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Financial News September 10, 2015



BoE to focus on strengthening domestic economy


The U.K PMI continued its fall in August, inflation remains stubbornly close to zero percent, industrial production is limping and the trade deficit is expanding. In addition there are the external developments surrounding China and the Emerging Markets.


The resulting uncertainty and increased volatility on the markets will cause some MPC members to wait and see as well as considering the strength of the domestic economy as a kind of buffer against unfavourable external impacts.

"Moreover the BoE cannot completely ignore the Fed's and ECB's approach: the Fed is likely to wait until December before hiking its key rate and the ECB signalled that in the foreseeable future its monetary policy will become even more expansionary. If the BoE now seems like a central bank in favour of hiking interest rates soon it risks the appreciation of the pound which in return is going to put pressure on the inflation rate and make it more difficult to reach the inflation target", says Commerzbank.


So everything all told the BoE is likely to stick to its approach and underline the strength of the domestic economy while also sounding concerned about external developments. Therefore, Ian McCafferty, a MPC member of BoE, is unlikely to find any supporters for vote in favour of a rate hike.




Market Review September 10, 2015



The Reserve Bank of New Zealand cut its benchmark lending rate by 25bp from 3.00 percent to 2.75 percent. The reduction in the Official Cash Rate (OCR) was seen as necessary by the RBNZ in order to keep future average CPI inflation near the 2 percent target. This highly anticipated policy decision was the third consecutive adjustment since the central bank began easing this year. Moreover, the central bank maintained a dovish stance and signalled in its statement that "some further easing in the OCR seems likely." Furthermore, RBNZ said that the global outlook was "revised down" due to weaker activity in developing economies particularly in China and East Asia. The New Zealand Dollar declined more than 1.5 percent (over 95 pips) versus the US Dollar after the RBNZ decision.


Elsewhere, Australia’s labour market, yet again, has exceeded expectations in August. Over the month employment increased by 17,400, smashing the median market forecast for a gain of 5,200. Moreover, Full time jobs rose 11.5k while part-time jobs rose 5.9k. Unemployment rate dropped to 6.2% as expected while participation rate dropped from 65.1% to 65.0%. Despite the better-than-expected economic figures, AUD/USD was dragged down by the RBNZ rate cut decision, which pushed the pair down to the 0.6945 area. AUD/USD was somewhat recovered ad is currently trading near the 0.7028 area.


Released during the Asian session, Japan’s Core Machinery Orders declined -3.6% versus the estimated 3.4%, while PPI dropped -3.6% versus the estimated -3.2%. USD/JPY is currently trading near the 120.78 area.


Released from China during the Asian session, Consumer Price Index (CPI) rose 2.0% beating the estimated 1.9% while PPI declined -5.9% versus the estimated -5.6%.


Released during the early European session, French Final Non-Farm Payrolls rose 0.2% while French Industrial Production dropped -0.8% missing the estimated 0.3%. EUR/USD is currently trading near the 1.1200 area with the next resistance seen at the 1.1244 level.


The main events for the day will be the BOE Official Bank Rate, Monetary Policy Summary, MPC Official Bank Rate Votes, MPC Rate Statement and the United States Unemployment Claims.


Additional economic releases will be the Canadian NHPI, BOE Asset Purchase Facility and MPC Asset Purchase Facility Votes.


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


Data releases to monitor:


USD: Unemployment Claims, Import Prices, Wholesale Inventories, Natural Gas Storage, Crude Oil Inventories, 30-y Bond Auction.


CAD: NHPI, Capacity Utilization Rate.


GBP: MPC Official Bank Rate Votes, Official Bank Rate, Asset Purchase Facility, MPC Asset Purchase Facility Votes, MPC Rate Statement, Monetary Policy Summary.



Trade Idea of the Day


AUD/USD


Currently the pair is trading at 0.7047. Traders must monitor the 0.7205 resistance level and the support level of 0.6908 for possible breakouts. A possible scenario would be a movement towards the 0.7069 resistance level where a break may lead to the 0.7110 area. An alternative scenario could be movement towards the 0.6980 support level where a break could lead to the 0.6940 area.


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Financial News September 11, 2015



Central bank of Russia to be on hold today


Consensus expectations are for rates to remain on hold at 11% during today's interest rate meeting. The Russian central bank (CBR) would like to cut rates, given that month on month CPI inflation trended lower recently.


However RUB's decline towards levels last seen during the crisis period in late January complicates matters. A rate cut today would invite further speculation against RUB, which in an environment of deteriorating sentiment towards EM is hardly desirable.


Not only is this an issue, but FX induced pass through inflation could rear its head once again. Interestingly, markets are now starting to price in a hiking cycle, but we think markets are overdoing it.


"Russia, despite its numerous problems, boasts a healthy current account surplus, so it should not be affected in the same way as other emerging markets when the Fed normalizes rates in the coming months. Nonetheless, consistent oil price declines mean that USD-RUB remains a buy on dips for the moment", says Commerzbank.


Weak inflation outlook could bring USD under pressure today

Next week will bring the Fed's rate decision. It is still quite unclear what market momentum the meeting is likely to create. Even if the market has given up on the idea of a rate hike next week the all-important question for the US dollar is how optimistic the Fed will sound as regards the future rate path.


The reason behind the market's much more cautious rate expectations is the more pessimistic inflation outlook. The Fed had originally given the expectation that inflation was likely to rise notably soon as the reason for its plans to start the rate hike cycle. The market does not yet expect that and as a result expects a much slower rise of interest rates.


As a result some movement might be seen in the USD exchange rates today, as there are two events on the calendar for today, producer prices and the University of Michigan's consumer poll, that might provide new information regarding expected price developments.


According to Commerzbank, what is of particular interest are the long term inflation expectations the University of Michigan compiles. The Fed uses these poll-based inflation expectations to judge whether inflation expectations are still anchored or not .


If the expectations record a surprise rise to above 2.7% this is likely to be seen as a signal that the Fed will not correct its outlook notably lower in September and therefore as a signal that first rate rises are due.


If on the other hand the poll-based inflation expectations fall the market is likely to feel confirmed in its doubts of the inflation outlook and trade the US dollar weaker, as market based inflation expectations seem to have eased compared with one month ago.


As at -0.3% mom, a weaker result for producer prices is expected than consensus (-0.1%) there is a lot to suggest that yesterday's USD weakness will continue today. The next psychological resistance in EUR-USD is located at around 1.1450.



Market Review September 11, 2015




Investors are turning their attention to the Federal Reserve, after the Bank of England left interest rates unchanged yesterday, saying that the threat to the world economy from China’s stock-market slump did not signal a slowdown for Britain. The Monetary Policy Committee (MPC) voted 8-1 to keep rates unchanged at a record-low of 0.5%, as widely expected. BOE remains on track to raise its benchmark interest rate next year, with rate setters agreed that signs of a sharper than expected slowdown in China and turbulence in global financial markets have not as yet altered the outlook for the United Kingdom economy. GBP/USD raised sharply on the news, and currently is trading near the 1.5445 area after the recent decline to the 1.5165 area.


The focus is turned now on Federal Reserve rate decisions, after the BOE decided to stand firm and leave rates unchanged. For the past year, the Federal Reserve's policy committee, the Federal Open Market Committee (FOMC), has described the timing of its much-anticipated move to raise interest rates as "data dependent, but with the latest developments in China and the global markets in general, the scenario for rising the rates is seen as a uncertain move. Moreover, IMF has warned that "monetary policy must stay accommodative to prevent real interest rates from rising prematurely".


Released during the Asian session, Japan BSI Manufacturing Index came in at 11.0 versus the estimated -1.9 and New Zealand FPI declined -0.5% compared to the previous of 0.6%.


Released during the early European session, German Final CPI remained flat at 0.0% while German WPI declined -0.8% versus the estimated 0.2%. EUR/USD is currently trading near the 1.1300 area after breaking the 1.1245 resistance.


The main events for the day will be the United States Prelim UoM Consumer Sentiment, PPI and Core PPI.


Additional economic releases will be the United Kingdom Construction Output, Consumer Inflation Expectations, MPC Member Forbes speech and ECOFIN Meetings.


Data releases to monitor:


USD: Core PPI, PPI, Prelim UoM Consumer Sentiment, Prelim UoM Inflation Expectations, Federal Budget Balance.


GBP: Construction Output, Consumer Inflation Expectations, MPC Member Forbes speech.


EUR: ECOFIN Meetings, Italian Industrial Production.



Trade Idea of the Day


EUR/TRY


Currently the pair is trading at 3.4327. Traders must monitor the 3.4700 resistance level and the support level of 3.3944 for possible breakouts. A possible scenario would be a movement towards the 3.4415 resistance level where a break may lead to the 3.4540 area and in long term, it may reach the 3.4700 area. An alternative scenario could be a break below the 3.4240 level, which may lead to the 3.4120 area and further to the 3.4000 area.


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Financial News September 14, 2015



EUR profits from calmer EM markets


During the course of last week EUR-USD slowly but surely crept from levels around 1.1150 to levels at now roughly 1.1350. A reduction in EM risks would now have to be seen as a EUR positive signal.


And indeed the EUR appreciation was accompanied by the EM markets becoming a little calmer. The exchange rates of BRL and TRY have at least stabilised, ZAR was even able to recover slightly and also the CDS spreads of most EM currencies have fallen slightly.


ECB President Mario Draghi had stressed the EM risks at the last ECB press conference and suggested an interpretation according to which the ECB might extend its QE programme should these risks deteriorate.


In particular in comparison with the Fed, whose representatives had presented themselves as totally relaxed about EM risks, the European central bankers seemed much more prepared to react to EM risks.


"One had to assume that a potential EM crisis would have affected the ECB's monetary policy far more than the Fed's monetary policy. Therefore it would have put much more pressure on the euro rather than the dollar. The most recent development now suggests that this scenario will not arise which is therefore a EUR positive signal", says Commerzbank.


Poland to have temporary relief on CHF mortgage conversion

The Polish zloty had a better time last week, with EUR-PLN dropping from 4.24 early last week to below 4.21 levels by the end of the week, PLN outperformed HUF over this period too.


One PLN-supportive development was the abandonment of the infamous CHF mortgage conversion bill which ruling party PO had presented to parliament in the summer.

The proposal initially was that CHF borrowers who were 'under water' could convert their mortgages to local currency at the historical exchange rate, and banks would share 50% of the FX loss, later, this bill was amended by Opposition pressure to increase the banks' share of the loss to 90%.


This bill has been a source of major concern for the Polish banking sector. But now, the parliament's public finance committee has ruled that it will not push the bill through because of the many "constitutional doubts" it involves. CHF conversion legislation will again be taken up only after the new government is in place in late October.


"This is only temporary relief, though, Opposition PiS is leading in all major polls and is unlikely to forget this issue. If PiS forms the government, a harsher version of the same FX conversion bill can be expected, with larger loss implications for banks, to be launched", says Commerzbank.



Market Review September 14, 2015


Minor market movement was noticed during the Asian session this morning as the session was relatively quiet with few economic releases. Released from Japan, Revised Industrial Production declined -0.8% versus the estimated -0.6% while Tertiary Industry Activity rose 0.2%. USD/JPY has turned south during the Asian session opening. The pair is currently trading near the 120.20 area with the key resistance seen at the 120.80 level.


Global markets are relatively noiseless with focus turned mainly on the United States FOMC rate decision. The Fed may raise policy interest rate from 0% for first time since 2008 this week, but China’s economic slowdown and deflation looming worldwide are seen as a warning signal that is not the right time for a rate hike.


Elsewhere, the Reserve Bank of Australia will release meeting minutes on Tuesday while the Bank of Japan will release its Monetary Policy Statement on the same day. Moreover, the Swiss National Bank will have its Monetary Policy Assessment on Thursday. Among these central banks, RBA is the only central bank expected to proceed with further interest rate cut, once again before the end of the year. Furthermore, SNB and BoJ are expected to keep monetary policies unchanged.


Released during the early European session, Swiss Producer Price Index (PPI) declined -0.7% versus the estimated -0.4% and Retail Sales dropped -0.1% missing the estimated 1.5%. USD/CHF is currently trading near the 0.9700 area with the next key resistance seen at the 0.9820 level.


The economic calendar for the day is quite empty. Eurostat will releases the European Industrial Production, which is estimated to rise 0.3% compared to the previous of -0.4% decline.


Data releases to monitor:


USD: Core PPI, PPI, Prelim UoM Consumer Sentiment, Prelim UoM Inflation Expectations, Federal Budget Balance.


GBP: Construction Output, Consumer Inflation Expectations, MPC Member Forbes speech.


EUR: ECOFIN Meetings, Italian Industrial Production.



Trade Idea of the Day


EUR/AUD


Currently the pair is trading at 1.6006. Traders must monitor the 1.6173 resistance level and the support level of 1.5773 for possible breakouts. A possible scenario would be a movement towards the 1.6088 resistance level where a break may lead to the 1.6140 area. An alternative scenario could be a break below the 1.5974 level, where a break may lead to the 1.5920 area.


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Financial News September 15, 2015



BoJ keeps monetary policy stance unchanged


Yen reacted with strength to the Bank of Japan's (BoJ) decision this morning to leave its monetary policy unchanged. Clearly some investors had expected more expansionary monetary policy or predicted a notably more pessimistic outlook.


But the accompanying statement remained largely unchanged.

The few changes that were made are quite something though: the weak economic development of the EM countries has been included into the statement. According to the BoJ the latter is the main reason why exports and industrial production were flat recently. Even though according to the BoJ domestic demand benefits from rising investment as a result of increased company profits.


However, if industrial production was unable to rise further as a result of weak external demand that could quickly be a thing of the past. Economic momentum in Japan does not yet seem sufficiently strong to exist without demand from abroad. Of course the BoJ is well aware that the latter can be fuelled most easily via a weaker currency.


"Even if a weaker currency is only needed to prevent the economy from becoming less competitive as a result of recent depreciation of the Asian currencies. The BoJ is certainly not going to be pleased about further JPY appreciation", says Commerzbank.


Speculation about a further easing of monetary policy is likely to pick up over the coming week, in late October it will be one year since the Japanese bond purchasing programme was last extended.


GBP investors too likely to focus on Fed

UK inflation data for August is also likely to be moderate today. The rate of inflation remains near zero.


And until inflation rises it is premature to speculate about Bank of England (BoE) rate hikes.


However, for the time being GBP investors too are likely to be focussing on the Fed.

"One thing everyone agrees on, the BoE will wait for a Fed rate hike before taking action itself. As of Thursday speculation about the timing of BoE rate hikes will increase again in GBP exchange rates", says Commerzbank.


Fed hoping for benign circumstances

The Fed wants to hike rates. Not on Thursday as that would catch the market on the back foot. But principally it increasingly wants to convince the market that higher rates are appropriate.


There is no other explanation why the US central bankers are so determined to move attention away from low inflation expectations.

Inflation expectations in a survey on consumer expectations published by the New York Fed yesterday also pointed downwards, although that does not become clear on the website due to the way the data was represented . The Fed knows that like a bad sky diver it has missed the best moment to jump.


The majority of analysts agree that the current economic environment has not justified zero rate levels for some time now. However, if during the past six years circumstances were never sufficiently good to hike rates when will they ever be?


"Companies and consumers are unlikely to put pressure on the Fed to hike rates any time soon. A step of this nature is unpopular. And in the end central bankers are only human too. One thing is clear, the better an economic environment the more likely it is that a rate hike will be acceptable", says Commerzbank.


That is what the Fed is hoping for. There is a good reason why it underlines its data dependence. Today's data on retail sales and industrial production in August is likely to confirm again that the Fed will not yet hike rates on Thursday.


"Due to extraordinary effects such as a strong previous month and a decline of petrol prices the data is likely to be moderate. As a result USD exchange rates will continue to be dominated by strategic positioning", added Commerzbank.


Market Review September 15, 2015


During the Asian session this morning, the Reserve Bank of Australia released its Monetary Policy Meeting Minutes, where it was noted that the economic growth is "below average" and that the downward risks to the outlook had increased from overseas developments, such as China’s slowdown. More specifically, RBA members said international developments "had increased the downside risks to the outlook," but it was too early to assess whether Australia’s GDP growth in the coming years would be affected. The central bank was concerned that lower resource exports and soft commodity prices would weigh on the economy, although depreciation in Australian dollar and low interest rates was "expected to support growth, particularly through a larger contribution from net service exports". Moreover, the RBA took an optimistic view regarding employment and said that it "continued to grow strongly in July and the employment-to-population ratio had increased to its highest level since 2013". AUD/USD climbed above the 0.7100 level and currently is trading near the 0.7113 area.


Elsewhere, the Bank of Japan said that the slowing emerging market demand was putting further strains on the economy, while it held off on expanding stimulus, preserving its limited policy options in case an expected United States Federal rate hike, which sparks more global volatility. The recent poor economic data, including weak exports, weak wage growth and soft household spending, has added pressure on the BOJ to expand its already massive stimulus programme to spur on the economy, which contracted in the second quarter. Furthermore, the BoJ reiterated that "Japan's economy continues to recover moderately, although exports and output are being affected by the slowdown in emerging economies." USD/JPY turned south and currently is trading near the 119.62 area.


Released during the early European session, French CPI rose 0.3% versus the estimated 0.4% causing insignificant impact on the EUR/USD, which remained near the 1.1300 area.


The key events for the day will be the United Kingdom CPI and PPI inflation data, the United States Core Retail Sales and retails sales, German ZEW Economic Sentiment and New Zealand GDT Price Index.


Additional economic releases will be the United States Empire State Manufacturing Index, Capacity Utilization Rate and Industrial Production.


Data releases to monitor:


GBP: CPI, PPI Input, RPI, Core CPI, HPI, PPI Output, CB Leading Index.


EUR: German ZEW Economic Sentiment, ZEW Economic Sentiment, Employment Change, Trade Balance.


USD: Core Retail Sales, Retail Sales, Empire State Manufacturing Index, Capacity Utilization Rate, Industrial Production, Business Inventories.


NZD: GDT Price Index.


Trade Idea of the Day


USD/JPY


Currently the pair is trading at 119.69. Traders must monitor the 121.32 resistance level and the support level of 118.77 for possible breakouts. A possible scenario would be a movement towards the 119.38 support level where a break may lead to the 118.90 area. An alternative scenario could be a movement towards the 120.35 resistance level, where a break may lead to the 120.65 area.


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Financial News September 16, 2015



UK sales probably hurt by bad weather

The underlying trend of consumer demand is strong, supported by a high level of consumer confidence and rapid growth in real disposable income.


However, retail sales are highly volatile on a month to month basis.


"In July, sales ex auto fuels rose by 0.4% mom but in August they will have been hurt by the unusually wet weather in the final week so a fall of 0.6% mom is predicted", says Societe Generale.


Temporary recovery of oil prices was driven by speculation


The ICE and CFTC statistics show that the previous increase in oil prices was largely attributable to short covering.


Since mid-August, the number of speculative short positions in Brent on the ICE has fallen from around 130,000 contracts to 97,000 contracts as per 8 September, while those in WTI on the NYMEX have declined from 159,000 to 129,000 contracts.


Overall, however, investor optimism has decreased significantly as compared with May, based on net long positions in both oil types, notes Commerzbank.



Market Review September 16, 2015


Rumours for the upcoming FOMC rate hike give and take. Some traders are expecting a violent move and some others claim that the market has already priced in a small increase in the rates. Despite of this US and global equities recorded an increase and it resumes in the early session today. Traders will be turn their focus to the yields and bonds market as all the volatility will start from there. On Forex market the most pairs are trading in a range waiting for the actual release in order to get a new direction. Nonetheless the opinion that the currency market has priced in the hike is also present.


In UK traders are waiting for the economic releases in order to predictive the possible moves of BoE since it look that there is no solid evidence and necessity for a rate hike this year. Is clear that BoE and FED are highly depended on the upcoming data to structure their monetary policy.


On the data front so far we had New Zealand’s Current account came in at -1.22 billion and Australia’s MI Leading Index m/m released at -0.3%. Later Today we expect the UK data that will be the major event of the session. The Swiss ZEW Economic Expectations and Eurozone CPI data may have an impact to the market. In US session the US CPI data and the Canada Manufacturing Sales data will caused volatility.


Data releases to monitor:


GBP: Average Earnings Index 3m/y, Average Earnings Index 3m/y, Unemployment Rate, 10-y Bond Auction


CHF: ZEW Economic Expectations


EUR: Final CPI y/y, Final Core CPI y/y, German 30-y Bond Auction


USD: CPI m/m, Core CPI m/m


CAD: Manufacturing Sales m/m, Foreign Securities Purchases, NAHB Housing Market Index


Trade Idea of the Day


GBP/JPY


Currently the pair is trading at 184.51. Traders must monitor the 187.31 resistance level and the support level of 181.80 for possible breakouts. A possible scenario would be a movement towards the 183.90 support level where a break may lead to the 183.10 area. An alternative scenario could be a movement towards the 185.20 resistance level, where a break may lead to the 186.00 area.


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Market Review September 17, 2015


The United States consumer prices unexpectedly fell in August as gasoline prices resumed their decline and a strong dollar curbed the cost of other goods, pointing to tame inflation that complicates the Federal Reserve's decision whether to hike interest rates. More specifically, Consumer Price Index declined -0.1 percent, the first decline since January, while Core CPI rose 0.1%. The greenback was pushed lower against the other major currencies after releasing the CPI data, and remained at the same levels today as Markets await FOMC rate decision. The domestic growth in the United States combined with the mixed economic data and the global uncertainty due to the slowdown in China, has made the rate decision a difficult choice for the Fed and put them in a paradoxical situation.


Economists and some policy makers are pressing hard the Fed to continue its stimulus campaign of near-zero-rates because the economic recovery remains far from complete, leaving most Americans still struggling to pay their bills on stagnant incomes. At the same time, Ms. Yellen faces growing internal pressure to start raising rates from Fed officials who are concerned about froth in financial markets and about maintaining control of inflation. The most possible scenario would be Fed leaving the Fed funds rate unchanged at 0.25% for this month and Fed chairwoman, Janet Yellen signaling the chance to raise interest rate in October, by announcing an extra post meeting press conference in that month.


Another event that would be closely monitored today is the quarterly SNB rate decision. The Swiss National Bank is expected to keep interest rates unchanged at -0.75% today while the attention will be on any revision to the economic outlook.


Released during the Asian session this morning, New Zealand GDP rose 0.4% missing the estimated 0.5%, causing insignificant impact on the NZD/USD, which remained in tight range near the 0.6350 area.


Further key events for the day would be the United States Building Permits, Unemployment Claims, Current Account, Housing Starts and Philly Fed Manufacturing Index, while the United Kingdom will release its Retail Sales.



Data releases to monitor:


GBP: Retail Sales.


EUR: ECB Economic Bulletin, Italian Trade Balance.


USD: Building Permits, Unemployment Claims, Current Account, Housing Starts, Philly Fed Manufacturing Index, Natural Gas Storage, FOMC Economic Projections, FOMC Statement, Federal Funds Rate, FOMC Press Conference.\



Trade Idea of the Day


EUR/GBP


Currently the pair is trading at 0.7290. Traders must monitor the 0.7358 resistance level and the support level of 0.7239 for possible breakouts. A possible scenario would be a movement towards the 0.7313 resistance level where a break may lead to the 0.7335 area. An alternative scenario could be a movement towards the 0.7267 support level, where a break may lead to the 0.7245 area and test the support of 0.7239.


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Market Review September 18, 2015


Fed moves opens some upside room for EUR/USD in short term


The USD continued to feel some pressure yesterday already ahead of the Fed, while the EUR performed much better. The moves were generally not huge, though.


Clearly, the Fed meeting has been a great source of uncertainty lately.


And after the meeting, Fed policy uncertainty is not really lower.

"The Fed move opens some more upside for EUR/USD in the short term, especially as it will probably take time for the ECB to respond with dovishness. As for the medium-term trend, a stronger USD is expected on the back of assessment that the US recovery is on track and that a rate hike will come soon", says Nordea Bank.


First Fed rate hike still likely in December


Fed kept rates unchanged yesterday, worried about the global economy, financial market volatility and sluggish US inflation. Still, 13 out of the 17 FOMC members see at least one rate hike this year.


They still seem to give more weight to the almost full achievement of its maximum employment objective than to the disappointments on the inflation front.


"The Fed is still seen on track for a rate hike this year, more likely in December than in October", says Nordea Bank.


Market Review September 18, 2015


The Federal Reserve announced yesterday that it is keeping its benchmark interest rate at or near zero, where it has been since December 2008 at the height of the financial crisis. The decision was made with 9-1 vote, with Richmond Fed President Jeffrey Lacker dissented and called for a 0.25% hike. The lower than expected inflation in the United States, affected by the drop in oil prices and recent volatility in world markets were the main reasons for keeping the rates untouched. “Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term,” the FOMC said. Furthermore, FOMC noted that it would take into account a wide range of information, including "readings on financial and international developments" before deciding on a rate hike.


Fed Chair Yellen said the economic performance of China and other emerging market nations "bears close watching." In addition, fears about the effects of a weakening Chinese economy on U.S. companies were a major factor in recent stock market declines. Yellen also cited the appreciation of the dollar against other currencies as a cause for lower-than-desirable inflation in the short-term. The USD fell broadly against the other majors, especially against the EUR, GBP and JPY. The EUR/USD pair broke above 1.1400 and is currently trading near the 1.1410 area. GBP/USD rose to the 1.5585 area, while USD/JPY pair dropped to the 119.35 area.


Elsewhere, the Swiss National Bank left interest rates unchanged as broadly expected, maintaining the -1.25% to -0.25% range for the 3-month Libor as well as the -0.75% setting for the sight deposit rate. Moreover, SNB warned that the Swiss Franc remained “significantly overvalued, despite a slight depreciation” and reiterated that it would remain active in foreign exchange markets to soften the impact on Switzerland’s economy. USD/CHF dropped sharply yesterday, reaching to the 0.9585 area, where is currently trading, after breaking the 0.9633 support level.


The key events for the day would be the Canadian inflation data, where CPI is estimated to rise 0.0% and Core CPI is expected to rise 0.2%.


Additional economic releases will be the European Central Bank’s Current Account and the United States CB Leading Index.



Data releases to monitor:


GBP: BOE Quarterly Bulletin, MPC Member Haldane speech.


EUR: Current Account.


USD: CB Leading Index.


CAD: Core CPI, CPI.



Trade Idea of the Day


EUR/NZD


Currently the pair is trading at 1.7878. Traders must monitor the 1.8020 resistance level and the support level of 1.7650 for possible breakouts. A possible scenario would be a movement towards the 1.7815 support level where a break may lead to the 1.7790 area and even lower to 1.7730. An alternative scenario could be a movement towards the 1.7930 resistance level, where a break may lead to the 1.7975 area.


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Market Review September 21, 2015


ECB worried about EMs

Two more important ECB representatives, this time Benoit Coeure and Peter Praet, voiced their concerns about the weak growth of the EMs, and the implications of that for the euro zone.


The ECB remains very sensitive.

That means two things according to Commerzbank


(1) The euro increasingly turns into a currency whose exchange rate is likely to fluctuate in line with the EM currencies. It was just an episode that it behaved like a safe haven.

(2) Regardless of what the development in the EMs will look like in the near future the ECB is likely to be more sensitive than the Fed.


The Greek elections took place and produced a clearer result than had been expected. That does not seem to affect the euro though. The exchange rate certainly did not react to the news during today's Asian trading session. And indeed the outcome is difficult to interpret.

"Some commentators celebrate the result as a confirmation of the austerity measures on the part of the Greek electorate. Many see the exact opposite. How Greece overcomes these fiscal problems may not be relevant for the euro exchange rate medium to long term, but how Europe deals with these issues may well be", says Commerzbank.


However, yesterday's election really did not provide any new insights into the latter question. That can be only got if the politicians of a now to be formed Greek government were to break the spirit or the letter of the new aid programme.



Market Review September 21, 2015


The Federal Reserve announced yesterday that it is keeping its benchmark interest rate at or near zero, where it has been since December 2008 at the height of the financial crisis. The decision was made with 9-1 vote, with Richmond Fed President Jeffrey Lacker dissented and called for a 0.25% hike. The lower than expected inflation in the United States, affected by the drop in oil prices and recent volatility in world markets were the main reasons for keeping the rates untouched. “Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term,” the FOMC said. Furthermore, FOMC noted that it would take into account a wide range of information, including "readings on financial and international developments" before deciding on a rate hike.


Fed Chair Yellen said the economic performance of China and other emerging market nations "bears close watching." In addition, fears about the effects of a weakening Chinese economy on U.S. companies were a major factor in recent stock market declines. Yellen also cited the appreciation of the dollar against other currencies as a cause for lower-than-desirable inflation in the short-term. The USD fell broadly against the other majors, especially against the EUR, GBP and JPY. The EUR/USD pair broke above 1.1400 and is currently trading near the 1.1410 area. GBP/USD rose to the 1.5585 area, while USD/JPY pair dropped to the 119.35 area.


Elsewhere, the Swiss National Bank left interest rates unchanged as broadly expected, maintaining the -1.25% to -0.25% range for the 3-month Libor as well as the -0.75% setting for the sight deposit rate. Moreover, SNB warned that the Swiss Franc remained “significantly overvalued, despite a slight depreciation” and reiterated that it would remain active in foreign exchange markets to soften the impact on Switzerland’s economy. USD/CHF dropped sharply yesterday, reaching to the 0.9585 area, where is currently trading, after breaking the 0.9633 support level.


The key events for the day would be the Canadian inflation data, where CPI is estimated to rise 0.0% and Core CPI is expected to rise 0.2%.


Additional economic releases will be the European Central Bank’s Current Account and the United States CB Leading Index.


Data releases to monitor:


USD: FOMC Member Lockhart speech, Existing Home Sales.


CAD: BOC Gov Poloz speech, Wholesale Sales.


EUR: German Buba Monthly Report.



Trade Idea of the Day


GBP/AUD


Currently the pair is trading at 2.1667. Traders must monitor the 2.1929 resistance level and the support level of 2.1349 for possible breakouts. A possible scenario would be a movement towards the 2.1707 resistance level where a break may lead to the 2.1800 area. An alternative scenario could be a movement towards the 2.1570 support level, where a break may lead to the 2.1485 area.


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Market Review September 22, 2015


JPY and AUD volatilities suggest intensifying correlations

Individual volatilities suggest that the correlation between AUD and JPY should intensify. The implied correlation between USD/JPY and AUD/USD is well approximated by the spread between AUD/JPY and AUD/USD implied volatilities via triangle identities between currency pairs.


A further tightening of the spread will reinforce the negative correlation. This approximation, using only two volatilities, essentially failed when Japan launched Abenomics. At that time, the massive increase in USD/JPY volatility significantly impacted the implied correlation, so that using the three currencies of the triangle was necessary, suggests Societe Generale.


Since mid-2013, however, the correlation between USD/JPY and AUD/USD is accurately tracked by the spread between AUD/JPY and AUD/USD volatilities. This spread recently peaked at 3 vols but is showing signs of mean reversion while being still attractive.


Societe Generale recommends - Short AUD/JPY 3M volatility swap vs Long AUD/USD 3M volatility swap


USDAsia pullback likely temporary

Fed kept rates on hold, the prospect of higher US rates has become less of an issue at this stage for EM Asia, while risks of a sharper slowdown in China and larger CNY depreciation have become increasingly important negative factors, particularly for currencies more closely tied to China's growth, such as the KRW and TWD.


"Any rebound in Asian currencies should be seen as opportunities to reinstate long USD positions. The USD may retrace further in the very short term, but remaining bullish is recommended over the medium term. The CNY, KRW, TWD and THB are least likely to benefit from a short-term USD retracement", says Barclays.


Our long-held INR outperformance view remains unchanged, while authorities are likely more willing to accept a temporary rebound in MYR and IDR than in Korea or Taiwan.


"In terms of data, China's Caixin flash PMI is expected to edge up slightly to 47.5 from its August low (47.3) due to a resumption in economic activity. August industrial production for Taiwan, Singapore and Thailand are all expected to remain in contraction on a y/y basis due to weak China and EM growth", added Barclays.


Philippines and Taiwan central banks are both expected to keep rates unchanged, but the latter could turn more dovish, given recent poor outcomes for exports and growth.


Market Review September 22, 2015


The Asian session this morning was rather quiet with few economic releases, as Japanese banks remained closed in observance of Autumn Equinox. Released during the session, Australia’s House Price Index (HPI) rose 4.7% beating the estimated 2.5%. AUD/USD is currently trading near the 0.7150 area after dropping from the 0.7279 area, which was reached during the previous week. The pair has an immediate resistance at 0.7198 level, above which gains could be extended to 0.7253 level. On the flip side, support is seen at 0.7122 level.


Released during the early European session, the Swiss Trade Balance came in at 2.87B beating the estimated 2.77B. Currently, the USD/CHF pair trades near the 0.9735 area, recovering from the 0.9711 area, which was trading during Asian session.


The key events for the day would be the United Kingdom Public Sector Net Borrowing and MPC Member Shafik speech.


Additional economic releases will be the Eurostat Consumer Confidence, the United States House Price Index (HPI), Richmond Manufacturing Index and the United Kingdom CBI Industrial Order Expectations.


Data releases to monitor:


GBP: Public Sector Net Borrowing, CBI Industrial Order Expectations, MPC Member Shafik Speech.


USD: HPI, Richmond Manufacturing Index.


EUR: Consumer Confidence.


Trade Idea of the Day


CAD/JPY


Currently the pair is trading at 90.87. Traders must monitor the 92.03 resistance level and the support level of 90.09 for possible breakouts. A possible scenario would be a movement towards the 90.55 support level where a break may lead to the 90.20 area. An alternative scenario could be a movement towards the 91.29 resistance level, where a break may lead to the 91.63 area.


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Financial News September 24, 2015



AUD/USD likely to reach 0.75 by year end

The Australian dollar has extended its depreciating trend over the past month, with AUD/USD briefly falling below 0.70 for the first time April 2009. The main drivers behind this latest leg lower were further declines in commodity prices amid rising concerns about China, both key to prospects for Australian exports.


An improvement in global risk sentiment and a surprisingly 'dovish' line from the US FOMC at its latest policy meeting saw AUD/USD rally above 0.72 but it remains vulnerable to renewed market volatility.


More positively, comments from RBA Governor Stevens at his recent semi-annual testimony were more upbeat about economic prospects and also suggested he wascomfortable with the current monetary policy setting and level of the exchange rate. Meanwhile, markets still await new Prime Minister Turnbull's policy initiatives.


"Looking ahead, we believe further stabilisation in Chinese data and financial markets, aligned with firming commodity prices, should support the AUD. AUD/USD is forecasted at 0.75 end 2015, rising to 0.78 at end Q2 2016", says Lloyds Bank.


Market Review September 24, 2015


he economic calendar during the Asian session this morning was quite light with releases from New Zealand and Japan. Released from New Zealand, trade deficit widened to NZD -1035M in August, which is higher than the expected NZD -875M. NZD/USD rose above the 0.6300 level despite the disappointing New Zealand trade balance numbers. Released from Japan, Flash Manufacturing PMI dropped to 50.9, missing the estimated 51.3 while All Industries Activity rose 0.2% beating the estimated 0.1%. The Japanese markets re-opened on Thursday after three-day bank holiday while USD/JPY pair remained near the 120.00 area with the next resistance seen at the 120.65 level.


The US Dollar remains the strongest major currency for the week as markets await Fed chair Janet Yellen's speech. Last week the FOMC kept interest rates unchanged, despite the decision, rumours that rate hike would still happen this year remain. Developments regarding the Fed Rate decision will be closely monitored as volatility may arise.


Released during the early European session, Germany’s Gfk consumer climate fell more-than-expected last month to 9.6, from 9.9, missing the estimated 9.8. EUR/USD is currently trading near the 1.1200 area ahead of the German IFO indicator, German Ifo Business Climate and ECB’s Targeted LTRO.


Additional economic releases will be the United Kingdom BBA Mortgage Approvals, the United States Core Durable Goods Orders, Unemployment Claims, New Home Sales and Durable Goods Orders.


Data releases to monitor:


GBP: BBA Mortgage Approvals.


USD: Core Durable Goods Orders, Unemployment Claims, Durable Goods Orders, New Home Sales, Natural Gas Storage.


EUR: German Ifo Business Climate, Italian Retail Sales, Targeted LTRO, Belgian NBB Business Climate.


Trade Idea of the Day


AUD/CHF


Currently the pair is trading at 0.6794. Traders must monitor the 0.7043 resistance level and the support level of 0.6537 for possible breakouts. A possible scenario would be a movement towards the 0.6762 support level where a break may lead to the 0.6680 area. An alternative scenario could be a movement towards the 0.6933 resistance level, where a break may lead to the 0.6980 area.


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Financial News September 25, 2015


Lower demand from EMs and China hit German economy

The PMIs fell more than expected in Germany, pulled down particularly by lower manufacturing confidence. Whereas, the levels are still high indicating a growth rate around 0,4 % in the third quarter of 2015, argues Nordea Bank.


Domestic demand appear to keep up the German incoming orders reflecting lower demand from emerging markets and China. This effect could be more than temporary since it is already visible in incoming orders.


The turbulence in China has had a negative effect on Euro area confidence, the effect being most visible in Germany. The manufacturing PMI of Euro zone fell to 52 from 52.3 and the services sector fell to 54 from 54.4, both still indicating solid growth in September, notes Nordea Bank.



Market Review September 25, 2015


Federal Reserve chair Janet Yellen has made clear that she expects the US interest rates to be raised from their current record low before the end of the year. In her extensive speech in Amherst, Massachusetts, on Thursday, Janet Yellen noted that she “anticipates that it will likely be appropriate to raise the target range for the federal funds rate sometime later this year and to continue boosting short-term rates at a gradual pace thereafter as the labour market improves further and inflation moves back to Fed’s 2% objective”. With her statement, Fed Chair Yellen set out the case for raising rates, for the first time since 2006.


Janet Yellen comments come a week after Fed policymakers voted to keep interest rates at near-zero, where they have been since the 2008 financial crisis. Furthermore, she warned that the United States economy was not yet strong enough to withstand “recent global economic and financial developments” following a worldwide markets slump due to concerns about the health of the Chinese economy. Moreover, she warned that if rates remain low it could lead to excessive risk taking. “Continuing to hold short-term interest rates near zero well after real activity has returned to normal and headwinds have faded could encourage excessive leverage and other forms of inappropriate risk-taking that might undermine financial stability,” she said. She also added that “the more prudent strategy is to begin tightening in a timely fashion and at a gradual pace, adjusting policy as needed in light of incoming data.”


The US Dollar short-lived retreat was waved away by Fed chair Janet Yellen comments, as the greenback covered loses rapidly against other majors. EUR/USD dropped to the 1.1155 area after reaching to the 1.1295 area while USD/JPY rose back to the 120.50 area after dropping to the 119.22 area.


Released during the Asian session, Japan’s national CPI core dropped to -0.1%, which is below the previous of 0.0%, while Tokyo CPI core dropped to -0.2%, in line with consensus. In addition, Corporate Service Price Index (CSPI) rose 0.7% beating the estimated 0.5%.


The key events for the day would be the United States Final GDP, Revised UoM Consumer Sentiment and Flash Services PMI.


Additional economic releases would be the ECB’s M3 Money Supply and Private Loans.



Data releases to monitor:



GBP: FPC Statement.


USD: Final GDP, Final GDP Price Index, Flash Services PMI, Revised UoM Consumer Sentiment, Revised UoM Inflation Expectations.


EUR: M3 Money Supply, Private Loans, German Buba President Weidmann speech.



Trade Idea of the Day



GBP/JPY



Currently the pair is trading at 120.48. Traders must monitor the 120.98 resistance level and the support level of 119.04 for possible breakouts. A possible scenario would be a movement towards the 120.65 resistance level where a break may lead to the 120.90 area, with the next target seen at the 121.30 area. An alternative scenario could be a movement towards the 120.24 support level, where a break may lead to the 119.80 area.



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Market Review September 28, 2015


Investors this week are waiting the Chinese factory data and U.S. employment data for any clue on when the FED will finally hike U.S. interest rates. Any sign of improvement in U.S. employment numbers and signs of stabilization in China economy could help the FED to raise rates. Therefore until then no significant movements are expected in the market and most currencies pairs will move in their recent ranges.


In Europe and particularly in Spain separatists in Catalonia won the parliamentary majority in the regional elections. The result will now intensify the campaign for independence as the separatist leader pledged to lead Catalonia to statehood in 18 months. The same time Bank of Spain governor warned that Catalonia independence would automatically force itself out of Eurozone and EU. Nonetheless the news so far had little impact on the EUR.



Data releases to monitor:



GBP: MPC Member Cunliffe Speaks


USD: Core PCE Price Index m/m, Personal Spending m/m, Pending Home Sales m/m, FOMC Member Dudley Speaks



Trade Idea of the Day



XAU/USD (GOLD)



Currently the pair is trading at 1138.00. Traders must monitor the 1156.45 resistance level and the support level of 1121.20 for possible breakouts. A possible scenario would be a break of the 1135.70 support level where it may lead to the 1130.30 area and possibly near 1121.00 area. An alternative scenario could be a movement towards the 1140.35 resistance level, where a break may lead back to the 1150.00 area.




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Financial News September 29, 2015



Factors that needs to coincide to support US Fed hike as well as USD

Even a more pronounced collapse in US consumer confidence today might fuel concerns about its economic momentum and cause the market to doubt that the US economy really is ready for a rate hike.


Whether or not something will happen in December depends on two factors, as per Commerzbank,



Does the data support a rate hike? For the Fed to hike rates now that it has waited for so long everything will have to be right.

The FOMC members will have to have made it clear that they are ready for rate hikes. And for that to happen they need to continue to stress their willingness to act in the weeks to come.


However, both these factors have to coincide for the dollar to be able to benefit. Only at that stage is the market likely to really price in higher interest rates and only then will EUR/USD dare move below 1.10 again. So for the time being the FX market is dominated by risk sentiment.


USD/JPY to maintain its sideways move due to optimistic Fed outlook


Bank of Japan (BoJ) governor Haruhiko Kuroda continued to sound optimistic in yesterday's speech that Japan was well on the way towards reaching the 2% inflation target and decent growth. However, he admitted that the positive feedback mechanism between employment growth, wage rises and higher inflation still had to gain momentum to reach the inflation target.


He underlined that the BoJ would adjust its monetary policy without hesitation should the inflation trend change as a result of new risks. As the inflation trend moves much more pessimistically than the BoJ, the question is whether there are any further signs that risks for inflation are on the up.


In addition to the current fall in long term inflation expectations, attention centres on the recent rise of the yen as a result of risk aversion and weaker demand in Q2. The data on industrial production and retail sales due for publication tonight will provide an insight into whether at least the latter is beginning to change.


"At present the demand for the yen as a safe haven is clearly still dominating over concerns about further monetary policy easing in Japan. USD/JPY is once again trading below 120. However, the stronger the yen the more difficult it will become to reach the inflation target and the more likely further BoJ measures get", says Commerzbank.


For the time being USD/JPY will therefore maintain its sideways move around 120 before the currency pair will move back towards 125 as a result of a more optimistic Fed outlook.



Market Review September 29, 2015


“A later lift off from near-zero interest rates will better help the United States economy, and the best time for a rate hike may not come until the middle of next year,” Chicago Federal Reserve President Charles Evans said on Monday at Marquette University. Furthermore, Fed Evans noted that normalizing policy too early may bring risks amid pressure on inflation from low energy prices and "subdued" wage growth. Moreover, he said that "before raising rates, he would like to have more confidence than he do today that inflation is indeed beginning to head higher."


New York Fed President William Dudley seems to have different opinion regarding the Fed’s Interest Rate Decision, as he said that “the Fed will probably move this year, and its October meeting remains a possibility”. He, however, stressed that the decision would be depend on the health of US economy and financial conditions, as well as global economic development. The comments follow Fed Chair Janet Yellen's remarks last week that it will likely be "appropriate" to hike rates "sometime this year". The Fed has two meetings remaining this year in October and December.


Elsewhere, the Reserve Bank of India (RBI) reduced its repo rate to 6.75% from 7.25%, with economists having forecast it would trim rates to 7%. The repo rate is the level at which the central bank lends to commercial banks. The latest cut takes interest rates in the country to the lowest level in four and a half years. A rate cut is being seen as a key trigger to boost investment demand in an economy where credit growth has dipped to a multi-year low.


Released during the early European session, German Import Prices fall -1.5%, which is more than the expected -1.4%, while Spanish Flash CPI declined -0.9% versus the estimated -0.6%. EUR/USD was supported overnight as EUR presses on making fresh highs. EUR/USD is currently trading near the 1.1255 area, while EUR/GBP rose above the 0.7400 level and currently is trading near the 0.7418 area.


The key events for the day would be the United States CB Consumer Confidence, the United Kingdom Net Lending to Individuals and the Canadian RMPI.


Additional economic releases would be BOE Gov Carney speech and the United States Goods Trade Balance.


Data releases to monitor:


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


USD: Goods Trade Balance, S&P/CS Composite-20 HPI, CB Consumer Confidence.


EUR: Italian 10-y Bond Auction.


CAD: RMPI, IPPI.


Trade Idea of the Day


EUR/USD


Currently the pair is trading at 1.1254. Traders must monitor the 1.1363 resistance level and the support level of 1.1105 for possible breakouts. A possible scenario would be a movement towards the 1.1302 resistance level where a break may lead to the 1.1340 area. An alternative scenario could be a movement towards the 1.1204 support level, where a break may lead to the 1.1170 area.


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Financial News September 30, 2015



Is Japan under risk of recession?

Once again industrial production in Japan disappointed in August. Production fell by 0.5% mom. Analysts had expected a rise of 1%. Similarly, last night, the country's retail sales remained below expectations .


However, weak macro data long since stopped being a reason for the JPY to come under pressure, notes Commerzbank. It continues to react mainly to changes in risk perception.


At the same time data such as that published last night does create increasing pressure, as there is a risk of Japan sliding back into recession for the second time within Prime Minister Shinzo Abe'e time in office. As it increasingly looks as if abenomics will fail the pressure on the government to spend even more money is mounting. And of course politicians will make increasing demands of the Bank of Japan.


However, the latter has hardly any options left for making its monetary policy any more expansionary. Should it become clear at some stage that there are no options left for Japanese officials to act weak macro data will probably stop being like water off the JPY's back.




Market Review September 30, 2015


The Asian session this morning was rather busy with economic releases from New Zealand, Japan and Australia. Released from New Zealand, ANZ Business Confidence improved to -18.9 in September, from -29.1 in the prior month, while Building Consents declined -4.9%. Released from Japan, industrial production dropped -0.5%, versus the consensus of a 1.1% increase, while Retail Sales rose 0.8% missing the estimated 1.2%. Released from Australia, Building Approvals dropped -6.9% versus the estimated -1.8% and Private Sector Credit rose 0.6% beating the estimated 0.5%.


The US Dollar seems to be struggling in tight range against the other majors. USD/JPY is trading below the 120.00 level, GBP/USD above the 1.5140 level and EUR/USD remained above the 1.1200 level .


Elsewhere, the low inflation data for September from Germany and Spain raised the prospect of the Eurozone inflation number falling below zero. While ECB officials appear to be maintaining their confidence in the Eurozone’s inflationary outlook, soft readings are likely to raise expectations that the central bank will boost its asset-purchase program to support the region’s economy. The EUR has remained relatively firm after ECB Governing Council member Jens Weidmann said concerns about deflation had dissipated, signalling a lack of worry about diminishing price pressures.


Released during the early European session, Japan’s Housing Starts increased 8.8% beating the estimated 7.8%, United Kingdom Nationwide HPI increased 0.5% versus the estimated 0.4%. Furthermore, German Retail Sales dropped -0.4% missing the estimated 0.2%, while French Consumer Spending rose 0.3% beating the estimated 0.2% and Consumer Spending remained flat versus the estimated 0.4% increase. Released from Switzerland, KOF economic barometer dropped unexpectedly last month.The KOF Economic Research Agency said that its economic barometer dropped to a seasonally adjusted 100.4, from the previous of 101.2. Analysts had expected the KOF economic barometer to remain at 101.2.


The key events for the day would be the Eurozone employment report and inflation data, the United States ADP Non-Farm Employment Change, Fed Chair Yellen speech, the BOE Current Account and the Canadian GDP.


Additional economic releases would be Chicago PMI, the United Kingdom Final GDP and German Unemployment Change.


Data releases to monitor:


GBP: Current Account, Final GDP, Index of Services, Revised Business Investment.


USD: FOMC Member Dudley speech, ADP Non-Farm Employment Change, Chicago PMI, Crude Oil Inventories, Fed Chair Yellen speech.


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


Trade Idea of the Day


GBP/USD


Currently the pair is trading at 1.5141. Traders must monitor the 1.5210 resistance level and the support level of 1.5050 for possible breakouts. A possible scenario would be a break of the 1.5130 support level where it may lead to the 1.5090 area. An alternative scenario could be a movement towards the 1.5160 resistance level, where a break may lead back to the 1.5200 area.

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Financial News October 1, 2015



Core USD long remains in tact?

Policy divergence and US growth outperformance are likely to underpin the dollar, even if downside risks in China are realized.


"EUR/USD are forecast at 1.05 for year-end 2015 after the Fed held, but still parity is seen at end-Q1 2016.


Year-end USD/JPY forecasts remain at 125, but GBP-USD is forecasted lower to 1.48 for the year end and 1.47 for 2016 along with other euro crosses. In the dollar bloc, we maintain our USD/CAD forecasts, but now expect AUD/USD to finish 2015 and 2016 at 0.69 and 0.65, respectively", says Bank of America.

A significant CNY devaluation by Chinese authorities would be a significant shock not only to financial markets but also inflation. Such a scenario would make it difficult for the Fed to increase rates, muting the policy divergence theme we expect to strengthen the USD.


"On the emerging market side, core EM Asia FX forecasts are the same in CNY and INR, but in LatAm a higher USD-BRL profile but a lower USDMXN one are manintained for now", added Bank of America.


JPY likely to depreciate further against USD

Kikuo Iwata, Former Deputy Governor of the BoJ says, the Japanese economy is in a much weaker position than the current head of the BoJ Haruhiko Kuroda is trying to tell us and in the foreseeable future the BoJ will have to step up its Quantitative and Qualitative Easing programme.


According to Iwata there is no sign of rising prices in Japan and instead there is a risk that the country could slip back into deflation. The inflation data Mr Kuroda is consulting would allows him to come to the conclusion that he will be able to reach the inflation target of 2% by mid-2016.


"We stick to our view that the yen will depreciate against the USD", says Commerzbank.


Market Review October 1, 2015


Data releases are what characterizes the market today. Starting from Japan Tankan Manufacturing Index came in at 12 and Tankan Non-Manufacturing Index came at 25 and these number made some economists to declare that they are pessimistic and wait to see the construction spending. Further to that is common belief that government might push BoJ harder for expanding monetary easing.


On china we had the Manufacturing PMI release that rose slightly to 49.8. Caixin Final Manufacturing PMI was announced at 47.2. Analyst believe that the outlook for the global economy remains very subdued, mainly due to weak Chinese growth. China surveys draw market attention after the U.S. FED refrain from raising interest rates at its last meeting and worries about the global economy arise. Nonetheless NFP data is releasing this Friday and investors believe that an improvement in U.S. employment could speed up the rate hike as early as this month.


On the same topic IMF chief Christine Lagarde said that global growth will likely be weaker this year than last, with only a modest acceleration expected in 2016. The anticipated rate hike by Fed and slowdown in China are contributing to uncertainty and higher market volatility.


In early European session, we aslo had the below releases:


CHF Retail Sales y/y -0.3%


EUR Spanish Manufacturing PMI 51.7


CHF Manufacturing PMI 49.5


EUR Italian Manufacturing PMI 52.7


EUR French Final Manufacturing PMI 50.6


EUR German Final Manufacturing PMI 52.3


EUR Final Manufacturing PMI 52.0


Looking ahead UK will also release manufacturing PMI. US session main focus will be the ISM manufacturing while jobless claims and construction spending will also cause volatility in the market.


Additional economic releases would be Chicago PMI, the United Kingdom Final GDP and German Unemployment Change.


Data releases to monitor:


GBP: Manufacturing PMI, FPC Meeting Minutes


USD: Unemployment Claims, ISM Manufacturing PMI, FOMC Member Williams Speaks


CAD: RBC Manufacturing PMI


Trade Idea of the Day


EUR/CAD


Currently the pair is trading at 1.4799. Traders must monitor the 1.5155 resistance level and the support level of 1.4660 for possible breakouts. A possible scenario would be a movement towards 1.4734 support level where a break may lead near 1.4660 an possible to 1.4605 level. An alternative scenario could be a movement near the 1.4855, and a break of 1.4890 resistance level.


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Financial News October 2, 2015



U.S. manufacturing slows in September

The Institute for Supply Management (ISM) manufacturing index of United State fell 0.9 points to 50.2 in September. The reading was below consensus expectations, which called for a lesser pullback to 50.6.


"Most subcomponents experienced declines, led by the backlog of orders (down 5.0 pts to 41.5), production (down 1.8 pts to 51.8), and new orders (down 1.6 pts to 50.1). Imports (down 1.0 pts to 50.5), prices paid (down 1.0 pts to 38.0) and employment (down 0.7 pts to 50.5) also pulled back somewhat on the month. The export index was unchanged, but remained in contractionary territory at 46.5. Inventories were unchanged at 48.5, while the customers inventory sub-index rose by 1.5pts to 54.5", notes TD Economics.


There is no doubt that this report is a disappointment, both in terms of the weak headline print, as well as the breadth of the weakness. The declines were widely felt across key sub-components with many showing little to no expansion whatsoever, and with a majority of industries reporting declines.


Moreover, the small spread between new orders and inventories suggests that manufacturing will likely remain subdued through year end, says TD Economics.


China and US drag global manufacturing confidence lower


In terms of the regional details, PMI data from China confirmed weak manufacturing confidence in the nation. The official NBS PMI for September rose marginally to 49.8 from 49.7, but remained in the contraction (sub-50) zone.


The uptick was driven by improvement in production and new orders.

The Markit PMI reading was revised slightly upwards to 47.2 (compared to the flash estimate of 47.0), but it remains at a six-year low. On balance, the tepid PMI data reinforces their view of moderating growth in China and is in line with their lower, revised growth forecast for the year, says Barclays.


In the US, the ISM manufacturing index surprised on the downside, falling to 50.2 in September. The slowdown was broad-based; new orders declined to 50.1 - the lowest since December 2012 and production also slowed. Inventories were unchanged from August and consequently, the forward-looking new orders less inventory measure worsened to 1.6 in September from 3.2.


The weak print came in the wake of the sharp falls of some regional PMIs (Chicago, Milwaukee) into contractionary territory in September, which had been released earlier in the week. On the whole, factors such as lower energy prices, a stronger dollar and weak external demand are likely to keep the manufacturing sector under pressure in the near term, foresees Barclays.


Market Review October 2, 2015



The Eurozone had returned to “sustained growth, under the impulse of our monetary policy” ECB President Mario Draghi said in a speech on Thursday at the Global Citizen Awards in New York City. The ECB has been buying €60 billion of bonds each month under a program set to run until at least September 2016, nonetheless Mr. Draghi said that the central bank would do more if inflation weakens further.


Released during the Asian session this morning, Japan unemployment rate rose to 3.4% versus the consensus of 3.3%, monetary base rose 35.1% versus the estimated 34.2% and Household Spending rose 2.9% beating the estimated 0.4%. Furthermore, Australia retail sales rose 0.4% in August. USD/JPY remained near the 120.00 while AUD/USD is trading near the 0.7045 area.


Released during the early European session, Spanish Unemployment Change came in at 26.1K missing the estimated 17.9K, causing insignificant impact on the EUR/USD, which is currently trading near the 1.1170 area.


US Dollar remained in tight range against most major currencies as traders await employment report from the United States Non-farm payroll is expected to show 201k growth in September. Unemployment rate is expected to remain unchanged at 5.1% and average hourly earnings are expected to rise 0.2%.


Additional economic releases would be the United Kingdom Construction PMI, the United States Factory Orders and the Eurozone’s Producer Price Index (PPI).


Data releases to monitor:


GBP: Construction PMI.


USD: Average Hourly Earnings, Non-Farm Employment Change, Unemployment Rate, Factory Orders, FOMC Member Fischer speech.


EUR: Producer Price Index (PPI).



Trade Idea of the Day


NZD/USD


Currently the pair is trading at 0.6402. Traders must monitor the 0.6504 resistance level and the support level of 0.6236 for possible breakouts. A possible scenario would be a break of the 0.6447 resistance level where it may lead to the 0.6485 area. An alternative scenario could be a movement towards the 0.6337 support level, where a break may lead to the 0.6300 area.


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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.


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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 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 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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