Weekly Review and Outlook 10th October 2016

Mark NugentOct 2016, Trading Plan

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Weekly Forex Review – Week Commencing 3rd October 2016

Economic Calendar

Monday: UK Manufacturing PMI beat expectations (55.4 vs 52.1). US ISM Manufacturing PMI did likewise (51.5 vs 50.4). The Fed’s Mester said the case for a rate hike in December will likely be strong.

Tuesday: Early this morning the RBA kept rates unchanged at 1.50%. The statement noted that the current rate is consistent with sustainable growth. Inflation to remain low for some time. RBA also stated that the strong AUD may complicate matters. BoJ’s Kuroda said that negative interest rates are good for the economy but he will consider the profitability of banks when making policy. UK Construction PMI beat expectations (52.3 vs 49.1). In New Zealand, Global Dairy came in substantial negative for the first time since May, at -3.0%. There are rumours of a taper to the ECB QE programme, reducing it from EUR80B/month to EUR70B/month. This has strengthened the Euro. The ECB have stated clearly this has not been discussed at any ECB meeting.

Wednesday saw Australian Retail Sales exceed expectations (0.4% vs 0.2%). In the UK, the third PMI, and the most important, Services PMI, exceeded expectations (52.6 vs 52.1). In the US, ISM Non-Manufacturing PMI was positive (57.1 vs 53.1). There was an unexpected draw-down in crude oil inventories in the US (-3.0M barrels vs 1.1M barrels).

Thursday saw US Unemployment Claims beating expectation (249K vs 255K). There was a flash crash in GBP just after midnight BST this morning caused by algorithmic trading or fat finger in low volume conditions. There was no underlying news driver and the loss, where the GBPUSD momentarily hit 1.20, was quickly regained bar 185 pips or so.

Friday saw US Non-Farm Payroll miss (156K vs 171K) but seen to be in an acceptable range and Average Hourly Earnings m/m came in on target at 0.2%..

Market Reaction

US equities moves sideways at all-time highs. Both the FTSE100 and FTSE250 were up on the week. The Euro50 was flat on the week via a rise then fall. WTI broke through USD50/barrel but gave back some gains on Friday and closed at just under USD50/barrel. Yields jumped on UK, US and German 10-year bonds. On the currency markets the dominant themes were a strong USD and EUR, a weak GBP with a flash crash on Friday and a weak-then-strong JPY that ended up flat on the week.

Trading Plan

During the week, Trade 68 (AUDJPY long) closed at breakeven. The Euro50 short is in a small profit and the GBPUSD short has a profit of 4x risk locked in via a stop loss placement.

Weekly Forex Outlook – Week Commencing 10th October 2016

Economic Calendar

It’s a very quiet week.

Mon – Holiday in Japan, Canada and the US.
Tues –
Wed – FOMC Meeting Minutes
Thurs –
Fri – US Headline and Core Retail Sales m/m

Financial News

The media is full of stories of the second presidential debate against the backdrop of Trump and his 11-year-old lewd video. He came out fighting and is thought to have done better than expected.
Deutsche Bank’s CEO, John Cryan, fails to reach agreement with US Justice Department at meeting on Friday in Washington regarding the proposed USD14B fine for alleged misconduct in mortgage-backed securities. Talks continue. OPEC to meet again in Istanbul, trying to agree full production cap for November meeting.

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