Trading news

Shares rally amid disappointing US jobs report, Australia likely to hold rates

 - Traders started to price out an October Fed rate hike and lowered their expectations for a December one.
- EUR/USD is stabilising slightly below 1.1250 with the closest support at 1.1087 
- USD/JPY erased almost completely Friday’s losses with the dollar back above ¥120 as market continue to expect further yen weakness due to a highly probable expansion of the BoJ’s monetary stimulus
- AUD/USD is on its way to test the resistance lying at $0.71  as the latest inflation data from TD securities suggest that inflation pressures continue to build up in Australia
- RBA is expected to remain on hold at tomorrow’s meeting and we do not forecast the central bank to cut rates further as the pick-up in inflation is reducing its manoeuvring room
- Australia, positive effects of weak currency are not offsetting growth deceleration due to negative market conditions
 
US jobs data surprised to the downside on Friday with nonfarm payrolls printing at 142k versus 201k expected, while the previous month reading was downwardly revised to 136k from 173k first estimates. As a result, the greenback suffered a quick and heavy sell-off with the dollar index losing -1.15% within seconds before stabilizing around the key support area at around 95.20. But the biggest reaction came from the bonds market where investors rushed into treasuries, bringing US rates significantly lower with the 2-year reaching 0.5458%, down 11bps from its pre-NFP levels while the 10-year fell as much as 15bps to 1.9022% as traders started to price out an October rate hike and lowered their expectations for a December one. We think that the US economy is not as strong as anticipated and investors are beginning to wonder whether the fed is not too optimistic regarding the economic outlook. Besides the NFPs, unemployment rates remained stable at 5.1% while participation rates continued to fall, reaching 62.4% in September. Finally, wage pressures remained subdued as average hourly earnings didn’t grow at all in September while market participants expected a read of +0.2%m/m. Finally, the strong US dollar continues to hurt manufacturers as factory orders (s.a.) contracted -1.7%m/m in September versus -1.2% median forecast.
 
 
EUR/USD jumped 1.45% on Friday but was unable to break the resistance standing at 1.1327 (Fib 38.2% on August - September sell-off). Subsequently, the pair stabilized slightly below 1.1250 and traded sideways in the Asian session. On the downside, the closest support can be found at 1.1087 (low from September 3rd), while the next one stands at 1.0809 (low from July 20th).
 
The US jobs report wasn’t a disappointment for everyone as most emerging markets welcomed the news. The Brazilian Bovespa index rose 4%, the Argentinian Merval climbed almost 6.50%, while in Asia this morning, equities are blinking green across the board. The Japanese Nikkei is up 1.58%, while the broader Topix index adds 1.31%. In Hong Kong, the Hang Seng climbs 1.34%, in Australia the S&P/ASX is up 1.95% and in New Zealand, shares climbed 0.66%. European futures are also trading significantly higher this morning with the Footsie up 1.81%, the DAX 1.74%, the CAC 40 1.84% and the SMI +1.85%.
 
In the FX market, USD/JPY almost completely erased Friday’s losses with the dollar back above ¥120 as market continue to expect further yen weakness due to high probability of the expansion of the BoJ’s monetary stimulus. AUD/USD is on its way to test the resistance lying at $0.71 (psychological threshold) as the latest inflation data from TD securities suggest that inflation pressures continue to build up in Australia. We therefore expect the RBA to remain on hold at tomorrow’s meeting. On the long-term, we do not expect the central bank to cut rates further as the pick-up in inflation is reducing its manoeuvring room.
 
***Yann Quelenn, Market Analyst, Swissquote: “The Reserve Bank of Australia will tomorrow release its Cash Rate Target, currently at 2%. Markets are currently pricing in a 90% probability that the rates are going to be unchanged. However, there is a decent likelihood, estimated at 40%, that a rate cut will happen by next year.
 
The fundamentals are improving. Inflation data, released this morning from the institution TD Securities, increased in September by 0.3%m/m. The annualized figure has increased also toward by 2% year-on-year. The Australian dollar has devalued and remains currently very low, which has taken some of the pressure off the country by boosted exports. Nevertheless, one of the major partners for commodities is China and the lingering weak commodity prices are weighing on the Australian growth. In particular, the mining industry is suffering and investments have declined sharply. It seems that the positive effects of a weak currency are not offsetting the growth deceleration due to negative world market conditions.
 
Another issue is the real estate bubble that Melbourne and Sydney are facing. Decreasing the rates will fuel this bubble and, if the RBA decides to cut rates by next year, it will lose control of the endless housing increase***
 
Today traders will be watching industrial production from Sweden; market PMI from Germany, Italy, France, UK and the US; ISM non-manufacturing composite from the US: Halifax house price from the UK.
 

Monday, 05 Oct, 2015 / 8:18

Note: Company News is a promotional service of the Directory and the content isn't created by Finance Magnates.

Source : http://en.swissquote.com/fx/news-and-live-signals/daily-forex-analysis/2015/10/05

Trading news

 

Weekly outlook: Bank of Canada, Bank of Japan, US GDP

Week gone by: China’s global influence grows, volatility falls You know [...]

Posted on Friday, 19 Apr, 2019 / 9:15 under

EUR down, USD up as global PMIs disappoint; US housing starts

Market recap EUR fell on the weaker-than-expected Eurozone preliminary [...]

Posted on Friday, 19 Apr, 2019 / 9:14 under

EUR Falls on Eurozone PMIs, USD Gains on Strong US Data

The euro came under selling interest yesterday, tumbling after another set of [...]

Posted on Friday, 19 Apr, 2019 / 7:26 under