Daily Alert: For Friday 11th December 2015

Mark Nugent2015 H2, Daily Alert

Today’s slides are HERE.

Today’s Economic News

Late last night the RBNZ reduced interest rates by 25 basis points to 2.50% as expected. The currency fell not so much due to buyers taking profit, but due to a critical passage in the central bank’s statement: “Monetary policy needs to be accommodative to help ensure that future average inflation settles near the middle of the target range. We expect to achieve this at current interest rate settings…” So, no more rate reductions on the horizon. This strengthened the NZD.

No change with the Bank of England’s monetary policy committee. As before, 8 out of 9 members voted for no change to the bank rate with only Ian McCafferty voting for an increase of 25 basis points. All voted for QE to remain unchanged at £375 billion. CPI expected to stay below 1% until H2 2016. “The projected return of CPI inflation to the target depends on an increase in domestic cost growth…” As before, it’s all eyes on wage growth. Rates will not rise before wage growth rises.

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Current Trades

My GBPNZD trade took a knock from the RBNZ’s statement that they can get to their inflation target with no further rate reductions. The market does not fully believe this and I think there is still NZD weakness to be seen so I will stay in this trade.

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Euro sentiment

The Euro index is down today and the market is looking at shorting EURUSD. I will short this pair with an entry just below yesterday’s low. Big stop.

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Swiss Rate Decision (sell CHF)

The SNB did not change the rate, although they do continue with their statement that “the Swiss franc is still significantly overvalued.” One to watch, warily.

GBPCAD (as per Weekly Outlook; CAD weakness due to oil price)

Still some buyers in the market, who resisted the move down today, producing the large lower wick on today’s candle.

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New Setups

AUDUSD is at the top of a channel. AUD is not on the current fundamentals trade list, but this is more of a technical analysis play, and is in line with our bias for this pair (weak/strong = sell).

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GBPJPY is at the bottom of a channel. Again, this is a reasonable technical analysis play and is also with our bias (strong/weak = buy).

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Major Issues for tomorrow

US Core Retail Sales – I will trade this on demo in real time.