Top Things to Know Today - page 2
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
EUR/USD Post-FOMC: Range-Bound Next 3 Months - Danske Despite today’s big event, EUR/USD only moved in a tight range of only one big figure. Ultimately, Yellen’s balanced view pushed EUR/USD down to around 1 week low.
Near term, the removal of uncertainty regarding whether the Fed could back-track on rate lift-off as in September coupled with the potential for markets to price more ECB easing during spring, could drag EUR/USD a few figures lower still on a 3M horizon. We note however that the Fed's data-dependent hiking cycle implies that positive US data surprises while USD supportive via the rates channel may not necessarily sent EUR/USD lower as the cross has been negatively correlated with risk appetite recently (EUR as funding currency).
Looking further ahead, our view that risks remain tilted towards three rather than four Fed hikes next year suggests that, while markets are still pricing 'too little' on the Fed compared with both our and the FOMC projections, the potential for upside to US rates next year still exists. However, combined with stretched positioning in the FX market, which arguably reduces the sensitivity to monetary policy, the impetus to further EUR/USD downside from relative rates is still set to fade next year in our view.
Thus, we maintain the view that EUR/USD will be rangebound - and notably not reach new cycle lows on a 3M horizon - and then stage a rebound towards 1.16 in 12M as strong euro fundamentals provide support.
JP Morgan STRATEGIST: 'The Fed is flying this plane and ... the people at the controls don't know how to fly' Monetary policy is a tricky thing.
There are examples throughout history of central banks making missteps and ending up with unintended consequences.
In recent years, many central banks have been forced to cut interest rates soon after raising them because their economy was simply not ready.
Now that the Federal Reserve has raised interest rates off of zero, there are fears that they will join that ignominious group.
According to David Kelly, the chief global strategist at JP Morgan Funds, however, the real danger is the exact opposite but equally disastrous.
"The Fed is flying this plane and they're aiming for a soft landing," Kelly told Business Insider Friday.
"The problem is the people at the controls don't know how to fly."
Kelly is of the opinion that the economy is strong enough to sustain not just the rate hike from the Fed seen on Wednesday, but a brisk pace of rate hikes going forward.
The biggest concern — which even Janet Yellen herself has mentioned — is that the economy could be ready for rate hikes and that by going to slow the Fed runs the risk of letting the economy overheat. This could lead to a Fed-induced recession, which is clearly the worst outcome for the Fed.
Kelly also thinks the economy could overheat if the unemployment rate drops below "full employment," thus causing wages to spike with inflation following shortly after. "There is an extreme risk that we get back to full employment before the interest rates get back to neutral," said Kelly.
Pointed to the Fed's own economic outlook, Kelly noted that in the past three years GDP growth has been between 2.2% and 2.4% while the unemployment rate has fallen by around 1% annually. In its latest release, the Fed still expects GDP to stay in the same range but for the unemployment rate to only drop only .2%-.4%.
"That is just a wrong forecast," Kelly said. "The unemployment rate will come down more than the Fed expects and that will keep their feet to the fire for more rate hikes."
read more
BoJ Disappoints; Buy USD/JPY Dips - Credit Agricole
Overnight risk sentiment was unstable, with most Asian stock market indices trading lower at the time of writing.
In terms of events the main focus was on the BoJ rate announcement. The central bank announced a new ETF buying programme, which amounts to an annual budget of JPY 300bn, which comes as a disappointment.
First of all the latest policy action intends to replace a prior stock selling program and secondly the central bank leaves its main target for monetary stimulus of JPY 80tn unchanged. Overall the latest development is regarded as a form of smoothing market developments rather than making a case of strongly easing monetary policy further. Hence the JPY ultimately reacted higher in reaction to falling expectations of the central bank considering a more aggressive policy stance anytime soon.
From a broader angle, however, it must still be noted that muted domestic conditions are likely to prevent medium-term inflation expectations from rising sustainably and that may keep the chance of a more aggressive stance next year intact.
As such we stay of the view that the JPY should be sold on rallies, for instance against the USD.
source
5 Things to Watch on the Economic Calendar This Week In the week ahead, trading volumes are expected to remain light due to the Christmas holiday and as many traders already closed books before the end of the year, reducing liquidity in the market and increasing the volatility.
The U.S. is to release key reports on gross domestic product, durable goods orders, home sales and jobless claims, as traders look for further indications on the strength of the economy.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
1. U.S. Q3 GDP final release
The U.S. is to publish final figures on third quarter economic growth at 8:30AM Eastern Time Tuesday. The data is expected to show that the economy expanded 1.9% in the three months ended September 30, compared to last month's preliminary estimate of 2.1%.
2. U.S. durable goods data
The U.S. is to produce data on durable goods orders at 8:30AM ET on Wednesday. The report is expected to show that orders for durable goods declined 0.6% in November, following a gain of 2.9% a month earlier, while core orders are forecast to rise 0.1% after increasing 0.5% in October.
3. U.S. home sales data
The National Association of Realtors is to release data on existing home sales for November at 10:00AM ET on Tuesday, amid forecasts for a gain of 0.5% to 5.37 million, following a decline of 3.4% a month earlier.
On Wednesday, the Commerce Department is to publish a report on new home sales for November at 10:00AM ET. The data is expected to show a gain of 2.0% to 505,000, following an increase of 10.7% in October.
4. U.S. initial jobless claims
The U.S. is to release a weekly report on initial jobless claims at 8:30AM ET Thursday, amid expectations for a decline of 1,000 to 270,000.
5. Christmas vacation
Markets in Germany will remain closed in observance of Christmas Eve on Thursday. On Friday, markets in Australia, New Zealand, Europe, the U.K., Switzerland, Canada and the U.S. will remain closed for the Christmas Day holiday.
Risk Off on Christmas Week – Live Market Open from 8:00 GMT
Market Too Quick To Write Off BoJ Surprise; Buy USD/JPY - Goldman Sachs The market greeted last Friday’s (December 18) announcement by the Bank of Japan of enhancements to its QQE program with shrugged shoulders, notes Goldman Sachs.
"The JPY is stronger against the USD, and a common response is this latest action represents the limit of the BoJ’s current capacity and willingness to ease. We think this is wrong. Camouflaged as a ‘technical adjustment’ the BoJ has delivered a small but significant easing, indicating their ongoing commitment to reflate the economy and underscoring BoJ/Fed policy divergence in the week of the Fed’s historic rate hike," GS argues.
For us, these additional measures are not a symbol of impotence, but a reiteration of the BoJ’s commitment to achieving its objectives by future-proofing and improving the effectiveness of the current QQE program.
Top 5 Things to Know In the Market on Wednesday Here are the top five things you need to know today in financial markets:
1. U.S. oil prices rise to 1-week high
U.S. oil prices rose to a one-week high on Wednesday, amid speculation weekly supply data due later in the session will show U.S. crude inventories fell last week.
U.S. crude was last up 36 cents, or 1.01%, to $36.50 a barrel as of 6:11AM ET, after rallying 0.92% on Tuesday.
London-traded Brent was last up 40 cents, or 1.11%, to $36.51 a barrel. A day earlier, prices fell to $35.98, a level not seen since July 2004.
Brent's premium over the WTI crude contract stood at 1 cent, compared to a discount of 3 cents by close of trade on Tuesday.
U.S. crude has been firmer relative to Brent recently, on signs that the U.S. oil market is likely to grow tighter following Congress' decision to lift a 40-year old ban on domestic oil exports, while a global glut gets worse in 2016 due to soaring production in Saudi Arabia and Russia.
2. U.S. durable goods data due ahead of the bell
The U.S. is to produce data on durable goods orders at 8:30AM ET on Wednesday, amid expectations for a decline of 0.6% in November, while core orders are forecast to rise 0.1%. In addition, the U.S. is release reports on new home sales and consumer sentiment.
Earlier in the day, data showed that U.S. personal spending inched up 0.3% last month, meeting forecasts. The figure, which was to be made public at 8:30AM ET Wednesday along with the agency’s report on personal income, was released early on the Bureau of Economic Analysis’ website.
read more
5 Things to Watch on the Economic Calendar 1 Casing House Prices
The October S&P/Case-Shiller home-price index, released Tuesday, will give a new indication of whether home values are increasing more rapidly. The September reading showed a 4.9% gain from a year earlier. Rising home prices threaten to slow sales because they could put properties out of reach, especially for first-time buyers.
2 A Happy New Year for Consumers?
The Conference Board’s consumer confidence reading, also out Tuesday, will show how Americans are feeling heading into the New Year. The measure has weakened the past two months, but a combination of steady hiring, rising incomes and low gasoline prices should have shoppers feeling good as the ball drops.
3 Pending Further Investigation of Home Sales
The National Association of Realtors’ index of pending homes sales, released Wednesday, might be the most anticipated report of the week. November’s completed sales came in surprisingly weak, but the trade group said that was due to new government regulations slowing down the closing process. Pending home sales for the month shouldn’t be affected by paperwork, so the report will show if underlying demand remains firm, or is slowing.
4 Will Crop Prices Wilt Further?
The Agriculture Department will report prices farmers received for their crops in November on Wednesday. Prices in October fell 9.2%. A global decline in commodity prices is pushing down crop prices and weighing on farm incomes. That could have a negative impact on rural economies but may also translate into lower food prices at grocery stores.
5 Closing Time for Stocks
Financial markets wrap up for the year on Thursday. Watch to see if major indices can squeak out a gain for 2015. The Dow Jones Industrial Average and the S&P 500 index are hovering just below where they finished 2014. Stocks declined sharply late in the summer when China’s slowing economy sparked fears among investors. But equity prices have slowly rebounded and could eclipse last year’s finish with a solid week.
Get Ready To Rebuild Long USD Exposure Into The New Year - BNPP BNP Paribas continues to expect to see good interest to use recent weaker levels in the USD to build long exposure as we enter the new year.
"US rates markets continue to price a relatively high likelihood that the Fed leaves rates unchanged in Q1, with the implied yield on the April 2016 Fed funds contract just 13bp above the current effective rate.
The pricing is similar to that which prevailed in the January contract heading into Q4 of this year, and the adjustment to fully price December lift-off over the course of Q4 helped the USD gain broadly even taking into account the retreat of the past few days," BNPP argues.
5 Things to Watch on the Economic Calendar This Week
Heading into the final week of the year, trading volumes are expected to remain light as many traders already closed books due to the holiday period, reducing liquidity in the market and increasing volatility. The U.S. is to release key reports on consumer confidence, pending home sales and jobless claims in the week ahead, as market players look for further indications on the strength of the economy and the future path of U.S. rate hikes.
1. U.S. consumer confidence
The Conference Board, a market research group, is to publish data on December consumer confidence at 10:00AM ET on Tuesday, with market players expecting the index to inch up to 93.6 from 90.4 a month earlier, which was the lowest reading since November 2014.
2. U.S. pending home sales
The National Association of Realtors is to release data on November pending home sales at 10:00AM ET on Wednesday. The report is expected to show pending home sales rose 0.5% last month, after inching up 0.2% in October.
3. U.S. initial jobless claims
The U.S. is to release a weekly report on initial jobless claims at 8:30AM ET Thursday, amid expectations for an increase of 7,000 to 274,000 in the week ending December 25.
4. Chicago PMI
Market research group Kingsbury International will publish data on its Chicago purchasing managers’ index for December at 9:45AM ET Thursday. The index is forecast to improve to 49.7 this month from 48.7 a month earlier.
A reading above 50.0 indicates expansion, below indicates contraction.
5. China manufacturing PMI
China is to release reports on manufacturing and service sector activity from the China Federation of Logistics and Purchasing during Asian hours on Friday.
The official China's manufacturing purchasing managers' index is forecast to inch up to 49.9 in December from 49.6 in the preceding month, which was the lowest level since August 2012.
A reading below 50.0 indicates industry contraction.
source