Weekly Review and Outlook 17th October 2016

Mark NugentOct 2016, Trading Plan


Weekly Forex Review – Week Commencing 10th October 2016

Economic Calendar

Monday was quiet with Japan, Canada and the US all on holiday. The latest NBC/WSJ poll shows Clinton leading Trump 46%-35%. Oil hit a one year high as reports came in of Russia backing a production freeze. Russia Energy Minister Novak is scheduled to meet Saudi representatives today in Istanbul.Saudi Arabia Energy Minister Al-Falih said oil could reach USD60/barrel by end 2016. RBNZ’s Assistant Governor McDermott said policy is to remain accommodative and that projections indicate that further policy easing will be required.

On Tuesday, these was no Tier I news. BoJ Governor Kuroda said he will ease further if it is deemed to be beneficial and would lower rates further into negative territory if merits outweigh costs. GBP/USD was once again in focus as the pair rebounded as much as 200 pips initially slipping below 1.2100 to briefly reach 1.2300 following reports that UK PM May accepted that parliament should be allowed to vote on her Brexit proposals, which alleviated fears the PM could take an overly zealous approach to Brexit negotiations.

Wednesday saw the release of the most recent FOMC minutes in the US. The minutes did not reveal anything substantial but did note that many of the voting members felt there were few signs of inflationary pressure and that progress on inflation was slow. The FedWatch Tool barely moves, showing almost 70% chance of a hike in December.

Thursday had Chinese Trade Balance missing expectation (278B vs 365B) both on imports and exports. US Unemployment Claims beat expectations (246K vs 252K) and Crude Oil Inventories rose surprisingly by 4.9M barrels vs an expectation of 0.4M barrels.

Friday saw Chinese CPI y/y beating expectation (1.9% vs 1.6%) and PPI also surprised to the upside. US Core Retail Sales beats expectation (0.5% vs 0.4%). Finally, Fed chair Yellen made remarks that have been interpreted as suggesting an accommodative Fed for a longer period of time, that she is concerned about the trend of economic growth and that high pressure policy may be required for a full recovery from crisis.

Market Reaction

All US equity indices are slightly down on the week. The UK fairs a little better with the FTSE100 moving close to all-time highs and the FTSE250 ending the week where it began, again close to all time highs. The Euro50 moves sideways just below the 200MA. Oil moves sideways at around USD50/barrel as hopes continue of a November production cap. The German, UK and US 10 year bond yields show that what seemed like an endless appetite for government debt may be over. The USD gets close to 7 month highs; the Euro falls; the GBP drops over the week but less precipitously than recently; the commodity currencies rise due to the buoyant oil price and good economic news from China.

Trading Performance

Two trades closed this week. Trade 67 (GBPUSD short) yielded 8 times risk as reward: +4%. Trade 69 (Euro50 short) failed and made a loss of 1 times risk: -0.5%.

Weekly Forex Outlook – Week Commencing 17th October 2016

Economic Calendar

Mon – RBA’s Governor Lowe speaks; New Zealand sees CPI q/q reported.
Tues – Minutes of last RBA Monetary Policy Meeting; UK CPI y/y; US CPI (the favoured measure of PCE reports on 31st October); New Zealand Global Dairy.
Wed – China GDP and Industrial Production; UK Average Earnings; Canadian Rate Statement, Monetary Policy Report and Governor Poloz speaks.
Thurs – UK Retail Sales; Euro Zone – Minimum Bid Rate and ECB Press Conference.
Fri – Canada – Core CPI and Core Retail Sales.

Financial News

The big winner from London’s Brexit exodus isn’t even in Europe

Italy’s biggest bank merger since 2007 wins investor backing

Brexit hasn’t dimmed appetite for UK assets
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