Stocks also showing optimism. BoE and ECB as expected. Market waiting for ECB press conference and guidance.
MAJOR HEADLINES – PREVIOUS SESSION
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JN Current Account Total (Aug) out at Y1233B vs. Y1171B expected.
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AU Employment Change (Sep) out at 40.6K vs. -10.0K expected.
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AU Unemployment Rate (Sep) out at 5.7% vs. 6.0% expected. 5.8% prior.
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Participation Rate (Sep) out at 65.2% vs. 65.1% expected. Prior at 65.1%. * JN Bankruptcies YoY (Sep) out at -18.0% vs. -1.0% prior.
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JN Eco Watchers Survey Current (Sep) out at 43.1 vs. 42.5 expected.
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JN Machine Tool Orders YoY (Sep P) out at -61.9% vs. -71.5% prior.
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Swedish Industrial Production and New Orders quite disappointing.
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German Industrial Production MoM/YoY (Aug) out at 1.7%/-16.8% vs. 1.8%/-17.0% expected.
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BoE Interest Rate at 0.5% as expected (unchanged).
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BoE Asset Purchase Target out at £175B as expected (unchanged).
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ECB Interest Rate at 1.00% as expected (unchanged).
THEMES TO WATCH – UPCOMING SESSION
The much better than expected labor report from Australia made the RBA look smart after having just done a surprise rate hike. The picture seems to be rosy in Australia, where they actually worry about a bubble in the housing market (must be the only place in the world by now). Critics are saying that Australia is just a sub function of Chinese growth, but so far that has served the Australians well. The level of economic activity has clearly not only stabilized but risen considerably since March. It looks like AUD is a "buy on dips" -- certainly as long as the stock market continues higher and the risk appetite is strong. Who knows, if/when S&P500 is approaching the big-picture 50% Fibonacci retracement around 1121, the AUDUSD might be trading at parity?
Another intersting development today and yesterday is the news that the Latvian policy makers are considering (already decided) that lenders in the Latvian mortgage market can only collect collateral worth the ACTUAL value of the house that the mortgage was written on. This is a very dramatic change from the prior policy (law) where home owners were obliged to pay the whole value of the ORIGINAL loan. With a housing market down by around 70%, huge writedowns are waiting for particularly Swedish banks, where the entire shareholder equity is now at stake. It more and more looks like there actually was a reason for the Swedish FinMin hysteria last week. A bail-out is in the cards and both SEB and Swedbank are under pressure. The same goes for SEK. Look for a break of 10.37 in EURSEK today or tomorrow. Another interesting play would be NOKSEK, where the Latvian showdown apparently was feared/sensed in the past 12 trading days. Short-term SEK weakness could also be justified on the back of the disappointing Industrial New Orders and Production earlier today.
Another development these days center stage is the continuous rally in EURUSD (or rather weakness in USD).
Rumors of the dismissal of the USD as a reserve currency and Asian central bank buying of gold and EUR are everywhere these days - even the ones that are promtly denied. That might be the forex zeitgeist and it more and more looks like these kinds of expectations and rumor-mongering could become self-fulfilling profecies.
EURUSD faces tough resistance around 1.4844 (Sep high) and 1.4865 (technical level from a year ago - see above graph).
We expect the major USD support levels to be tested this week.
