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  1. #11
    Join Date
    Aug 2015


    Financial News August 19, 2015

    JPY weakness may not prevent exports to fall

    Japan's headline trade deficit widened in July to JPY268bn. The detail continues to show very weak underlying export performance. The country posted 7.6% year on year growth in exports. In volume terms, exports were down 0.7% y/y and the trend remains no better than flat.

    The second leg of JPY weakness (from 100 to 120 in 2014 H2) appears to be bearing no more fruit than the first (from 80 to 100 in 2013), though the lack of evidence that JPY weakness is "working" will not stop it falling further, says RCB Capital Markets in a report on Wednesday.

    ECB to revise macroeconomic outlook in September meeting

    The July ECB minutes revealed cautious optimism, highlighting the fragility of the economic recovery, the weak inflation outlook and the balance of risks still tilted to the downside (even if these risks have not worsened since the June meeting).

    Quite rightly, the members indicated that attention also needs to be paid to possible changes in commodity prices, to the slowdown in emerging markets and to exchange rate developments to the extent that they could affect the medium-term outlook for price stability. With the ongoing volatility in EM markets, the PBoC's decision to devalue the CNY and weakness in commodity prices, there is no doubt that the ECB will have to focus on these issues in the September policy meeting, possibly providing a revised macroeconomic outlook, including a lower inflation path, says Barclays.

    Market Review August 19, 2015

    During the Asian session this morning, minimal market movement was noticed in the FX market, due to the lack of significant economic releases and despite the persisting worries over China's economy and on the timing of the Federal Reserve interest-rate hike. Moreover, the Asian stocks fell a fourth day as a deepening commodities selloff raised concern that growth may be slowing in China. Furthermore, the Shanghai Composite index plunged 6.2% to close at 3748.16, which is the biggest drop since July 27.

    Released during the Asian session, New Zealand’s PPI Input dropped -0.3% versus the estimated -0.5% while PPI Output dropped -0.2%. In addition, Japan’s Trade Balance came in at -0.37T versus the estimated -0.16T and All Industries Activity rose 0.3% versus the estimated 0.4% causing insignificant impact on the USD/JPY, which remained near the 124.25 area.

    Elsewhere, the European Central Bank reduced the maximum level of emergency aid available to Greek banks in a sign the country's financial tensions are easing after a rescue package was agreed with creditors. More specifically, ECB decided to cut the ceiling on Emergency Liquidity Assistance provided by the Bank of Greece to EUR 89.7 billion from EUR 90.4 billion.

    The main event for the day will be the FOMC Meeting Minutes, where the focus will be turned on the policy makers comments regarding the timing of the first rate hike and whether September is the appropriate time.

    Additional economic releases will be the United States Core CPI, CPI and the ECB Current Account.

    Data releases to monitor:

    EUR: Current Account.

    USD: Core CPI, CPI, FOMC Meeting Minutes, Crude Oil Inventories.

    Trade Idea of the Day


    Currently the pair is trading at 1.5031. Traders must monitor the 1.5296 resistance level and the support level of 1.4825 for possible breakouts. A possible scenario would be a movement towards the 1.5005 support level where a break may lead to the 1.4935 area. An alternative scenario could be a movement towards the 1.5115 resistance level where a break could lead to the 1.5160 area.

  2. #12
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    Aug 2015


    Financial News August 20, 2015

    Swedish economy to post 3% growth rate in 2015

    The Swedish economy has developed pretty much as expected since the Riksbank's monetary policy meeting in July. Growth seems to be set for close to 3 % this year, employment and labour supply continue to increase (making the fall in unemployment only marginal) and inflation should increase from low levels, especially in Q4, says Nordea Bank in a report on Thursday.

    The SEK trades close to the Riksbank's forecast. Also, the Riksbank's worries on the Greek situation should have eased somewhat since the previous meeting.
    Nonetheless, the Riksbank is expected to provide further easing at its next monetary policy meeting on the 2nd of September, announcement the 3rd of September. A repo rate cut by another 10 bps, from -0.35% to -0.45% is expected, estimates Nordea Bank. The Riksbank expanded its government bond purchase programme by 45 bn SEK in July, thereby amounting to bn 135 SEK in total. The programme will be carried out throughout 2015. Nordea Bank states, neither an expanded programme or additional rate cuts below -0.45 % can be excluded.

    Analysts still regard the Riksbank's inflation forecast being on the high side. Admittedly, the most recent inflation outcome surprised on the upside. Inflation (CPIF) stood at 0.9% y/y in July, 0.2% point higher than the Riksbank's projection. But overall cost pressures remain low and the inflation outlook is muted, adds Nordea Bank. Both electricity and fuel prices have declined over the summer, which has not yet fed through to the inflation readings to a full extent.

    Chinese economic activity could pose risks to U.S. economic outlook

    The low level of inflation and wage inflation is creating doubts in the U.S. economy. Some participants cited downside risks to inflation, pointing to the absence of any noticeable response of inflation to the reduction in resource slack over the past several years, risks of further declines in oil and commodity prices, and the possibility of further appreciation in the dollar.

    The downward pressure on inflation from the previous declines in energy prices and the effects of past dollar appreciation would prove to be temporary.
    Chinese economic activity could pose risks to the U.S. economic outlook. A possible divergence in interest rates in the United States and abroad might lead to further a

    Market Review August 20, 2015

    The Minutes from the Federal Reserve's meeting were out early 20 minutes before the official release and after a leak. Late July meeting minutes showed that policymakers are concerned about lagging inflation and that a stronger dollar and Chinese developments are threatening the US economy. What is worth noting is that the Fed meeting took place before Chinese devaluation of the Yuan in early August, which means that in their upcoming meeting the Central Bank may well consider such risk has increased and therefore delay a rate hike. Furthermore, Policy makers agreed that "the conditions for policy firming had not yet been achieved, but were approaching that point.” A mixed reaction was noticed in the markets as US Dollar lost its edge against other major currencies falling to a three-week low of 123.68 against the Japanese Yen while the EUR/USD rose to 1.1132 level extending its rebound from this week's low of 1.1016. Moreover, Gold rose to one-month high of 1.1140. The focus will be on the upcoming economic data before September Fed meeting, as Jobs, manufacturing and inflation data may signal a red light for the long expected Fed rate hike.

    Released during the early European session this morning, Swiss Trade Balance came in at 3.74B versus the estimated 2.59B causing slight impact on the USD/CHF, which is currently trading near the 0.9660 area after falling from the 0.9780 area. Released from Germany, Producer Price Index (PPI) rose 0.0% versus the estimated -0.1%.

    Elsewhere, U.S. oil fell to a six-year low below $41 a barrel, a price last seen at the height of the financial crisis in February 2009, raising expectations that crude could drop below $40 soon. The seasonal falloff in demand together with concerns about the Chinese economy and the continuing global glut of crude are estimated to be the main reasons for this price drop.

    The main event for the day will be the United Kingdom Retail Sales, the United States Unemployment Claims, Existing Home Sales and Philly Fed Manufacturing Index.

    Additional economic releases will be the Canadian Wholesale Sales and United Kingdom CBI Industrial Order Expectations.

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

    Data releases to monitor:

    EUR: Spanish 10-y Bond Auction.

    USD: Unemployment Claims, Existing Home Sales, Philly Fed Manufacturing Index, CB Leading Index, Natural Gas Storage.

    CAD: Wholesale Sales.

    GBP: Retail Sales, CBI Industrial Order Expectations.

    Trade Idea of the Day


    Currently the pair is trading at 194.39. Traders must monitor the 195.25 resistance level and the support level of 192.00 for possible breakouts. A possible scenario would be a break of the 194.00 support with target 193.60 and possible the 193.20 area. An alternative scenario would be a move above 194.50 with possible testing of 194.90 level.

  3. #13
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    Aug 2015


    Financial News August 21, 2015

    USD absorbs depreciation of other currencies

    At the margin newly arisen risks from China and the implied USD appreciation may dissuade those members of the FOMC who lack confidence in US economic momentum from voting for a hike in September.

    But currencies cannot escape relative value; hence, the US as a largely closed economy with the greatest internal growth momentum is relatively less affected, implying the USD bears the burden of others' adjustment.
    "Furthermore, if Fed policymakers are dissuaded from policy firming due to risks from China, it is even more likely that other major central banks' policies will push back tightening or move toward outright easing. It is worth stating that our forecasts implicitly force the USD to absorb nearly all of the depreciation of other currencies. This is not to say that the US is unaffected by Chinese growth or the weakening of the CNY", states Barclays in a ressearch note.

    Bullish bias in EUR rates is unlikely to disappear

    The bullish bias in EUR rates is unlikely to disappear as the ECB has little choice but to remain accommodative, if not increase this accommodation at some point. Therefore, a more bullish message from the September ECB meeting is possible.

    "While there is a bullish bias in rates, levels are not found to be attractive to initiative a new outright position though. In EGBs, short-term tactical outperformance of Spain is seen versus Italy in the 10y sector with this week's Spanish auctions out of the way and Italy likely to issue a new 10y BTP at the 28 August month-end auction", says Barclays.

    Bund ASW at 40bp trades close to the wides of the summer currently. While setting up for the September swapped issuance pipeline can put tightening pressure on spreads, the current level is not very expensive fundamentally, and the bullish sentiment in the rates market can likely overshadow any expected near-term swapped issuance anticipation near term.

    "Therefore, a further outright rates rally is likely to be seen that squeezes Bund ASW more before considering any tactical shorts", added Barclays.

    Euro area PMIs on focus

    The EUR has been well supported of late, regardless of the latest developments pointing towards a rising probability of the ECB turning more aggressive on monetary policy, at least verbally. Both weakening commodity price developments and a stronger EUR may have increased downside risks to inflation considerably, especially if growth momentum fails to accelerate from the current levels.

    From that angle today's focus will be on preliminary August PMI releases. Considering muted external demand prospects due to Asia related tensions, business activity is unlikely to improve strongly.
    Under such conditions it cannot be excluded that medium-term inflation expectations as measured by 5y inflation swaps will continue to trend lower in the weeks to come, says CAB Bank. This in turn suggests that the ECB will have to become more aggressive in order to prevent deflation fears from reappearing. It must be noted that starting with the next week several central bank members including Executive Board member Coeure will speak.

    "As a result to the above outlined conditions we advise against buying the single currency around the current levels, in particular against the USD and GBP", suggests CAB Bank.

    Market attention remains on China and the Fed
    Moving on from Greece, market attention remains on China and the Fed. Following China's currency devaluation last week, the Chinese stock market remained very volatile this week, facilitating the downward pressure on global stock markets and commodities with Brent oil down another c.5%, just shy of its lows in January.

    Meanwhile, emerging markets, especially the currencies, are under remarkable pressure helped by the China story, Fed getting closer to the lift-up and domestic issues in certain EM countries. In this environment, bond markets have stayed resilient with 10 Bund rallying 7bp and 10y Treasuries and Gilt yields falling by 10bp.

    Somewhat weaker-than-expected US inflation data and relatively dovish July FOMC minutes have also helped the bond market strength this week.

    "The recent fall in oil price will also likely to lead the ECB to lower its inflation projections in the 3 September staff projections. Furthermore, at 1.12, EURUSD is struggling to cheapen, especially during flight-to-quality episodes, partly because it is also a funding currency now", says Barclays.

    Lastly, with almost up to the 4y part of the German curve again trading below -20bp following the recent market rally, ECB is anecdotally pushing its QE purchases further out on the yield curve, not just in Germany but also in some peripheral issuers, which is making longer-end EGBs more resilient.

    Market Review August 21, 2015
    On the very day that Greece received the first tranche of its new EUR 86bn bailout package, from the European stability mechanism, the European Union’s rescue fund, Prime Minister Alexis Tsipras has decided to resign and call a snap general election, which will be held next month. In the next few months, Alexis Tsipras government has much to do in order to meet the terms of the bailout and persuade its creditors to consider giving Greece some much needed debt relief. The election will most probably complicate that timetable and will inevitably create more uncertainty about where the future of Greece. However, despite the risks it involves, Tsipras’s strategy seems necessary for broader democratic and political reasons.

    Released during the Asian session, Japan Flash Manufacturing PMI came in at 51.9 versus the estimated 52.1, New Zealand Credit Card Spending rose 9.7% versus the previous of 6.6% and Chinese Caixin Flash Manufacturing PMI came in at 47.1 missing the estimated 48.1. The US Dollar is sharply lower against the other majors especially against Euro and Yen as markets seem to be adapting to expectations of a Fed rate hike in September. EUR/USD rose to the 1.1294 level making EUR the strongest currency for the week. Furthermore, Gold extended its gains reaching as high as $1168 per ounce.

    Released during the early European session this morning, GfK German Consumer Climate came in at 9.9 versus the estimated 10.2, French Flash Manufacturing PMI came in at 48.6 versus the estimated 49.8 and French Flash Services PMI came in at 51.8 missing the estimated 52.1. Moreover, German Flash Manufacturing PMI came in at 53.2 beating the estimated 51.7 and German Flash Services PMI came in at 53.6 versus the estimated 53.7.

    Elsewhere, the United States equities suffered the steepest one-day sell-off in more than a year on concern over global growth in China and other emerging markets. DJIA dropped -2.06% to close at 16990 and breaking below the 17000 handle, which is the largest decline since February last year. S&P 500 also dropped -2.11% to close at 2035.73.

    The main event for the day will be the Canadian Core CPI, Core Retail Sales and United States and Europe Flash Manufacturing PMI.

    Data releases to monitor:

    EUR: Flash Manufacturing PMI, Flash Services PMI, Consumer Confidence.

    USD: Flash Manufacturing PMI.

    CAD: Core CPI, Core Retail Sales, CPI, Retail Sales.

    GBP: Public Sector Net Borrowing.

    Trade Idea of the Day


    Currently the pair is trading at 81.36. Traders must monitor the 83.25 resistance level and the support level of 80.67 for possible breakouts. A possible scenario would be a movement towards the 81.19 support level where a break may lead to the 80.90 area. An alternative scenario could be a movement towards the 81.90 resistance level where a break could lead to the 82.15 area.

  4. #14
    Join Date
    Aug 2015


    Financial News August 24, 2015

    EUR-USD at 1.15 What will ECB think about that?

    The 1.15 in EUR-USD was not breached for the time being. Nonetheless the euro is the main benefactor of the uncertainty on the FX market. The current EUR strength could soon become an issue: speeches by no less than three ECB central bankers are due over the coming three days.

    So far things have worked out well for the ECB on the currency side of things.
    "However, the success of the QE strategy could soon be at risk if the euro records further gains. ECB President Mario Draghi made it clear at the last press conference that the ECB would be willing to use all tools available within its mandate should this be the case. The ECB will no doubt put up a fight", states Commerzbank in a report on Monday.

    CNY to weaken on PBoCs policy dilemma

    PBoC set USD-CNY fixing rate at 6.3862 this morning, compared with last closing of 6.3889. While China's central bank intends to stabilize the CNY spot rates, a strong selling CNH flows in the offshore market is seen due to concerns over China's slowdown.

    USD-CNH breached above 6.4650 this morning, which has pushed up USD-CNY to around 6.40 as well.
    In fact, China's central bank is facing a policy dilemma: the market liquidity is tightening due to capital outflows; nonetheless, if PBoC injects large amount of cash to ease the liquidity tightness, this will exacerbate the expectation of CNY depreciation. Therefore, weakening bias in CNY exchange rate in the near term is expected, argues Commerzbank.

    Feds September decision: Little reason for USD weakness

    In view of the successes of the US economy and the strong labour market in the US the fundamental factors continue to support the US dollar. However, the USD too was under attack today as a result of the risk-off sentiment.

    At least against the EUR the USD was not the ultimate safe haven today. This is because, the risks in China and the turbulence this causes might cause the Fed to postpone its first rate step in September, states Commerzbank. To December at the earliest, but possibly even to early next year. The market is lowering its rate expectations, which is putting pressure on the US dollar.
    Concerns about an end of the cheap money from the US are no doubt contributing to the current nervousness on the FX market. Even though US monetary policy would remain expansionary even after a first rate step. And even if the Fed was to postpone its first rate hike there is little scope for extensive dollar weakness. In that case other central banks would not only have to react to the risks emanating from China and to falling commodity prices, but also to the Fed's hesitant approach - and would probably have to implement further monetary policy steps, says Commerzbank.

    Market Review August 24, 2015

    On Sunday, the State Council of China announced that it allowed pension funds managed by local governments to invest in the stock market for the first time, potentially channelling hundreds of billions of Yuan into the country's struggling equity market. According to rules, published by the State Council, pension funds will be able to invest up to 30 percent of their net assets in the country's stocks, equity funds and balanced funds. Asian markets opened the week sharply lower affected by the meltdown in China stock market. China’s stocks plunged the most since 2007 as government support measures failed to allay investor concern that a slowdown in the world’s second-largest economy is deepening. The Shanghai Composite Index tumbled 8.5 percent to 3,209.91 at the close.

    Moreover, global markets were affected by China’s worsening slowdown. The US Dollar suffered losses especially against Euro, the Japanese Yen and Swiss Franc. EUR/USD climbed to the 1.1497 area, USD/JPY dropped to the 120.70 area and USD/CHF plunged to the 0.9365 area. Furthermore, Crude oil extended its recent descent, reaching as low as $39 per barrel.

    Elsewhere, Greece’s pre-election campaign has turned ugly before it has even officially started, Confusion over the timing of fresh elections in Greece has threatened to jeopardise the prospects for a smooth transition to a new government and the ability of the debt-stricken country to meet the conditions of its Euro 86bn bailout. The election campaign intensified over the weekend with officials preparing candidate lists and the appointment of a caretaker administration after the Prime Minister, Alexis Tsipras refused to participate in talks with other party leaders to form a new government. The prospect of snap elections in Greece has raised fears that the country will once again fall behind implementation of vital reforms as officials indicated the poll could be held as early as 20 September. Eurozone politicians and investors are keenly watching the situation in Athens after Tsipras said he needed to renew his mandate with the Greek people following the deal with Brussels.

    The economic calendar is empty today with the focus turned on the developments in Greece, China and the emerging markets.

    Trade Idea of the Day


    Currently the pair is trading at 138.19. Traders must monitor the 138.95 resistance level and the support level of 137.06 for possible breakouts. A possible scenario would be a movement towards the 138.01 support level where a break may lead to the 137.75 area. An alternative scenario could be a movement towards the 138.54 resistance level where a break could lead to the 138.85 area.

  5. #15
    Join Date
    Aug 2015


    Financial News August 25, 2015

    Chinese economy slowing at alarming pace

    The latest sharp risk selloff in global market took many market analyst by a surprise. Part of the problem seems to be that unlike recent bouts of risk aversion the latest was not triggered by the 'usual suspects' - the Fed, the debt crisis in Europe or the fear of further selloff in commodity prices - but by China.

    There is therefore little that the FOMC or the ECB (or, for that matter, the BoJ or the BoE) could do to lift the market risk sentiment. Indeed, the fear is that the Chinese economy is slowing at an alarming pace and that the domestic policy makers have fallen well behind the curve.

    To make matters worse, weaker Chinese exports (because of sharp CNY REER appreciation in recent years and still feeble global trade) are among the culprits for the economic malice. This forced the PBOC to join the global currency wars with a bang couple of weeks ago. Weaker CNY should continue to propagate and prolong the negative impact from the Chinese demand shock on commodity and manufacturing exporters around the world, says CAB Bank in a research note on Tuesday.

    Market Review August 25, 2015

    China made the global economy looks fragile again. China started an alarming red light that caused global equities to collapse following a global sell off and the worst day in the last four years.

    The JPY and EUR benefited the most of these and made fresh highs against the USD on Monday. Both the EUR and JPY are bought back as investors unwind positions in trades that entail higher risk but also higher potential return. The USD tumbled as this may have consequences to the US economy and the FED plans to hike the interest rates in September.

    As Central banks tend to protect their financial markets, possible interventions or other actions may occur, a Japan official said that there is no plan for emergency MoF-BoJ-FSA meeting now, but possible if needed. In US Atlanta Fed Lockhart commented that a rate hike will begin sometime this year since normalization in monetary policy is needed, rates may remain low for some time more due to stronger USD and oil price drop that complicates growth forecasts. From Australia officials call for market calm as Australia fundamentals indicators are still good.

    On the data front so far we had Australia’s CB Leading Index m/m at -0.2%, China’s CB Leading Index 0.9%. New Zealand’s Inflation Expectations announced at 1.9%. German Final GDP q/q came in at 0.4% and Switzerland’s Employment Level reported at 1.24 million.

    German Info Business Climate and US CB Consumer Confidence and the US New Home sales will be among the highlights of the day.

    Data releases to monitor:

    EUR: German Ifo Business Climate

    USD: US CB Consumer Confidence, US New Home sales,

    CAD: Gov Council Member Schembri Speaks

    Trade Idea of the Day


    Currently the pair is trading at 0.6515. Traders must monitor the 0.6797 resistance level and the support level of 0.6252 for possible breakouts. A possible scenario would be a movement towards the 0.6533 resistance level where a break may lead to the 0.6590 area. An alternative scenario could be a movement towards the 0.6428 support level where a break could lead to the 0.6370 area.

  6. #16
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    Aug 2015


    Financial News August 26, 2015

    Major economies growth likely to fall in next few years due to weaker CNY

    Markets have been pricing in a higher risk of disinflationary pressure, and rightly so. Growth and inflation in the major economies are likely to fall in the next few years as a result of a weaker CNY.

    Europe and Japan are more vulnerable than the US, and the effect would be positive only for China.
    In line with this view, markets are anticipating that central banks will keep an easing bias, given the disinflationary influence of a weaker CNY. Core fixed income market have rapidly priced in these disinflation risks. Bond yields in major markets have fallen across the curve, but the moves have been more prominent in inflation breakevens, suggesting that inflation is a bigger concern than growth.

    "We agree with this view in the euro area and perhaps the UK, but not in the US. In the latest Global Inflation-Linked Monthly: Avoid the bear trap, our inflation strategists recommend being long US BE inflation up the 5y sector (energy hedged)", says Barclays.

    The market pricing of inflation is too aggressive, considering that the recent US inflation trends have been positive, labor markets have tightened further, and the Fed's reaction function is data dependant.

    CNY has opened opportunities, notably in EM FX

    As Chinese growth slowed and commodity prices fell, the currencies of commodity exporters and of China's regional trading partners have fallen versus the USD, which has also been strengthening versus major currencies as the US recovery gathers momentum and monetary policy easing is reduced.

    The CNY move has led to further concerns about EM generally and EM and commodity currencies in particular.
    "The external environment for EM has been more difficult since 2011 and it is likely to get tougher, given that the USD and US rates are likely to rise further and that commodity prices will have limited upside as China continues to slow in the next few years", says Societe Generale.

    A stronger USD, in particular, is usually associated with higher US rates, it dents the FX appreciation gains on EM assets and increases the value of USD-denominated EM debt.

    Market Review August 26, 2015

    China’s central bank cut interest rates on Tuesday and said it would pump liquidity into the banking sector in an attempt to boost the slowing economy. Moreover, PBoC announced that it had reduced its benchmark one-year lending rate by 25 basis points to 4.6 per cent, effective from Wednesday August 26, which is the fifth time to cut rates since November. Furthermore, the bank also cut the one-year savings rate by 25 basis points to 1.75 per cent and said it would lower the reserve requirement ratio for large banks 50 basis points to 18 per cent from September 6. In addition, Shanghai Composite index closed down 1.3 percent at 2,926.3, as investor confidence remained frail despite fresh monetary stimulus.

    The Japanese Yen remains the strongest currency for this week followed closely by the Euro and Swiss franc. Dollar and Sterling remained in the same tight range. USD/JPY is currently trading near the 119.45 area, GBP/USD near the 1.5685 area, USD/CHF near the 0.9420 and EUR/USD near the 1.1500 area.

    Released during the Asian session, New Zealand’s Trade Balance came in at -649M versus the estimated -665M, causing insignificant impact on NZD/USD, which remained near the 0.6485 area. Japan Services Producer Price Index (SPPI) rose 0.6% beating the estimated 0.4% and Australian Construction Work Done rose 1.6% versus the estimated -1.5%.

    Released during the early European session, Swiss UBS Consumption Indicator came in at 1.64 compared to the previous of 1.61.

    Elsewhere, Oil prices staged a comeback on Tuesday, amid gains from bargain hunting and short covering spurred on by an interest rate cut from China’s central bank. Light, sweet crude for October delivery settled 2.8% up at $39.31 a barrel while Brent gained 1.2%, to $43.21 a barrel. Both had fallen to fresh six-year lows Monday as a broad market selloff sparked by China added to a series of massive losses from an unrelenting flood of supply.

    The main event for the day will be the United States Core Durable Goods Orders, FOMC Member Dudley speech and Crude Oil Inventories.

    Additional economic releases will be the United Kingdom BBA Mortgage Approvals and CBI Realized Sales.

    Data releases to monitor:

    USD: Core Durable Goods Orders, Durable Goods Orders, FOMC Member Dudley speech, Crude Oil Inventories.

    GBP: BBA Mortgage Approvals, CBI Realized Sales.

    Trade Idea of the Day


    Currently the pair is trading at 1.5690. Traders must monitor the 1.5818 resistance level and the support level of 1.5561 for possible breakouts. A possible scenario would be a movement towards the 1.5720 resistance level where a break may lead to the 1.5770 area. An alternative scenario could be a movement towards the 1.5659 support level where a break could lead to the 1.5610 area.

  7. #17
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    Aug 2015


    Financial News August 27, 2015

    PBoC may take additional monetary easing
    The PBoC has already cut interest rates and the reserve requirement ratio (RRR) twice since June as a response to the stock market turmoil. Additional monetary easing is expected but the benefit of every additional move is likely to be smaller.

    During summer, a number of unprecedented measures have been introduced, such as outright ban of selling for investors holding more than 5% of a stock and large purchases from the "national team". Neither of these measures has been able to stop the market crashing.

    Larger policy interventions is needed in case the equity turmoil spills over to the real economy, says Nordea Bank. The massive stimulus to stabilise the economy during the Global Recession clearly had negative side-effects, including the build-up of a housing bubble and a credit bubble and thus the economy will need to be in fairly big need to prompt larger-scale easing measures.

    Nordea Bank suggests additional policy steps in order of likelihood:

    High likelihood: Rate cuts, RRR cuts and ad hoc measures directly aimed at the equity markets
    Medium likelihood:Larger-scale fiscal and monetary easing
    Low likelihood: Additional significant CNY devaluation

    Increased likelihood of ECB extending QE program
    At least ECB member Peter Praet does not mice his words. In his view there are risks as regards the inflation target due to developments in the global economy and on the commodity markets.

    According to Praet, the ECB is prepared to extend the QE programme or to increase its volume.
    Next week Mario Draghi, who by the way is not going to the wilderness of Wyoming, will announce new projections for growth and inflation at the ECB meeting. At that stage the market will receive more information on the future of QE.

    "There is an increased likelihood that QE will be extended beyond September 2016 the longer the turbulence on the financial markets persist thus leading to increased concerns about the long term impacts on the real economy", says Commerzbank.

    Market Review August 27, 2015

    Yesterday markets were volatile and behaved as expected and corrected the Monday’s drop. The US stock market indices DJIA and S&P show the biggest percentage gain in the last four years. In Asia Nikkei followed and gain 250 pts, same for HSI that rised as well. Also, China's Shanghai composite is up by 5.3% and reclaimed 3080 level.

    In the currency markets, comments from FED official William Dudley downplayed prospects of a September rate hike helped USD and the market to stabilise. Investors reacted by unwinding recent moves that lifted both the JPY and the EUR. "The yen, euro and Swiss franc are funding currencies...and so when things calm down, dollar/yen can rise and the euro can slip against the dollar," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corp in Singapore.

    On the data front so far we had Australia’s Private Capital Expenditure q/q at -4% missing the forecast of -2.5%. Eurozone M3 Money Supply y/y came in at 5.3%. IN US today main focus will be Prelim GDP q/q and Unemployment Claims.

    Data releases to monitor:

    EUR: Private Loans y/y

    Prelim GDP q/q, Unemployment Claims, Pending Home Sales m/m

    Trade Idea of the Day


    Currently the pair is trading at 1.4946. Traders must monitor the 1.5445 resistance level and the support level of 1.4695 for possible breakouts. A possible scenario would be a movement towards the 1.4790 support level where a break may lead to the 1.4695 area. An alternative scenario could be a movement above the support level of1.5230 with target the 1.5375 area.

  8. #18
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    Aug 2015


    Financial News August 28, 2015

    Euro reference rates to remain low and stable

    With the curves already pricing Eonia rates close to the depo facility on expectations of a further increase in the surplus, the room for reducing Eonia and Euribor fixings further is limited absent a new policy rates cut.

    "The liquidity expansion, which is expected to continue on the QE purchases and more TLTROs to be conducted until June 2016, will be crucial to keep liquidity conditions accommodative and money market reference rates (Eonia and Euribor fixings) stable at very low levels", says Barclays.

    In this respect, the recent increase in market volatility has not affected money market rates up to 1-year, contrary to longer maturities being affected due to greater sensitivity to EGB market flows.

    Is US rate hike still on the table?

    Yesterday's positive US GDP data matches the positive sentiment on the markets. The data illustrated once again that first estimates from the US are not very resilient. A rather small rise in Q2 of annualised 2.3% turned into an impressive 3.7% (qoq).

    That would be well above potential growth rates. Could that be the straw that breaks the Fed's back and causes it to hike rates after all in just under three weeks' time? For the time being the market does not yet want to really bet on that following yesterday's data.

    "For that to be the case we would have to hear some clearly more aggressive comments from the Fed in Jackson Hole this weekend followed by a super strong labour market next week. And of course the recent recovery on the Chinese stock markets would have to turn out to be more than just a flash in the pan", says Commerzbank.

    However, there is some data due for publication today that FOMC members will pay attention to. First of all there is some price data in the shape of the PCE deflator which is of particular significance for the Fed. However, mom changes are likely to be limited.

    "There is even a chance that everything will remain unchanged yoy at 0.3% (core rate +1.3%) in July. 90 minutes later the University of Michigan's poll will then provide insight into consumer sentiment in the second half of August while also providing information on the inflation expectations of those polled. Long term the latter was quite stable at 2.7%, the last thing the Fed needs would be a fall", added Barclays.

    Market Review August 28, 2015

    During the Asian session this morning, the economic releases from Japan were the main focus. More specifically, Household Spending dropped -0.2% missing the estimated 0.9%, Tokyo Core CPI dropped -0.1%, National Core CPI rose 0.0% beating the estimated -0.2%, Unemployment Rate rose 3.3% versus the estimated 3.4% and Retail Sales rose 1.6% beating the estimated 1.1%. The inflation figures which are way below the Bank of Japan's (BoJ) 2.0% inflation target, are sure to boost expectations that BoJ will expand its already record 80 trillion yen annual asset-buying plan to counter the downturn. Furthermore, the recent situation in China, which is a major trading partner with Japan, signals additional danger to the Japanese economy as the recent freefall in the Chinese stock market may bring new financial nightmare to the global equity markets, which will definitely affect Japan also. USD/JPY rose back to the 121.00 area after falling to the 116.20 area on Monday.

    Released during the early European session, Swiss Gross Domestic Product (GDP) rose 0.2% from the previous quarter, beating the estimations that will drop -0.1%. Switzerland's economy grew in the second quarter as solid private and government spending offset the impact of the strong Swiss franc on foreign demand for the country's goods. The GDP data shows also that Switzerland avoided recession by recording a slight growth in the second quarter. USD/CHF is currently trading near the 0.9615 area after dropping to the 0.9260 area at the beginning of the week. Released from Spain during the session, Flash CPI dropped -0.4% versus the estimated -0.1%.

    The main events for the day will be the United Kingdom Second Estimate GDP, Prelim Business Investment and Prelim Business Investment.

    Additional economic releases will be the United States Goods Trade Balance, Core PCE Price Index, Personal Spending and Revised UoM Consumer Sentiment.

    Data releases to monitor:

    Data releases to monitor:

    USD: Goods Trade Balance, Core PCE Price Index, Personal Spending, Personal Income, Revised UoM Consumer Sentiment, Revised UoM Inflation Expectations.

    GBP: Second Estimate GDP, Prelim Business Investment, Index of Services.


    EUR: Italian 10-y Bond Auction.

    Trade Idea of the Day


    Currently the pair is trading at 1.3189. Traders must monitor the 1.3352 resistance level and the support level of 1.3058 for possible breakouts. A possible scenario would be a movement towards the 1.3240 resistance level where a break may lead to the 1.3280 area. An alternative scenario could be a movement towards the 1.3170 support level where a break could lead to the 1.3115 area.

  9. #19
    Join Date
    Aug 2015


    Financial News August 31, 2015

    USD-CNY to be range-traded in near term

    PBoC set USD-CNY fixing at 6.3893 this morning, compared with previous closing rate of 6.3885. USD-CNY trended downward this morning following unwinding activities in USD long positions in both onshore and offshore markets, as China's Premier Li Keqiang reiterated over the weekend that there is no basis for continued depreciation of CNY.

    In the meantime, Premier Li also emphasized the importance of financial stability, indicating that China's central bank could continue to intervene into the market to stabilize the CNY exchange rate.

    "At the same time, China's central bank will continue to add liquidity into the system as intensive interventions drain a large amount of CNY liquidity from the market. In the near term, USD-CNY spot rate is seen to be range traded between 6.38 and 6.40", says Commerzbank.

    Clearly the Chinese regime is trying to calm markets rather than generate further excessive volatility. Too much volatility would be a bad idea, as its main concern should be to prevent too much capital leaving the country. The quicker capital flows out the larger the risk that following the stock market other domestic capital bubbles might burst. Systemic risks are typically caused by the property market - as property crises quickly affect the financial system of a country, which will have to be prevented.

    However, according to Commerzbank, the medium to long term outlook for China is a completely different set of news. Publicly the regime seems to try and make single journalists and traders responsible for the crash on the stock markets. As ridiculous as that may seem to Western readers, two things are worth remembering:

    That is no too much different in the West. After every crash the public (if not the government) finds someone to blame. The pattern is almost the same and has been sufficiently described. Even those who had bet on ever rising tulip prices in the Netherlands of the 16th century blamed others for their losses after the bubble had burst.
    In all political systems this approach prevents a sensible investigation of the causes and consequences of a crash. This is not a recipe for ensuring long term stability - on the contrary.

    Domestic data no burden for JPY
    n July Japanese industrial production was surprisingly weak as the Ministry for Trade and Industry announced this morning. July industrial production is declined by 0.6% mom, after a firm growth in June of +1.1% mom.

    However, the yen was unaffected by the news. It was able to appreciate in line with its role as a safe haven. The fact that Chinese stocks started the week on the wrong foot and that the oil price is easing against Friday's high was clearly more important than domestic factors. Current developments are further proof of how much exchange rates are driven by global factors rather than country specific factors.

    Market Review August 31, 2015

    The Asian session this morning was quite busy with economic releases from Australia, Japan and New Zealand. Released from Australia, MI Inflation Gauge rose 0.1% versus the previous of 0.2%, HIA New Home Sales dropped -0.4% compared to the previous of 0.5%, Company Operating Profits dropped -1.9%, matching the estimated, and Private Sector Credit rose 0.6 beating the estimated 0.4%. AUD/USD remained near the 0.7140 area and within previous week range. Released from Japan, Prelim Industrial Production dropped -0.6% missing the estimated 0.1% and Housing Starts rose 7.4% missing the estimated 11.2%. USD/JPY remained at the 121.00 area with the next resistance seen at the 121.63 level. Released from New Zealand, ANZ Business Confidence fall to the -29.1, which is the lowest level since the height of the global financial crisis. NZD/USD dropped slightly and is currently trading near the 0.6420 area.

    Elsewhere, Jackson Hole symposium showed that people doubt the capability of central banks to steer inflation. Moreover, Fed Vice chair Stanley Fischer's speech in Jackson Hole Symposium was seen slightly more hawkish than expected. He noted that recent performance of job market data were "well above the amount needed to continue the strengthening of the labour market". He also noted inflation would move higher as "forces holding down inflation dissipate further”. Additionally Fed can "probably remove accommodation at a gradual pace".

    Fed Vice chair Stanley Fischer added that the case for September hike was "pretty strong" before China devaluated Yuan. He also expressed optimism that the United States economic performance have "been impressive" and was "returning to normal".

    Released during the early European session, German Retail Sales rose 1.4% versus the previous of -1.0% causing insignificant impact on the EUR/USD, which started the week slightly higher than it closed. EUR/USD is currently trading near the 1.1215 area with the next support seen at the 1.1155 level. Furthermore, Switzerland’s KOF economic barometer rose to a seasonally adjusted 100.7, from 100.4 in the previous month whose figure was revised up from 99.8.

    The main events for the day will be the Eurostat CPI Flash Estimate and Core CPI Flash Estimate, the Canadian Current Account and the Chicago PMI.

    Additional economic releases will be the Italian Retail Sales and Prelim CPI.

    Data releases to monitor:

    GBP: CPI, PPI Input, RPI, Core CPI, HPI, PPI Output.

    USD: Housing Starts, Building Permits.

    NZD: GDT Price Index.

    Trade Idea of the Day


    Currently the pair is trading at 1.1219. Traders must monitor the 1.1713 resistance level and the support level of 1.0848 for possible breakouts. A possible scenario would be a movement towards the 1.1280 resistance level where a break may lead to the 1.1360 area. An alternative scenario could be a movement towards the 1.1180 support level where a break could lead to the 1.1135 area.

    Last edited by VinsonFinancialsFX; 08-31-2015 at 01:27 AM.

  10. #20
    Join Date
    Aug 2015


    Financial News September 1, 2015

    In the end there will be a weaker EUR
    Things do not look much better in the Euro zone. Long term inflation expectations react in a clearly visible manner to the developments of the oil price. It would be desirable to reach a situation where long term inflation expectations were independent of short term effects, as a sign of confidence into the ECB's ability to manage inflation.

    While that is clearly not the case, the rising oil price is causing inflation expectations to rise again. Anyone accepting that inflation expectations play a significant role in the economic process of inflation generation will have to come to the conclusion that the inflation outlook in the euro zone remains depressed, at least as long as a continuous rise in commodity prices (unlikely) or a continuous euro depreciation create a constant flow of inflation momentum.

    "At some stage sooner or later the ECB would then have to react. Later is more likely than sooner. It will have to become sufficiently clear that the medium term inflation target is being missed before the European central bankers change their QE programme (i.e. extend or expand it). That will then cause euro weakness through a different channel. Whichever way it will happen, in the end the different alternatives will all lead to a weaker euro", says Commerzbank.

    This outlook would only come under threat if the rest of the world was in a similar situation, as all currencies obviously cannot depreciate at the same time. However, the Fed's relaxed approach signals, Nobody is going to take action against the appreciation of the US dollar, at least this currency will be able to shoulder the burden of appreciation.

    No surprises from RBA

    The RBA is not expected to change its key rate today, and it didn't. It is not a non-event. What was decisive was how prominent a position RBA governor Glenn Stevens would give to the developments in China in his statement.

    Of course they were mentioned, but the major part of the statement was unchanged. It would therefore seem that the Australian central bankers see no need for a radical revaluation of the situation.

    "So compared with the concerns of some market participants who feared the need for further monetary policy easing at least medium term, this was news that will support AUD at current levels", says Commerzbank.

    Market Review September 1, 2015

    The Reserve Bank of Australia left official interest rates unchanged at 2.00%, as widely expected, and for a fourth meeting after a month of turmoil on financial markets and amid rising concern about China's economy. The central bank maintained a neutral bias and noted that "further information on economic and financial conditions" are needed to determine the assessment of outlook and monetary policy.

    Moreover, RBA governor Glenn Stevens noted China's economy continued to weaken, with commodity prices falling, partly because of increased supply from Australian producers. In addition, Mr Stevens repeated that he expected the Federal Reserve to begin hiking interest rates this year, without specifying the timing. AUD/USD remained in tight range and near the 0.7100 area. Released from Australia during the Asian session, Building Approvals rose 4.2% versus the estimated 2.9% and current account deficit widened sharply to AUD -19.0B versus the estimated AUD -15.9B.

    Released during the Asian session this morning, New Zealand Overseas Trade Index rose 1.3% beating the estimated -1.9%, Japan Capital Spending rose 5.6% missing the estimated 9.0% and Final Manufacturing PMI came in at 51.7 versus the estimated 51.9.

    Released during the early European session, Spanish Manufacturing PMI came in at 53.2 missing the estimated 53.9 and causing insignificant impact on the EUR/USD, which is currently trading higher than yesterday, near the 1.1270 area.

    The main events for the day will be the German Unemployment Change, the United Kingdom Manufacturing PMI and Net Lending to Individuals, Eurostat Unemployment Rate, the Canadian GDP, and the United States ISM Manufacturing PMI and Final Manufacturing PMI.

    Additional economic releases will be New Zealand GDT Price Index.

    Data releases to monitor:

    USD: Total Vehicle Sales, ISM Manufacturing Prices, IBD/TIPP Economic Optimism, Construction Spending, ISM Manufacturing PMI, Final Manufacturing PMI.

    CAD: GDP.

    EUR: Italian Manufacturing PMI, French Final Manufacturing PMI, German Unemployment Change, German Final Manufacturing PMI, Final Manufacturing PMI, Italian Monthly Unemployment Rate, Italian Quarterly Unemployment Rate, Unemployment Rate.

    GBP: Manufacturing PMI, Net Lending to Individuals, M4 Money Supply, Mortgage Approvals.

    NZD: GDT Price Index.

    Trade Idea of the Day


    Currently the pair is trading at 120.43. Traders must monitor the 122.36 resistance level and the support level of 116.17 for possible breakouts. A possible scenario would be a movement towards the 120.00 support level where a break may lead to the 119.30 area. An alternative scenario could be a movement towards the 121.05 resistance level where a break could lead to the 121.65 area.

    Last edited by VinsonFinancialsFX; 09-01-2015 at 12:20 AM.

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