|
|
US Session: BoE Expands QE, But Less Than Expected
November 05, 2009 6:14 PM CET
|
|
G10 Advancers and Decliners vs USD |
| | SEK | 0.57 |  | | | JPY | 0.43 | | | | EUR | 0.23 | | | | DKK | 0.20 | | | | NOK | 0.17 | | | | CHF | 0.16 | | | | AUD | 0.10 | | | | GBP | 0.08 | |  | CAD | -0.11 | | | NZD | -0.59 | |
|
|
Global Indexes |
Current Level |
% Change |
|
| Hang Seng Index | 21,479.08 | - 1.28 | | Shanghai Index | 3,155.05 | + 0.84 | | FTSE 100 Index | 5,140.64 | + 0.64 | | DAX Index | 5,492.74 | + 0.89 | | S&P 500 Index | 1,062.36 | + 1.51 | | DJIA Index | 9,973.69 | + 1.75 | | Nikkei 225 Futures | 9,740.00 | + 0.40 |
|
|
World Markets |
Current Level |
% Change |
|
| Gold | 1,091.00 | - 0.19 | | Silver | 17.46 | - 0.10 | | VIX | 26.06 | - 5.92 | | Crude wti | 80.20 | - 0.24 | | USD Index | 75.65 | + 0.01 |
|
|
Todays Calender |
Estimates |
Previous |
Country / GMT |
|
| Chicago Fed President Evans (FOMC voter) speaks | -- | -- | USD / 14.45 | | Fed Governor Duke (FOMC voter) speaks | -- | -- | USD / 16.30 | | ECB Executive Board Member Gonzalez-Paramo speaks | -- | -- | EUR / 16.30 | | Unemployment rate, % (sa) Oct | 4.2 | 4.1 | CHF / 09.00 | | Manufacturing production, % m/m Sep | 0.3 | 0.8 | NOK / 09.00 | | Producer input prices, % m/m (y/y) Oct | 1.5 (-1.5) | -0.5,-6.5 | GBP / 09.30 | | Producer core output prices, % m/m (y/y) Oct | 0.2 (2.0) | 0.5 (1.4) | GBP / 09.30 | | Producer output prices, % m/m (y/y) Oct | 0.4 (1.9) | 0.5 (0.4) | GBP / 09.30 | | Germany: New manufacturing orders, | 1.0,-13.7 | 1.4,-21.1 | EUR / 11.00 | | Change in non-farm payrolls, thous Oct | -175 | -263 | USD / 13.30 | | Unemployment rate, % Oct | 9.9 | 9.8 | USD / 13.30 | | Average hourly earnings, % m/m (y/y) Oct | 0.1 (2.3) | 0.1 (2.5) | USD / 13.30 | | Wholesale inventories, % m/m (y/y) Sep | -1.0,-14. | -1.3,-14. | USD / 15.00 | | Consumer credit, chg $bn Sep | -10.0 | -12.0 | USD / 20.00 |
|
|
|
Currency Tech |
EURUSD
R 2: 1.4930
R 1: 1.4910
CURRENT: 1.4874
S 1: 1.4700
S 2: 1.4625
GBPUSD
R 2: 1.6740
R 1: 1.6690
CURRENT: 1.6580
S 1: 1.6405
S 2: 1.6240
USDJPY
R 2: 91.60
R 1: 91.30
CURRENT: 90.52
S 1: 90.05
S 2: 89.25
AUDUSD
R 2: 0.9220
R 1: 0.9145
CURRENT: 0.9101
S 1: 0.8970
S 2: 0.8905
USDCAD
R 2: 1.0960
R 1: 1.0870
CURRENT: 1.0642
S 1: 1.0598
S 2: 1.0505
|
|
Market Brief |
The headline event of the day was the BoE meeting where MPC members voted to maintain interest rates at 0.5%, but more significantly, chose to increase their asset purchase target by only GBP25bn (vs. consensus estimates for 50bn). The smaller-than-expected expansion of the QE program caused a rapid spike in GBPUSD from 1.6500 to 1.6600, as markets perceived this move signaled a less severe assessment of the UK economy by the MPC than the bearish press commentary that has prevailed since the GDP number. Policy-makers did however explicitly say that they would keep the size of the Asset Purchase Program under review, leaving the door open for further expansion if necessary later. Nevertheless, the surprisingly optimistic tone of the statement – that suggested a pick-up in UK economic activity may soon be evident, and cautioned that inflation is likely to rise ‘sharply’ in the near term – caused a rapid exit of many GBP-shorts that have weathered the rally until this point, and helped GPBUSD to push above 1.6605 previous resistance to touch a high of 1.6636. The pair has since pared back gains after meeting steady supply above 1.6600, and is currently still at elevated levels around 1.6570. Resistance remains for now just around 1.6650 and thereafter 1.6700, but a break above there would likely target 1.7000.
Following shortly after the BoE we had the ECB rate announcement where rates were kept on hold as expected at 1.0%. Aside from the more encouraging outlook on the economic recovery, Trichet kept very much to the same message as in previous meetings; namely that current rates are ‘appropriate’ and inflation expectations in the medium and long term are firmly anchored. EURUSD rallied on the mention that not all of the liquidity measures currently in place would be needed in the future, but the currency rally (much of which had pre-empted Trichet by rising in sympathy with GBPUSD earlier), again struggled in the face of supply between 1.4910-20 (high 1.4917). As with previous press conferences, Trichet refused to be drawn into a comment on the level of EURUSD strength, and instead reiterated that a strong USD is in the US interest.
There were a number of other releases during the day, including Swiss CPI which posted a disappointing -0.8% YoY change for Oct against consensus forecasts for a -0.7% print (-0.9% prior). Given the SNB’s commitment to warding off deflation by keeping the CHF weak (supported by policy-maker Jordan in a recent interview), the reading reinforces our view that the SNB will continue to intervene in EURCHF, and we like to buy on dips from 1.5100to 1.5080.
Although somewhat overshadowed by the impending central bank events, there was positive data from the UK data as Industrial Production gained 1.6% MoM vs. 1.2% expected, and Manufacturing Production climbed 1.7% MoM vs. 1.0% expected. Eurozone Retail Sales on the other hand was well below expectations, posting a -0.7% MoM change in Sep vs. expectations for a 0.2% gain.
As a busy week of data winds down, there are still a handful of significant releases to expect on Friday. After the FOMC statement expressed that subdued inflation and the deteriorating labour market were the major hurdles to a change in policy stance, tomorrow’s Non-Farm Payrolls have increased in importance. A poor number should ensure the Fed remains in accommodative mood (positive for EURUSD, equities, gold), whilst evidence that employment levels are improving may give ammunition to the Fed to shift to a more hawkish tack (expect a USD rally). Overnight we will also get the RBA’s Quarterly Monetary Policy Statement, while the rest of the session promises Norwegian Industrial Production, UK PPI, Canadian Unemployment and US Wholesale inventories.
|
|
European Session: FOMC Signals Low Rates To Continue Contingent On Employment And Inflation
November 05, 2009 9:13 AM CET
|
|
G10 Advancers and Decliners vs USD |
| | JPY | 0.57 | | | CHF | -0.12 | | | EUR | -0.14 | | | DKK | -0.20 | | | CAD | -0.43 | | | GBP | -0.53 | | | NOK | -0.63 | | | AUD | -0.66 | | | SEK | -0.70 | | | NZD | -1.17 | |
|
|
Global Indexes |
Current Level |
% Change |
|
| Nikkei 225 Index | 9,717.44 | - 1.23 | | Hang Seng Index | 21,459.39 | - 0.71 | | Shanghai Index | 3,155.05 | + 0.84 | | FTSE futures | 5,085.00 | + 1.34 | | DAX futures | 5,388.50 | - 1.08 | | SMI Futures | 6,218.00 | - 0.82 | | S&P future | 1,042.00 | - 0.47 |
|
|
World Markets |
Current Level |
% Change |
|
| Gold | 1,084.99 | - 0.66 | | Silver | 17.25 | - 1.18 | | VIX | 27.72 | - 3.74 | | Crude wti | 79.79 | - 0.75 | | USD Index | 75.94 | + 0.26 |
|
|
Todays Calender |
Estimates |
Previous |
Country / GMT |
|
| CNB rate announcement Nov | 1.25% | 1.25% | CZK / -- | | Industrial production, % m/m (y/y | 1.3,-10.2 | -2.5,-11.2 | GBP / 09.30 | | Manufacturing output, % m/m (y/y) | 1.0 (-9.9) | -1.9,-11.3 | GBP / 09.30 | | Retail sales, % m/m (y/y) Sep | 0.4 | -0.2,-2.4 | EUR / 10.00 | | BoE MPC Bank Rate decision | 0.50% | 0.50% | GBP / 12.00 | | ECB rate announcemen | 1.00 % | 1.00 % | EUR / 12.45 | | ECB press conference | -- | -- | EUR / 13.30 | | Initial jobless claims, thous | -- | 530 (526) | USD / 13.30 | | Non-farm productivity, | 6.0 (3.4) | 6.6 (1.9) | USD / 13.30 | | Unit labour costs, | -3.2,-3.1 | -5.9,-1.2 | USD / 13.30 |
|
|
|
Currency Tech |
AUDUSD
R 2: 0.9220
R 1: 0.9145
CURRENT: 0.9036
S 1: 0.8970
S 2: 0.8910
USDCAD
R 2: 1.0960
R 1: 1.0870
CURRENT: 1.0677
S 1: 1.0596
S 2: 1.0500
EURJPY
R 2: 135.00
R 1: 135.73
CURRENT: 133.96
S 1: 132.50
S 2: 131.70
USDMXN
R 2: 13.455
R 1: 13.405
CURRENT: 13.3215
S 1: 13.205
S 2: 13.175
|
|
Market Brief |
Yesterday’s key event was the US FOMC meeting where policymakers kept rates on hold as expected. The headline aside, markets were more keenly awaiting the accompanying statement for an insight into how Fed officials have incorporated recently improved US data into their policy view, and whether this environment of cheap liquidity would continue going forward.
True to form, the statement was largely a cut-and-paste job of last month’s release, and included the key sentence that rates would remain “exceptionally low” for an “extended period”, a crucial phrase that has underpinned the recent asset rally. EURUSD rallied from around 1.4850 before the release to just above 1.4900, but price action after that was very choppy between 1.4825-1.4910 as markets digested the wording of some of the later sections of the statement. A new insert to the wording was that improved growth alone did not warrant higher rates, and mentioned for first time that this would depend on the evolution of “low rates of resource utilization”, subdued inflation trends and inflation expectations from here. This is likely to make Friday’s Non-Farm Payrolls a critical event for investors (if it wasn’t already). The committee also announced that the agency debt buying program would be cut back to $175bn from $200bn, but clarified that this reflected the “limited availability of agency debt”.
The results of the meeting should be broadly positive for risk assets, but after a big rally from EURUSD, equities and gold in the run-up to the event, prices have moderated slightly in the aftermath. Gold tipped to a new all-time high at 1097.80 in the evening before profit-taking set in and we have dealt down to a low of $1084.80 this morning. Meanwhile Asian equities have been mixed to lower, and European futures are pointing to a mildly lower open.
Today’s main events will of course be the BoE and ECB meetings. The main focus for the BoE meeting will be the MPC’s response to recent UK data; it is largely guaranteed by the dismal Q3 GDP that an extension to the QE program will be deemed necessary, but market estimates have drifted between whether this will be GBP25bn or GBP50bn. We feel that the MPC will likely increase the plan by 25bn to a total of 200bn, and choose to re-assess at subsequent meetings whether more is necessary. However a significant number of economist estimates now look for a 50bn increase (to 225bn total), so there is scope for GBPUSD to either sell-off or rally depending on which of the two scenarios plays out.
The ECB meeting is expected to produce another unchanged rate decision, but the markets will be sensitive to any official references to currencies and EURUSD strength. Trichet’s press conference will be keenly eyed for mentions of this, especially in the Q&A session after the statement. Also today Swiss CPI will be released and consensus is looking for -0.7% y/y. The SNB's Jordan said inflation would be the main determinant for the SNB's exit from current policies. With inflation expected to remain in negative territory, the SNB will likely continue its FX intervention policy.
|
|
ACM Advanced Currency Markets SA (hereinafter referred as ACM) is a professional financial intermediary, directly regulated by the Swiss Federal Department of Finance, Anti Money Laundering Control Authority. As forex specialist, ACM provides only currency trading via highly professional forex trading software. All customers are aware that this information or any part thereof has been prepared without taking account of your objectives, financial situation and/or needs. This information is not intended as personalized investment advice and does not constitute a recommendation. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. The analysis is based on the information which ACM finds reliable and accurate, but ACM does not assume any responsibility for any material nor for the transactions made on the basis of the information or the estimates of the analysis. ACM cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct, indirect and/or consequential loss arising from any use of this information, document or its content. All opinions and estimates constitute ACM analysis as of the data and are subject to change without notice. ACM does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions. Past performance is not a reliable indicator of future performance.
|
| |
|
|
| |
| |
|