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  1. #1

    Important Forex News Daily.

    Forex Major Currencies Outlook (Nov 24, 2016)

    The US dollar resumed its rallies across the board, buoyed by hawkish FOMC minutes and mostly strong data. Both headline and core durable goods orders figures beat expectations while the flash manufacturing PMI also posted an increase. Initial jobless claims and new home sales fell short of consensus. US banks are closed for the Thanksgiving holiday today.

    The euro resumed its slide to the dollar but continued to take advantage of yen weakness. Flash PMI readings from Germany and France were mostly better than expected, except for the German flash manufacturing PMI. The German Ifo business climate index is due today and a rise from 110.5 to 110.6 is eyed.

    The pound was still one of the stronger performers for the day as it chalked up gains after the Chancellor’s Autumn Forecast Statement. Hammond laid out plans for stronger spending and lower taxes in order to keep the economy afloat in transitioning out of the EU. There are no major reports due from the UK today.

    The franc extended its slide to the dollar and the pound but ended higher against the euro. There were no reports out of the Swiss economy yesterday, although SNB official Maechler emphasized that the franc remains overvalued.

    The yen was the biggest loser, owing to the quake in Japan and risk-taking. Japanese banks reopened today but the yen still failed to draw support, as the flash manufacturing PMI slid from 51.4 to 51.1 instead of improving to 51.7.

    Commodity Currencies (AUD, NZD, CAD)

    The comdolls resumed their slide to the dollar but managed to go for more gains against the yen. Crude oil inventories posted a surprise draw of 1.3 million barrels instead of rising by 0.3 million barrels while Iraq expressed willingness to cooperate in an OPEC output deal. New Zealand’s trade balance is due next.
    - See more at: [Only registered and activated users can see links. ]

    [Only registered and activated users can see links. ]Important Forex News Daily.

  2. #2

    FOMC Minutes confirm December hike

    After Yellen’s recent testimony, there were few doubts that the Fed is set to raise rates in December. Also, recent data was looking good. And now, the FOMC minutes also confirm the upcoming rise of interest rates. Here are three opinions:

    Market Reaction – CIBC

    The Fed’s most recent statement was light on changes, but the markets heard the message loud and clear. The minutes of the meeting only confirm that the Fed is ready to tighten policy in December, with most members seeing a rate hike as being appropriate ‘relatively soon’. Moreover, some officials saw a December rate hike as important to Fed credibility and even saw the economy as already having reached maximum employment. That said, there are reasons to believe that the pace of tightening will be gradual. Several officials judged there is still appreciable slack in the labour market, in direct contrast to those who believe that further gains will push the economy through full employment. Moreover, some Fed officials remain wary of tightening too early, with monetary policy so close to the lower bound.

    All told, not much new was revealed in the minutes, and it shouldn’t garner much market reaction. The Fed is still on track to hike December, with further evidence needed to consolidate the current divergence in opinions.

    Nov FOMC Minutes: All ‘Teed-Up’ For A December Hike – BNPP
    The November FOMC meeting minutes gave the overall impression that December is baked in, failing a substantial shock. And this was before the election and the subsequent positive assessment by markets. December seems as certain as any rate move in recent years.
    A substantial majority viewed the risks as roughly balanced, though a few still saw significant downside risks. When the Fed says ‘balanced’ it means they have just hiked, so roughly balanced signals very close to hiking.
    The participants “generally agreed” the case for a rate hike had “continued to strengthen.” Most agreed it could well become appropriate to raise the rate “relatively soon” (which we translate as “December”).
    Some said that to preserve credibility, the hike needed to come at the “next meeting”. A “few” advocated an increase in December (though only two dissented). * “Many” thought risks to economic and financial stability could increase over time if the labor market overheated appreciably, though some argued undershooting the full-employment rate of unemployment could have favorable supply-side effects. The latter point is one the Chair has made, but it sounds like not everyone buys that and more in fact worry about the possible adverse implications of undershooting full employment than see it as a plus..

    The Committee reiterated a slow pace of future hikes, saying that monetary policy would remain “dependent on the outlook as informed by incoming data” and that participants expected that “economic conditions would evolve in a manner that would warrant only gradual increases in the federal funds rate.”

    Nov FOMC Minutes: Fed Set To Move In December – Danske

    The FOMC minutes from the November meeting were quite a non-event, mainly because much has happened since the meeting.
    We think the higher wage growth and lower unemployment rate in the jobs report for October were sufficient ‘further evidence’ for the Fed to feel comfortable raising rates in December (regardless of the election result). The combination of the market rally on the back of the Trump victory and strong US economic indicators for Q4 has only made the case for a December hike even stronger. Markets have priced in a Fed hike in December with certainty.
    The Fed is only expected to partly offset the fiscal boost from Trump, as the FOMC turns more dovish next year due to shifting voting rights and many dovish FOMC members (including Fed Chair Yellen) have said it may be a good idea to let the economy run a bit hot.

    Markets expect four hikes from now until year-end 2018 against only two hikes before the US election. While the ‘median’ dots in the September projections indicated two hikes in 2017 and three in 2018, we expect two Fed hikes each year.
    [Only registered and activated users can see links. ]Important Forex News Daily.

  3. #3
    The latest US data on US durable goods was very impressive. It was a big leap for the month of October as the previous reading for the month of September was really disappointing. All these pointing to the possibility of interest rates hike by December.

  4. #4

    Moerning recap. 25 Nov. 2016

    USD/JPY climbed above 113.90 overnight on rising 10-year US bond yields. Japanese inflation data came slightly higher than it was expected and ahead of the figure of the last month, but it is still very low to push BOJ to taper its accommodative monetary policy.

    EUR/USD slipped down yesterday in the countdown to Italy’s constitutional referendum scheduled for December 4. The euro rose to 1.0575 in the course of Asian session as 10-year US Treasuries had finally slowed down their pace. Later today we will receive goods trade balance data for the US (the consensus forecast indicates an extended divergence between American exports and imports), and flash services PMI.

    AUD/USD gained some point having risen to 0.7435 mainly of the rising prices of copper and iron ore. Kiwi moved upwards to 0.7025 in the cross with USD availing of the drop in the US Treasuries.

    USD/CAD slid down below 1.3480 due to the weakening of the greenback. Oil prices were mostly steady as investors are waiting for the next week's meeting of the OPEC for clarity on proposed output cut.

    GBP/USD didn’t make big moves on the session. The pair is slowly rising towards the next resistance line located at 1.2465. The trigger of today’s session is the British second estimate GDP. The reading should be bullish for the pound. Many strategists call on the market participants to give the pound a break. It has already weakened significantly since the UK voted to leave the EU on June 23. There is little reason to buy/sell the cable aggressively before any news on the UK/EU relationship surface.

  5. #5

    Brexit May Take Decade So Give the Pound a Rest, Investors Say

    two of Scotland’s biggest fund management firms have a message for the currency market: it’s time to give the pound a break.

    Sterling’s 16 percent slide since the U.K. voted to leave the European Union on June 23 reflects a changed economic reality, according to Standard Life Investments and Kames Capital. That means there’s little reason to aggressively sell -- or buy -- the currency until the details of the U.K.’s new relationship with the EU and the economic implications have unfolded.

    “This is a long, slow train lasting a decade,” Andrew Milligan, head of global strategy at Standard Life, which manages about 270 billion pounds ($335 billion), said in an interview at Bloomberg’s Edinburgh office this week. “Markets have priced in the fact that the U.K. economy is going to go through a big structural adjustment -- sterling shows us that.”

    [Only registered and activated users can see links. ]Important Forex News Daily.

    After plunging to the lowest against the dollar since 1985, the year of an international agreement to devalue the American currency, the pound has recovered some equilibrium and traded between $1.21 and $1.27 over the past month. Initial losses were capped as the depreciation boosted exports and the Bank of England’s monetary stimulus supported the economy more than policy makers had predicted.

    The pound was the “whipping boy” of foreign exchange markets in the aftermath of the referendum, said Stephen Jones, chief investment officer at Kames. Also based in the Scottish capital, the firm oversees about 51 billion pounds for clients.

    “I’m slightly more optimistic on it now,” Jones said in an interview alongside Milligan. “We are not short sterling, but it’s not an endorsement of buying it. Whilst we can take comfort from the beginnings of reference to policy, the detail is non-existent.”
    The government hasn’t yet triggered the two-year legal process to leave the EU. While the Supreme Court will decide whether it needs a parliamentary vote, Prime Minister Theresa May reiterated her plan to do it by the end of March. Only then will Britain start unraveling more than four decades of agreements with continental Europe spanning everything from trade and labor laws to weights and measures.

    [Only registered and activated users can see links. ]Important Forex News Daily.

    In the meantime, the country’s financial health is deteriorating and the pound remains the worst-performing major currency in the world this year along with the Mexican peso, which was hit by Donald Trump’s U.S. election victory. In the first major statement on the economy since the Brexit vote, U.K. Chancellor of the Exchequer Philip Hammond this week slashed the forecast for growth in 2017 and laid out plans for more government borrowing.

    For now, there’s less scope for a bigger selloff irrespective of concerns about the state of the economy past next year and 2018, Jones said. The median of analysts’ predictions compiled by Bloomberg is for the currency to trade at $1.23 by Dec. 31 and $1.25 next year, little changed from Thursday’s $1.2457 close.

    “The U.K. economy generally does well when you lower the cost of borrowing for the consumer and have depreciated your currency pretty aggressively relative to neighbors,” said Jones.

    Standard Life’s Milligan advises investors to be “neutral and flexible” on U.K. assets because extricating the U.K. from the EU won’t be quick and easy.

    “We can have a lot of preliminary talks,” he said. “But very little will actually be agreed of any note until the beginning of 2018.”

  6. #6

    British companies keep investing in third-quarter despite Brexit

    UK companies managed to increase their investment by more than expected during the three months as Britain’s economy surged solidly following June's vote to abandon the European Union.

    Business investment expanded at a quarterly rate of about 0.9% during the three months to September, as the Office for National Statistics informed, thus ruining expectations for a 0.6% ascend in a Reuters survey of economists.

    The ONS officially confirmed that the UK’s economy surged 0.5% during the third quarter, assisted by a rebound in exports and also robust household spending.

    While it resembles a much better performance than many experts had expected in the immediate aftermath of Brexit, a much bigger test is awaited next year.

    Ascending inflation provoked by the sterling’s post-Brexit vote plunge seems to have squeezed household spending, while there have been worries that business investment looks set to slow.

    [Only registered and activated users can see links. ]Important Forex News Daily.

  7. #7

    Weekly Trading Forecast: December Expectations Face Themes Like Brexit, Data Like NFP

    December is historically one of the more quiet trading periods of the year. However, an antsy market heading towards protectionism makes a docket loaded with events like US NFPs, an OPEC meeting and BoE stability report a trading minefield.

    Dollar Looking to Close Out Best Two-Month Rally in Two Years. - Rate forecasts are fully pricing a December 14 hike, with Feds funds calling a 100% chance of a move.

    - The speculative burden is now on February and beyond – the Fed’s expectations glide path.
    - The US trade agenda under new president will compete with Fed rate forecasting and strength in counterpart weakness.

    Though the ICE Dollar Index (DXY) closed out this past week at its highest level in over 13 years, there was a notable downshift in bullish momentum. Following the strongest two-week rally since the currency topped out in early 2015, the benchmark currency barely eked out a bullish close through a period restrained by holiday liquidity. The currency’s primary effective driver – Fed rate forecasts – has enjoyed a remarkable run but is quickly burning off its fuel. Can the expectation of 2017 rate hikes pick up the responsibility for further Dollar gains? Will the threat of US trade barriers take over the responsibility of lifting the speculative value of the Dollar at the detriment of its largest trade partners? The bullish course is not particularly easy to chart ahead.

    This past week, the Dollar managed its third straight positive close; but the gains were far less material than what was achieved in the two weeks immediately following the US Presidential election. This was not simply a flush of optimism following the outcome of the closely watched vote, but it nevertheless supplied the kind of fuel that the Dollar has been able gain considerable traction on. The problem is that these outlets of strength may be tapped without direct – rather than incidental – support. The most prominent bullish engine at risk of spent conviction is the rapid buildup of interest rate speculation.

    As of this past week, the market is affording a 100 percent probability that the Federal Reserve hikes at its next meeting on December 14th. We haven’t seen this degree of certainty since the last hawkish policy cycle. In an environment where most are maintaining zero or negative rate policies alongside ever-expanding quantitative easing programs, this unusual tack is a strong fundamental booster. Yet, you can’t push expectations beyond 100 percent. Well, in fact, you can push yield forecasts above that traditional cap in certitude because speculation can go out to a move beyond 25 basis points. That is extremely unlikely however as the group has vowed a gradual pace so as to curb fears as they attempt to normalize policy. Where further bullish premium may be found is through tightening at further meetings.

    According to the same futures contracts, the market is pricing out a meager 10 percent chance that the Fed would hike in December and act again at the first gather in 2017 (February 1st). Accelerating the Fed’s timetable would be exceptionally difficult to motivate. That said, it is still possible. The data listings on tap for the coming week are the high-profile that could accomplish just that if they provided an unexpectedly robust outcome…though they could also torpedo current forecasts with surprisingly weak outcomes.

    Top billing for event risk this coming week is the November NFPs and broader labor statistics. The net job change is the speculative rank’s first concern. If the number can tap a deeper risk response, it may carry a lasting Dollar move. More likely, the print will be capable of a jolt at best with lasting motivations reserved for the underlying statistics closer to the Fed’s mandate. The jobless rate is already far along. It is the wage growth clip that the FOMC has mentioned in minutes and amongst individual members for lacking the credibility to support a follow up to December 2015’s liftoff. Before the employment statistics cross the wires, the Conference Board’s consumer sentiment survey and the PCE deflator will offer insight into a more unstable backdrop for the group and currency.

    While the economic docket lays direct track for us to follow for possible volatility flare-ups, Dollar traders should also be intimately aware of the influence that rising protectionist agenda has for the currency and global investment landscape. The Brexit vote, US Presidential election, competitive monetary policy regimes are all product of countries attempting to benefit at their global counterparts’ detriment. There are initial gains to be had for those pursuing barriers to and withdrawal from global trade; but they are short lived. In the first phase, few countries stand to benefit more than the world’s largest consumer nation. However, the net loss for the global economy in diminished trade, investment and growth will come back to hit that largest player. The question is: what phase are in for these big picture fundamental themes? I believe we aren’t as early as many seem to be treating the Dollar. –JK

  8. #8

    Euro Risks Increasing for Euro Ahead of Italian Constitutional Referendum

    - French Republican primary results see Francois Fillon – the more mainstream candidate more likely to beat the National Front’s Marine Le Pen – win on Sunday, providing a boost for the Euro.

    - Italian constitutional referendum next Sunday (December 4) looks increasingly likely to fail; the existential threat of a Euro-Zone break-up may soon be thrust back into the spotlight.

    [Only registered and activated users can see links. ]Important Forex News Daily.

    EUR/USD looks increasingly likely to break consolidation streak to downside, setting up a move towards 0.9500 in 2017.

    All things considered – it being a holiday week, resulting in markedly lower liquidity levels than normal across all markets, including forex – the Euro had a rocky week. While it was barely changed on balance, EUR/USD traded between roughly 1.0520 and 1.0660, an appetizer of the volatility that may be forthcoming. Over the coming days, a mix of economic data and political risk should be particularly prominent in driving EUR/USD.

    The calendar provides an outlet for traders looking for more definable risk. On the Euro side, inflation data from Germany and the Euro-Zone for November are due out. With energy prices providing a nice tailwind (vis-à-vis a base effect), there might a slight bump higher in the year-over-year figures in the cards for both Germany and the broader Euro-Zone. A speech by European Central Bank President Mario Draghi in European Parliament on Monday should draw interest, as well as his speech in Madrid on Wednesday, as markets prepare for the ECB’s rate decision on December 8.

    On the US Dollar’s side of the economic calendar, the November US Nonfarm Payrolls report will be in obvious focus on Friday. It’s important to understand that slower rates of headline NFP growth are expected with the unemployment rate below 5%, so the FOMC won’t be hesitant about raising rates at their December 14 meeting even if the headline NFP report came in around +150K. Over the past year, various Fed officials (including Fed Chair Janet Yellen) have estimated the breakeven pace of jobs growth is around +100-110K; the Atlanta Fed’s Job Calculator projects +120K per month are needed to keep the unemployment rate at or below 4.9% through October 2017.

    Political risk is on a different level than the economic risk over the coming weeks for EUR/USD. For one, the economic risk is quantifiable; the political risk is more nebulous. To be clear: we are not operating in the bounds of a ‘normal distribution’ anymore; there will only be ‘bimodal outcomes’ going forward. The political risk can still be boiled down into a binary scenario: events will unfold in a manner that will help strengthen the bonds of the Euro-Zone; or they will unfold in a manner that will strain them more than ever. There will be no more kicking the can down the road, lest policymakers desire to sow the seeds of greater upheaval in 2017 and beyond.

    In what should be seen as a positive development for the Euro to start the week, Francois Fillon appears poised to lock up the Republican Party’s nomination for President. For those participants hoping to see the European Union and the Euro-Zone stay together, Fillon represents the best choice to defeat nationalist populist Marine Le Pen, France’s version of Nigel Farage or Donald Trump. Le Pen has campaigned on taking France out of the EU; she represents more than an existential threat for the Euro. French elections are in April and May.

  9. #9

    British Pound May Weaken on Profit-Taking, Year-End Flows

    Fundamental Forecast for the British Pound: Neutral

    British Pound gains for sixth week as monetary policy outlook improves
    Thin UK data docket, status-quo BOE FSR may leave prices rudderless
    Profit-taking, year-end flows may drive Pound lower in the week ahead

    [Only registered and activated users can see links. ]Important Forex News Daily.

    The British Pound recovery continued as prices posted the sixth consecutive weekly gain versus an average of the UK unit’s major currency counterparts. An increasingly benign BOE policy outlook appears to be the catalyst driving recent gains. Prices have advanced alongside OIS- and futures-based measures of expectations for next year’s policy path as well as benchmark 10-year Gilt yields.

    Last week, a revised set of third-quarter GDP figures underscored the economy’s relative resilience since the Brexit referendum. An expansionary Autumn Budget Statement also appeared to shift some of the burden of supporting the economy from monetary and toward fiscal policy. Traders appeared to interpret this as reducing scope for further BOE accommodation.

    Looking ahead, November’s manufacturing and construction PMIs as well as October’s Mortgage Approvals report headline an otherwise lackluster data docket. UK economic news has cautiously deteriorated relative to consensus forecasts since the beginning of October but more of the same seems unlikely to beckon easing by itself as inflation firms and the government readies its own stimulus.

    Meanwhile, the BOE Financial Stability Report seems unlikely to offer anything particularly novel. Credit conditions have appeared to be broadly stable since mid-August since recovering from a slump in the referendum’s immediate aftermath. This means that the central bank is probably comfortable in wait-and-see mode for the time being, saving its ammunition for the possibility that something truly worrisome transpires.

    On balance, this leaves Sterling somewhat rudderless. The currency has enjoyed the longest winning streak since mid-2015, which may inspire jittery investors to consider profit-taking amid a lull in top-tier news flow. Year-end portfolio readjustment that tends to play out across financial markets in the month leading up to winter holidays and the turn of the calendar year may reinforce this dynamic.

  10. #10

    Yen Dropping at its Fastest Pace in Two Decades But What Motivation are Bears Tapping

    Fundamental Forecast for Japanese Yen: Neutral

    - USD/JPY has posted its fastest three-week climb since July 1995.

    - Risk trends, a rise in carry appeal, and divergent monetary policy all take part responsibility.

    [Only registered and activated users can see links. ]Important Forex News Daily.

    All of the major Yen crosses rose this past trading week…aggressively. Much of the strength to these crosses – weakness for the Japanese currency – can be summed in the USD/JPY’s performance. The world’s second most liquid currency pair rallied strongly this past week to round out a three-week climb that has no equal in the past 21 years. Dollar strength strong-arming the Yen and its counterparts does have some merit, but such tail wind is limited. Risk appetite is similarly dubious as only US equities seem to enjoy the drunk optimism that would be extracted from the USD/JPY’s rate of climb. The true source of this move may be something as detrimental as capital flight. Few trades founded on pain perform well for long.

    The first thing to clear up in assessing the Yen crosses bearings moving forward is misallocated views of influence. This current climb is not the work of Japanese authorities. The Bank of Japan has backed off of its ever-growing stimulus vow as the effectiveness of competitive monetary policy globally cools. The Japanese government’s efforts in the meantime have barely even registered. As central banks collectively set the limits of their accommodation, the BoJ has found itself among the most prominent recipients of outright doubt from speculators.

    While the Japanese stimulus program may have lost control of the reins, its long-term course has solidified the assumptions that its currency is an ideal funding currency to carry trade. The yield collecting strategy rises and falls with the same sentiment tide that pushes global equities or shifts the preference from advanced to emerging market assets and back again. US equities seem to signal a remarkable climb in speculative appetite – perhaps enough to make even the record low returns on these crosses palatable. The problem is that risk drive in everything other than US shares lacks for drive.

    In the absence of these traditional, speculative motivations; perhaps the true motivation is something as banal as necessary diversification. Brexit rang the bell of rising protectionism, but the US election made the risk all too real for Japan. President-elect Donald Trump ran on a platform of protectionism that would see the world’s largest consumer economy erect trade barriers on countries whose livelihood is more prominent source through exports. Japan is one of those economies. With the TTP and other important trade deals with the US and other major partners at risk, growth and international investment appeal in Japan drop quickly.

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