Market Review - 19/11/2015 18:40GMT
The greenback weakens broadly on Thursday on long-liquidation
U.S. dollar fell against the other major currencies on Thursday as traders continued to lock in profits from the greenback's recent rally, although data showed that the number of people who filed for unemployment assistance in the U.S. fell in line with expectations last week.
Versus the Japanese yen, U.S. dollar ratcheted lower after meeting renewed selling interest at 123.65 ahead of Asian open and then tanked to 123.10 after BoJ's unchanged monetary policy decision. Later, the pair remained under pressure throughout European session and New York morning and eventually fell to a session low of 122.62 after release of mixed U.S. economic data before stabilising.
The Bank of Japan kept its monetary policy unchanged Thursday as widely expected. The central bank maintained its pledge to increase the purchase of Japanese government bonds at an annual pace of about 80 trillion yen . The policy board made the decision by an 8-1 vote. Later in a press conference, BoJ Governor Kuroda said, 'economy continues to recover moderately although exports and production are affected by slowdown in emerging economies; exports to rise gradually after being flat for time being; expect industrial production to pick up as inventory adjustment proceeds; inflation expectations appear to be rising on the whole from long-term perspective although some indicators have recently shown relative weak developments; Japan economy to continue moderate recovery; consumer inflation likely to hit 2PCT around latter half of fiscal 2016 although timing may swing depending on oil prices; BoJ will examine both upside, downside risks to economy and prices, and adjust policy as appropriate; GDP data showed final demand is rising; Q3 GDP contraction largely due to decline in inventory investment; want to monitor if Paris attacks weigh on consumer sentiment; turned cautious on inflation expectations as break-even inflation rates and other surveys showed weakness; still reason to believe firms will raise prices, so price trend intact; machinery orders are on gradual improving trend; Capex being delayed slightly despite robust Capex plans; need to closely monitor how Capex plan will be implemented.'
On the data front, the Department of Labor said that the number of Americans filing for initial jobless benefits fell by 5,000 to 271,000 last week, a level below 300,000 for 36 weeks.
Separately, data showed that U.S. CB Leading Index rose to a seasonally adjusted annual rate of 0.6%, from -0.1% in the preceding month whose figure was revised up from -0.2%.
In addition, the Federal Reserve Bank of Philadelphia said that its manufacturing index improved to 1.9 this month from October's reading of -4.5. Market had expected the index to rise to -1.0 in November.
The single currency gained a respite against the usd on Thursday after falling to a fresh 7-month trough at 1.0617 in previous session following the release of FOMC minutes. During the day, although the single currency continued to strengthened in Asia and rose to 1.0718, cross-selling in euro versus other major currencies knocked price down to 1.0667 in European morning and then moved in a choppy fashion before rallying from 1.0669 to 1.0763 in New York session.
News from Reuters on Thursday reported, the European Central Bank's chief economist, Peter Praet, warned of the perils of inaction to avert a slide in prices, as records of the bank's latest policy meeting suggested new ECB action within weeks.
“I count the number of times we had to say we push back the horizon where inflation is going to go closer to (target)," Praet told an audience of bankers, in a frank admission the goal has been evasive. “At some point, you have a problem of credibility and ... it means that you have a risk always that markets and households, at some point, will revise down their long term expectations.”
The ECB will decide on Dec 3 whether to cut rates or expand its 60-billion-euro per month asset purchase programme. "I count the number of times we had to say we push back the horizon where inflation is going to go closer to (target)," Praet said.
In other news, ECB released minutes of govening council meeting, 'negative risks to inflation have increased since Sept projections; anticipated timing of inflation hitting target was likely to be pushed back again; downward revision of inflation outlook 'potentially worrisome', rebound in underlying inflation stalling; policy measures may not be gaining sufficient traction to achieve inflation target must; reexamine degree of policy accommodation in Dec, ready to act if necessary; risks of deflation relevant but declined since the start of the year; disappointed with speed of structural reforms, implementation of EU's juncker plan; influx of refugees could boost growth through construction, investments.'
Elsewhere, investors shrugged off the downbeat U.K. retail sales and pushed the British pound higher against the greenback on Thursday. During the day, although cable retreated after a brief rise to 1.5295 in Asia and then fell to 1.5236 following the release of disappointed U.K. retail sales reports, broad-based weakness in usd lifted price higher and price later rose to a fresh session high of 1.5336 in New York morning before retreating.
The U.K. Office for National Statistics showed Retail sales in the U.K. fell more than expected last month. ONS said retail sales in U.K. declined by a seasonally adjusted 0.6% in Oct, worse than forecasts for a decline of 0.5%. Retail sales in September rose by 1.7%, whose figure was revised from a previously reported gain of 1.9%. Meanwhile, year-on-year, retail sales increased at an annualized rate of 3.8% in October, below expectations for a 4.2% gain, after rising at a rate of 6.2% in September .
Separately, data from ONS showed core retail sales, which exclude automobile sales, fell by a seasonally adjusted 0.9% last month, disappointing forecasts for a 0.5% decline and following a gain of 1.5% in September.
Atlanta Fed President and CEO Dennis Lockhart said, 'he is comfortable raising interest rates assuming no marked downturn in economic outlook; rate path after initial hike may be “slow” and “halting” as Fed feels its way towards a potentially lower equilibrium; Fed's rate 'liftoff' criteria for labor markets has been met, expects inflation to pick up amid little evidence that disinflation is likely; encouraging data confirm U.S. economy growing at moderate pace despite weak energy and export sectors.' He then added 'chief concern is over path of inflation, but has faith prices will rise over time.'
Another piece of news from Reuters worth mentioning, SNB's member of the Governing Board Andrea Maechler said 'Swiss negative interest rates were introduced as a consequence of exceptionally low international interest rates; negative interest rates helped restore traditional interest rate differential, thus reducing Swiss franc's attractiveness; SNB's willingness to intervene in forex market plays crucial role in stabilizing markets; two-pronged monetary policy is proving effective in reducing the relative attractiveness of the franc; Swiss franc remains significantly overvalued, likely to remain under pressure until investor preferences normalize; SNB does not expect sustained negative inflation, let alone a deflationary spiral.'
Data to be released on Friday:
Japan BoJ economic survey, Germany producer prices, U.K. public sector net borrowing, Canada CPI and EU consumer confidence flash.
The greenback weakens broadly on Thursday on long-liquidation
U.S. dollar fell against the other major currencies on Thursday as traders continued to lock in profits from the greenback's recent rally, although data showed that the number of people who filed for unemployment assistance in the U.S. fell in line with expectations last week.
Versus the Japanese yen, U.S. dollar ratcheted lower after meeting renewed selling interest at 123.65 ahead of Asian open and then tanked to 123.10 after BoJ's unchanged monetary policy decision. Later, the pair remained under pressure throughout European session and New York morning and eventually fell to a session low of 122.62 after release of mixed U.S. economic data before stabilising.
The Bank of Japan kept its monetary policy unchanged Thursday as widely expected. The central bank maintained its pledge to increase the purchase of Japanese government bonds at an annual pace of about 80 trillion yen . The policy board made the decision by an 8-1 vote. Later in a press conference, BoJ Governor Kuroda said, 'economy continues to recover moderately although exports and production are affected by slowdown in emerging economies; exports to rise gradually after being flat for time being; expect industrial production to pick up as inventory adjustment proceeds; inflation expectations appear to be rising on the whole from long-term perspective although some indicators have recently shown relative weak developments; Japan economy to continue moderate recovery; consumer inflation likely to hit 2PCT around latter half of fiscal 2016 although timing may swing depending on oil prices; BoJ will examine both upside, downside risks to economy and prices, and adjust policy as appropriate; GDP data showed final demand is rising; Q3 GDP contraction largely due to decline in inventory investment; want to monitor if Paris attacks weigh on consumer sentiment; turned cautious on inflation expectations as break-even inflation rates and other surveys showed weakness; still reason to believe firms will raise prices, so price trend intact; machinery orders are on gradual improving trend; Capex being delayed slightly despite robust Capex plans; need to closely monitor how Capex plan will be implemented.'
On the data front, the Department of Labor said that the number of Americans filing for initial jobless benefits fell by 5,000 to 271,000 last week, a level below 300,000 for 36 weeks.
Separately, data showed that U.S. CB Leading Index rose to a seasonally adjusted annual rate of 0.6%, from -0.1% in the preceding month whose figure was revised up from -0.2%.
In addition, the Federal Reserve Bank of Philadelphia said that its manufacturing index improved to 1.9 this month from October's reading of -4.5. Market had expected the index to rise to -1.0 in November.
The single currency gained a respite against the usd on Thursday after falling to a fresh 7-month trough at 1.0617 in previous session following the release of FOMC minutes. During the day, although the single currency continued to strengthened in Asia and rose to 1.0718, cross-selling in euro versus other major currencies knocked price down to 1.0667 in European morning and then moved in a choppy fashion before rallying from 1.0669 to 1.0763 in New York session.
News from Reuters on Thursday reported, the European Central Bank's chief economist, Peter Praet, warned of the perils of inaction to avert a slide in prices, as records of the bank's latest policy meeting suggested new ECB action within weeks.
“I count the number of times we had to say we push back the horizon where inflation is going to go closer to (target)," Praet told an audience of bankers, in a frank admission the goal has been evasive. “At some point, you have a problem of credibility and ... it means that you have a risk always that markets and households, at some point, will revise down their long term expectations.”
The ECB will decide on Dec 3 whether to cut rates or expand its 60-billion-euro per month asset purchase programme. "I count the number of times we had to say we push back the horizon where inflation is going to go closer to (target)," Praet said.
In other news, ECB released minutes of govening council meeting, 'negative risks to inflation have increased since Sept projections; anticipated timing of inflation hitting target was likely to be pushed back again; downward revision of inflation outlook 'potentially worrisome', rebound in underlying inflation stalling; policy measures may not be gaining sufficient traction to achieve inflation target must; reexamine degree of policy accommodation in Dec, ready to act if necessary; risks of deflation relevant but declined since the start of the year; disappointed with speed of structural reforms, implementation of EU's juncker plan; influx of refugees could boost growth through construction, investments.'
Elsewhere, investors shrugged off the downbeat U.K. retail sales and pushed the British pound higher against the greenback on Thursday. During the day, although cable retreated after a brief rise to 1.5295 in Asia and then fell to 1.5236 following the release of disappointed U.K. retail sales reports, broad-based weakness in usd lifted price higher and price later rose to a fresh session high of 1.5336 in New York morning before retreating.
The U.K. Office for National Statistics showed Retail sales in the U.K. fell more than expected last month. ONS said retail sales in U.K. declined by a seasonally adjusted 0.6% in Oct, worse than forecasts for a decline of 0.5%. Retail sales in September rose by 1.7%, whose figure was revised from a previously reported gain of 1.9%. Meanwhile, year-on-year, retail sales increased at an annualized rate of 3.8% in October, below expectations for a 4.2% gain, after rising at a rate of 6.2% in September .
Separately, data from ONS showed core retail sales, which exclude automobile sales, fell by a seasonally adjusted 0.9% last month, disappointing forecasts for a 0.5% decline and following a gain of 1.5% in September.
Atlanta Fed President and CEO Dennis Lockhart said, 'he is comfortable raising interest rates assuming no marked downturn in economic outlook; rate path after initial hike may be “slow” and “halting” as Fed feels its way towards a potentially lower equilibrium; Fed's rate 'liftoff' criteria for labor markets has been met, expects inflation to pick up amid little evidence that disinflation is likely; encouraging data confirm U.S. economy growing at moderate pace despite weak energy and export sectors.' He then added 'chief concern is over path of inflation, but has faith prices will rise over time.'
Another piece of news from Reuters worth mentioning, SNB's member of the Governing Board Andrea Maechler said 'Swiss negative interest rates were introduced as a consequence of exceptionally low international interest rates; negative interest rates helped restore traditional interest rate differential, thus reducing Swiss franc's attractiveness; SNB's willingness to intervene in forex market plays crucial role in stabilizing markets; two-pronged monetary policy is proving effective in reducing the relative attractiveness of the franc; Swiss franc remains significantly overvalued, likely to remain under pressure until investor preferences normalize; SNB does not expect sustained negative inflation, let alone a deflationary spiral.'
Data to be released on Friday:
Japan BoJ economic survey, Germany producer prices, U.K. public sector net borrowing, Canada CPI and EU consumer confidence flash.
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