Trading news

US inflation supports hawks and USD, U.S. Industrial Production

- In spite of better-than-expected US CPI, we do not see any trend reversal in inflation levels for the moment 
- We think the greenback is lacking the strong catalyst it needs to reverse the ongoing negative trend
- Economists expect industrial production, due later today, to have contracted -0.2%m/m in September after a decrease of -0.4% in the previous month
- Commodity currencies stabilising against the greenback with Aussie trading around $0.73 and unable to break the resistance lying at around $0.74, the Kiwi holding ground above $0.68 and the loonie keeps printing new highs against the greenback, reaching levels last time seen in July 2015
 
Yesterday, better-than-expected US CPI figures put an end to the commodity currency rally. The core gauge indicated that when food and energy are excluded, consumer prices grew 0.2%m/m during the month of September, while economists were expecting an increase of 0.1%. On a year-over-year basis, core CPI rose 1.9%, beating market expectations and previous reading of 1.8%. Even with the most volatile components factored in, consumer prices remained stable compared to September 2014, above consensus of -0.1%y/y. In spite of this good news from the core gauge, we do not see any trend reversal in inflation levels for the moment. Recent dollar gains aside, we think the greenback is lacking the strong catalyst it needs to reverse the ongoing negative trend. Even though the market is highly data-sensitive, just like the Fed, even this recent string of good news is not enough - we need to see a real, concrete trend reversal in economic indicators.
 
Economists expect industrial production, due later today, to have contracted -0.2%m/m in September after a decrease of -0.4% in the previous month. Aside from this, the preliminary Michigan Sentiment is expected to rise from 87.2 to 89 in October. EUR/USD dropped 1.15% yesterday amid dovish comments from Benoît Cœuré, ECB board member, and US CPI figures.
 
***Yann Quelenn, Market Analyst: “There is a single observation to be made: the American economy is not recovering as we are being lead to believe. Previous manufacturing survey data shows that U.S. activity remains weak. Jobs data for the past two months has also proved a disappointment, while September's NFPs surprised markets with a very low read. In addition, the latest retail sales have revealed a slight drop and to make matters worse, good exports have lowered by 10% since February. 
 
September’s U.S Industrial production data, due later today, is expected to fall 0.2% m/m, following the 0.4% decline in August. The EURUSD is set to increase on this release. However, on the medium-term, we remain bearish on the pair as expectations for a Fed rate hike increase for 2016, especially for the March meeting. Yet, for the moment, targeting 1.1500 seems a good option.
 
A new era is on the horizon. The ECB started a QE and it is already almost certain that this monetary policy will be expanded above its initial end of September 2016. The EURUSD will not move on who is not recovering but rather on who is declining less .”***
 
Commodity currencies stabilised against the greenback. The Aussie is trading around $0.73 and has been unable to break the resistance lying at around $0.74 (psychological level and previous high). The Kiwi is holding ground above $0.68 on better-than-expected third quarter CPI figures; inflation rose 0.3%q/q versus 0.2% consensus, but below the previous reading of 0.4%. The loonie keeps printing new highs against the greenback, reaching levels last seen in July 2015. Finally, USD/NOK has been unable to break the strong support standing at 8.0464 (low from September 18th) and is currently trading slightly above.
 
On the equity front, shares are trading higher across the board on positive from Wall Street. The Japanese Nikkei is 1.08%, the Topix index 1.01%, in Singapore shares rose 0.40%, in mainland China the Shanghai Composite climbed 1.43%, while its tech-heavy counterpart were up 1.08%. In Hong Kong the Hang Seng edged up 0.50%. In Europe, futures are also trading higher with the DAX gaining 0.60%, the Footsie 0.33%, the SMI 0.01%, the CAC 0.51% and the Euro Stoxx 600 0.50%.
 
Today traders will be watching final September CPI from the Euro tone; manufacturing sales from Canada; industrial production, capacity utilisation, Michigan sentiment and JOLTS opening from the US.

 

Friday, 16 Oct, 2015 / 11:22

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Source : http://en.swissquote.com/fx/news-and-live-signals/daily-forex-analysis/2015/10/16

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