Fundamental News
Today’s highlights:
• Halifax House Price Index (MoM) (GB: 08:00 GMT)
• Services PMI (GB: 09:28 GMT)
• Spanish 10-Year Obligacion Auction (Spa: 09:50 GMT)
• Retail Sales (MoM) (EU: 10:00 GMT)
• Initial Jobless Claims (U.S: 13:30 GMT)
• ISM Non-Manufacturing Index (U.S: 15:00 GMT)
• FOMC Member Fisher Speaks (U.S: 17:30 GMT)
Federal Reserve Bank of Boston President Eric Rosengren, a consistent backer of record stimulus who votes on policy this year, said the Fed refrained from tapering its bond purchases last month because growth was lower than forecast and fiscal policy posed a risk to the outlook. “Had U.S. fiscal matters not been so problematic and incoming data on real GDP and employment stronger, it may well have been appropriate to take some action in September,” Rosengren said today in a speech in Burlington, Vermont, referring to gross domestic product. “Unfortunately, those were not the facts we faced” at a policy meeting on Sept. 17-18.
President Barack Obama summoned the top four leaders of Congress to the White House today for the first high-level talks on reopening the partially shut U.S. government amid few signs of a resolution. Jay Carney, the White House press secretary, said the bipartisan Oval Office meeting at 5:30 p.m. wouldn’t be a negotiation, according to an article by Bloomberg News.
The Bank of Japan will wait at least until the second quarter of 2014 before deciding whether to add more stimulus, as it gauges the impact of an April sales-tax increase, said Atsushi Mizuno, a former BOJ board member. “It is too early to judge whether additional monetary easing will be necessary” when the levy is raised in April, Mizuno, vice chairman at Credit Suisse AG in Tokyo and a member of the central bank’s board from 2004 to 2009, said in an interview yesterday. “The BOJ has said they have done enough, and will do more if necessary, but collecting evidence supporting the need to do more will take a lot of time.”
European Central Bank President Mario Draghi said he’s ready to take any necessary measures to keep money-market rates in check as he tries to steer Europe’s banks through the early stages of an economic recovery. “We’ll remain particularly attentive to developments which may have implications to monetary policy and consider all available instruments,” Draghi said at a press conference in Paris yesterday, reiterating comments he made last month. “We have a vast array of instruments to this extent and we exclude no option in order to address the needs as is most appropriate.” Draghi spoke after the ECB’s Governing Council left its main refinancing rate at a record low of 0.5 percent for a fifth month. Officials held the deposit rate at zero and the marginal lending rate at 1 percent.
EUR/USD: The dollar fell to an eight-month low versus the euro as the U.S. government’s partial shutdown continued; adding to concern it will slow economic growth and postpone a tapering of monetary stimulus. House Speaker John Boehner signaled a lack of progress on resolving the fiscal impasse after congressional leaders met President Barack Obama. In addition, some soft jobs data out of the world’s largest economy, weighed on the demand for the USD. Today, the pair was trading higher at 1.36036 at the time of writing before the Spanish Services PMI (Forecast: 51.0 – Previous: 50.4), the Italian Services PMI (Forecast: 49.1 – Previous: 48.8), the French Services PMI (Forecast: unchanged at 50.7), the German Services PMI (Forecast: Flat at 54.4), the Services PMI in the Eurozone (Forecast: unchanged at 52.1), the Spanish 10-Year Obligacion Auction and the Retail Sales (MoM) in the Eurozone. The Euro-area retail sales rose 0.2 percent in August following a 0.1 percent gain in the previous month, economists predicted. If better than expected data are released in the Euro area, it should be bullish for the Euro and push the pair up to the resistance level of 1.36591. Later today, the U.S will release the key risk events; the Initial Jobless Claims and the ISM Non-Manufacturing Index. Americans probably filed more claims for unemployment benefits last week, economists forecast in a Bloomberg News survey, while the Institute for Supply Management’s non-manufacturing index fell to 57 in September from 58.6 a month earlier, the Tempe, Arizona-based group’s report may show, according to the median estimate in a separate poll. Traders should also closely monitor the progress on resolving the fiscal impasse as President Barack Obama summoned the top four leaders of Congress to the White House today for the first high-level talks on reopening the partially shut U.S. government. Investors should stay very cautious. The support level is at 1.35327.
GBP/USD: The pound approached the strongest level since January versus the dollar as an industry report showed construction expanded for a fifth month in September, adding to evidence that the U.K. economy is expanding. The Pound found additional support after a key private-sector jobs report missed expectations and rekindled expectations for ultra-loose Federal Reserve policies to stay in place possibly through the end of the year. Meanwhile, the U.S. government’s partial shutdown continued, adding to concern it will slow economic growth and postpone a tapering of monetary stimulus. Today, the pair was trading nearly flat at 1.62265 at the time of writing as investors jumped on the sidelines ahead of the Halifax House Price Index (MoM), which is expected to come at 0.5% compared to the previous reading of 0.4% and the Services PMI, which is forecast to come at 60.0 compared to the last reading of 60.5 in the UK. If higher than expected reading are released, it should be bullish for the GBP. Later in day, the U.S will release the key risk events; the Initial Jobless Claims and the ISM Non-Manufacturing Index. Americans probably filed more claims for unemployment benefits last week, economists forecast in a Bloomberg News survey, while the Institute for Supply Management’s non-manufacturing index fell to 57 in September from 58.6 a month earlier, the Tempe, Arizona-based group’s report may show, according to the median estimate in a separate poll. Traders should also closely monitor the progress on resolving the fiscal impasse as President Barack Obama summoned the top four leaders of Congress to the White House today for the first high-level talks on reopening the partially shut U.S. government. Investors should stay very cautious and adopt a wait and see strategy on the market. The resistance level is at 1.63053 and the support level is at 1.61506.
Gold: Gold traded above $1,300 an ounce gaining the most in two weeks as investors assessed the U.S. government shutdown and its impact on the outlook for monetary stimulus from the U.S. Federal Reserve and after a private report showed U.S. companies added fewer workers than forecast in September. Weak US economic data contributed to the commodity’s rallies, as the selloff in the US dollar led to a gold price increase. The two assets are inversely correlated. Today, the precious metal was trading slightly lower at 1309.826 at the time of writing on profit taking ahead of some important data in the U.S. The country will release the key risk events; the Initial Jobless Claims and the ISM Non-Manufacturing Index. Americans probably filed more claims for unemployment benefits last week, economists forecast in a Bloomberg News survey, while the Institute for Supply Management’s non-manufacturing index fell to 57 in September from 58.6 a month earlier, the Tempe, Arizona-based group’s report may show, according to the median estimate in a separate poll. Traders should also closely monitor the progress on resolving the fiscal impasse as President Barack Obama summoned the top four leaders of Congress to the White House today for the first high-level talks on reopening the partially shut U.S. government. This causes the US dollar to lose its appeal as a safe-haven investment, pushing traders to flee to more stable assets such as gold. Investors should closely monitor all data and news to better assess the direction of the commodity. The resistance level is at 13337.375 and the support level is at 1277.593.
