ECB Likely More Cautious amid Soft Core Inflation and Italy. Reinvestment Details to be Revealed in December
We expect ECB to emphasize downside risk to growth in this week's meeting on October 25. That would be a slight shift from the more hawkish stance at the last meeting six weeks ago. With the path of QE announced in June, the focus is on the reinvestment arrangement....
Euro Rally Falters on Italy, Sterling Extending Selloff on Brexit
Italy is the center of focus in a rather quiet day. The highly anticipated response to EU on its budget is delivered. And there is little surprise that Italy insists on sticking with it's budget deficit target of 2019. Euro's rally attempt falters after that and turned mixed. Nonetheless,...
BOC Preview – Rate Hike Fully Priced but Future Decision Still Data- Dependent
The market has fully priced in that BOC would raise its policy rate by +25 bps to 1.75% this week. With Canada-US trade uncertainty eased and the employment market staying strong, the focus is on whether policymakers would consider accelerating the pace of normalization. Notwithstanding a rosier picture, the...
Chinese Stocks Lead Asia Higher, But Australian Dollar Soft
Asian stocks are in full risk-on mode as the week starts. China's Shanghai SSE leads the way by rising 4.56% at the time of writing, back above 2600 handle at 2666. Some attribute the rebound to words of top Chinese official, including President Xi Jinping who vowed to "unwavering"...
CFTC Commitments of Traders – Traders Trimmed Speculations on Currencies amid Looming Uncertainty
The CFTC Commitments of Traders report in the week ended October 16 indicates that positioning on major currencies lowered as a whole. Speculative long positions for USD index futures dropped -2 635 contracts while shorts fell -2 802, sending the NET LENGTH higher, by +167 contracts, to 37 876...
CFTC Commitments of Traders – Oil Bulls Shied as Price Rally Might be Over
According to the CFTC Commitments of Traders report for the week ended October 16, NET LENGTH for crude oil, heating oil and gasoline futures all dropped. This happened in line with the ongoing correction oil prices. Speculative long positions of crude oil futures declined -18 694 contracts, while shorts...
Multiple Themes in Markets, More Upside in Euro after Surviving Italy Rating Downgrade
The markets were driven by multiple themes last week. Dollar ended up broadly higher as supported by hawkish FOMC minutes and rebound in treasury yields. However, it's outshone by New Zealand and then Australian Dollar. Kiwi was boosted by stronger than expected CPI. Meanwhile, the Aussie was pulled up...
Canadian Dollar Dives after Weak CPI and Retail Sales, Euro Steady Despite Widening German-Italian Spread
Canadian Dollar suffers heavy selling in early US session as the large deceleration in CPI to 2.2% raising doubts on whether BoC would still hike next week. Meanwhile Yen and Swiss Franc are among the weakest ones. Widening of German-Italian spread is not translated into selloff in European stocks...
China’s Economic Growth Slowed More than Expected. Worst of Trade War Yet to Come
China’s economic growth decelerated further in 3Q18, as the impacts of restraining infrastructure investment and trade war surfaced. GDP growth moderated to +6.5% y/y in the third quarter, the slowest since the first quarter of 2009. Growth came in lower than market expectations and second quarter’s +6.7%. On an...
Euro Weak as Italy-EU Budget Clash Starts, China GDP Miss Shrugged
Euro and Sterling recover mildly in Asian session but they remain the weakest two for the week. Brexit impasse and Italian budget continued to weigh down both currencies, which also drags down Swiss Franc. Dollar's rally extended lower night as helped by hawkish comments from a top Fed official....
Dollar Struggles to Find Momentum Despite Solid Job Data
Dollar is struggling to find more upside momentum in early US session except versus Swiss Franc. Solid job data is not giving the greenback the needed fuel for rally. Nonetheless, Dollar is still firm as supported by the hawkish FOMC minutes released yesterday. For now, Australian Dollar is the...
Dollar Slightly Firmer on Hawkish FOMC Minutes, Sterling Softens on Brexit Impasse
Dollar strengthened overnight after FOMC minutes showed that majority of Fed officials expected interest to enter into restrictive region down the road. Treasury yields also ended up mildly higher. And more importantly, stock markets showed no particular negative reaction to the minutes. USD/CHF's break of 0.9954 high and USD/JPY's...
Fed’s September Minutes Explained the Rationale of Removing Forward Guidance, Showed More Concerns about USD Strength
The FOMC minutes for the September meeting contained little news regarding the rationale of the 25 bps rate hike last month, as well as the future path of monetary policy normalization. Yet, there are some points worth nothing. First, the minutes explain why the “accommodative” guidance was removed. Second,...
Crude Oil Inventory Surprisingly Gained Despite Falling Production
The report from the US Energy Information Administration (EIA) shows that total crude oil and petroleum products stocks gained +2.99 mmb to 1262.98 mmb in the week ended October 12. Crude oil inventory rallied +6.49 mmb (consensus: +2.17 mmb) to 416.44 mmb. Inventories increased in ALL of of 5...
Dollar Higher But More Needed to Prove Itself, Sterling Weak as CPI Miss
Dollar and Yen trade broadly higher in early US session as investors turn cautious again. Minutes of September FOMC meeting where there was another 25bps hike would catch much attention. But we're not expecting anything dramatic from there. All the markets need to know should have been delivered in...
Dollar Ignores Another Trump Attack on Fed, Yen Higher as Chinese Stocks Resume Down Trend
US equities closed sharply higher overnight with DOW ended up 2.17%. Optimism carried on in early part of Asian session but couldn't persist. At the time of writing, China's Shanghai SSE reversed earlier gains and is trading down -0.8%, breaking yesterday's low to extend larger down trend. Riding on...
Sterling Jumps on Strong Wage Growth, But Upside Capped by Brexit Uncertainty
Sterling trades broadly higher today as boosted by stronger than expected wage growth data. While the gains are impressive, upside is limited against Dollar, Euro and Yen so far. UK Prime Minister Theresa May's fortunate in the EU summit tomorrow is a factor capping the Pound. Also, there will...
New Zealand Dollar Jumps on CPI, Dollar Recovers after Brief Selloff
New Zealand Dollar rises sharply and broadly today as boosted by consumer inflation data. Other than that the forex markets are pretty directionless. Despite being sold off yesterday after retail sales, Dollar recovers broadly today as corrective trading continues. The greenback is in tie with Canadian Dollar as the...
RBA Minutes – Content with Weak AUD but More Concerned about Credit Conditions
The RBA minutes for the October meeting reinforced its cautious stance on the monetary policy. With the cash rate unchanged at 1.5% for 24 consecutive months, the members have seen no urgency to make adjustment. While affirming the next move would more likely a rise than a fall, there...
Dollar Weakens on Retail Sales Miss and Saudi Arabia Tensions, Sterling Rebounds
Dollar is trading as the weakest one for today after it's rally attempt failed. Additional pressure i seen in early US session after retail sales miss. Tension between the US and Saudi Arabia and the risks of sanctions are seen as a factor weighing down the greenback. Meanwhile, Sterling...