Foreign Exchange Market Recap - Around The World #BoC #CETA #EU #USD #forex #Brexit #OPEC #USPresidentialElection

finviz.png

While the EUR was the over-all winner last week, the USD showed considerable strength, pushing stronger on supportive fundamentals and, most importantly, strong technicals (more below). Although there were several economic releases of note – for example, Durable Goods Orders, a notoriously volatile number, coming in at -0.1% vs call of +0.1% and CAPEX (non-defense + ex-aircraft) orders down -1.2% vs call -0.1% and others – these soft readings were eclipsed by Friday's first look at Q3cc GDP. The headline numbers were excellent and subject to future revision, but do support the notion of a Fed hike in December. In Q3 the US economy grew +2.9% vs call of +2.5% and better than double the Q2 annual rate of +1.4%. Mr. Market was impressed and took both equities and the USD higher; the latter not hugely as the currency had been strengthening all week, so there was a measure of profit-taking by traders.

The CAD traded in a relatively tight range after Bank of Canada Governor Stephen Poloz, while renewing the BOC's commitment to a 2% inflation target last Monday, clarified the bank's stance on economic stimulus. In a word: Nada. While rate hikes are far off in the future, rate cuts are not being seriously considered at present despite his remarks of two weeks ago. Traders had been selling the loonie but shifted tack immediately on this news. There was a near-total dearth of domestic economic news for players to digest, so the currency traded largely on US and overseas developments and, considerably less so, on the gyrating price of oil. The correlation is actually much less than one might expect for the so-called 'Petroloonie".

g2.png

Speaking of crude, OPEC appears to be having some (not-unexpected) difficulty keeping its members and associates in line on proposed production freezes. To the extent the cartel appears united, crude rallies but when Russia or Iraq or Venezuela start demanding exemptions or the like, crude weakens. WTI traded north of $50 USD/bbl but seemed to lack conviction. Some analysts are now openly sceptical of OPEC's ability to enforce discipline in its ranks and one researcher is calling for crude to drop to $30 USD/bbl in the near future. Elsewhere, GBP rose and fell on changing views of how the whole Brexit/Article 50 scenario will play out. Sterling did rise on Thursday's release of Q3 GDP (+2.3% vs call +2.1%) which, once again, seemed to confirm continued domestic strength, gainsaying the anti-Brexit pundit class, but the currency is still vulnerable to the whole Brexit issue. On the very next day, Friday, GBP tumbled after a court in Northern Ireland affirmed the British government's right to proceed with the whole Brexit process as currently structured. What this means to investors is that sterling, for at least the next long while, will be driven by headlines in addition to fundamentals and technicals. The JPY traded weaker in advance of Bank of Japan meetings being held today. Earlier this year Prime Minister Abe had announced that a 'comprehensive, bold economic stimulus package' would be released this fall. Since that point nothing substantial has happened, aside from 10 year bond yield targeting, but Mr. Market believes in being prepared so the Yen sold off in anticipation of further economic stimulus of some type. (The fact that all these stimulus packages announced over the years by the BOJ have had, on balance, minimal effect is best left unsaid.) The EUR held relatively steady on a lack of (bad) news in the EU and developments at the ECB. Deutsche Bank surprised with a better-than-expected earnings report. Monte dei Pasche, the floundering Italian bank, managed to survive another week while looking for a capital infusion. The Canada-EU trade accord surmounted a major barrier when the Belgian region of Wallonia agreed to sign on to the deal, thus clearing the decks for eventual ratification. As for the ECB: analysts now believe the bank will renew its 80 billion EUR monthly bond purchases come next March. The bank is slated to discuss the issue in December, and ECB President Mario Draghi has indicated in the recent past that monetary accommodation will continue. He had also dismissed any talk of an abrupt end to the quantitative easing program, so traders anticipate no change next March. Finally, we draw our readers' attention once again to a very strong USD bullish signal. The so-called 'Golden Cross', where the 50 day moving average (in blue) crosses above the 200 day moving average (in red) is now confirmed, and traders have taken note. The index has surged about 5% this month. Assuming no negative surprises with the economy and or the November 8th US Presidential election (big if now with the FBI involved again) and a December Fed rate hike, the index could mount a challenge to the 100 Level. Having said that, the index did snap a three week advance and the technical indicators are warning that consolidation or correction may be in order - the RSI that did not make new highs with prices and the MACDs are on the verge of crossing lower. g3.png

Key Data Releases This Week

Forecast

Previous

MONDAY, OCTOBER 31

21:00

CNY

Manufacturing PMI

50.3

50.4

21:45

CNY

Caixin Manufacturing PMI

50.2

50.1

23:30

AUD

Cash Rate

1.50%

1.50%

23:30

AUD

RBA Rate Statement

TUESDAY, NOVEMBER 1

All Day

EUR

Bank Holiday

05:30

GBP

Manufacturing PMI

54.6

55.4

08:30

CAD

GDP m/m

0.2%

0.5%

10:00

USD

ISM Manufacturing PMI

51.8

51.5

12:00

CAD

BOC Gov Poloz Speaks

17:45

NZD

Employment Change q/q

0.6%

2.4%

17:45

NZD

Unemployment Rate

5.1%

5.1%

20:30

AUD

Building Approvals m/m

-2.8%

-1.8%

22:00

NZD

Inflation Expectations q/q

1.7%

WEDNESDAY, NOVEMBER 2

All Day

JPY

Bank Holiday

05:30

GBP

Construction PMI

51.9

52.3

08:15

USD

ADP Non-Farm Employment Change

166K

154K

10:30

USD

Crude Oil Inventories

-0.6M

14:00

USD

FOMC Statement

14:00

USD

Federal Funds Rate

<0.50%

<0.50%

20:30

AUD

Trade Balance

-1.71B

-2.01B

THURSDAY, NOVEMBER 3

05:30

GBP

Services PMI

52.5

52.6

08:00

GBP

BOE Inflation Report

1.3%

1.1%

08:00

GBP

MPC Official Bank Rate Votes

0-0-9

0-0-9

08:00

GBP

Monetary Policy Summary

08:00

GBP

Official Bank Rate

0.25%

0.25%

08:30

USD

Unemployment Claims

258K

10:00

USD

ISM Non-Manufacturing PMI

56.2

57.1

20:30

AUD

RBA Monetary Policy Statement

20:30

AUD

Retail Sales m/m

0.4%

0.4%

20:35

CAD

BOC Gov Poloz Speaks

FRIDAY, NOVEMBER 4

08:30

CAD

Employment Change

-10.0K

67.2K

08:30

CAD

Unemployment Rate

7.0%

7.0%

08:30

USD

Average Hourly Earnings m/m

0.3%

0.2%

08:30

USD

Non-Farm Employment Change

175k

156k

08:30

USD

Unemployment Rate

4.9%

5.0%

083e3d7a6b

Follow us




Follow us on Twitter @vbcefx


Disclaimer


The information and opinions contained herein are gathered from sources which are thought to be reliable but the reader should not assume that the information and opinions are official or final. VBCE makes no warranty concerning the accuracy of the information and opinions, and accepts no liability for the consequences of any actions taken on the basis of the information and opinions provided. The content is for general information only and does not constitute in anyway giving financial advice.