Market Brief
Risk correlated trades continue to appreciate and are showing no signs of weakening. In fact, there are fundamental reasons why the rally should continue. First, several Fed officials suggested that the Fed is still not close to shifting its policy stance. Fed Presidents Lockhart, Yellen and Rosengren, in particular, sounded wary on the economic recovery, even as they recognized the significance of eventual policy tightening. Their comments apparently supported the feeling that the Fed would keep rates ultra loose for a while, which has caused the USD to depreciate broadly. The recent rise in the long end of the US yield curve reflects concerns over inflation, but hasn’t shifted enough to warrant reconsidering inflation expectations. In Asia, stronger economic data also help support risk taking, as Japanese core machine orders and Chinese industrial production and retail sales surprised to the upside. In addition, Both Korean and Taiwanese trade data also exceeded expectations recently, which is important because these trade figures generally act as leading indicators. EURUSD rose to 1.5049 while spot Gold climbed to $1117.33oz.
In New Zealand, RBNZ Governor Bollard cautioned on recent kiwi strength. He stated that the currency's current price was unsustainable and that continued strength could deter progress in the current account. The Governor's word did little to dampen NZD strength as the NZDUSD climbed to 0.7440. However, these comments highlight a rising concern by policymakers globally over the recent USD slide and we should expect increasingly hawkish rhetoric.
The key event on this light calendar day will be the Bank of England Inflation Report and press conference. Markets expect that today will reinforce expectations that the central bank is nearing the end of their QE program, due to the fact that inflation will be nearing their two year inflation target. Perhaps the core uncertainty will be the committee’s forecasts on economic growth. We are expecting a decent rebound, which would additionally support the end / indefinite pause in QE. While the last couple inflation reports have been negative for the sterling, should our central belief (recovery, end of QE and rising inflation) come to fruition we believe it will be GBP positive.
| Global Indexes | Current Level | % Change |
| Nikkei 225 Index | 9,871.68 | 0.01 |
| Hang Seng Index | 22,524.11 | 1.14 |
| Shanghai Index | 3,175.19 | -0.1 |
| FTSE futures | 5,220.50 | 0.11 |
| DAX futures | 5,651.00 | 0.56 |
| SMI Futures | 6,403.00 | 0.51 |
| S&P future | 1,095.40 | 0.32 |
| World Markets | Current Level | % Change |
| Gold | 1,108.60 | 0.25 |
| Silver | 17.4 | 0.28 |
| VIX | 22.84 | -1.33 |
| Crude wti | 78.86 | -0.24 |
| USD Index | 75.04 | 0.02 |
| Todays Calender | Estimates | Previous | Country / GMT |
| Public holiday | -- | -- | USD / -- |
| BoE publishes quarterly Inflation Report Q4 | -- | -- | GBP / 10.30 |
| Claimant count unemployment, change K Oct | 20 | 20.8 | GBP / 09.30 |
| ILO unemployment rate, % Sep | 8 | 7.9 | GBP / 09.30 |
| Average earnings growth, % 3m y/y Sep | 1.5 | 1.6 | GBP / 09.30 |
| Core average earnings growth, % 3m y/y Sep | 1.8 | 1.9 | GBP / 09.30 |
| Industrial production, % y/y Sep | -7.2 | -7.3 | MXN / 20.30 |
| Retail Sale m/m | 0.4 | 1.1 | NZD / 21.45 |
Currency Tech
AUDUSD
R 2: 0.9475
R 1: 0.9330
CURRENT: 0.9288
S 1: 0.9195
S 2: 0.9090
USDCAD
R 2: 1.0780
R 1: 1.0608
CURRENT: 1.0475
S 1: 1.0450
S 2: 1.0380
EURJPY
R 2: 135.99
R 1: 135.70
CURRENT: 134.66
S 1: 133.22
S 2: 132.50
USDMXN
R 2: 13.442
R 1: 13.340
CURRENT: 13.194
S 1: 13.177
S 2: 13.065
- S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot
