Fundamental News
Today’s highlights:
• German Business Expectations + German Current Assessment + German Ifo Business Climate Index (Ger; 09:00 GMT)
• BBA Mortgage Approvals (GB; 09:30 GMT)
• Core Retail Sales (MoM) (Can; 13:30 GMT)
• CB Consumer Confidence (U.S; 15:00 GMT)
Federal Reserve Bank of Atlanta President Dennis Lockhart, who has backed the Fed’s $85 billion in monthly bond purchases, said U.S. monetary policy should focus on creating a more dynamic economy after a recent cooling in growth. “Recently there appears to have been some slowing” in job creation, Lockhart, who next votes on policy in 2015, said yesterday in New York. Payroll gains have averaged just 148,000 over the past three months, he said. Moreover, the Federal Reserve Bank of New York President William C. Dudley said policy makers must “forcefully” push against economic headwinds as the U.S. has yet to show “any meaningful pickup” in momentum. “The economy still needs the support of a very accommodative monetary policy,” Dudley, who is vice chairman of the Federal Open Market Committee, said yesterday in a speech in New York. “Improving economic fundamentals versus fiscal drag and somewhat tighter financial conditions are pulling the economy in opposite directions, roughly canceling each other.” While; Richard Fisher, president of the Federal Reserve Bank of Dallas, said the White House botched the nomination for Chairman Ben S. Bernanke’s successor by allowing an unprecedented public debate over who would be the best choice. “The White House has mishandled this terribly,” Fisher said yesterday in response to a question from the audience after giving a speech in San Antonio, Texas. “This should not be a public debate,” he said, adding that the Fed “must never be a political instrument.”
The Federal Reserve’s surprise decision to delay tapering stimulus as inflation remains subdued suggests Bank of Japan Governor Haruhiko Kuroda faces an uphill battle to stoke price increases with quantitative easing. Japan’s implied forward yield, which indicates bond investor expectations of the two-year note rate in 2015, has fallen to the lowest since April 4 when Kuroda began unprecedented stimulus, at 0.24 percent last week. That suggests the market doesn’t expect inflation pressure to push up yields for at least two years. The equivalent rate in the U.S. declined to a month low of 1.8 percent on Sept. 18.
European Central Bank President Mario Draghi said he’s ready to deploy another long-term refinancing operation to provide funds to Europe are banking system if needed. “We are ready to use any instrument, including another LTRO if needed, to maintain the short term money markets at the level that is warranted by our assessment of inflation in the medium term,” Draghi said in response to questions from lawmakers in the European Parliament in Brussels yesterday.
EUR/USD: The EUR/USD traded lower yesterday after European Central Bank President Mario Draghi said monetary authorities were willing to provide low-costs loans to the euro zone’s banks to keep interest rates from rising. Moreover, the USD found support after Fed Officials back stimulus. Today, the pair was trading flat at 1.34933 at the time of writing ahead before the Business Expectations (Forecast: 104.0 – Previous: 103.3), the German Current Assessment (Forecast: 112.5 – Previous: 112.0) and the Ifo Business Climate Index (Forecast: 108.2 – Previous: 107.5) in Germany. If a higher than expected readings are released in Germany, it should be taken as bullish for the EUR, while a lower than expected reading should be taken as bearish for the EUR. Later in the day, the U.S will release its key risk event the CB Consumer Confidence, which is expected to decrease to 79.9 from the 81.5 registered previously. If a higher than expected reading is released should be taken as bullish for the USD, while a lower than expected reading should be taken as bearish for the USD. Investors should adopt a wait and see approach on the pair. Market sentiments remain very fragile. Investors should continue to monitor the progress on the Syria case for more visibility. The resistance level is at 1.35671 and the support level is at 1.34098.
USD/CAD: The USD/CAD was trading flat at 1.02841 at the time of writing as investors jumped on the sidelines ahead of the key risk data in Canada and the U.S. Today, Canada will release the Core Retail Sales (MoM), which is forecast to improve to 1.0% from the last month -0.8%. If a higher than expected reading is released it should be taken as bullish for the CAD, while a lower than expected reading should be taken as bearish for the CAD. One and a half hour after the data in Canada, the U.S will release its key risk event the CB Consumer Confidence, which is expected to decrease to 79.9 from the 81.5 registered previously. If a higher than expected reading is released should be taken as bullish for the USD, while a lower than expected reading should be taken as bearish for the USD. Here also investors should adopt a wait and see approach. Investors should also keep an eye on the data in the Euro area and the latest developments in Syria for more visibility as they will affect sentiments for risky assets. The resistance level is at 1.03090 and the support level is at 1.02595.
WTI (Oil): Oil prices traded near the lowest price in more than six weeks amid speculation a United Nations resolution this week will reduce the likelihood of a U.S.-led military strike against Syria. Today, the commodity was trading flat at 103.450 at the time of writing as investors are waiting for some data and news to get visibility on the market. Investors should stay very cautious when dealing with the commodity. Sentiments remain very fragile as concern that a U.S.-led assault would widen the Syrian conflict and disrupt Middle East shipments still weigh despite the UN Security Council is set to negotiate a Syria resolution as world leaders travel to New York for the opening of the General Assembly. The U.S., the U.K. and France have accused government forces of carrying out a chemical attack on Aug. 21 that killed 1,400 people near Damascus. Syrian President Bashar al-Assad has blamed rebel groups. Russia, an ally of Syria, rejected a plan to include enforcement in the resolution. Syria borders Iraq and is near Iran, which together control almost a fifth of the production capacity in the Organization of Petroleum Exporting Countries, according to data compiled by Bloomberg. Other News is that Nigeria restored oil supplies from three trunk pipelines that were sabotaged by vandalism and theft. While the U.S. crude stockpiles probably fell to an 18-month low as refineries maintained operations at more than 90 percent of capacity and oil imports slipped, a Bloomberg News survey shows before data from the Energy Information Administration tomorrow. The data in the Euro area and the U.S are likely affect the movement of the commodity intra trade. The resistance level is at 105.019 and the support level is at 102.041.
