Weekly Fundamental Dose: 09– November – 2017
While the mixed messages from RBA & RBNZ have already propelled the AUD and NZD moves, together with market’s response to China’s inflation figures, there are fewer economics left for publishing during the already thin economic calendar-week. However, Geo-political concerns emanating from Saudi Arabia, US and Asia could keep offering interesting facts to entertain investors. Let’s discuss them.
It Was Actually An Active Week
Unlike the present week, the economic calendar was heavier and contained too many important events that together gifted volatility to last week. To name some of the headlines, BoE’s once in a decade rate-hike didn’t let upbeat UK PMIs to support the GBP as the central bank’s tone sounded like one and done case while employment details from US, Canada and New Zealand flashed welcome figures but couldn’t please the commodity buyers with top-tier PMIs from China and US being dismal, which in-turn dragged the AUD towards south but not the NZD and CAD which benefited due to pullback. Further, US President proposed his tax-plan in front of the House of Representatives and revealed his choice of Fed Governor Jerome Powell as next Fed Chair that helped the US Dollar to register another weekly advance whereas softer than expected Flash CPI dragged the EUR towards negative weekly closing. Additionally, the safe-havens, namely JPY and Gold, had to take the loss due to market’s risk-off mood while increased chances of extension to the global production-cut agreement favored Crude prices.
A Bit Softer Moves Witnessed During The Week
With majority of headline details/events already being conveyed during last week, there are very few details left for publishing during the week. Among them, monetary policy meetings by the RBA & RBNZ, together with inflation figures from China and US Prelim UoM Consumer Sentiment, gained major attentions out of which only the US gauge of consumer confidence is still on the card to roll out.
Even if both the RBA and RBNZ didn’t alter their monetary policy, the former sounded a bit nervous for its inflation and hurt the AUD while the later upgraded inflation forecast and signaled sooner than expected rate-hike that propelled the NZD. Also, the Chinese Inflation figures flashed some welcome numbers on Thursday and helped the commodity basket to extend their latest profit-booking, which also favored AUD, NZD and CAD, while the Crude benefited from Geo-political crisis at Saudi Arabia and could ignore higher than forecast US inventory build.
Given the recent purge in Saudi Arabia to crackdown corruption reigniting global political tensions, together with Trump’s Asia visit and the drama concerning his tax-plan at home being additional fuel, global investors seem not bothering about thin economic calendar. As a result, the JPY and Gold managed to recover majority of its latest losses while the USD is struggling to hold its heights. Moving on, uncertainties concerning Brexit hurt the GBP while the EUR, left with no important data-point, gained on greenback’s weakness. However, impressive earnings report from US tech-giants and positive result of JOLTS Job Openings confined the USD’s excessive drop.
Politics May Keep Dominating Trading Desks
Although monthly releases of UK Manufacturing Production & Goods Trade Balance, followed by the US Preliminary UoM Consumer Sentiment, are the only things about to publish on Friday, political waves at US, Middle-East and Asia could cater the need of momentum traders.
Looking at the forecasts, UK Manufacturing Production may soften a bit to 0.3% from 0.4% earlier but the Goods Trade Balance can register a smaller deficit figure of -12.9B compared to -14.2B previous while Preliminary reading of UoM Consumer Sentiment is expected to please greenback buyers with 100.80 mark versus the downwardly revised 100.70 earlier.
Hence, economic details are less likely to create much of the market noise with majority of them remaining around previous levels.
In case of Geo-political concerns, Saudi Arabia’s latest purge to crackdown corruption is still in the highlight as some of the important policymakers are also under the threat of arrests while the nation’s latest feud with Iran indicates not so happy journey for OPEC’s production-cut accord.
Turning to US, President’s tax plan is finding it harder to please the House of Representative, even if some of the changes are proposed, while the Senate is planning to announce its own tax-cut bill on Thursday, differing from one in the House of Representatives, which may generate even larger noise of opposition as the Republicans hold minority status in Senate.
Moving forward, US President’s long Asia tour seems struggling to generate its required efforts as Japan didn’t sound too optimistic about the trade-ties with US, needless to mention its absence of word for North Korea. However, the South Korea had to please Mr. Trump as he being the only super-power in its side to confront the Hermit kingdom’s missile-threats.
Mr. Donald Trump is in China on Thursday where he struck a welcome business deal and also praised the nation to help US confront the North Korea diplomatically; however, his eagerness to look for more from China and Russia may not be satisfied looking at the latest response from both the economies.
**Given the on-going differences concerning tax-bill between Republicans and Democrats, the delay in tax-budget announcement is more likely and the same can hurt the USD while Trump’s failure to lure Asian leaders against the North Korea could add the weakness into the greenback. **
Further, tensions at Middle-East have started threatening the Crude’s global supply-cut pact and may affect the energy front negatively. Additionally, the UK PM is again in threat of losing power after the recent scandals push some of Theresa May’s top-tier politicians to resign, which in-turn signals GBP’s further downside.
However, in all these crisis safe-havens like JPY, Gold and CHF are likely to benefit due to risk-safety demand but impressive earnings from US companies could limit their rally.
EURUSD struggles around 1.1550-55, breaking which it can drop to 1.1480, with 1.1660 acting as nearby important resistance whereas GBPUSD is less likely to dip beneath 1.3060 and aim for 1.3000 but its upside can be confined by 1.3180 & 1.3230 resistance-levels. Further, USDJPY again failed to surpass 114.40-50 area and dropped below short-term ascending TL that may drive it to 113.00 but the USDCAD had to break 1.2680 in order to test 100-day SMA level of 1.2600. Moreover, AUDUSD seems struggling between 0.7730 & 0.7620 while NZDUSD need to clear 0.7010 barrier to aim for 0.7055-60 and a downside break of 0.6890 likely again fetching it to 0.6815.
Have a nice trading-day ……