms to take out loans to invest. The point is that actual demand has not met expectations for the past three quarters.


Market Review October 20, 2015



The RBA said the Aussie's depreciation, in line with falling commodity prices, along with low interest rates had helped the economy re-balance without costing jobs. After weak expansion in gross domestic product in the June quarter, growth in the September quarter was "expected to have strengthened", the RBA said. However, the board also noted a build-up of risks in commercial and residential property development, mainly concerning oversupply. The Reserve Bank of Australia left interest rates unchanged at a record low 2.0% and did not look eager to cut them any soon. Rates have not changed since The AUD/USD pair remained in tight range and near the 0.7275 area, with the next support seen at the 0.7240 level.

Released during the early European session, Swiss Trade Balance came in at 3.05B beating the estimated 2.51B and compared to the previous of 2.86B. USD/CHF is currently trading near the 0.9555 area with the next resistance seen at the 0.9577 level. Released from Germany, Producer Price Index (PPI) declined -0.4% missing the estimated -0.1%.

The key events for the day will be the United States Housing data, such as Building Permits and Housing Starts, the Canadian Wholesale Sales and New Zealand’s GDT Price Index.

Additional economic releases would be ECB Current Account, BOE Gov Carney speech and Fed Chair Yellen speech in Washington DC.

View our full economic calendar for a daily roundup of major economic events.


Data releases to monitor:

USD: Building Permits, Housing Starts, FOMC Member Dudley and Member Powell speeches, Fed Chair Yellen speech.

EUR: Current Account.

CAD: Wholesale Sales.

GBP: MPC Member McCafferty speech, BOE Gov Carney speech.

NZD: GDT Price Index.


Trade Idea of the Day

AUD/USD


Currently the pair is trading at 0.7280. Traders must monitor the 0.7381 resistance level and the support level of 0.7197 for possible breakouts. A possible scenario would be a movement towards the 0.7310 resistance level, where a break may lead to the 0.7345 area. An alternative scenario could be a movement towards the 0.7240 support level, where a break may lead to the 0.7210 area.

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Financial News October 21, 2015


BCB to stay on hold?

It is pretty much a foregone conclusion that the Brazilian central bank (BCB) will keep rates on hold at tonight's Copom meeting at 14.25%. The improvement in external financing conditions (lower US yields etc.

) alongside generally better sentiment towards EM as a whole means that BCB is under no immediate pressure to raise rates.
Moreover, as long as the political stalemate in Brasilia continues, BCB will not want to make an already bad situation (budget deficit) worse with further rate hikes. However, inflationary developments give some cause for concern.

According to local newspapers, the central bank now believes CPI inflation will converge to the 4.5% target only by 2017 rather than 2016.

"No one realistically expected inflation to reach the target range in 2016, but the question is whether the admission by the central bank is a case of simply being realistic or indicative of a change in policy stance where they favour a less hawkish stance with respect to overall inflationary developments. Buying dips in USD-BRL is recommended", says Commerzbank.


Market Review October 21, 2015



Japan's trade deficit narrowed in September to 114.5 billion yen, while exports fell short of expectations as demand from China waned. More specifically, the monthly trade data released by the Ministry of Finance showed that the country’s trade balance rose to a seasonally adjusted -0.36T, from -0.37T in the preceding month whose figure was revised down from -0.36T. Exports rose only 0.6 percent from the year before to 6.42 trillion yen while imports fell 11%, to 6.53 trillion yen. Moreover, Japan's trade balance has improved with the fall in prices of crude oil and other fuels. In September, imports of oil, gas and coal fell 36 percent from the year before. The slowdown in China has hindered a recovery in exports, adding to pressure on Japan's central bank to expand monetary stimulus to help revive growth. Released also from Japan during the Asian session, All Industries Activity declined -0.2% versus the estimated -0.1%. USD/JPY rose to the 120.07 level, where it found strong resistance and currently is trading near the 119.88 area.

Released from Australia during the session, CB Leading Index declined -0.4% versus the previous of 0.3% and MI Leading Index rose 0.1% compared to the previous -0.3% decline. Released from New Zealand, Credit Card Spending rose 7.3% versus the previous of 10.4% and Visitor Arrivals rose 4.2%.

The main events for the day will be the Bank of Canada rate decision, Policy Report and Press Conference. The central bank is expected to keep interest rate unchanged at 0.50%.


Data releases to monitor:

USD: FOMC Member Powell speech, Crude Oil Inventories.

CAD: BOC Monetary Policy Report, BOC Rate Statement, Overnight Rate, BOC Press Conference.

GBP: Public Sector Net Borrowing, BOE Gov Carney speech.


Trade Idea of the Day

EUR/CAD


Currently the pair is trading at 1.4768. Traders must monitor the 1.4896 resistance level and the support level of 1.4605 for possible breakouts. A possible scenario would be a movement towards the 1.4810 resistance level, where a break may lead to the 1.4850 area. An alternative scenario could be a movement towards the 1.4715 support level, where a break may lead to the 1.4670 area.

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Financial News October 23, 2015


Deposit rate cut back in ECB's toolbox
To boost the ECB's toolbox, the ECB also reinserted the deposit rate as a possible instrument to be used. While last year's assessment suggested that the "effective" lower bound for rates had been reached, the view now, due to "changed conditions", is that there is some further room to cut the deposit rate.

"While this tool has the potential to affect the exchange rate, it is less clear why a cut in the deposit rate would have a bigger impact on the economy or the exchange rate than accelerating asset purchases. In view of the potential negative effects on the real economy and the limited room for manoeuvre, we would mainly expect this tool to be used in a much worse economic scenario or as a compromise if other options are not possible", says Societe Generale.



Market Review October 23, 2015


Yesterday, the European Central Bank left the main refinancing rate unchanged at 0.05%. The marginal lending rate also stayed unchanged at 0.3% and the deposit rate at -0.2%. At the press conference, President Mario Draghi surprized markets by signalling that the ECB is prepared to cut interest rates and step up quantitative easing to stave off the risk of a renewed economic slump in the Eurozone. Moreover, President Draghi acknowledged that the QE program has been "proceeding smoothly" and would "continue to have a favourable impact". Furthermore, he indicated that the decline in commodity prices and concerns about slowdown in emerging markets would extend deflation, and that in this case the central bank would re-examine its bond-buying program in December. In addition, Draghi announced that the ECB’s governing council had discussed expanding its €1.1tn bond-buying programme and cutting the rate on reserves held at the central bank. The reserves rate is already negative, at -0.2%, meaning banks effectively have to pay the ECB for holding their reserves, a measure aimed at keeping money flowing around the economy. The value of the single currency dropped sharply against the US Dollar. EUR//USD dropped below the 1.1200 reaching as low as the 1.1075 area, and currently is trading near the 1.1115 area.

Released during the Asian session, Japan Flash Manufacturing PMI came in at 52.5 beating the estimated 50.6. USD/JPY is currently trading near the 120.75 area with the next resistance seen at the 120.97 level.

Released during the early European session, French Flash Manufacturing PMI came in at 50.7 beating the estimated 50.2, while French Flash Services PMI came in at 52.3 versus the estimated 51.9.

The main events for the day will be German Flash Manufacturing PMI, the Eurozone Flash Manufacturing PMI and Flash Services PMI and the Canadian Core CPI.

Additional economic releases would be the United States Flash Manufacturing PMI and Canadian CPI.

View our full economic calendar for a daily roundup of major economic events.


Data releases to monitor:

USD: Flash Manufacturing PMI.

CAD: Core CPI, CPI.

EUR: German Flash Manufacturing PMI, German Flash Services PMI, Flash Manufacturing PMI, Flash Services PMI, Italian Retail Sales, Belgian NBB Business Climate.


Trade Idea of the Day

AUD/USD


Currently the pair is trading at 0.7275. Traders must monitor the 0.7362 resistance level and the support level of 0.7182 for possible breakouts. A possible scenario would be a movement towards the 0.7293 resistance level, where a break may lead to the 0.7330 area. An alternative scenario could be a movement towards the 07225 support level, where a break may lead to the 0.7195 area.

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Financial News October 26, 2015


PBoC to cut RRR by another 50 bps in Q4 2015

Theoretically it does not make sense for China to maintain a stable currency amid monetary policy easing. Nonetheless, it appears that the PBoC still caps the upside of USD/CNY and USD/CNH via selling its foreign reserves, suggesting that the Chinese authorities do not want to see a fast depreciation of its currency.

Market Review October 26, 2015


Investors focus right now is on central banks and monetary policy actions ahead of a FOMC, BOJ meeting later and RBNZ this week. The risk appetite is returning to ‘’normal’’ levels after China monetary easing and announcement from PBoC to extend the pilot program on bank lending that allowed banks to pledge assets to secure the central bank's lending. China's easing on Friday was the latest reminder of the monetary policy divergence taking place between the FED and other central banks.

The U.S. Federal Reserve makes a policy decision on Wednesday. While the Fed is widely expected to refrain from raising interest rates this time, the easing stance taken by its counterparts have kept the divergence theme alive. Furthermore, the RBNZ meets on Thursday and the BOJ on Friday. The RBNZ has cut rates three times this year. Also the BOJ is also gathering attention as a run of downbeat Japanese indicators has fanned expectations of further monetary easing.

In Europe the German Ifo Business Climate released at 108.2. Later on the US New Home Sales and the New Zealand’s Trade Balance may cause volatility in the market.

View our full economic calendar for a daily roundup of major economic events.


Data releases to monitor:

GBP: BBA Mortgage Approvals, CBI Industrial Order Expectations

USD: New Home Sales

EUR: German Buba Monthly Report

NZD: Trade Balance

Trade Idea of the Day

GBP/USD


Currently the pair is trading at 1.5342. Traders must monitor the 1.5505 resistance level and the support level 1.5220 for possible breakouts. A possible scenario would be a movement towards 1.5305 support level where a break may lead to 1.5280 and possible to 1.5250 area. An alternative scenario could be a movement above 1.5350 and a testing of 1.5385 resistance level.

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Financial News October 27, 2015


China may adopt flexible exchange rate to attract investors

Chinese top leadership is holding a plenum session this week, and the focus will be the eye-catching 13th Five-Year Plan. What market focuses in the first glance is the growth target.

"China should have at least 6.5% growth during 2016-2020 to meet the old goal of doubling per-capita GDP and overall GDP by 2020 from 2010 levels. That said, the most likely case is to set the growth target at 6.5% - 7.0%. To achieve this aggressive growth target, the base case is that China will still maintain an expansionary monetary policy and proactive fiscal policy", says Commerzbank.

Different from solely relying on bank credits in the past, Chinese corporates will be encouraged to tap capital market to get access to funding. From this perspective, further development in financial markets can be expected. China is still ambitious to push RMB's international status and export its economic power.

But this requires a sophisticated financial market to connect onshore China and the rest of the world. China is accelerating the interest rate liberalization reform, which will be a key element for further capital account openness. Nonetheless to attract global investors China will have to allow a more flexible RMB exchange rate regime, suggests Commerzbank.

Market Review October 27, 2015


ew Zealand trade deficit widened to NZD -1222M in September versus expectation of NZD -822M, More specifically, exports fell to $3.69 billion from $3.73 billion in August, marking the lowest monthly export total seen since January this year. While exports slipped, imports rose to $4.91 billion, an increase on the $4.77 billion level of August, with the monthly figure the largest recorded since September last year. With imports growing whilst exports slipped, the monthly trade deficit grew to $1.22 billion, a 12-month high. Despite the monthly miss, the annual trade deficit narrowed to $3.2 billion from $3.33 billion in August. Released from Japan, Services Producer Price Index (SPPI) rose 0.6% compared to the previous of 0.8%.

Released during the early European session, Swiss UBS consumption indicator rose slightly to 1.65 in September compared to the previous of 1.64.

The main event for the day would be the United Kingdom GDP data, which will offer a first look on the country’s performance in the third quarter. Economists estimate that the United Kingdom economy has been losing momentum, stymied by China’s downturn, a construction slump and ailing manufacturers. It is expected that the UK economy will grow 0.6% in Q3, slightly lower than the Q2's 0.7%. Furthermore, BoE Governor Mark Carney said on Saturday that an increase in Britain's interest rates is not guaranteed although households should prepare for higher borrowing costs, The Bank of England cut interest rates to a record low of 0.5 percent in 2009 and has kept them there ever since, even as Britain's economy recovered strongly over the past two years. Moreover, Governor Carney has previously said that a decision about when to raise rates would become clearer around the turn of the year. GB/USD is currently trading near the 1.5345 area with the next support seen at the 1.5108 level while EUR/GBP remained near the 0.7200 area.

Additional economic releases would be the European Central Bank M3 Money Supply and Private Loans, the United States Core Durable Goods Orders, CB Consumer Confidence and Richmond Manufacturing Index.

View our full economic calendar for a daily roundup of major economic events.


Data releases to monitor:

USD: Core Durable Goods Orders, Durable Goods Orders, S&P/CS Composite-20 HPI, Flash Services PMI, CB Consumer Confidence, Richmond Manufacturing Index.

GBP: Prelim GDP, Index of Services, 10-y Bond Auction.

CAD: Gov Council Member Lane speech.

EUR: M3 Money Supply, Private Loans.

Trade Idea of the Day

NZD/USD


Currently the pair is trading at 0.6777. Traders must monitor the 0.6863 resistance level and the support level of 0.6696 for possible breakouts. A possible scenario would be a movement towards the 0.6800 resistance level, where a break may lead to the 0.6840 area. An alternative scenario could be a movement towards the 0.6735 support level, where a break may lead to the 0.6700 area.

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Financial News October 28, 2015


USD may trade firmer after Fed meetings

The Federal Open Market Committee (FOMC) members may have said time and again that they could hike rates at their October meeting, but the markets have not believed them. And with nobody expecting a rate hike today.

The Fed certainly will not want to wrong-foot the markets in the current environment.
However, it will have to become more explicit in its communications if it wants to hike rates at any time in the future. Nevertheless, it is unlikely that it will clearly signal a rate hike in December today, as doing so would undermine its mantra of "data-dependency". The USD exchange rate will depend on what the Fed statement says on the recently weaker data.

"If the Fed believes that the US economy is still recovering nicely, the USD might trade somewhat firmer after the meeting, as the markets are currently overly cautious and predicting a rate hike only for March 2016. The Fed will certainly not sound even more pessimistic today. Rather, it might cautiously hint at approaching rate hikes. However, that will not be enough to justify EUR-USD to break out of its trading range of 1.08-1.15", says Commerzbank.

Market Review October 28, 2015


FOMC rate decision the main focus today and is widely expected that FED will keep policies unchanged. Nonetheless the big question is whether Fed will signal any chance in December. Some analysts believe that Fed will not hint anything since they need more time to clarify the recent slowdown in jobs data. Furthermore, assessment for inflation would likely remain unchanged. Analyst support this based on recent dovish comments from ECB, weakness in oil price and firmness in US stocks and they assume that USD will not affected by the FOMC statement.

Last night AUD dropped after release of consumer inflation data. Headline CPI rose 0.5% q/q, 1.5% y/y in Q3, missing the estimation of 0.7% q/q and of 1.8% on y/y. The RBA trimmed mean CPI rose 0.3% qoq, 2.1% y/y, below expectation of 0.5% q/q, 2.4% y/y. RBA weighted median CPI rose 0.3% q/q, 2.2% y/y versus expectation of 0.5% q/q, 2.5% y/y. Analyst speculated that that RBA may cut interest rate next week since the largest retail banks in the country increase there rates. Also analysts supported this from current inflation reading and if not done in November, there is still a high chance for the central bank to lower interest rate during the next 3 months.

Elsewhere, Germany released Gfk consumer sentiment at -0.7% missing the forecast of -0.2% we also have German 10 year bond auction later today. Later today US will release trade balance.

RBNZ will announce rate decision and is expected to keep interest rate unchanged at 2.75% so traders must be aware for any different announcement that may cause volatility in the market.

View our full economic calendar for a daily roundup of major economic events.


Data releases to monitor:

USD: Goods Trade Balance, Crude Oil Inventories, FOMC Statement, Federal Funds Rate

EUR: German 10-y Bond Auction

NZD: Official Cash Rate, RBNZ Rate Statement


Trade Idea of the Day

EUR/CAD


Currently the pair is trading at 1.4619. Traders must monitor the 1.4905 resistance level and the support level 1.4394 for possible breakouts. A possible scenario would be a movement towards 1.4952 support level where a break may lead to 1.4480 and possible to 1.4440 area. An alternative scenario could be a movement above 1.4675 and a testing of 1.4730 resistance level.

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Financial News October 29, 2015


Fed's rate hike likely in imminent future

The Fed left the door open for a rate hike in December as it dropping its previous warning about the risk global economic and financial development posed to the US economy and repeated that economic activity is expected to expand at a moderate pace.

Given the souring tone of recent US economic data and mixed signals from Fed officials, it is no surprise that the Fed kept rates unchanged today. Also in line with expectations, Richmond Fed President Lacker dissented again, supporting an immediate 25bp rate increase.

December rate hike remains on the table: While the Fed acknowledged the recent slowdown in job growth, an otherwise roughly unchanged statement on the economy indicates that the Fed leadership still believes lift-off in December is likely, if the US economy performs in line with the central bank's forecast of continued moderate growth and higher inflation, argues Nordea Bank. Thus, today's FOMC statement repeated that economic activity is expected to "expand at a moderate pace" and there were no major changes to the description of either inflation or inflation expectations.

"Regardless of the exact timing of the first hike, we continue to believe that rising inflation pressures will imply that the Fed will raise rates faster than is currently priced in by markets. Therefore, the Fed funds target range at 0.25-0.50% by end-2015, 1.25-1.50% by end-2016 and 2.25-2.50% by end-2017", foresees Nordea Bank.

Market Review October 29, 2015


The Federal Open Market Committee (FOMC) voted to maintain its zero interest rate policy, citing weakness in exports and soft inflation as reasons to continue its historically easy monetary policy. More specifically, FOMC kept overnight federal funds rate unchanged at 0-0.25%, nonetheless the committee indicated the possibility of a December rate hike. Fed officials have been saying for months that they believed the economy was nearly strong enough to tolerate an increase in the benchmark short-term rate from near zero, where it has been since December 2008, but they have hesitated to move. The key sentence in the FOMC statement was "in determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation”, where the phrase "next meeting “clearly indicated the possibility of December hike. The US Dollar rose sharply against the other majors, especially against the Euro, pushing the EUR/USD pair to the 1.0925 area.

Elsewhere, the Reserve Bank of New Zealand (RBNZ) kept the OCR at 2.75%, however it signalled that further reductions may be required to reach the inflation target. Moreover, the RBNZ noted that "concerns remain about the prospects for slower growth in China and East Asia especially," and that "the sharp fall in dairy prices since early 2014 continues to weigh on domestic farm incomes."

Released during the Asian session, Japan’s Prelim Industrial Production rose 1.0% beating the estimated -0.5% while Australia’s Import Prices rose 1.4% missing the estimated 1.6%.

Released during the early European session, the United Kingdom Nationwide HPI rose 0.6% versus the estimated 0.5% and Spanish Flash CPI declined -0.7% versus the estimated -0.6%.

The main event for the day would be the United States Unemployment Claims, Advance GDP, Pending Home Sales and Advance GDP Price Index.

Additional economic releases would be the German Unemployment Change, German Prelim CPI and the United Kingdom mortgage approvals and Net Lending to Individuals.

View our full economic calendar for a daily roundup of major economic events.


Data releases to monitor:

USD: Advance GDP, Unemployment Claims, Advance GDP Price Index, FOMC Member Lockhart speech, Pending Home Sales, Natural Gas Storage.

GBP: Net Lending to Individuals, M4 Money Supply, Mortgage Approvals, CBI Realized Sales.

CAD: RMPI, IPPI.

EUR: German Unemployment Change, German Prelim CPI, Italian 10-y Bond Auction.

NZD: Building Consents.


Trade Idea of the Day

USD/JPY


Currently the pair is trading at 120.71. Traders must monitor the 121.46 resistance level and the support level of 119.60 for possible breakouts. A possible scenario would be a movement towards the 121.06 resistance level, where a break may lead to the 121.40 area. An alternative scenario could be a movement towards the 120.31 support level, where a break may lead to the 120.00 area.

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Financial News October 30, 2015


Fed likely to postpone first rate hike to January

U.S. economic data have disappointed over the past month. Industrial and export data indicate a slowdown and retail sales and employment growth have also eased.

While long the bright spot in a weak global economy, the US has dimmed of late.

Nevertheless, the US slowdown comes from a position of strength and so is not particularly alarming at this time.
"However, we do expect slower growth to cause the Federal Reserve to postpone its first rate hike. We are now pencilling in the first rate hike for Q1 16 rather than December this year - albeit the latest Fed statement was more hawkish than what we had expected", says Danske Bank.

RUB might weaken temporarily against USD over next 3 months

Any significant impact of rate cuts is not seen on the RUB if the CBR cuts its policy rate according to expectations. OFZs seen benefiting further from anchored expectations on monetary easing.

"The key rate is likely to fall to 7% in late 2016, which would support the restoration of economic growth. Any tightening would be very destructive for Russia's economy, while it would not prevent possible RUB weakening if the oil price continues to fall", says Danske Bank.

Yet, a marginal RUB strengthening effect cannot be excluded from possible monetary easing, as, in Russia's case, the markets have been interpreting rate cuts as RUB supportive on improving economic prospects rather than seeing cuts as diminishing carry opportunities.

"The RUB might weaken temporarily against the USD over the next three months to 70.00, as the Fed is likely to start tightening its monetary policy in Q1 16, weighing on emerging markets assets globally", added Danske Bank.

Market Review October 30, 2015


The Bank of Japan has kept monetary policy on hold, betting prices and growth will pick up enough to sustain the credibility of its 2 per cent inflation target. Moreover, BoJ held Interest rate near zero and reiterating its pledge to increase its monetary base at an annual rate of 80 trillion yen.

At the press conference, BOJ Governor Haruhiko Kuroda said there were no proposals at Thursday's meeting to ease monetary policy and he added that while the timing for achieving the price target has been delayed, it was largely due to the effect of energy price falls. "We've said two years is the timeframe we have in mind when we say we will aim to achieve our inflation target at the earliest date possible," Kuroda said. The bank has not expanded its stimulus program since last October, even as falling oil prices and weaker exports, particularly to a slowing China, made it more difficult for Japan to reach the BOJ's 2 percent inflation target.

Released from Japan during the Asian session, Tokyo Core CPI declined -0.2%, Household Spending dropped -0.4%, National Core CPI declined -0.1% and Unemployment Rate rose 3.4%. Released from Australia, Producer Price Index (PPI) rose 0.9% versus the estimated 0.3% and Private Sector Credit rose 0.8% beating the estimated 0.5%.

Released during the early European session, Japan’s Housing Starts rose 2.6% missing the estimated 6.5%, German Retail Sales rose 0.0% missing the estimated 0.4%, French Consumer Spending rose 0.0% versus the estimated 0.2% and Spanish Flash GDP rose 0.8% versus the estimated 0.9%. EUR/USD remained below the 1.1000 level and currently is trading near the 1.0995 area, while USD/JPY is trading near the 120.75 area after reaching the 121.48 level yesterday.

Released from Switzerland, KOF economic barometer fell more than expected last month, In a report, the KOF Economic Research Agency said that its economic barometer fell to a seasonally adjusted 99.8 versus the estimated 100.1 and compared to the previous of 100.3 in the preceding month whose figure was revised down from 100.4.

Elsewhere, the Chinese state-run news agency Xinhua reported that China is to scrap its one-child policy, first implemented in 1979. The news emerges at the end of a four-day meeting of China’s ruling Communist Party. All Chinese couples will now be able to have two children, not just one, according to the news agency.

The main events for the day would be the United States Employment Cost Index, Personal Spending, Chicago PMI and Revised UoM Consumer Sentiment. Canada will also release its GDP report.

Additional economic releases would be the Eurozone CPI and Unemployment Rate.

View our full economic calendar for a daily roundup of major economic events.


Data releases to monitor:

USD: Employment Cost Index, Core PCE Price Index, Personal Spending, Personal Income, Chicago PMI, Revised UoM Consumer Sentiment, Revised UoM Inflation Expectations, FOMC Member Williams speech.

CAD: GDP.

EUR: Italian Monthly Unemployment Rate, CPI Flash Estimate, Core CPI Flash Estimate, Unemployment Rate, Italian Prelim CPI.


Trade Idea of the Day

EUR/AUD


Currently the pair is trading at 1.5473. Traders must monitor the 1.5787 resistance level and the support level of 1.5163 for possible breakouts. A possible scenario would be a movement towards the 1.5547 resistance level, where a break may lead to the 1.5630 area. An alternative scenario could be a movement towards the 1.5400 support level, where a break may lead to the 1.5350 area.

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Financial News November 2, 2015


Will RBA cut rates or not?

The Reserve Bank of Australia (RBA) will decide on its key rate tomorrow morning. Almost half of the market expect a rate cut. That means no matter what happens the decision is likely to cause some volatility.

The reason behind the disagreement amongst the analysts is the uncertainty about the interpretation of the recent inflation data. At 0.5% (quarter on quarter) the overall rate of consumer price inflation was not that bad. The trimmed mean on the other hand reached an all-time low though.

If the RBA really was to cut the key rate at this stage the step no doubt would be of a pre-emptive nature. It is certainly not entirely clear whether the rate of inflation is under pressure.

As concerns about a collapse of the Chinese economy (by far the largest export partner of Australia) are easing the real economic risk factors should also point towards a wait-and-see approach.

"However, it has to be admitted that the outlook provided by the dollar block central banks resembles a lottery at present. Non-linear positions seem much more rewarding at present", says Commerzbank.

Market Review November 2, 2015


The Asian session this morning was quite busy with economic releases from China, Australia and Japan. Released from China, the Caixin Manufacturing PMI rose to 48.3 in October from 47.2 in September while the official China PMI manufacturing, released over the weekend, remained unchanged at 49.8 in October, below expectation of 50.0. Moreover, the official PMI non-manufacturing dropped to 53.1 and hit the lowest level since December 2008.

Released from Australia, Building Approvals rose 2.2% beating the estimated 1.8%, Commodity Prices dropped -19.8% and MI Inflation Gauge rose 0.0%. Released from Japan, Final Manufacturing PMI came in at 52.4 versus the estimated 52.1.

Elsewhere, Turkey's ruling Justice and Development Party (AKP) has won a critical parliamentary election, regaining the majority it lost in June. With almost all ballots counted, the AKP had won 49.4% of the vote, with the main opposition CHP on 25.4%. In a major comeback from the previous general election, the AKP, led by Prime Minister Ahmet Davutoglu, seems to have secured a large enough majority of seats in parliament for single-party rule, according to preliminary results released by the semi-official Anadolu News Agency. President Recep Tayyip Erdogan said voters had "shown that they prefer action and development to controversy". EUR/TRY pair opened the week around 770 pips lower, as it closed around the 3.2050 area and opened near the 3.1280 area.

Released during the early European session, Switzerland’s Retail Sales rose 0.2% that was in line with expectations, while Manufacturing PMI came in at 50.7 beating the estimated 50.2. Furthermore, Spanish Manufacturing PMI came in at 51.3 missing the estimated 51.9, while Italian Manufacturing PMI came in at 54.1 beating the estimated 52.9.

The main event for the day would be the United Kingdom Manufacturing PMI and the United States ISM Manufacturing PMI.

Additional economic releases would be the Eurozone Final Manufacturing PMI, RBC Manufacturing PMI and the United States Construction Spending and Final Manufacturing PMI.


Data releases to monitor:

USD: Final Manufacturing PMI, ISM Manufacturing PMI, Construction Spending, ISM Manufacturing Prices, Loan Officer Survey, FOMC Member Williams speech.

GBP: Manufacturing PMI.

EUR: French Final Manufacturing PMI, German Final Manufacturing PMI, Final Manufacturing PMI.

CAD: RBC Manufacturing PMI.

Trade Idea of the Day

AUD/USD


Currently the pair is trading at 0.7140. Traders must monitor the 0.7295 resistance level and the support level of 0.7068 for possible breakouts. A possible scenario would be a movement towards the 0.7181 resistance level, where a break may lead to the 0.7235 area. An alternative scenario could be a movement towards the 0.7122 support level, where a break may lead to the 0.7080 area.

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Financial News November 3, 2015


Weak euro with nice side effects for ECB
Neither the slightly improved euro zone PMI nor the struggling ISM index were able to cause a notable reaction in EUR-USD yesterday. In the end the deviation from expectations was simply too small, thus not providing the market with a reason to change its view of the world.

However, the data was not entirely uninteresting. It illustrated how the industry in both regions is coping with the head winds caused by the struggling export markets, in particular the Emerging Markets. It is very obvious that the industrial sector in the euro zone is notably more robust than its counterpart in the US. The ISM index has been easing notably, in particular since the summer, while the index for the euro zone has been stable. This is due to the strong US dollar and the weak euro respectively. However, in particular in the euro zone the currency effect should start to fade in the near term, argues Commerzbank.

The euro has recovered notably since the spring and on a trade weighted basis it has now appreciated by approx. 4%. The data thus underlines why ECB President Mario Draghi is likely to be so keen for the euro to return to its depreciation trend at present: not only as it will provide a quick relief on the inflation front due to higher import prices but also due to the pleasant side effects for the export sector.

"If anything a strong industrial sector can only support inflation developments. And in view of the fact that the outlook remains uncertain for the important export markets of the euro zone a weak euro is no doubt a good reinsurance strategy", says Commerzbank.


Market Review November 3, 2015


The market got volatile after RBA decision to hold rates, nonetheless the market was quiet due to the Japan holiday. Australia's central bank kept its cash rate unchanged at the low of 2% as widely expected the same time left the window open for possible rate cuts due to low inflation if needed. In New Zealand the Commodity Price Index came in at 6.9% in October. Further to this we are expecting jobs data from New Zealand later tonight.

U.S. NFP data on Friday remains the key event of the week, therefore rather the market would be rather quiet. The number is important since it will signal if the FED will hike rates in December.

Today other events that worth monitoring are UK PMI construction and US factory orders.


Data releases to monitor:

GBP: Construction PMI,

USD: Factory Orders m/m,

EUR: ECB President Draghi Speaks

NZD: Employment Change q/q, Unemployment Rate

Trade Idea of the Day

EUR/CAD


Currently the pair is trading at 0.6727. Traders must monitor the 0.6895 resistance level and the support level 0.6618 for possible breakouts. A possible scenario would be a movement below 0.6725 support level where a break may lead to 0.6675 area. An alternative scenario could be a movement above 0.6760 and a testing of 0.6790 resistance level.

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Financial News November 4, 2015


ECB unlikely to force EUR/USD lower with higher rate cuts

ECB might not go higher than the priced in rate cuts and weigh on EUR/USD in near future. It can go to the extent of 12bp by mid 2016 is what some of the market participants expecting.

The pair is currently at 1.952 and might stay above the March lows, although with the risk of downside of 1.08 in coming months.
As there would be expectations on the possibitly of further ECB cuts and as there will be first rate hike from US Fedral Reserve, the pair might also be weighed on. It is skeptical that the ECB settles on -30bp for the deposit rate and EUR/USD will be continued to be pressurized to go much lower beyond Q1.

With ECB waiting for the economic impact of previous easing and the shallow US Fed hiking cycle is adjusted into the money markets, the downside risks are set to wane and the factors supporting EUR should slowly dominate.

"In terms of the impact on EUR/USD, the ECB will be satisfied to see it stop strengthening, rather than force about a drop towards, say, parity. While the USD is important for the effective euro, the CNY has a higher weight, hence in terms of the impact on inflation, the CNY should be followed more closely than the USD", says Danske Bank.

Market Review November 4, 2015


New Zealand posted yesterday its Job data, and it was worse than expected. More specifically, employment fell by 11,000, or 0.4%, missing expectations for an increase of 0.4%, the first fall in employment seen since the June 2012. Moreover, unemployment rate ticked up to 6.0% from 5.9%, in line with expectations, but this was entirely due to a plunge in labour market participation. Furthermore, Labour Cost Index rose 0.4% missing the estimated 0.5%. The recent poor job data is seen by many as an additional reason for the RBNZ to maintain its easing bias after it left the OCR unchanged at 2.75% last week. NZD/USD dropped to the 0.6630 area and currently is trading near the 0.6655 area.

Released during the Asian session this morning , Australian Retail Sales rose 0.4%, which is in line with expectations, while Trade Balance came in at -2.32B versus the estimated -2.85B.

Released also during the session, the BOJ monetary base rose 32.5% on year in October, as the Bank of Japan stated, coming in at 338.887 trillion yen and compared to the previous of 35.1% in September. In addition, Japan Consumer Confidence came in at 41.5 beating the estimated 41.1.

Elsewhere, the EUR fell against the GBP and the USD last night, following European Central Bank (ECB) president Mario Draghi reiterating the dovish comments he made in October. Speaking at a cultural event in Frankfurt, Draghi repeated that the ECB would review the amount of monetary stimulus required at the next governing council meeting in December, but is “willing and able to use all the instruments available”. Growth prospects in emerging markets and “external factors” are dragging on the outlook for growth and inflation, he said. Domestic demand remains “resilient”, however. Last month, Draghi said the ECB would be better able to decide the level of stimulus needed once the latest inflation forecasts for the Eurozone came in. EUR/USD is currently trading near the 1.0935 area with the next support seen at the 1.0895 level.

The main event for the day would be the United Kingdom Services PMI, the United States ADP Non-Farm Employment Change, Trade Balance, ISM Non-Manufacturing PMI and Fed Chair Yellen Testimony.

Additional economic releases would be the Eurozone Final Services PMI.

Data releases to monitor:

USD: ADP Non-Farm Employment Change, Trade Balance, Final Services PMI, Fed Chair Yellen testimony, ISM Non-Manufacturing PMI, Crude Oil Inventories, FOMC Member Dudley speech, FOMC Member Brainard speech.

GBP: Services PMI.

EUR: Spanish Services PMI, Italian Services PMI, French Final Services PMI, German Final Services PMI, Final Services PMI, PPI.

CAD: Trade Balance.

Trade Idea of the Day

USD/CHF


Currently the pair is trading at 0.9919. Traders must monitor the 0.9956 resistance level and the support level of 0.9805 for possible breakouts. A possible scenario would be of the 0.9924 resistance level, where a break may lead to the 0.9950 area. An alternative scenario could be a movement towards the 0.9881 support level, where a break may lead to the 0.9855 area.

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Financial News November 5, 2015


Daily Economic Outlook: 5th November 2015

Today, market's focus will be on the BoE monetary policy announcement, with the simultaneous publication of the MPC minutes and the Inflation Report.

"Due to the poor performance of the global economy and recent fall in domestic momentum, the MPC will need to re-examine its previous assumptions of ongoing relative UK economic strength leading to firmer cost pressures.The MPC's communications overall is likely to paint the prospect of an eventual but unhurried tightening", says Lloyds Bank.

FOMC speakers alongside US productivity data for 2015 Q3 are likely to be observed for implications on US monetary policy lift-off. With the profile of GDP growth choppy over 2015, underlying productivity trends are hard to gauge.

Lloyds Bank says that the MPC will perhaps point towards an inflation overshoot "beyond the 2-year horizon", thereby emphasizing on an eventual policy tightening, regardless of the possibility of downward near-term revisions to the GDP growth as well as inflation projections of the economy. But with the timing allowed to slip by a quarter, even this passive change could be seen as dovish. Crucially, the MPC's forecasts will be conditioned on a much shallower policy rate profile than in August.

"As such, the MPC's indication of steeper rate expectations would start from a much lower base. In terms of the vote split, one MPC member, more likely Forbes than Weale, is expected to join McCafferty in voting for higher rates. An unchanged 8-1 vote split would render more likely a move later in 2016 than our current expectation of February 2016", added Lloyds Bank.


Market Review November 5, 2015


Federal Reserve chair stated yesterday to the House committee that no decision has been made but a rise in rates is still a ‘live possibility’ if the upcoming data are supportive and despite continued low inflation. "If the incoming information supports that expectation, then or statement indicates that December would be a live possibility," she said.

Yellen also said she and the committee expect the economy to grow "at a pace that's sufficient to generate further improvement in the labour market, and to return inflation to the 2 percent target." Yellen also provided testimony on the health of U.S. banks, which has improved, but some problems still remain. Testifying before the House Financial Services Committee, Yellen said capital at the eight biggest U.S. banks has nearly doubled and now sits at about $500 billion. The US Dollar was supported by job data and Fed chair Yellen's comment and remains firm today.

Elsewhere, the minutes for BOJ's meeting released during the Asian session, unveiled that domestic demand remained firm despite stagnant growth in exports and the economy in general. Policymakers agreed that the underlying trend in inflation would continue to improve and they pledged to continue implementation of QQE until the target inflation rate of 2 per cent is stable. On global economic developments, the central bank, however, noted concerns over slowdown in China and other emerging market would eventually affect Japan's exports and economic activities.

Released during the early European session, the Swiss SECO Consumer Climate came in at -18 versus the estimated -14 and compared to the previous of -19. German Factory Orders declined -1.7% versus expectations of 1.1% rise. EUR/USD extended losses reaching to fresh 3 months low of 1.0833. Released from the United Kingdom, Halifax HPI rose 1.1% beating the estimated 0.7%.

The United Kingdom will remain the focus of the day, as the BoE will have another "Super Thursday”. The BoE will release its Inflation Report, Official Bank Rate Votes, Monetary Policy Summary and Official Bank Rate.

Additional economic releases would be the United States Unemployment Claims and ECB President Mario Draghi speech.


Data releases to monitor:

Member Fischer speech, Natural Gas Storage, FOMC Member Lockhart speech.

GBP: BOE Inflation Report, MPC Official Bank Rate Votes, Monetary Policy Summary, Official Bank Rate, Asset Purchase Facility, MPC Asset Purchase Facility Votes, BOE Gov Carney speech.

EUR: ECB Economic Bulletin, Retail PMI, EU Economic Forecasts, Retail Sales, Spanish 10-y Bond Auction, French 10-y Bond Auction, ECB President Draghi speech.

CAD: Ivey PMI

Trade Idea of the Day

GBP/CAD


Currently the pair is trading at 2.0239. Traders must monitor the 2.0320 resistance level and the support level 2.0120 for possible breakouts. A possible scenario would be a movement above 2.0270 resistance level where a break may lead to 2.0320 and possible to 2.0390 area. An alternative scenario could be a movement near 2.0220 and a testing of the level.

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