Week to Oct 29th

NDX ATH, ECB acknowledge inflation, volatile DXY

MY CALL THIS WEEK : BUY EURGBP

THIS WEEK (all times are GMT) 

In a week packed with central bank activity and US corporate earnings, new all-time highs were made in the SPX and DJI, and for the first time since 7th September, NDX finally caught up too with a new high. The Earnings season continues to be a positive driver, although a bad EPS miss by Amazon and in-line earnings from Apple and Facebook were punished. The FTSE also made new 2021 highs, as did oil before both faded lower again. But neither the DAX nor the (key) Russell made new highs … yet!

In the central bank race to tighten, the ECB caved in and admitted inflation was not as transitory as it had hoped, although no changes in policy decisions made. The BoJ were also unchanged while, in comparison, the BoC ended QE and signalled rate hikes in the near future.  This generally contributed to further bearish consolidation in bonds and partly explains why the Dollar was subject to increasing two way volatility which end up with EURUSD back down at its lows after an ECB inspired ramp. Currency volatility increased, with DXY and EURUSD both posting outside weeks, as did Oil, although Gold had an inside week.

WEEKLY PRICE MOVEMENT

The biggest mover this week was NDX, up 3.23%. The top forex mover was EURAUD this week, down 1.49%. Bitcoin was flat but ETH hit new highs, and FANGs were strong despite variable earnings.

Last week’s AUDNZD short lost 0.46%, taking my year to date profit to 3.77% and 28/42 wins. This week I am buying EURGBP.

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.

NEXT WEEK (all times are GMT)

Although most major earnings have now been reported, the first week of November is busy as we enter the early part of the post Hallowe’en holiday season, traditionally a bullish sign.
The Fed, as always, dominates the week. A taper announcement is virtually inevitable as Fed Quarles confirmed on Oct 20 that the “substantial further progress” test had been met. The focus will now turn to rate hikes to combat inflation. The BoE have been equally bullish recently. Their strategy is that rate hikes are not necessarily preceded by taper. As no adjustment is expected this week, Gov Bailey’s words will be scrutinised closely. There is also a rate decision in Australia, which has now caught up with vaccinations, and is also seeing inflation above 2%.

As if that was not enough, we also have NFP, with a relatively modest estimate of 385k (vs 369k on ADP). Given the order of business this week, the ‘bad is good’ factor is removed, and markets are expected to initially react the logical way, although given the Fed timing, the effect may not be as strong as in previous months.

CALENDAR (all times are GMT)

Monday November 1
01:45 China Caixin Mfr PMI

07:00 Germany Retail Sales (p0.4%)
09:30 UK Markit Mfr PMI
14:00 US ISM Mfr PMI (e60.41 p61.1)
14:30 Canada Markit Mfr PMI
14:45 US Markit Mfr PMI
23:50 BoJ MPC Minutes

Tuesday November 2
00:30 Aus TD Securities Inflation (time approx.)
03:30 RBA Rate Decision/Statement (e0.1% hold)
05:50 RBA Debelle speech
08:55 Germany Markit Mfr PMI
21:30 Aus AiG Performance of Construction Index
22:00 Aus Commonwealth Bank Svcs PMI

Wednesday November 3
00:30 Aus Building Permits
01:45 China Caixin Svcs PMI
09:00 Eurozone Unemployment Rate
12:15 US ADP Employment Change (e369k p568k)
13:45 US Markit Svcs & Comp PMI
14:00 US ISM Services PMI (e61.5 p61.9)
14:00 US Factory Orders (MoM)(Sep)
18:00 Fed Rate Decision/Statement (e0.25% hold)
18:30 FOMC Press Conference

Thursday November 4
00:30 Aus Trade Balance (e1.03B p1.50B)
07:00 Germany Factory Orders
08:55 Germany Markit PMI Composite
09:00 Eurozone Economic Growth Forecasts
09:00 Eurozone Markit Comp PMI
12:00 BoE Rate Decision/Statement (e0.1% hold)
12:30 BoE Governor Bailey speech
12:30 US Trade Balance
12:30 US Productivity/Labor Costs
12:30 US Jobless Claims
12:30 Canada Trade Balance
23:30 Japan Overall Household Spending

Friday November 5
00:30 RBA MPC Statement
07:00 Germany Industrial Production
10:00 Eurozone Retail Sales (p0%)
12:30 US NFP/AHE/UnEmp (NFP e385k p194k)
12:30 Canada NFP/AHE/UnEmp (NFP e65k p157.1k)
14:00 Canada Ivey PMI