Week to Nov 24th

The German coalition problems weighed on Monday, causing pressure on EUR during the Asian session. It rebounded sharply at the European open, only to fade again and end the day roughly flat from Friday’s close. DAX reacted inversely and was up 0.5% on the day. It was risk-on as Gold, JPY and US 10-year bond prices (inverse to yields) fell heavily. The Bund was flat. SPX NKY and FTSE were also up on the day, the latter being in spite of GBP also being up on positive Brexit news. In a similar pattern to last week AUD was down with Gold, and CAD was down with Oil, which took a slight rest from its upward trajectory.

Tuesday was another good day for equities with SPX ramping to touching another all-time high, briefly breaking the 2600 roundpoint. DJIA, NDX and RUT closed at fresh records. DAX added 1% on a flat Euro, and FTSE and NKY added to Monday’s gains. Yields were down as was USD against all other currencies, and so was Gold and Oil, the latter making another two-year high after the API beat at 2135.

Something very strange happened in Hong Kong. The HSI cash had just closed at 0900, touching a record and roundpoint 30,000. When the futures opened at 0915, there was a huge 4.5% momentary spike (to 31339) which immediately retraced. This then induced volatility and the index traded between 30,200 and 29,600 for the rest of the week, completely unlinked to other indices.

Wednesday saw the UK budget, and as we predicted last week, housebuilding stocks moved sharply downwards on news that the government is going to investigate their land-banking policies. FTSE had spiked up in the morning, but gave all that up after the Budget to end the day a mere 0.1% up. SPX showed its strength by only falling 0.1%. However, NKY was down sharply as JPY rose, as was DAX, giving up the gains earlier in the week on continued German political uncertainty, but partly on a rising Euro, which in turn was the effect of USD which had been falling all day again (against all currencies) and was accelerated by dovish FOMC minutes. The December hike is fully priced in (in fact, CME Fedwatch now has an 8.5% chance of a 50bp hike rather than 25bp) , but the minutes showed concern about low inflation. DXY hit its lowest level for a month. As you would expect Gold and bond prices rose quite significantly. Risk-off again, and Wednesday turned around Tuesday. Oil was flat, despite the EIA miss at 1530. 

Thursday was Thanksgiving and US and Japanese markets were closed. Of course futures were still traded around the world, but volume was thin, and so were the price movements. Indices were all slightly up, despite a heavy sell-off in China (see HSI note above). DAX had an early rally despite the GDP miss at 0700, mixed PMIs at 0830, and a climbing Euro. SPX futures were active around this time, but stopped moving around the time the US session would have opened.

Currencies were directionless on this holiday, with EUR (after the Eurozone PMI beat), and AUD slightly up, but GBP (after UK GDP came in as expected), JPY and CAD slightly down. The Canadian Retail Sales print was interesting. It missed, but it is not normally regarded as a high-volatility event. However on this day of thin trading, the miss caused CAD to drop an instant 42 pips (0.33%), and continue to fall until Friday morning. The overall effect was that DXY edged down another 0.1%, Oil continued its advance to new (two year) highs, and Gold was flat. The bond market was closed.

Friday was a half-holiday in the US, and of course the famous Black Friday shopping day. Even without any instant sales results, AMZN traders just assumed they would perform, and the shares rose throughout the short session to finish 2.67% up on the day and 5.37% on the week. Similar enthusiasm was shown across the board, with all indices rising again, SPX and NDX closing at record highs, and the VIX at an all-time low. DAX and EUR rose in unison (the latter to a two-month high). following the upbeat IFO sentiment prints at 0900, and some progress on German coalition talks. NKY was also up as JPY fell (with Gold - risk-on again), and only FTSE struggled with rising GBP to end flat.

Surprisingly, despite USD falling against all currencies except AUD (a Gold proxy), and particularly against EUR, leading to a 0.4% fade in DXY to a now two-month low, bond yield were actually up, although this was a gap-up following Thursday’s holiday.

Oil was up again, this time following news of a leak in the Keystone pipeline, and expectations that cuts will be extended at next week’s OPEC meeting.

WEEKLY PRICE MOVEMENT

These are the prices movements for the week on the instruments we cover, with USD down across the board. The best forex trade would have been to buy EURUSD, up 1.20%. Once again NKY was the most volatile index, but the overall winner was, as is often the case, WTI, with the January contract rising 3.82%

AUDUSD 0.7610 (+0.61%)

EURGBP 0.8946 (+0.36%)

EURUSD 1.1929 (+1.20%)

GBPUSD 1.3338 (+0.94%)

NZDUSD 0.6875 (+0.94%)

USDCAD 1.2709 (-0.47%)

USDJPY 111.48 (-0.54%)

DAX     13067 (+0.69%)

FTSE     7409 (+0.34%)

NIFTY   10389 (+1.03%)

NKY     22641 (+1.09%)

SPX    2602.4 (+1.00%)

GOLD  1288.29 (-0.41%)

OIL     58.97 (+3.82%)

NEXT WEEK (all times are GMT)

As we move into the final week of November, and the holiday season, the question is are we poised for the Santa rally, covered in our email earlier this week. 

Monday is a quiet day, as is the weekend. However, there may be some delayed volatility following the holiday on Thursday and half-holiday on Friday. In particular retail stocks which report a bumper Black Friday should see movement, although retail leader AMZN already rose over 2% on the day.

Tuesday’s highlight is the confirmation hearing for Jay Powell, the new Fed chair at the Senate Banking committee at 1445. Traders will be looking for any variance from Janet Yellen’s views. There is also a BoC press conference at 1615, with Governor Poloz and Senior Deputy Governor Wilkins. Economic data is light.

Wednesday is stronger on data, with German inflation (giving a hint to Eurozone inflation the next day), followed by US GDP and QoQ Personal Consumption Expenditure, the latter being a strong inflation proxy.  Fed Williams (centrist) is speaking at 1745 after Janet Yellen.

Thursday is month end, and some volatility should be seen for month-end rotation. Main news is German unemployment and Eurozone inflation. The MoM and YoY PCE figures are important, but any serious change will have been shown in the QoQ on Wednesday. OPEC hold a one-day meeting in Vienna, and are expected to discuss cut extensions, which have been working well, and of course have driven up the price of Oil 28% in under five months. A six-month extension is the consensus, so a longer or shorter period would most likely produce a noticeable move in the price. There is also a minor speech from Fed Kaplan.

Friday sees a new month, and a raft of Markit Manufacturing PMIs. These don’t in themselves tend to move currencies much, but as always, a big miss from one and a strong beat from another could move the pair in question. The final Manufacturing PMI of the day is the US ISM at 1500. This is more important, although no large variation is expected. Although it is the first Friday of the month, the US NFP data is not until next week. However, the Canadian jobs report is today, with a modest 10k estimate, along with Canadian GDP at the same time, so volatility in CAD is very likely.

CALENDAR (all times are GMT). High volatility items are in bold

Mon Nov 27

0900 EUR EU Financial Stability Review

1500 USD US New Home Sales

1530 USD Dallas Fed Manuf Business Index

Tue Nov 28

0700 EUR Germany Gfk Consumer Confidence

1400 USD US Home Price Indices

1445 USD New Fed Chair Powell testifies

2350 JPY Japan Retail Trade

Wed Nov 29

0930 GBP UK Consumer Credit/Mortgage Approvals

1000 EUR Eurozone Sentiment Indicators

1300 EUR Germany Harmonised Index of Consumer Prices

1330 USD US GDP

1330 USD US PCE QoQ (CPI proxy)

1500 USD Pending Home Sales

1530 (approx) Fed Yellen speaks

1530 WTI EIA Stocks

1800 USD Fed Beige Book

2000 NZD RBNZ Financial Stability Report

2145 NZD NZ Building Permits

2350 JPY Japan FDI

Thu Nov 30

0000 AUD Australia HIA New Home Sales

0001 GBP UK Gfk Consumer Confidence

0100 CNY China PMIs

0700 EUR Germany Retail Sales

0900 EUR Germany Unemployment Rate/Change

1000 EUR Eurozone Unemployment Rate

1000 EUR Eurozone CPI

1330 USD US Personal Income

1330 USD US PCE MoM and YoY (CPI proxy)

1330 USD US Jobless Claims

1330 CAD Canada Current Account Q3

1445 USD Chicago PMI

2230 AUD Australia AiG Performance of Manuf Index

2330 JPY Japan CPI/Overall Household Spending

2330 JPY Japan Job/Applicants, Unemployment

Fri Dec 01

0145 CNY Caixin Manuf PMI

0855 EUR Germany Markit Manuf PMI

0900 EUR Eurozone Markit Manuf PMI

0930 GBP UK Markit Manuf PMI

1330 CAD Canada GDP

1330 CAD Canada Employment/Unemployment

1430 CAD Canada Markit Manuf PMI

1445 USD US Markit Manuf PMI

1500 USD ISM Manuf PMI/Prices Paid

1500 USD US Construction Spending

1700 WTI Baker Hughes Rig Count

This report is published every week as an email by MatrixTrade.com - you can sign up to receive it here.

Week to Nov 17th

NKY fell 1.3% in the Asian session on Monday partially giving up spectacular gains in previous weeks, but also affected by the continuing oil price rise. Japan imports all its oil. Otherwise it was fairly flat for indices after the previous week’s red candle. Nevertheless, SPX managed a 0.1% rise despite the 7.6% drop in GE after they announced a dividend cut. DAX fell sharply, down 165 points at one point, and breaking the psychological 13,000 barrier. However it recovered in the US session to close only 18 points down on the day.

Currencies only moved slightly, and were mixed. DXY was slightly up (0.11%) on the day and 10-year yields advanced 1bp, but this belied a mixed picture. EUR was up a little, JPY was flat, GBP fell 0.5%, and AUD and CAD were notably down. Gold and Oil were also flat.

Tuesday was another weak day for equities, and all indices fell, in particular DAX which was reacting to a strong Euro.  Markets also reacted to a sharp drop in Oil, down 3% on the day, and further weakness from GE, the SPX and DJIA’s oldest component. EUR had its best day for months, up 1.13% after German GDP beat expectation at 0700 and Eurozone GDP held as expected at 0.6% at 1000. GBP also rose 50 pips (0.4%) on the UK CPI beat at 0930. The risk-off in equities was confirmed by the classic rises in JPY and Gold, and fall in yields. Only AUD and CAD failed to make progress and were flat on the day.

The equity downtrend continued on Wednesday, with all indices lower. Analysts cited high PE ratios (important) and uncertainty about the slow progress of the tax reform. In particular the SPX recorded its biggest one day drop in ten weeks, although this was only 0.6%, but the VIX touched its highest level since mid-August.

Currencies were again mixed, despite the beats on US Retail Sales and CPI at 1330. GBP and JPY were slightly up, and yields were down. However, EUR gave up a little ground after an early spike to a one-month high, and AUD and CAD were down again, as was Gold. Oil was flat on the day. AUD in particular fell sharply (53 pips) on the big Consumer Confidence miss (-1.7 vs +3.6) at the Asian session open, and this fade held all day.

On Thursday, the House of Representatives voted to approve their version of the tax bill, and this turned the trend in equities. SPX was up 0.8%, erasing the week’s losses, and other indices followed suit ,and bond yields were up. It was not completely risk-on, as although JPY only faded slightly, and Gold was even slightly up on the day. DXY was almost flat (0.09% up), because EUR was nearly flat (after the Eurozone CPI came in as expected at 1000), and GBP and CAD advanced. AUD and Oil were flat on the day. The Australian payrolls miss at 0030 (3.7k vs 17.5k) had surprisingly little effect. 

Friday was option expiry day. The reversal in indices was short-lived, and the downtrend resumed — SPX was down 0.3%. FTSE manage to remain flat, perhaps on the ramp in Oil, which nearly recovered all Tuesday’s losses, possibly because of option expiry and rollover, although there was remarkably less contango this time. This was put down to fresh news that US Special Prosecutor Mueller has issued subpoenas to several of President Trump’s campaign officials.

In line with this, Gold, JPY and bond prices (the inverse of yields) were up, as were EUR and GBP. CAD fell sharply after the CPI print came in as expected at 1330, giving up 0.5%, although most of this was recovered by the end of the day. Nevertheless, CAD and the beleaguered AUD ended the day down.

So in summary, a risk-off week seeing appreciation in Gold, JPY and bond prices, and a clear separation between EUR and GBP advancing, and AUD, NZD and to an extent CAD fading. However, despite a change in sentiment from, say, two weeks ago, SPX only fell 0.18% on the week, and is still up on the month.

WEEKLY PRICE MOVEMENT

These are the prices movements for the week on the instruments we cover. A risk-off week with JPY and Gold both up, and all indices down, but otherwise a mixed picture for USD. A bad week for AUD and NZD, and the best forex trade would have been to buy EURNZD, up 2.74%. After four weeks as the strongest riser, it is not surprising that NKY fell the most this week.

AUDUSD 0.7564 (-1.21%)

EURGBP 0.8914 (+0.84%)

EURUSD 1.1787 (+1.07%)

GBPUSD 1.3214 (+0.18%)

NZDUSD 0.6811 (-1.67%)

USDCAD 1.2769 (+0.66%)

USDJPY 112.08 (-1.25%)

DAX     12978 (-1.14%)

FTSE     7384 (-0.81%)

NIFTY   10283 (-0.38%)

NKY     22396 (-1.26%)

SPX    2576.7 (-0.18%)

GOLD  1293.64 (+1.47%)

OIL     56.80 (-0.18%)

NEXT WEEK (all times are GMT)

The holiday season starts this week, and data is light, and the FOMC and ECB Minutes will be the main events.

On Monday, we get a lot of ECB speakers. Draghi speaks at 1400 and 1600, and also on the roster are Nwotony at 1145, Lautenschlager at 1215 and Constancio at 1415. Data is light.

Tuesday sees the RBA minutes, and also a speech from Governor Lowe. AUD touched a five-month low last week. Traders will be wondering how low it can go. The monthly GDT milk auction has had little effect on NZD recently, but give the currency’s recent strong move to the downside, again this is one worth watching.

Wednesday is a bit busier, with the UK Budget statement, although this is primarily a tax change bill, and nothing major is expected, except in the area of housing. Volatility will probably be limited to UK Housebuilding stocks. The FOMC minutes will be keenly watched. The current consensus on the CM FedWatch tool is a 96.7% chance of a hike in December. Any dovish remarks which put this in doubt could therefore put negative pressure on USD. The US Durable Goods print is not expected to produce much volatility, given its proximity to the Fed minutes.

Thursday is Thanksgiving and US and Japanese markets are closed. (Japan call it Labor Thanksgiving Day). Trading is therefore expected to be very light. Focus is of course on Europe, with UK GDP and then the ECB Minutes. The latter is the big event, watch for EURUSD volatility all day. There is also a rate decision on the South African ZAR, 6.75% hold expected.

Thanksgiving is followed by Black Friday, the retail bonanza. Expect bullish announcements from AMZN even before the end of the day. US Markets are open, but expect reduced volatility as many traders make a long weekend of the holiday, and data is light.

CALENDAR (all times are GMT). High volatility items are in bold

Sun Nov 19

2350 JPY Japan Trade Balance

Mon Nov 20

0700 EUR Germany Producer Price Index

1400 EUR ECB President Draghi speaks

Tue Nov 21

0030 AUD RBA Minutes

0430 JPY Japan All Industry Activity Index

0900 EUR EU Financial Stability Review

0900 AUD RBA Governor Lowe speaks

0930 GBP UK PSBR

1330 USD Chicago Fed National Activity Index

1430 (approx) NZD GDT Milk Auction

2030 WTI API Stock

2300 USD Fed Yellen speaks

Wed Nov 22

0800 EUR ECB non-MPC Minutes

1300 (approx) GBP UK Budget Statement

1330 USD US Initial Jobless Claims

1330 USD US Durable Goods Orders

1530 WTI EIA Stock

1800 USD FOMC Minutes

Thu Nov 23

0700 EUR Germany GDP

0830 EUR Germany Markit PMIs

0900 EUR Eurozone Markit PMIs

0930 GBP UK GDP

1230 ECB MPC minutes

2145 NZD NZ Trade Balance

2350 JPY Japan FDI

Fri Nov 24

0900 EUR Germany IFO Sentiment

1445 USD US Markit PMIs

1700 WTI Baker Hughes Rig Count

This report is published every week as an email by MatrixTrade.com - you can sign up to receive it here.

Week to Nov 10th

The previous week’s rally continued into Monday, with SPX, DJIA and NDX all hitting fresh peaks, particularly with energy stocks, as Oil rose at one point by 3.5%, and settled at 2.82% up on the the day, on uncertainly surrounding the surprise Saudi corruption crackdown, where dozens of billionaires and princes were arrested. Tax cut anticipation also helped. FTSE was also slightly up, although the non-oil indices DAX and NKY remained flat. The Saudi situation (and Fed Dudley’s retirement announcement) was seen as risk-off in currencies and Gold and JPY were up. CAD followed Oil of course, helped by the PMI beat at 1500. Following the Australian inflation beat at 0100, AUD (and GBP) were also up against the dollar, and 10-year US bond yields were down 3bp at 2.32% on the day.

It was Turnaround Tuesday again for indices. US indices again touched intraday all-time highs, but pulled back and ended the day down, as the tax plan was delayed another day, and another Saudi issue, a spat over Lebanon was reported. Oil gave back a little of Monday’s gains. DAX and FTSE also pulled back but NKY carried on advancing. After RBA rate decision at 0330 completely gave up Monday’s gains and more. Indeed the turnaround applied across the board to the dollar, which advanced against all currencies, after beats on US data such as JOLTS Job Openings (1500) and Consumer Credit (2000). Only GBP held its own after an early dip, to finish the day flat. As you would expect therefore, Gold was down and bond yields were up.

Wednesday saw the rally resume and SPX made another all-time high as did NDX on a tech stocks rally, whereas financials retreated on concerns about the details of tax reform. The mood was less strong elsewhere but NKY, DAX and FTSE all made gains. Oil pulled back again after the EIA miss at 1530. The tax issues also weighed on USD, which lost ground again all currencies. NZD was particularly strong, putting on 50 pips (0.73%) after the rate hold at 2000, and press conference at 2100. Gold rose in line, but surprisingly bond yields were actually up half a basis point on the day.

The euphoria collapsed on Thursday. In Asia, NKY briefly rallied to a quarter-century high of 23420, then gave up 1,100 points (4.69%) by the middle of the US session. NKY has of course put on 22.3% in the last 10 weeks. European stocks had their worst day for four months with DAX down over 200 points (1.5%), despite the Trade Balance beat at 0700. FTSE was also down. The mood was reflected in the US, at one point the SPX was down 1%, although it recovered to finish 0.25% down on the day. The general consensus was that this was due to failure to make progress on tax, as House Republicans released a draft bill which differed from the original proposals, in particular that the proposed corporation tax cut from 35% to 20% may be delayed until 2019. Of course, simple profit-taking may have played a part.

USD followed the mood, and was down 0.5% against JPY and 0.4% against EUR. The other currencies followed suit, and Gold was up. Once again, however, bond yields disconnected from USD, and were up. Oil was up again as Saudi political developments unfolded, and the Brent-WTI spread, which had been falling, started to rise again. Saudi Oil is traded at the Brent price.

Friday was a US public holiday (the observance of Veteran’s Day, which falls on Saturday this year), and although US markets were open, trade was subdued, and as you might expect, there was more volatility in ES futures during the European morning, than in SPX itself during the cash session. All indices were slightly down as the tax cut debate continued.

The USD picture was mixed. EUR was up, and GBP rallied after breaking resistance at 1.3175, as was CAD, slightly, on very little volatility. However AUD, JPY and Gold were down, as was Oil. 10-year yields continued their disconnect by rising sharply.

WEEKLY PRICE MOVEMENT

These are the prices movements for the week on the instruments we cover. USD was down across the board, GBPUSD, up 0.87% was the standout winner. The strongest index movement up was (for the fourth week) NKY up 1.16%. The largest overall movement was the DAX, down 2.62%

AUDUSD 0.7657 (+0.13%)

EURGBP 0.8840 (-0.36%)

EURUSD 1.1662 (+0.47%)

GBPUSD 1.3190 (+0.87%)

NZDUSD 0.6927 (+0.35%)

USDCAD 1.2685 (-0.56%) 

USDJPY 113.50 (-0.47%) 

DAX     13127 (-2.62%)

FTSE     7444 (-1.50%)

NIFTY   10322 (-1.24%)

NKY     22681 (+1.16%)

SPX    2581.3 (-0.25%)

GOLD  1274.95 (+0.48%)

OIL     56.90 (+2.30%)

NEXT WEEK (all times are GMT)

The weekend sees Mario Draghi speak unexpectedly on Saturday at 1000 and RBA Deputy Governor Guy Debelle speaks in Sydney on Sunday. Otherwise the theme of the week is inflation (CPI) prints, with half the G10 (US, UK, Sweden Eurozone and Canada) all reporting.

Monday sees further work on the US tax bill. There is an ‘Open Executive Session’ in the Senate at 2000, and there some further indication of the yes/no positions of the House. There also speeches by Fed Harker at 0010, ECB Constancio at 0900, and BoJ Kuroda at 1745.

Tuesday has more Central Bankers, at some point in the day we will hear from outgoing Fed Chair Yellen, ECB Draghi, BoJ Kuroda, and BoE Carney, along with various speeches by other bank members. Also the committee stage of the EU Withdrawal Bill begins in the UK Parliament.  If that weren’t enough, we have German and UK inflation, and Eurozone GDP all within a three-hour window.

Wednesday focus in on the US, with Retail Sales and CPI being reported together at 1330. UK Unemployment is at 0930, but the key measure will be wage growth, an important determinant of future rate rises. Central Bank speakers include Fed Evans, BoC Wilkins (2345), ECB Lane (0700) and RBA Ellis (0700).

Thursday sees the important Australia employment report. The estimate is 15k, lower than last month’s 19.8k (and equivalent to 202k in US terms, whose population is 13.5 times as many). UK Retail Sales is somewhat less important now we have had a rate hike, although we will still be producing our monthly fractal. A new report appears today. ADP have started to produce payroll statistics in Canada, although notably, these figures come two weeks after the official Canadian jobs report. Other than that, we have BoE Governor Carney speaking in a plenary session with other BoE MPC members, Fed Mester at 1410, and ECB and Bank of France Governor Villeroy de Galhau at 1430.

Friday’s main release is Canadian CPI. Given other recent data, it would take a very strong print to reverse CAD’s recent decline. Mario Draghi speaks in Germany at 1300, and Fed Williams is expected to speak also. US Congress goes into recess as politicians return to district work for the Thanksgiving Week. The public holiday and potential start of the ‘Santa Rally’ is the following Thursday. Friday is also monthly option expiry day.

CALENDAR (all times are GMT). High volatility items are in bold

Mon Nov 13

0010 USD Fed Harker speaks

0200 CNY China FDI

1900 USD US Monthly Budget

Tue Nov 14

0200 CNY China Retail Sales

0200 CNY China Industrial Production

0700 EUR Germany CPI

0700 EUR Germany GDP

0805 USD Fed Evans speaks

0930 GBP UK PPI

0930 GBP UK CPI

1000 EUR Eurozone GDP

1000 EUR Eurozone Industrial Production

1000 EUR Germany ZEW Sentiment

2030 WTI API Stock

Wed Nov 15

0000 AUD Australia Westpac Consumer Confidence

0930 GBP UK Unemployment/Claimant Count Change

1000 EUR Eurozone Trade Balance

1330 USD US Retail Sales

1330 USD US CPI

1530 WTI EIA Stock

2350 JPY Japan FDI

Thu Nov 16

0030 AUD Australia Payrolls/Unemployment

0100 AUD Australia Consumer Inflation Expectations

0700 EUR Germany Wholesale Price Index

0930 GBP UK Retail Sales

1000 EUR Eurozone CPI

1330 USD Jobless Claims

1330 CAD Canada ADP

1330 USD Philly Fed Manuf Survey

1415 USD Industrial Production/Capacity Utilisation

1500 USD NAHB Housing Market Index

1530 CAD Boc Review

Fri Nov 17

1330 USD Building Permits/Housing Starts

1330 CAD Canada CPI

1700 WTI Baker Hughes Rig Count

2230 NZD Business NZ PMI

This report is published every week as an email by MatrixTrade.com - you can sign up to receive it here.

Week to Nov 3rd

On Monday, charges were filed against Trump’s campaign manager Paul Manafort and the mood changed from Friday’s all-time highs. The US PCE report at 1230 was as expected. SPX and NKY fell slightly, but DAX and FTSE were flat. DAX was particularly subdued, trading in a narrow 40-point range. USD was down across the board as were bond yields, and Gold was up. Oil was nearly flat, added a few cents on the day to make a new 7-month high.

It was definitely Turnaround Tuesday on the last day of the month. SPX almost exactly reversed Monday’s move as did Gold, JPY, bond yields and AUD. NKY and FTSE were also up, and although Germany was closed, DAX futures rose by 70 points. CAD was down after the Canadian GDP miss at 1230. At 1000, Eurozone GDP beat (2.5% vs 2.4%) but CPI miss (1.4% vs 1.5%). This means of course that real GDP beat (1.1%) by 0.2%, but surprisingly EUR was flat. GBP was up on the day on expectations of the Thursday rate hike.

Wednesday was another down day for most indices, except DAX where the previous day’s closure probably produced a delayed rally. After a brief spike to a new all-time high following the ADP jobs beat at 1215 (235k vs 225k), SPX ended down, as did NKY and FTSE. There was surprisingly little immediate reaction to the Fed Rate hold at 1900, but USD did well all day, rising against all currencies. Gold’s behaviour often changes, today it was up in line with stocks falling, but ignoring the stronger dollar. Bond yields were also detached from the rising dollar. They fell sharply (4bp) before the US session opened, and despite a brief rally on the Fed release, ended the day down.

Thursday saw the US tax bill unveiled (a day late), and President Trump confirmed the widely expected appointment of Jerome ‘Jay’ Powell as the new Fed Chair, replacing Janet Yellen. Both news items were largely priced into markets. SPX rose gently on the day. NKY advanced very slightly and DAX was flat. FTSE rose over 100 points, but this was largely a function of the move in GBP. NDX gapped after Facebook beat estimates the night before, but gave up those gains during the US session to end the day down.

The biggest market mover on the day was the Bank of England rate rise. Despite the headlines being hawkish (first rise in 10 years, a ‘beat’ on the committee votes (7-2 vs 6-3 estimate), the accompanying statement that further increases would be limited and gradual was read as dovish. GBP fell 1.34% in the next five hours to touch a four-week low, and become the only currency to have an outside week. A clear example of buy the mystery sell the history. Otherwise USD was slightly down on the day against other currencies, Gold was slightly up, and yields were down. But like equities, there was not much response considering the significance of events. 

Friday was NFP day and a surprise miss after the ADP beat, although the estimate was large, and the figure of 261k was still good, and above the ADP result. SPX fell 0.22% on the print, but had started to recover even before the opening bell and ended the day well up, finishing the day and week at another all-time high. DJIA and NDX also made new all-time highs. NKY similarly made a new 21-year high, but FTSE and DAX were fairly flat. The Canadian jobs figure was a substantial beat (35.5k vs 14.5k estimate), equivalent to 319k in US terms, as the US has nine times the population of Canada. USDCAD dropped 120 pips (0.92%) in 30 minutes, and then started to recover. Otherwise USD had a good day but the picture was uneven. EUR, AUD and Gold were sharply down, NZD only slightly down, and GBP was even slightly up. DXY finished 0.18% up on the day. After a fairly quiet week, Oil was strongly bid from about 1530, and put on 2.43% in the three hours until the pit closed the for week.

WEEKLY PRICE MOVEMENT

These are the prices movements for the week on the instruments we cover. Currency movement was very muted with all USD pairs except GBP having an inside week. The best trade would have been to sell GBPNZD, down 0.83%. The strongest index movement was (for the third week) NKY up 1.68%, but as usual, the most volatile instrument was Oil, up 2.64%.

AUDUSD 0.7647 (-0.33%)

EURGBP 0.8872 (+0.41%)

EURUSD 1.1607 (+0.02%)

GBPUSD 1.3076 (-0.37%)

NZDUSD 0.6903 (+0.44%)

USDCAD 1.2757 (-0.39%) 

USDJPY 114.04 (+0.18%) 

DAX     13480 (+1.92%)

FTSE     7557 (+0.77%)

NIFTY   10452 (+0.70%)

NKY     22420 (+1.68%)

SPX    2587.8 (+0.28%)

GOLD  1268.90 (-0.31%)

OIL     55.62 (+2.64%)

NEXT WEEK (all times are GMT)

Over the weekend President Trump is playing golf with Japanese PM Abe, and Daylight Savings time ends in the US, bringing New York back in line with Europe. Spain has issued an arrest warrant for Catalan leader Puigdemont, who is holed up in Brussels. This can’t be helpful to EUR, although the effect of the crisis has been largely confined to IBEX volatility. There are regional elections in Sicily which may give clues to the forthcoming Italian general election which must be held within six months from now.

Overall next week looks like being quieter than last, but as we saw little volatility on a lot of news then, we cannot be certainly of low volatility now.

With little news on Monday, focus turns to the first draft of the tax bill which was being prepared over the weekend. At the very end of the day are the usually uneventful BoJ MPC minutes.

Tuesday see the RBA rate decision. A hold is expected. Of more interest is a possible downgrade of the bank’s inflation forecast which would further depress AUD — unless of course it is already baked into the price which has already fallen 3% in the last four weeks. Also President Trump arrives in South Korea and speaks at the National Assembly, an obvious time for some reaction from Kim Jong Un. BoC Governor Poloz gives a speech in Montreal at 1745. The State Opening of Parliament in New Zealand ‘Throne Speech’ (equivalent to the British Queen’s Speech) will outline the priorities for the new incoming government and may move NZD.

On Wednesday Trump is in Beijing with President Xi, so again look out for unexpected comments about North Korea, or indeed the relationship with China. There are also the relatively unimportant Polish rate decision and Russian inflation figures. The main event of the day comes at end for Europeans and Americans, the NZD rate decision. A hold is expected. NZD has fallen nearly 10% in three months, and recently bounced off May support. In a similar but opposite case to Australia, traders will be looking for an upgrade to the inflation forecast, which would be positive for NZD.

Thursday has a lot of data, but none of it particularly important, unless of course there are big upsets, for example in the Chinese inflation print at 0130. The Bank of France Governor Villeroy de Galhau, an ECB board member speaks in Brussels at 1500.

Friday is similarly light, although there is a raft of UK manufacturing stats in the European morning. As Veterans Day falls on a Saturday this year, Friday is a public holiday in the US. Stock and bond markets are open as normal, but like Columbus Day, trading is expected to be lighter than normal.

CALENDAR (all times are GMT). High volatility items are in bold

Sun Nov 05

2350 JPY BoJ MPC Minutes

Mon Nov 06

0100 JPY Gov Kuroda speaks

0100 AUD Australia TD Securities Inflation

0855 EUR Germany Markit Services/Composite PMIs

0900 EUR Eurozone Markit Services/Composite PMIs

1000 EUR Eurozone Producer Price Index

1300 USD FOMC Yellen speaks

1500 CAD Canada Ivey PMI

2230 AUD Australia AiG Performance of Construction Index

Tue Nov 07

0001 GBP BRC Like-for-like Retail Sales

0330 RBA Rate Decision (est hold 1.5%)

1500 GBP UK NIESR GDP estimate

2000 USD Consumer Credit Change

2030 USD API Stock

Wed Nov 08

0200 CNY China Imports/Exports/Trade Balance

0800 EUR ECB non-MPC Minutes

1315 CAD Canada Housing Starts

1530 WTI EIA Stocks

2000 NZD RBNZ Rate Decision (est hold 1.75%)

2100 NZD RBNZ Press Conference

2350 JPY Japan FDI

Thu Nov 09

0001 GBP UK RICS Housing Price Balance

0030 AUD Australia Home Loans/Investment Lending

0130 CNY China PPI/CPI

0430 JPY Japan Tertiary Index

0500 JPY Japan Eco-Watchers Survey

0700 EUR Germany Trade Balance/Imports/Exports

0900 EUR Eurozone Economic Bulletin

1000 EUR EC Economic Growth Forecasts

1330 USD US Jobless Claims

2145 NZD NZ Electronic Card Retail Sales

Fri Nov 10

0030 AUD RBA Monetary Policy Statement

0930 GBP UK Manuf Production

1700 WTI Baker Hughes Rig Count

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