1. The lack of fresh developments on either North Korea and the succeeding FED chairman positions being filled, combined with the significant progress made on tax reform helped the U.S. dollar close out a strong week. The Dollar experienced the strongest gains against the New Zealand dollar and Japanese yen but none of the major currencies escaped its rally.
2. The most important event risk on next week’s calendar will be the highly anticipated European Central Bank monetary policy announcement. EUR/USD has traded in a narrow range ahead of the announcement as investors wonder whether it will be a hawkish or dovish taper. The euro was 0.15 % lower at $1.1769, extending losses from Friday when it lost 0.6 %.
3. The EURUSD has drifted lower from a 2-1/2-year peak of $1.2092 reached on Sept. 8, as hopes for the European Central Bank to take a more hawkish stance have been offset by speculation that it is not be in a hurry to discontinue its easy policy.
4. USD touched a three-month high against the yen on Monday, with an emphatic election victory for Japan’s ruling party keeping yen-weakening stimulus measures at the heart of government policy. The U.S. currency was up 0.25 % at 113.79, losing a bit of momentum after earlier touching 114.10, its highest since July 11.
5. Gold prices fell in Asia on Monday as the dollar showed strong gains after Japan’s Premier Shinzo Abe resoundingly won re-election, signaling continued easy policy. Gold prices continued falling on Friday, pressured lower by the stronger U.S. dollar which was boosted after President Donald Trump’s plans to overhaul the tax code cleared a critical hurdle. Prices are now at $1274
Another D-Day in the ongoing Catalan crisis. The Catalan parliament will convene on Thursday, October 26th to discuss the next moves. A straightforward declaration of independence is on the cards. The gathering will come one day before the Spanish Senate is expected to approve the measures to suspend the Catalan autonomy. For the euro, the [...]
The election results confirmed the latest polls: Abe is returned to office with a huge, “super majority”. His coalition won 312 seats in the 465-strong lower house. This will allow him to enact his policies in full-swing. He vowed to use the money that will be raised by the rise in the sales tax for […]
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The dollar soared a three-month high versus the yen on Monday, after an emphatic election victory for Japan's ruling party which ensured that yen-weakening stimulus measures remain at the heart of government policy.
The US dollar index gained ground against its G7 counterpart currencies this week, after the Senate Republicans in Washington approved a $4 trillion budget for 2018, pushing the Trump administration proposed tax reform plan one step closer. The chamber approved the budget resolution by a vote of 51-49, with US Senators now having to reconcile their budget resolution with a separate one passed by the House. Doing so would allow for the tax overhaul to move ahead quickly, possibly as fast as this week.
Passing a budget unlocks reconciliation, which enables the GOP to pass the Trump administrations tax reform plan, with a simple 51-vote majority in the Senate. The Senate version of the bill would allow for tax cuts to add $1.5 trillion to the deficit over a decade. In contrast, the House called for a revenue-neutral proposal. Republicans hope to pass a bill that broadly chops individual and corporate tax rates and scraps provisions like the estate tax and alternative minimum tax.
The market reaction saw global stock markets moving higher, with Japan’s Nikkei stock index hitting its longest winning streak in more than half a century. In the currency market the US dollar moved to a more-than three-month high against the Japanese Yen, hitting 113.47.
The New Zealand dollar tumbled against the US dollar, Swiss franc, Japanese yen and Australian dollar as Jacinda Ardern of the Labour Party was named New Zealand’s next Prime Minister. New Zealand stock market’s reacted with shock, as the New Zealand First and the Labour Party announced that they had formed a coalition, supported by the Greens. Investors were concerned with some of the looser fiscal policies promised by the Labour Party including their intention to issue $7 billion more in debt than the National party would have and to implement a higher minimum wage and build more affordable housing. Further worries were raised that the Reserve Bank of New Zealand may have to adopt a different policy mandate, which may undermine the strength of the kiwi dollar.
The New Zealand dollar fell below the $0.70 level against the US dollar, losing over 2%, while the AUD/NZD pair surged above the 1.1200 technical level. The AUD/NZD received a further boost after Australian jobs figures surprised on the upside, prompting many investors to ponder whether the RBA may soon start to raise interest rates.
The euro continued to look past the political crisis in Catalonia last week, with the single currency holding above the 1.1800 handle against the US dollar, and gaining ground against the Japanese Yen and the British pound. The Spanish government said Thursday it would begin the process to impose direct rule on Catalonia in an unprecedented move to crush the region’s independence bid. The euro failed to react, as the government of Prime Minister Mariano Rajoy said it would invoke Article 155 of the constitution, a provision that allows the central government to suspend the autonomy of the Catalan regional administration.
The British pound will be looking to recover lost ground this week, after slipping against the euro and the US dollar last week. Disastrous UK retail sales figures and continued deadlock in Brexit negotiations between UK and EU officials pushed the GBP/USD briefly below the 1.3100 level last week. The sterling also came under pressure from mixed wage data, which caused many investors to question whether or not the Bank of England will raise interest rates, as expected in November. The British pound faces a further test this week, as the ONS releases official third fiscal quarter gross domestic product estimates.
The main event for traders this week will be the European Central Bank interest rate decision and policy decision. The ECB President Mario Draghi is widely expected to start to unwind his large-scale assets purchasing programme started back in 2014.
Traders will also look to the Bank of Canada, as they deliver their decision on interest rates. The United States also releases third fiscal quarter gross domestic product figures, and core durable goods orders data.
Welcome to the weekly outlook starting this Monday 23 October. We’ll be looking at the week’s key economic events on the financial calendar covering Monday to Thursday. As you’ll read below, it’s an active economic news week with releases coming from all major economies around the globe. On Friday, we also get inflation figures from the US with the Consumer Price Index for October due at 12:30 GMT.
Event: EU Market Services, Manufacturing and Composite PMI (October)
Date: Tuesday 24 October 2017 at 08:00 GMT
Markets affected: EUR/USD, EUR/GBP
Trending hashtags: #eur, #pmi
Business executives in the Eurozone manufacturing and services sectors showed confidence in the common region last month with the PMI releases by Markit Economics confidently above the 50 mark which shows confident growth. Markit Services came in at 55.8, the Markit Manufacturing PMI was 58.1 while the combined Markit PMI Composite showed an improvement on previous months with 56.7.
Event: Australia Consumer Price Index (Q3)
Date: Wednesday 25 October 2017 at 00:30 GMT
Markets affected: AUD/USD, AUD/NZD
Trending hashtags: #aud, #cpi
Important inflation data is due out for Australia on Wednesday. The aussie dollar experienced volatility last week with retail sales below expectations but then seeing the lowest unemployment rate for a number of years. The Reserve Bank of Australia will be closely following the release of the consumer price index which saw 0.2% growth in the second quarter from the first quarter and an annualised growth of 1.9%.
Event: UK Gross Domestic Product (preliminary)
Date: Wednesday 25 October 2017 at 08:30 GMT
Markets affected: GBP/USD, EUR/GBP
Trending hashtags: #gbp, #gdp
Estimates for third quarter GDP are due out for the UK. The economy grew 0.3% on a quarterly basis during the second quarter with 1.5% annualised growth. Analysts are expecting a slight improvement for the third quarter at 1.8%. With a number of challenges facing the UK economy around the Brexit negotiations, the Bank of England will be on the lookout for signals to consider tightening monetary policy again.
Event: Bank of Canada Interest Rate Report
Date: Wednesday 25 October 2017 at 14:00 GMT
Markets affected: CAD/USD
Trending hashtags: #cad, #interestrate
While the Canadian economy has been outperforming it’s G7 counterparts, the Bank of Canada may take caution in making any changes to its current 1% interest rate. Last week retail sales fell by 0.3% in August and inflation has only grown 0.2% in September – both figures missed forecasts and may deter the central bank on making any modifications to the benchmark rate at this time.
Event: New Zealand Trade Balance (September)
Date: Wednesday 25 October 2017 at 21:45 GMT
Markets affected: NZD/USD, AUD/NZD
Trending hashtags: #nzd, #trade
Trade data is due out for New Zealand which will be key in helping the struggling kiwi. The NZD took a tumble last week as the NZ First party threw its support behind the Labour Party and raising fears of increased spending on housing and wages taking a toll on the country’s debt level. Imports last month came in at $4.92 billion with exports at only $3.69 billion. With a monthly balance of $-1,235 million the overall year’s level is currently sitting on$-3.2 billion.
Event: ECB Interest Rate Decision
Date: Thursday 26 October 2017 at 11:45 GMT
Markets affected: EUR/USD, EUR/GBP
Trending hashtags: #eur, #interestrate
One of the main events in this week’s calendar comes on Thursday with the European Central Bank’s decision on interest rates which are currently 0% and deposit rate at -0.4%. ECB President, Mario Draghi, has commented on a reduction on the monthly bond purchasing programme which has been in place for three years now. The Markets will be on the lookout for any further news on that front.
Tokyo’s benchmark stock index extended a record winning streak on Monday as Japanese Prime Minister Shinzo Abe’s victory in a snap election pushed the yen down and boosted exporters.
The Nikkei 225, which on Friday posted a 14th straight day of gains to match a record set in 1961, added 1.15 percent, or 246.51 points, to sit at 21,704.15 in early trade.
The broader Topix index was up 0.96 percent, or 16.70 points, at 1,747.34.
Abe — who came into power in late 2012 on a ticket to reignite the lumbering economy — is now on course to become the country’s longest-serving premier.
“It’s a relief for foreign investors who had bought Japanese stocks aggressively before the election on a bet that Abenomics will continue,” said Masayuki Kubota, chief strategist at Rakuten Securities, referring to Abe’s flagship growth policy.
The greenback strengthened to 113.91 yen against 113.51 yen in New York Friday.
A cheaper yen is a positive for Japanese exporters as it boosts their profitability, spurring demand for their shares.
“Abe policies should remain accommodative and point to a weaker yen over time,” said Stephen Innes, who heads Asia-Pacific trading at forex firm OANDA.
A cheaper yen boosted carmakers, with Nissan up 1.25 percent at 1,092.5 yen and Honda rising 0.99 percent to 3,462 yen.
Panasonic rose 1.67 percent to 1,664.5 yen and Canon climbed 0.42 percent to 4,047 yen.
Major bank Mitsubishi UFJ Financial rose 1.42 percent to 738.2 yen.