Daily Market Analysis by Vinson Financials

[VinsonFinancialsFX]

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

[B]Trade Idea of the Day

GBP/JPY[/B]

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.

[VinsonFinancialsFX]

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.\

[B]Trade Idea of the Day

EUR/GBP[/B]

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.

[VinsonFinancialsFX]

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.

[B]Trade Idea of the Day

EUR/NZD[/B]

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.

[VinsonFinancialsFX]

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.

[B]Trade Idea of the Day

GBP/AUD[/B]

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.

[VinsonFinancialsFX]

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.

[B]Trade Idea of the Day

CAD/JPY[/B]

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.

[VinsonFinancialsFX]

Market Review September 23, 2015

ECB likely to ease policy further before year end?
US might not be a direct immune to a likely China slowdown. In line with market expectations, it is now seen that the Fed delaying its rate liftoff until March 2016, due in part to risks from China.

The delay in the Fed’s policy normalization has undermined the USD’s momentum and re-enforced EUR/USD range trading, leading to a ‘vicious circle’ of low macro conviction, exacerbated by declining liquidity, market direction and investor engagement.

The above have led to material trade-weighted EUR appreciation, which in combination with global disinflationary pressures including a sharp decline in commodity prices, have increased the already considerable downside risks to euro area inflation.

“There has been a further sharp drop in market-based measures of euro area inflation expectations. These developments have tightened financial conditions and lead us to expect the ECB to ease policy further before year end”, says Barclays

ECB’s policy easing may break EUR/USD trading range to downside
The ECB is likely to extend its time-based commitment QE for an additional 6-9 months (ie, through March or June 2017). The greatest effect of this policy change would be to push 2-3 year Eonia swap rates closer to the ECB deposit rate floor of -20bps as the risk of a reversal of ECB balance sheet expansion policies is pushed further into the future.

“EUR/USD is expected to depreciate both in response to the decline in relative rates and the refocusing of market attention on the chasm between euro area and US growth prospects. Alternatively (or additively), the ECB may increase the pace of monthly purchases”, says Barclays.

While it may have some of the same signalling effect on the EUR, a little impact is expected on euro area rates from such action. Finally, there also is a low, but non-negligible risk that the ECB cuts its deposit rate further into negative territory, more likely as a secondary action should the euro appreciation persist.

“A further cut is expected in deposit rates to have the greatest negative impact on the EUR as it would remove the lower bound on interest rates, and represents a downside risk to our EUR/USD forecasts”, added Barclays.

Market Review September 23, 2015

The preliminary Caixin China manufacturing purchasing managers’ index (PMI) fell to a six-and-a-half-year low of 47.0 in September, below the 47.6 forecast. Furthermore, the reading has been below 50 since March. The decline in the flash PMI was mainly led by the new orders and new export orders sub-indexes, suggesting weak domestic and external demand. The recent run of disappointing data has raised concerns around the health of China’s economy, leading several banks and international institutions to pare growth forecasts for the country. Earlier this week, the Asian Development Bank lowered growth projection for China for this year to 6.8%, down from March projection of 7.2%, and was below the government’s target of 7.0%.

Several currency pairs were affected by the Chinese data released during the Asian session, AUD/USD extended losses, dropping below the 0.7040 level, while NZD/USD dropped to the 0.6255 area.

The GBP/USD pair fell to the 1.5340 area, making it the worst performing major pair for the week so far. The decline was resulted due to weaker UK data and rising expectations of 2015 Fed rate hike.

The key events for the day would be the Eurozone Markit PMI and PMIs from France and Germany in addition to ECB President Draghi speech.

Additional economic releases will be the Canadian Core Retail Sale, FOMC Member Lockhart speech and MPC Member Broadbent speech.

Data releases to monitor:

GBP: MPC Member Broadbent speech.

USD: FOMC Member Lockhart speech, Crude Oil Inventories, Flash Manufacturing PMI.

EUR: French Flash Manufacturing PMI, French Flash Services PMI, German Flash Manufacturing PMI, German Flash Services PMI, Flash Manufacturing PMI, Flash Services PMI, ECB President Draghi speech.

CAD: Core Retail Sales, Retail Sales.

CHF: SNB Quarterly Bulletin.

[B]Trade Idea of the Day

EUR/AUD[/B]

Currently the pair is trading at 1.5784. Traders must monitor the 1.5959 resistance level and the support level of 1.5597 for possible breakouts. A possible scenario would be a movement towards the 1.5820 resistance level where a break may lead to the 1.5880 area. An alternative scenario could be a movement towards the 1.5735 support level, where a break may lead to the 1.5682 area.

[VinsonFinancialsFX]

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.

[B]Trade Idea of the Day

AUD/CHF[/B]

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.

[VinsonFinancialsFX]

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.

[B]Trade Idea of the Day

GBP/JPY[/B]

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.

[VinsonFinancialsFX]

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

[B]Trade Idea of the Day

XAU/USD (GOLD)[/B]

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.

[VinsonFinancialsFX]

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.

[B]Trade Idea of the Day

EUR/USD[/B]

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.

[VinsonFinancialsFX]

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.

[B]Trade Idea of the Day

GBP/USD[/B]

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.

[VinsonFinancialsFX]

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

[B]Trade Idea of the Day

EUR/CAD[/B]

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.

[VinsonFinancialsFX]

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).

[B]Trade Idea of the Day

NZD/USD[/B]

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.

[VinsonFinancialsFX]

Financial News October 5, 2015

CNB discusses negative interest rates

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

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

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

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

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

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

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

Market Review October 5, 2015

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

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

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

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

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

Data releases to monitor:

GBP: Services PMI.

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

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

[B]Trade Idea of the Day

EUR/AUD[/B]

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

[VinsonFinancialsFX]

Financial News October 6, 2015

Euro area orders to bounce back in August

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

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

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

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

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

Market Review October 6, 2015

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

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

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

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

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

Data releases to monitor:

GBP: Housing Equity Withdrawal.

USD: Trade Balance, IBD/TIPP Economic Optimism.

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

CAD: Trade Balance, Ivey PMI.

CHF: CPI.

NZD: GDT Price Index

[B]Trade Idea of the Day

EUR/GBP[/B]

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

[VinsonFinancialsFX]

Financial News October 7, 2015

IMF sees slower growth as economy adjust to lower commodity prices

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

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

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

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

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

Will the Fed hike rates this year?

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

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

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

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

Market Review October 7, 2015

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

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

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

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

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

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

Data releases to monitor:

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

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

EUR: French Trade Balance.

CAD: Building Permits.

CHF: Foreign Currency Reserves

JPY: BOJ Press Conference.

AUD: RBA Assist Gov Debelle speech.

[B]Trade Idea of the Day

GBP/CHF[/B]

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

[VinsonFinancialsFX]

Financial News October 8, 2015

BoJ slow in downgrading its assessment on economy

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

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

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

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

No major impulses from BoE?

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

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

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

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

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

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

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

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

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

Data releases to monitor:

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

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

EUR: ECB Monetary Policy Meeting Accounts.

CAD: Housing Starts, NHPI.

[B]Trade Idea of the Day

CHF/JPY[/B]

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

[VinsonFinancialsFX]

Financial News October 9, 2015

Neither FOMC minutes nor Williams helpful for the dollar

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

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

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

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

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

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

Market Review October 9, 2015

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

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

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

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

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

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

Data releases to monitor:

GBP: Trade Balance, Construction Output.

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

EUR: Italian Industrial Production.

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

[B]Trade Idea of the Day

GBP/CAD[/B]

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

[VinsonFinancialsFX]

Financial News October 12, 2015

ECBs Coeur says too early to discuss more QE

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

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

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

Market Review October 12, 2015

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

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

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

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

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

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

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

Data releases to monitor:

GBP: CB Leading Index, MPC Member Weale speech.

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

CAD: BOC Gov Poloz Speech

[B]Trade Idea of the Day

AUD/NZD[/B]

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

[VinsonFinancialsFX]

Financial News October 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
[B]Trade Idea of the Day

CAD/JPY[/B]

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.