Market Views For 2016 - page 17
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
Fed's Williams: A few rate hikes next year 'makes sense'
Comments from Williams to reporters
Hawkish stuff from Williams, especially the chatter about a few hikes in 2017. Of course, we finished last year with the same kind of talk about 2016 so the market doesn't get too excited about rate hike talk.
Analysts: Euro Exchange Rate Could Only Reach a Bottom in December, Pound and Dollar
Following a torrid week for the Euro we ask whether there is much downside remaining for a currency that has over recent months shown it is immune to prolonged periods of weakness.
The Euro exchange rate complex was one of the largest underperformers in G10 for the week 17-21 October - only the Swedish Krona and Candian Dollar underperformed the shared currency.
This is surprising for a currency that has throughout 2016 shown it is stubborn to prolonged bouts of weakness.
EUR/USD is trading at a seven-month low, below the 1.0915 low set around the Brexit decision in June, EUR/GBP is meanwhile trading at a two-week low at 0.8901.
However, the month of October sees the shared currency continue to outperfirm the Pound with the latter having more work to do if it is to better the Eurozone's shared currency this month:
read more
Barclays are not expecting more BOJ easing until mid 2017 or later
Bloomberg with some headlines from Barclays:
Bundesbank says German inflation could exceed 1% by year-end
German central bank out with its latest monthly report 24 Oct
" According to current market expectations for the development of crude oil prices, the inflation rate at the end of 12016 could rise back to slightly above 1%."
Increase in inflation rate will be give Weidmann & Co more ammunition to call for ECB tapering but they're a little way off yet with Sept CPI coming in at +0.1%
Report here from the BUBA's website.
Some Traders See Big USD Reversal
Over the past 24 hours, many of our clients have asked if the U.S. dollar has peaked and is now prime for a major reversal. This question is largely sparked by the 2-day decline in the Dollar Index and the fact that it is aiming for 98.00. While USD/JPY remains strong, the greenback is beginning to lose momentum versus the euro, British pound, Swiss franc and commodity currencies. What’s interesting about the move is that U.S. data was good, allowing Treasury yields to resume their rise. The country’s trade balance narrowed significantly in September from -$59B to -$56B -- its best level since March 2016. New home sales and Markit PMI’s services and composite index also rose strongly, boosting expectations for Friday’s third-quarter GDP report. Economists are calling for a sharp increase in growth and while Wednesday’s trade report is encouraging, weak retail sales over the past 3 months makes us skeptical of a sharp rise. Treasury yields may be up but it's worth noting that Fed fund futures have fallen slightly. Durable goods, jobless claims and pending home sales are scheduled for release on Thursday. These reports are not expected to have a dramatic impact on the dollar but with USD/JPY eyeing 105, stronger reports could give the pair the push it needs to make a run for this key level.
The euro extended its gains for the second day in a row but its struggle to move beyond 1.0950 indicates that the bears remain in control. The latest Eurozone economic reports reinforce the recent strength that we’ve seen in other releases. Import prices grew at a faster pace in September while German consumer confidence ticked lower slightly and French consumer confidence increased. However the dialogue out of the central bank remains dovish with insiders saying that bond purchases will almost certainly extend beyond March. ECB member Praet feels that there are material downside risks to the economic outlook with very little indication of rising core inflation. His concern centers around Brexit and the uncertainty that it poses to export demand. Yet we still like buying EUR/USD below 1.09 for a move to 1.10. The ECB may be dovish but they have no plans to ease until December and for now, data has been very good. Speculative short positions are at extreme levels, which means the currency pair is prime for a short squeeze.
read more
Largest expansion of U.S. economy in 2-years may pressure Fed to hike
After the U.S. gross domestic product (GDP) registered its largest expansion in two years, pressure could increase on the Federal Reserve (Fed) to move forward with policy normalization at the end of the year.
In a report, the Bureau of Economic Analysis said that GDP increased to a seasonally adjusted annual rate of 2.9% in the three month period from July to September, from the 1.4% expansion registered in the second quarter of 2016. That was its largest expansion since the third quarter of 2014.
Consensus had penned in growth of just 2.5%.
Despite the headline number, it should be noted that the growth was driven by a 10% jump in exports that compared to the second quarter’s 1.4% increase.
Furthermore, real consumer spending increased by only 2.1%, missing estimates for a 2.6% advance and well below the prior increase of 4.3%.
The headline expansion coincided with the estimate from Goldman Sachs. The investment bank increased its projection on Wednesday to 2.9% from the prior 2.7%.
However, the reading was a far cry from forecasts from regional Fed banks.
On Thursday the Atlanta Fed lifted its estimate to just 2.1% from the prior 2.0%.
The New York Fed’s last forecast, from October 21, was at 2.2%.
read more
Goldman Sachs says high USD may lead to FOMC delay rate hike
Bloomberg with concerns from Goldman Sachs on the strength of the US dollar
Goldman Sachs Asset Management, note on October 28, says:
-
GS looking at the 7 month high for the big dollar, and thinking if it gets much higher that'll be likely to prompt the Fed to delay.
Beware, British Pound to Euro Exchange Rate Faces One More Big Move Lower
While Pound Sterling can be expected to defend current levels against the Euro, and maybe even go a little higher, the broader decline is not yet done warns technical analyst Lucy Lillicrap at AFEX Markets Plc.
Sterling trades around familiar levels at the start of the new month with
Those with an interest in the future direction of the British Pound should be aware that the currency's multi-week stability should not be read as the end of the downturn.
Analyst Lucy Lillicrap at AFEX Markets plc in London tells us that the UK currency is likely to take one more tumble lower.
With regards to both GBP/USD and GBP/EUR, “at least one more sell-off is readable here before the current negative trend completes,” says Lillicrap in a weekly briefing to clients.
However, “no direct re-test of prior notable (Dec 2008) 1.0200 area lows is currently favoured.”
Instead Lillicrap’s projections suggest an interim range now exists either side of 1.1000 with resistance at 1.1250 but support also extending to 1.0750.
“Further weakness may well unfold in coming days with 1.1075 support still vulnerable initially (targeting 1.0925 next once broken) but expect stability to return thereafter as this holding pattern takes shape,” says Lillicrap.
read more
Stan Chart echoes Deutsche Bank during GFC "roiled credit markets in Europe"
This is from Bloomberg, but seems to have otherwise escaped notice amidst the politics nonsense developments
- Standard
Chartered Plc roiled credit markets in Europe on Tuesday, when the U.K.
bank broke with convention by saying it wouldn't buy back its junior
bonds at the first opportunity.
- Notes plunged by a record 14 cents on the dollar to 83 cents, the lowest since 2012
- The
move echoes Deutsche Bank AG's decision during the financial crisis not
to redeem its bonds, which shook investor assumptions about callable
subordinated debt and made it more difficult to value the securities.
More detail at the article, here.Fed gives no clues and that could leave the market in a pickle over Dec
Only subtle changes in language won't give hope to the bulls
The standouts from the statement were,
It's all just rewording the text without making any definitive comments. It's as boring as you can get, and if the FOMC has got the election on their minds then this is as drab as they could get it, to get them through until Dec.
While I think that the Rosengren pullback is the big surprise, it's not shaken the market, as the PA is telling us and the interest rate probabilities after the release. Dec stood at 68.8% before the meeting and they're now at 77.5%. Being based on the futures market, that might just be a result of some profit taking or position adjustment before the announcement.
Eitherway, we won't know Rosengren's thoughts until the minutes, unless he pops up somewhere beforehand. His last speech was 17th Oct and he was fairly strong on wanting to hike;
"I want to probe, I don't want to plunge," he said. "I am getting more concerned about the optionality we are losing if we wait too long... "We have the luxury right now to make a change, wait a little while, see what the impact is."