Daily Market Analysis by Vinson Financials

[VinsonFinancialsFX]

Financial News October 5, 2015


CNB discusses negative interest rates

atest Czech National Bank's (CNB) board minutes confirmed what Governor Miroslav Singer had hinted at following the rate decision last month, that the CNB board actively discussed further monetary easing and use of negative interest rates.

EUR-CZK rose sharply ahead of the rate meeting in anticipation that the CNB might cut rates to negative. But, this did not occur. Dovish sentiment prevailed but still, most board members agreed to wait and watch inflation developments in coming months. EUR-CZK has drifted lower since.

"The developments in China do pose fresh disinflation risk for the region, and CNB could cut rates to negative during H1 2016. Under this scenario, CNB would also maintain its EUR-CZK target of 27.00 for longer than we currently forecast, possibly until mid-2017", according to Commerzbank.

This is not mainly expected for now, but the risk to this forecast would shift in this direction if inflation data were to surprise to the downside over the coming quarter. In this scenario there are upside risks to EUR-CZK.

EM slowdown likely to hit U.S. economy
The slowdown in emerging market growth is unlikely to leave the U.S. economy unscathed. The preliminary release of August trade data showed a sharp decline in nominal goods exports with the drop spread across categories.

The weakness in exports is consistent with the general deterioration in business activity surveys since mid-2014 and seems to confirm the view that US manufacturing activity will struggle against the combined headwinds of a strong dollar and weak global growth, says Barclays. The September jobs report continued this theme, showing gains of only 142k with substantial downward revisions to prior months.

Offsetting the drag from abroad, the household sector remains healthy and consumption growth should continue to support overall activity, though risks to the household sector have risen. As such, the first rate hike will occur in March 2016, at the earliest, although FOMC members will likely continue to signal that a rate hike this year is possible, says Barclays.

Market Review October 5, 2015


On Friday, the United States released the monthly employment figures for September. The data disappointed on most fronts, with the headline change in non-farm payrolls printing 142k, well below the forecast for 201k. The number for August was also adjusted lower from an initial print of 173k to 136k. Moreover, the unemployment rate remained unchanged at 5.1%. Overall, most of the employment data, released on Friday, were particularly disappointing, leading the market once again to doubt the prospects of a 2015 Fed rate hike. The immediate effect on the global markets after release of this data was strong and sweeping. The US dollar fell broadly against most other major currencies, most notably the euro and yen, while gold surged sharply, paring much of the precious metal’s losses over the past week.

Released during the Asian session this morning, Japan’s Average Cash Earnings rose 0.5% versus the estimated 0.7% causing minimal impact on the USD/JPY, which is currently trading near the 120.00 area.

Released during the early European session, Spanish Services PMI came in at 55.1 missing the estimated 59.7. EUR/USD is currently trading near the 1.1250 area after reaching the 1.1318 level on Friday after the release of the US data.

The key events for the day would be the United Kingdom Services PMI and the United States ISM Non-Manufacturing PMI.

Additional economic releases would be the French Final Services PMI, Italian Services PMI, German Final Services PMI and Sentix Investor Confidence.

Data releases to monitor:

GBP: Services PMI.

USD: Final Services PMI, ISM Non-Manufacturing PMI, Labour Market Conditions Index.

EUR: Italian Services PMI, French Final Services PMI, German Final Services PMI, Final Services PMI, Sentix Investor Confidence, Retail Sales, Eurogroup Meetings.


Trade Idea of the Day

EUR/AUD

Currently the pair is trading at 1.5890. Traders must monitor the 1.6246 resistance level and the support level of 1.5736 for possible breakouts. A possible scenario would be a movement towards the 1.5858 support level where a break may lead to the 1.5780 area. An alternative scenario could be a movement towards the 1.5932 resistance level, where a break may lead to the 1.5990 area.

 

[VinsonFinancialsFX]

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.

 

[VinsonFinancialsFX]

Financial News October 7, 2015


IMF sees slower growth as economy adjust to lower commodity prices

In IMF's World Economic Outlook published yesterday ahead of the IMF/World Bank annual meetings in Lima.

"Global growth for 2015 is projected at 3.1%, 0.3pp lower than in 2014, and 0.2pp below the forecasts in the July 2015 update.

The institution forecasts 3.6% for 2016", notes Barclays.
Prospects across the main countries and regions remain uneven. Relative to last year, the recovery in advanced economies is expected to pick up slightly, while activity in emerging market and developing economies is projected to slow for the fifth year in a row, primarily reflecting weaker prospects for some large emerging market economies and oil-exporting countries.

In an environment of declining commodity prices, reduced capital flows to emerging markets and pressure on their currencies, and increasing financial market volatility, downside risks to the outlook have risen, particularly for emerging market and developing economies.

The IMF expects growth of 1.5% and 1.6% this year and next for the euro area, and 2.5% and 2.2% respectively for the UK, added Barclays.

Will the Fed hike rates this year?

The recent disappointing US labour market report did not cause John Williams, President of the San Francisco Fed to change his mind. He considers a rate hike before the end of the year to be appropriate.

Williams who as a moderate dove on the FOMC is amongst those who could be decisive in the vote made some interesting points.
He considers 100,000 new jobs per month to be sufficient to meet the current rise in labour available (so therefore the latest report obviously does not constitute a problem for him). Against the background of the strong USD he does not consider the fact that inflation is below target to be problematical either.

Moreover he referred to signs of rising inflation domestically. In any case Williams did not sound like someone who was going to vote against a rate hike in December. At the same time he pointed out that the rate hike cycle was likely to be the most cautious in the Fed's history.

"And the projected cautious approach is an argument not to wait too long with the lift off in his view as the Fed may otherwise be forced to proceed more quickly. It is not really surprising that USD was unable to benefit from Williams' comments as the outlook of a slow and cautious rate hike path is not exactly the stuff that USD bulls' dreams are made of", opines Commerzbank.

Market Review October 7, 2015


The International Monetary Fund (IMF) lowered global growth forecast and warned of rising risk of global recession. Global growth for this year was lowered to 3.1%, comparing to July forecast of 3.3%. Modest growth in the United States and a meagre recovery in the Eurozone have not been able to offset falling output in emerging markets. The IMF cut its projections for global growth to 3.1% this year from its previous forecast of 3.3%. Souring emerging-market prospects also are muting next year’s rebound: The IMF reduced its prediction for global growth in 2016 by the same amount to 3.6%. IMF noted that "a return to robust and synchronized global expansion remains elusive." Meanwhile, the “downside risks to the world economy appear more pronounced than they did just a few months ago." The fund warned that there's a 50% change of sub-3% growth next year and that was a level "equivalent to a global recession".

Furthermore, IMF projected US growth to be 2.6% in 2015 and 2.8% in 2016, comparing to prior projection of 2.5% and 3.0% respectively. Eurozone growth is projected to be 1.5% in 2015 and 1.6% in 206, comparing to prior projection of 1.5% and 1.7% respectively. Japan growth is projected to be 0.6% in 2015 and 1.0% in 2016, comparing to prior projection of 0.8% and 1.2%. UK growth is projected to be 2.5% in 2015 and 2.2% in 2016, comparing to prior projection of 2.5% and 2.2%. Overall, growth in advanced economies are projected to be 2.0% in 2015 and 2.2% in 2016, comparing with prior 2.1% and 2.4%.

Elsewhere, the Bank of Japan (BOJ) held off on expanding stimulus, even as slumping exports and falling oil prices threaten its healthy-looking projection, that the economy is on track to hit its ambitious 2 percent inflation target next year. Moreover, remaining fears of recession will keep the central bank under pressure to ease at a more crucial meeting on October the 30th , when it is expected to cut its long-term economic and price forecasts, analysts say. As widely expected, the central bank maintained its pledge to increase base money at an annual pace of 80 trillion yen through aggressive asset purchases. "Japan's economy continues to recover moderately although exports and production have been affected by the slowdown in emerging economies," the BOJ said in a statement, keeping its assessment of the economy unchanged from the previous month. Released from Japan, Leading Indicators rose 103.5% versus the estimated 103.4%. USD/JPY remained near the 120.00 area with the next resistance seen at the 120.56 level.

Released during the early European session, German Industrial Production declined -1.2% versus the estimated 0.3% increase.

The key events for the day would be the United Kingdom Manufacturing Production, NIESR GDP Estimate, the Canadian Building Permits and the Swiss Foreign Currency Reserves.

Additional economic releases would be the BOJ Press Conference and RBA Assist Gov Debelle speech.

Data releases to monitor:

GBP: Manufacturing Production, Industrial Production, NIESR GDP Estimate.

USD: Crude Oil Inventories, 10-y Bond Auction, Consumer Credit.

EUR: French Trade Balance.

CAD: Building Permits.

CHF: Foreign Currency Reserves

JPY: BOJ Press Conference.

AUD: RBA Assist Gov Debelle speech.

Trade Idea of the Day

GBP/CHF

Currently the pair is trading at 1.4736. Traders must monitor the 1.4852 resistance level and the support level of 1.4671 for possible breakouts. A possible scenario would be a movement towards the 1.4714 support level where a break may lead to the 1.4685 area. An alternative scenario could be a movement towards the 1.4783 resistance level, where a break may lead to the 1.4815 area.

 

[VinsonFinancialsFX]

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.

 

[VinsonFinancialsFX]

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.

 

[VinsonFinancialsFX]

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.

 

[VinsonFinancialsFX]

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.

 

[VinsonFinancialsFX]

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.

 

[VinsonFinancialsFX]

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.

 

[VinsonFinancialsFX]

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.

 

[VinsonFinancialsFX]

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.

 

[VinsonFinancialsFX]

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.

 

[VinsonFinancialsFX]

Financial News October 22, 2015


USD/CAD currency outlook?
The Canadian dollar has been the third best-performing G10 currency against the USD over the past month. Evidence that crude oil prices may have found their lows in August, combined with a recent firming in domestic economic data, has provided major support for the currency.

Now that Federal Elections are out of the way focus will turn to monetary policy.
Canada's central bank left its key policy rate on hold in September at 0.50%, sounding more neutral after reducing its policy rate twice this year, noting that weak crude oil prices were likely to have only a transitory impact on inflation. While that may be the case, the negative impact of low crude oil prices on the oil & gas sector and wider economy has been sustained, with GDP contracting for two straight quarters in a row this year.

"Given this, it is believed that the market may be attaching too low a probability to further rate cuts over the coming months. While our forecast of higher crude oil prices should provide some further support to the Canadian dollar to around 1.25-1.20 against the USD, the possibility of further monetary easing suggests a return to 2014 sub-1.20 levels may be a stretch", argues Lloyds Bank.

BoC downgrades its outlook for economic growth in Canada
Bank of Canada left its key policy rate unchanged at 0.50%. The Bank judges the current level of the overnight rate to be appropriate, but maintained a cautious tone in its outlook, acknowledging global risks and citing that the persistently low level of commodity prices has led to a modest downgrade to the bank's growth forecast.

The Bank's decision to leave rates unchanged was widely expected. It maintained a cautious tone, acknowledging that the Canadian economy rebounded smartly from the contraction in the first half of the year, but that it continues to adjust to lower prices for oil and other commodities.

The current level of monetary policy stimulus is necessary to facilitate this ongoing adjustment. The downgrade to the Bank's growth outlook further out in the horizon is in line with more modest global growth and continued weakness in energy prices.

This would typically mean the economy returning to full capacity at a later date, but the Bank also downgraded its estimate of Canada's pace of potential growth. As a result, there is little effect on the outlook for inflation.

At the same time, with the Bank now focused on a measure of underlying inflation rather than core, the performance of the economy relative to growth expectations is particularly important.

The new forecasts in the MPR set the bar that Canada's economy must attain to see the eventual removal of monetary stimulus. If growth falls short of the mark, it could elicit further rate cuts.

"Overall, with the outlook for inflation little changed and the growth much the same as our latest outlook, the bank is expected to remain comfortably on the sidelines until the second half of 2017, when it is expected to embark on a modest pace of interest rate hikes", says TD Economics.

Market Review October 22, 2015


The Bank of Canada (BOC) downgraded its economic outlook again as the country continues to face the “complex” aftershocks of lower prices for oil and other commodities. Furthermore, the central bank kept its key overnight lending rate unchanged at 0.5 % on Wednesday as widely expected, following two surprise rate cuts earlier this year. Moreover, in the latest monetary policy report BOC said that “the Canadian economy is expected to grow just 2.00% in 2016 and 2.50% in 2017”. That is down from previous forecasts of 2.30% and 2.60%. Lower oil prices are continuing to sap business investment and put a dent in the value of Canadian exports, overwhelming improvements elsewhere in the economy. In addition, the central bank warned that the two-track economy would persist longer than expected, in spite of the positive effects of earlier interest rate relief and the cheaper Canadian dollar. USD/CAD rose sharply from the 1.2970 area, reaching as high as the 1.3125 area, where is currently trading.

Released during the Asian session Australia NAB business confidence dropped to 0 versus the previous of 4.

Released during the early European session, Spain's third-quarter unemployment rate fell to 21.2%, the lowest level in four years, driven by strong job creation. Moreover, the National Statistics Bureau said that the number of people without jobs in the Eurozone’s fourth-largest economy fell by 298,200 in the quarter to 4.85 million, with the economy adding 182,200 jobs. Of those, 152,100 corresponded to the private sector, with the remainder linked to the public sector. EUR/USD remained above the 1.1300 level until the moment, but seems that it is heading south.

The main events for the day will be the ECB rate decision and press conference, where the central bank is expected to keep policies unchanged and pledge to continue implementation of the QE program through September 2016 and reiterate commitments to extend stimulus whenever necessary.

Additional economic releases would be the United Kingdom Retail Sales, the Canadian Core Retail Sales and the United States Unemployment Claims.

Data releases to monitor:

USD: Unemployment Claims, HPI, Existing Home Sales, CB Leading Index, Natural Gas Storage.

CAD: Core Retail Sales, Retail Sales.

GBP: Retail Sales, MPC Member Cunliffe speech.

EUR: Minimum Bid Rate, ECB Press Conference, Consumer Confidence.


Trade Idea of the Day

NZD/USD

Currently the pair is trading at 0.6750. Traders must monitor the 0.6895 resistance level and the support level of 0.6617 for possible breakouts. A possible scenario would be a movement towards the 0.6835 resistance level, where a break may lead to the 0.6870 area. An alternative scenario could be a movement towards the 0.6723 support level, where a break may lead to the 0.6675 area.

 

[VinsonFinancialsFX]

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.

 

[VinsonFinancialsFX]

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.

 

[VinsonFinancialsFX]

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.

 

[VinsonFinancialsFX]

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.

 

[VinsonFinancialsFX]

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.

 

[VinsonFinancialsFX]

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.

 

[VinsonFinancialsFX]

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.