Eurozone to Close the Year on a Strong Note but Concerns Remain on Catalonia Independence

Data released on Monday indicates that the Eurozone economy is on target to close out 2017 strongly. The latest Markit composite PMI fell to 56.0 in October, slightly lower than the previous months reading of 56.7, but well above the key 50 zone indicating positive sentiment for growth. PMI data showed the 2 largest economies, Germany and France, have remained strong. Not all PMI data was positive, as Italian growth slowed and Spain saw its mainstay services sector falling to its lowest level in 9 months. The decline in sentiment in Spain is not surprising given the political crisis that has developed following the Catalonian referendum, with many businesses concerned for their future. An investor sentiment index, released by Sentix, indicated that sentiment has grown to a level not seen in over 10 years – all attributed to a growing economy. With robust economic growth, which is likely to create upward inflationary pressure, the ECB’s recent decision to finally scale back Quantitative Easing can only help in accelerating Eurozone growth.

Earlier this morning, the Reserve Bank of Australia left interest rates unchanged (as expected) at 1.5%, for the 15th month in a row. RBA Governor Philip Lowe said the board expects the current low inflation rate to gradually lift as economic growth improves, stating; “Inflation remains low, with both CPI and underlying inflation running a little below 2%”. The markets are now looking ahead to the RBA’s latest quarterly outlook report (the November Statement on Monetary Policy), due on Friday, which might prove to be more insightful about future policy than today’s interest rate decision. The report is not expected to have changed for growth and inflation forecasts. However, AUD could see volatility if there are any significant changes to the inflation picture, specifically if the report indicates any possible delays to the timing of a rate hike.

EURUSD is unchanged in early Tuesday trading at around 1.1577.

USDJPY is 0.25% higher to currently trading around 114.25.

GBPUSD is little changed overnight, currently trading around 1.3152.

Gold is 0.2% lower in early session trading at around $1,277.50.

WTI is 0.16% higher, trading at around $57.64.

Major data releases for today:

At 15:00 GMT, the UK National Institute of Economic and Social Research will release a 3-month estimate for UK GDP (August to October). The report is released 1 month ahead of the official GDP report and has been known to be highly accurate.

At 19:00 GMT, Bank of Canada Governor Stephen Poloz will be speaking before the CFA Montreal and the Montreal Council on Foreign Relations on the topic of Central banks’ ability to understand inflation. Any hints to future Canadian Monetary Policy will see volatility in CAD.

This article is written by FxPro

Trump: “JOBS, JOBS, JOBS!”, US Dollar Firm

Data released on Friday showed US job growth accelerated in October after hurricane-related disruptions in the prior month, but a sharp retreat in average earnings and an increase in the number of people leaving the workforce caused concern on the robustness of the labor market. Nonfarm payrolls increased by 261K in October as 106K leisure and hospitality workers returned to work. This was the largest gain since July 2016 but below forecasts of an increase of 310K. The data for September was revised to show a gain of 18K jobs instead of the previously reported decline of 33K. Average hourly earnings disappointed the markets, falling by 1%. The reduction results in the year-on-year increase dropping to 2.4%, the smallest since February 2016. In September earnings increased 0.5% lifting the annual increase in that month to 2.9%. Whilst the data was below forecasts, the job growth underscored the recent Fed statement that “the labor market has continued to strengthen” and has done little to change expectations of a rate hike in December. More upbeat data came in the form of the unemployment rate at 4.1%, a rate not seen in 17 years. President Trump tweeted after the data release “JOBS, JOBS, JOBS!”

There was more “up-beat” jobs news on Friday, with Statistics Canada releasing data that showed the Canadian economy added 35,300 jobs in October, as the number of full-time positions swelled by 88,700, while part-time employment dropped by 53,400 jobs. The increase in jobs came as the unemployment rate increased to 6.3%, up from 6.2% in September, as more young people started looking for work. The positive news was short-lived as Statistics Canada also reported a $3.2-billion trade deficit for September compared with an initial estimate of $3.4 billion. The deficit was caused by both exports and imports dropped 0.3% – which signals demand is slowing – as many had anticipated for H2 after the stellar H1 performance.

EURUSD is little changed from Friday’s close. Currently, EURUSD is trading around 1.1612.

USDJPY is at 3+ month highs in early Monday trading at around 114.30.

GBPUSD is little changed in early Monday trading at around 1.3085.

Gold is currently trading around $1,270.

WTI is 0.5% lower in early session trading at around $55.90.

Major data releases for today:

At 08:15 GMT, Markit Economics will release Spanish Services PMI for October. Whilst not normally an impactful data release, the markets will be keen to see what impact the Catalan Independence vote has had on business sentiment in Spain. The forecast is for 55.5 down from September’s release of 56.7. A release wildly away from consensus could see EUR volatility.

At 08:55 GMT, Markit Economics will release German Services and Composite PMI for October. As the largest economy in the Eurozone, the markets will be looking for any indications that German business executives are still confident in the economy. Both releases are expected to come in unchanged with Services PMI at 55.2 and Composite PMI at 56.9. We can expect EUR volatility if the data is significantly off the consensus.

At 9:00 GMT, Markit Economics will release Eurozone Services and Composite PMI for October. Similar to the German PMI releases, the consensus is for an unchanged reading in both. Services is expected unchanged at 54.9 and Composite unchanged at 55.9. We can expect EUR volatility if the data is significantly off the consensus.

At 10:00 GMT, Eurostat will release the Year-on-Year Producer Price Index for September for the Eurozone. The consensus is suggesting a higher reading of 2.8% compared to the previous release of 2.5%. With higher prices, this upward inflationary pressure will provide more indications of a likely rate increase by the ECB sooner rather than later. Expect EUR volatility if the release is wildly different from the consensus.

This article is written by FxPro

Why is Bitcoin so Sensitive to News and Speculation? Bitcoin Price above $7000

Since the beginning of January 2017, the price of Bitcoin has increased by an astonishing 690%, up from $1,000 to the current price of $7,066. Ethereum entered the scene at $10, now trading at around $300. In all, cryptocurrencies have experienced exponential growth this year, with Ethereum marking a 3,000% rally year to date. Naturally, this has attracted worldwide attention, made particularly evident during the summer months of 2017 when big investors entered the market.

It seems clear that the cryptocurrency market looks similar to how the stock market must have looked a century ago. Back then, investors bought securities directly on the basis of news stories, the latter being what predominantly drove prices as no one looked into earnings reports or compared ratios. Despite its impressive growth, though, the cryptocurrency market also seems prone to notably high volatility. In fact, it appears to be much more sensitive to speculation and news than any other market. It is worth recalling that, over the past few years we have witnessed a number of crashes and spikes, and many pessimists are now insisting, time and again, that this new cryptocurrency bubble is about to burst.

The Nasdaq Composite stock market index lost 78% of its value during the dot-com crash (2000-2002), yet after the dust settled we saw the emergence of companies like Google and Amazon. The high-profile investors, bankers, and entrepreneurs are now caught in a debate over whether Bitcoin and Ethereum could constitute the fundamental structure of the whole blockchain. Warren Buffett, for example, said that he “can’t value Bitcoin because it’s not a value-producing asset”, but at the same time Dee Hock, the founder of Visa, argued that “Bitcoin represents not only the future of payments but also the future of governance”. With growing pace in altcoins creation and a vast number of seemingly doomed ICOs, it begins to seem like the whole situation looks more and more similar to the dot-com crash. Only recently, Vitalik Buterin
(co-founder of Ethereum), said that 90% of all ICOs will fail.

News that the CME Group will launch bitcoin futures and that China may allow OTC trading in yuan create a more favorable climate in the market. Bitcoin has risen by 3.00%, trading at around $6,936, Ethereum is down by 2.87%, trading at around $280, while Bitcoin Cash is up by 14.71%, trading at around $553.12. The market enjoys this Bitcoin growth, yet we should remember that the situation may change at any moment.

This article is written by FxPro

UK Interest Rates in Focus

The Bank of England is widely expected to raise UK interest rates for the first time in 10 years today. An expected 0.25% rise, to 0.5%, will push UK interest rates back to pre-Brexit levels. UK inflation climbed to a 5 year high of 2.9% in August, significantly above the Bank of England’s Monetary Policy Committee (MPC) target of 2% and September saw the rate increase to 3%. Recent data has indicated that the UK economy is performing better than expected, with growth rising to 0.4% in Q3 which, to many, is an indication that a rate hike will not adversely affect growth. The MPC stated in September that a “majority” of members believed that some withdrawal of stimulus would be appropriate if the economy continues to grow at a steady pace. The markets are “pricing-in” a 91.2% probability of a rate hike today. If the BoE does not raise rates the markets will put downward pressure on GBP. If rates rise, as expected, there may only be slight upward pressure on GBP, as the markets have already factored in a hike. Regardless of the announcement, we are likely to see volatility in GBP.

In the US on Wednesday, the US the Federal Reserve, as expected, kept interest rates unchanged. The Fed underscored recent data that indicates solid economic growth and a strengthening labor market. The markets are now expecting the Fed to hike rates in December. The ADP employment report on Wednesday said the private sector added 235K jobs last month, more than the 196K the markets had forecast. The better-than-expected ADP data suggests an improving job market, even aside from the recent storms. Such strong data is indicating the US has the resiliency to endure a rise in interest rates. The markets will be looking ahead to Friday’s always impactful Non-Farm Payroll release for further confirmation of a robust labor market, which will, inevitably, underscore the likelihood of a December rate hike.

EURUSD is 0.3% higher in early trade at around 1.1656.

USDJPY is 0.2% lower in early Thursday trading at around 113.90.

GBPUSD has edged 0.3% higher overnight ahead of today’s interest rate decision. GBPUSD is currently trading around 1.3285.

Gold has gained 0.36% on USD weakness to currently trading around $1,278.75.

WTI is little changed, currently trading around $54.35.

Major data releases for today:

At 09:00 GMT, the Bundesagentur für Arbeit published by the German Statistics Office will release the Unemployment Rate s.a. & Change for October. The rate is forecast to be unchanged at 5.6% with the changing forecast at -11K, which is not as strong as the previous release of -23K.

At 09:30 GMT, the UK Chartered Institute of Purchasing & Supply and Markit Economics will release UK PMI Construction for October. The forecast is expected to show a slight decline to 48.0 from September’s release of 48.1.

At 12:00 GMT, the Bank of England will announce its interest rate decision. The markets are expecting a hike of 0.25%, taking UK interest rates to 0.5%. Analysts are unanimous that the BoE will raise rates for the first time in 10 years, bringing UK interest rates back to pre-Brexit levels. The BoE will also release its Quarterly Inflation report, Monetary Policy Statement and Asset Purchase Facility, all of which will be overshadowed by the interest rate decision. Regardless of the interest rate decision the markets are likely to see higher volatility in GBP.

At 12:30 GMT, Bank of England Governor Mark Carney is scheduled to deliver a speech outlining the rationale behind the 12:00-noon interest rate decision. The markets will be looking for clues as to future monetary policy and the timing of future interest rate hikes.

This article is written by FxPro

Markets Await FOMC

On Tuesday, the Bank of Japan made no changes to its huge monetary stimulus plan even as it reduced its inflation forecasts. The BoJ board voted, 8-1, to maintain the central bank’s yield curve control program and asset purchases. The board kept its view that its 2% inflation target is likely to be met at the start of the fiscal year that begins in April 2019. Governor Kuroda continued to stress the importance of maintaining monetary easing as the world major Central Banks are moving towards monetary normalization. However, this is whilst the Japanese economy is seeing its longest expansion since 2001, with equities at their highest level in 20 years and a labor market that is the tightest for several decades.

Data released by Eurostat on Tuesday showed economic growth beat forecasts in Q3. Preliminary GDP climbed 0.6% in Q3 from Q2. That is down slightly from the upwardly-revised 0.7% quarter-on-quarter growth in Q2, but ahead of a forecasted estimate of 0.5%. In addition, the Eurozone Unemployment Rate dropped to 8.9%. Unemployment below 9% has not been seen for nearly 8 years. Year-on-year GDP rose to 2.5% in the Q3, up from a 2.3% annual increase in Q2, again beating expectations of a 2.4% rise.

The markets are focusing on today’s US Federal Reserve’s two-day policy meeting for indications on future monetary tightening. The Fed has raised rates twice since January and currently forecasts one more hike by the end of the year as part of a tightening cycle that began in late 2015. The Fed is expected to leave interest rates unchanged but the markets will be looking for any new indications that the Fed will, as expected, hike rates in December.

EURUSD is slightly lower in early Wednesday trading at around 1.1643.

USDJPY is 0.2% higher in early session trading at 113.93.

GBPUSD is currently unchanged, trading around 1.3308.

Gold is 0.3% higher overnight, currently trading around $1,276.

WTI is 0.15% higher in early trade at around $54.98.

Major data releases for today:

At 09:30 GMT, the UK Chartered Institute of Purchasing & Supply and Markit Economics will release Markit Manufacturing PMI for October. Forecasts are calling for a lower reading of 55.8, from the previous 55.9.

At 13:45 GMT, Markit Economics will release US Markit Manufacturing PMI for October. The forecast is for the release to be unchanged at 54.5.

At 14:00 GMT, the Institute for Supply Management (ISM) will release US ISM Prices Paid and ISM Manufacturing PMI for October. Prices Paid is forecast to come in lower at 68 from the previous release of 71.5, with PMI also forecast lower at 59.5 from the previous 60.8.

At 14:30 GMT, the US Energy Information Administration (EIA) will release EIA Crude Oil Stocks change for the week ending October 27th. The forecast is calling for a drawdown of -2.575M compared to the previous small increase in stocks of 0.856M. The markets will be looking for any significant deviation from the forecast as this will cause volatility in Oil.

At 18:00 GMT, the US Federal Open Market Committee (FOMC) will release its statement on Monetary Policy. The statement may influence the volatility of USD and determine a short-term positive or negative trend.

At 18:00 GMT, the US Federal Reserve will announce its Interest Rate Decision. The markets are not expecting any change in US interest rates until December with the Fed holding interest rates at 1.25%. Naturally, any unexpected rate hike will cause volatility in USD.

This article is written by FxPro

Another Political Headache for Trump

US Dollar gave up some of its recent gains on news that investigators had charged President Trump’s former campaign manager regarding the investigation of Russian interference in last year’s US Presidential Campaign. Trump’s former campaign manager Paul Manafort and another aide, Rick Gates, were both charged with money laundering on Monday. It was also announced on Monday that Former Trump advisor, George Papadopoulos, pleaded guilty in early October to lying to the FBI. The indictment of Manafort & Gates includes accusations of conspiracy against the United States, failure to report foreign bank accounts to the US government and conspiracy to launder money, a count that carries a 20-year maximum prison sentence. The U.S. Justice Department Special Counsel Robert Mueller’s 5-month investigation into alleged Russian efforts to tilt the election in Trump’s favor and into potential collusion by Trump aides has Trump claiming the probe “a witch hunt” and, as we have come to expect from Trump, he also commented on Twitter: “Sorry, but this is years ago, before Paul Manafort was part of the Trump campaign. But why aren’t Crooked Hillary & the Dems the focus?????”. Once again political turmoil is haunting Trump at a critical time for his administration, as they look to pass a tax reform bill and await Trump’s selection of the next Fed Chair.

It appears that Federal Reserve Governor Jerome Powell is the first choice of President Trump to be the next Chair of the Federal Reserve, according to an unnamed senior official. Powell is a Republican centrist who is likely to continue the Fed’s strategy of gradual interest rate hikes but may also be open to easing some regulations on banks. Powell, 64, has consistently backed Janet Yellen’s plan to hike rates slowly to head off a potential surge in inflation without disrupting an economic recovery that remains in a fragile state. An unnamed senior administration commented that “Trump hasn’t made a final decision and could change his mind” and also commented that “an announcement is scheduled for Thursday”.

EURUSD is trading around 1.1635 in early Tuesday trading.

USDJPY is relatively flat, trading around 113.27.

GBPUSD currently trades around 1.3210.

Gold is little changed in early trading at around $1,276.50.

WTI is 0.15 lower at around $54.02 in early trading.

Major data releases for today:

At 06:30 GMT, Bank of Japan Governor Kuroda will give a press conference to the markets regarding monetary policy. He will comment on the factors that affected the most recent interest rate decision, the overall economic outlook, inflation, and clues regarding future monetary policy in Japan.

At 10:00 GMT, Eurostat will release a host of Eurozone Data: GDP (YoY & QoQ) for Q3, CPI & CPI Core (YoY) for October and the Unemployment Rate for September. Unemployment is forecast to have dropped to 9.0% from August’s 9.1%. CPI-Core is expected to come in at 1.2% slightly lower than the previous release of 1.3% with CPI forecast at 1.4% from 1.5%. Annualized GDP is forecast to come in slightly higher at 2.4% from the previous release of 2.3%. The quarterly GDP is expected to come in at 0.5%, slightly lower than the previous release of 0.6%. The markets will be looking for any significant deviation from the forecasts which will likely cause EUR volatility.

Eurozone GDP
Eurozone GDP
Eurozone Unemployment Rate
Eurozone Unemployment Rate

At 19:30 GMT, Bank of Canada Governor Poloz is scheduled to appear before the House of Commons Standing Committee on Finance in Ottawa. He will be accompanied by Senior Deputy Governor Carolyn A. Wilkins.

This article is written by FxPro

Strong US Q3 GDP Boosts USD, Euro under Pressure on Independent Catalonia Threat

The US Commerce Department released Q3 GDP data on Friday, showing the US economy expanded at an annual pace of 3%. With the back-to-back Hurricanes during the quarter many had expected Q3 GDP to be lower than the previous, robust, release of 3.1% – consensus forecasts had called for a release of 2.5%. The effects of the Hurricanes appear to have been smaller and less impactful on economic growth than had been previously expected. However, much can be attributed to the disruptions caused by Harvey & Irma, as consumer spending declined to 2.4% from the strong 3.3% rate seen in Q2. The Commerce Department cautioned that the data did not capture all the losses caused by the storms, which caused shutdowns of many businesses in Florida and Texas. The back-to-back growth of >3% is the first time since 2014 and is likely to keep the Federal Reserve on track to hike interest rates one more time in 2017. The data helped push USD higher against its peers.

In Spain on Friday, Catalonia’s parliament defiantly declared independence in a vote boycotted by three parties, claiming an Oct. 1 referendum, that was ruled illegal under Spanish law, had given them a mandate. Following the vote, Spain’s central government fired Catalonia’s President Puigdemont, dissolved the region’s parliament and dismissed the local government after the Spanish Senate approved the use of article 155 of the constitution. At the same time, Spanish Prime Minister Rajoy called for an election on December 21stOn Sunday, in Catalonia’s capital Barcelona, hundreds of thousands of demonstrators rallied to show that not everyone is in favor of independence. The United States and the European Union also rejected the results of the referendum and support a united Spain. Without Catalonia, Spain would continue to be the fourth largest economy in the eurozone, after Germany, France, and Italy, but it would be much weakened. An independent Catalonia becomes a threat not just to Spain but to the EU as a whole, in some ways a greater threat than Brexit. EUR had been under downward pressure following the slow and gradual reduction of QE and the Catalan issue is not helping the single currency.

EURUSD is little changed in early trading at around 1.1633.

USDJPY is trading close to Friday’s close at around 113.62.

GBPUSD is 0.24% higher in early Monday trading at around 1.3164.

Gold is slightly lower, due to USD strength, currently trading around $1,271.

WTI is 0.5% lower in early trading at around $54pb.

Major data releases for today:

At 09:30 GMT, the Bank of England will release Consumer Credit for September. The forecast is expected to come in at GBP 1.5 billion compared to the previous months GBP 1.583 billion. We can expect to see volatility in GBP if the release is wildly different from expectations.

At 10:00 GMT, the European Commission will release Industrial Confidence, Economic Sentiment Indicator, Business Climate, Consumer Confidence, and Services Sentiment for the month of October. Industrial Confidence is forecast at 7.0 (prev. 6.6), Economic Sentiment at 113.4 (prev. 113), Consumer Confidence unchanged at -1 and Services Sentiment at 15.0 (prev. 15.3). Whilst all of these data releases should indicate relatively good sentiment, any release that is significantly different from forecast will likely see EUR volatility.

At 12:30 GMT, the US Bureau of Economic Analysis will release Core Personal Consumption Expenditure – Price Index (YoY & MoM) for September. The previous year-on-year reading of 1.3% is expected to be beaten, as upward inflationary pressure should start to be evident in the US economy. The month-on-month releases is expected to come in at 0.2%, beating the previous release of 0.1% – again pointing to upward inflationary pressure.

This article is written by FxPro

Bitcoin Hard Fork Cools Down Investor Demand But Bitcoin Prices Hold Near All-Time High

Last week, Bitcoin underwent another hard fork which resulted in the creation of Bitcoin Gold (BTG). Investors had high hopes for this new cryptocurrency, as community support and exchanges seemed to guarantee receipt of equal amounts of BTG.

For this same reason, Bitcoin attracted high demand from investors of all levels, pushing the cryptocurrency above $6,170. Bitcoin price shortly fell to $5,470, now trading at $5,794, with the former price now emerging as having been a good opportunity for investing. BTG initially reached $539.72, albeit now trading at around $113, likely showing similar dynamics to those that Bitcoin Cash had displayed earlier.

On October 16, Ethereum also underwent a fifth hard fork, which came mostly as a technical upgrade. Ethereum currently trades at around $297.47, down from $346 prior to the hard fork.

With the cryptocurrency market digesting a speculative surge, the major Altcoins are showing moderate growth with numerous investors have made a huge profit following Bitcoin’s growth. Yet, Zcash could potentially attract investors, now trading at around $210.63.

Japan continues to attract capital from around the world, yet investors appear worried that the country’s prudent attitude may lead to tight cryptocurrency regulation, if not to a ban on exchanges and ICOs altogether. Meanwhile, the Central Bank of Indonesia has refused to recognize Bitcoin as a payment instrument, with exchanges in the country now scheduled to stop operating on November 1.

The Russian government, on the other hand, is in the process of developing industry regulation, with plans to create its own cryptocurrency, while Hong Kong and Singapore regulators are involved in a joint financial project based on the blockchain. By the end of 2017, we should be looking at a clearer picture of the global cryptocurrency market regulation.

Meanwhile, the U.S. dollar closed the previous week higher. EURUSD settled at 1.1608, as the GBP found closed at 1.3133. Gold appears to be still under pressure, dropping from 1280 to 1276.

This article is written by FxPro

Strong Economic Data from The UK & US, Euro and Pound Enjoyed a Strong Day

On Wednesday, the UK Office for National Statistics released Gross Domestic Product, that beat expectations, coming in with growth of 0.4% in Q3. Improving by 0.1% in the previous quarter of 0.3%, UK Chancellor Phillip Hammond commented that it showed a “resilient economy which is supporting a record number of people in employment”. The mainstay of the UK, the services sector, which accounts for nearly 80% of economic growth, grew by 0.4% as it did in the previous quarter. Industrial production also grew by 1% during Q3, helped by a 1% jump from manufacturing and a 1.5% increase from mining and quarrying. Despite the growth in GDP, the estimate for annual growth is below the 1.8% last year and is the slowest for 5 years. The better-than-expected data helped push GBP higher against its peers with GBPUSD rising to a near 3-week high.

The US Census Bureau released Durable Goods Orders and ex-Transportation data for September on Wednesday that increased more than expected. Durable goods for September climbed to 2.2%, beating expectations of a 1% rise, to $238.7 billion. The bulk of the increase was a result of higher transportation orders which rose by 5.1%. Durable Goods have now increased in 3 out of the last 4 months. The data indicated a favorable manufacturing sector, despite the recent Hurricanes that disrupted employment data. Following the release, the USD saw initial buying interest before retracing lower.

The Bank of Canada held its benchmark interest rate at 1% on Wednesday but raised concerns about the Canadian economy. Policy makers, led by Governor Stephen Poloz, left the benchmark overnight rate at 1%, after consecutive hikes at the bank’s last two decisions in July and September, and warned they will remain “cautious” when considering future hikes. Following the announcement, the markets are now discounting the likelihood of another interest rate hike this year, which caused CAD to weaken by 1%. Many are now expecting a hike in Canadian interest rates by March of next year and not January as many had forecast.

The markets are now focusing on today’s ECB Meeting at 12:45 BST.

EURUSD is 0.1 higher in early trading, around 1.1825.

USDJPY is 0.1 lower in early trading, around 113.66.

GBPUSD is little changed, trading around 1.3237.

Gold is 0.2% higher overnight, trading around $1,280.

WTI is 0.2% lower in early trading, around $52.05.

Major data releases for today:

At 08:45 BST, the Reserve Bank of Australia Assistant Governor Guy Debelle is scheduled to speak at the ABS Auditorium, Abercrombie Business School at the University of Sydney.

At 12:45 BST, the European Central Bank will announce its Interest Rate decision. The markets are not expecting any change.

At 13:30 BST, the US Department of Labor will release Initial Jobless Claims for the week ending October 20th, along with Continuing Jobless Claims for the week ending October 13th. Initial claims are expected to have risen to 253K from the previous 222K. Continuing claims are forecast to come in at 1.890M, a slight increase on the previous 1.888M. Any significant deviation from the forecasts are likely to see USD volatility.

At 13:30 BST, following the 12:45 BST ECB interest rate decision there will be the ECB Monetary policy statement and press conference. The markets will be keen to hear news of changes in policy which may affect EUR.

This article is written by FxPro

Next Fed Chair: John Taylor?

USD is trading close to a 3-month high against JPY on Wednesday, as rumors circulate that many Republican Senators are favoring John Taylor to become the next Chair of the Federal Reserve. Trump hosted a lunch with Republican Senators on Tuesday to gather their views on their preference for the next Fed Chief. Apparently, Trump conducted a “straw poll” amongst the attendees as to who is their preference between current Fed Governor Jerome Powell or Stanford University economist John Taylor for the role. Sources have revealed that the majority prefer John Taylor, who is regarded as having a strong hawkish stance on monetary policy. The markets believe that Taylor is likely to increase the pace of interest hikes which has, therefore, helped see USD gain against its peers overnight.

The rumors around Taylor helped dilute the fact that the infighting within the Republican party may impede Trump’s tax reform plans. Rumors circulated that several Republican Senators may not vote for the tax bill and Trump ranted that Bob Corker, Head of the Senate Foreign Relations Committee and a dissenter of the tax bill, was “incompetent”. With a slim, 52 to 48 Senate majority, Trump can ill-afford his own party members dissenting against the bill. House of Representatives Speaker Paul Ryan said he wants the House to pass the tax cut bill before the US Thanksgiving Day holiday on November 23rd. With in-party tussles that may be a challenge.

Oil has continued its upward trend as Saudi Arabia’s energy minister, Khalid A. Al-Falih, commented that “We are very flexible, we are keeping our options open. We are determined to do whatever it takes to bring global inventories down to the normal level which we say is the five-year average,”. Such comments are leading the markets to believe the current pact (OPEC, Russia & 9 other producing nations) will be extended past the agreed March 2018 end. The EIA will release data on US inventories later today and so the markets will be looking to see the extent of the forecasted drawdown.

EURUSD is currently trading around 1.1760.

USDJPY is currently trading around 113.92.

GBPUSD is currently trading around 1.3133.

Gold is 0.3% lower in early Wednesday trading. Currently, Gold is trading around $1,273.

WTI is currently trading around $52.50.

Major data releases for today:

At 09:30 BST, the UK Office for National Statistics will release Gross Domestic Product (QoQ & YoY) for Q3. The Quarter-on-Quarter release is expected to be unchanged from the previous reading of 0.3%, whereas the Year-on-Year release is expected to come in slightly lower than the previous release at 1.4%. Any significant deviation from the forecasts is likely to see GBP volatility.

At 13:30 BST, the US Census Bureau will release Durable Goods Orders and ex-Transportation data for September. Durable Goods excluding transportation are expected to be unchanged at 0.5%, with the main Durable Goods release forecast to come in at 1.0%, a significant decline from the previous release of 2.0%. Any significant deviation for the forecasts is likely to see USD volatility.

At 15:00 BST, the Bank of Canada will release their Interest Rate decision along with a Rate Statement, which will be followed by a press conference at 16:15 BST. The markets are not expecting any change from the Bank of Canada, with Canadian interest rates expected to remain at 1.0%. Any changes in interest rates will result in CAD volatility.

At 15:30 BST, the US Energy Information Administration will release Crude Oil Stocks change data for the week ending October 20th. The previous release saw a drawdown of -5.731M and the forecast for this release is also expecting a drawdown that is lower at -2.500M. Any significant deviation from the forecast will see volatility in Crude Oil prices.

This article is written by FxPro

So, Who Will Be the Next Fed Chair?

The markets are turning their attention to who will become the next Chairperson of the Federal Reserve. President Trump recently commented that he is “very, very close” to deciding who will take the position after interviewing 5 candidates. The 5 shortlisted candidates are current Fed Chair Janet Yellen, who has held the position for the past 4 years, she holds a Ph.D. in economics from Yale and has held numerous “Fed” roles, Kevin Warsh a Harvard Law graduate, financier and former governor of the Federal Reserve System, Fed Governor (since 2012) Jerome Powell, a lawyer and former investment banker, John Taylor, a Stanford University economist & Gary Cohn who is Trump’s chief economic advisor. The White House has stated that Trump will make his decision before he leaves for a trip to Asia in November.

With Japanese Prime Minister Shinzo Abe securing a decisive victory for his coalition party in the recent Japanese elections, the markets are looking for confirmation that his economic reforms will continue. With such ultra-easy monetary policy adopted by the Bank of Japan, the Yen has suffered from a degree of a risk-off sentiment of late.

On Thursday, the ECB meets and President Mario Draghi is expected to announce the long-awaited start of tapering. The question the markets are posing is how the central bank will pare back a bond-buying program that started over 2 years ago? Currently, monthly bond purchases by the central bank total some EUR60 Billion, with many analysts predicting that this will drop to between EUR20 to 30 Billion per month. At such a pace, it would make an increase in Eurozone interest rates highly unlikely until 2019. We can expect to see some extended volatility in EUR once the scale of tapering is announced.

EURUSD is slightly higher in early Tuesday trading. Currently, EURUSD is trading around 1.1765.

USDJPY is higher in early trading. Currently, USDJPY is trading around 113.67.

GBPUSD is lower to currently trade around 1.3190.

Gold is unchanged overnight to currently trade around $1,281.75.

WTI is 0.2% lower in early trading. Currently, WTI is trading around $51.80.

Major data releases for today:

At 08:30 BST, Markit Economics will release German PMI (Composite, Services & Manufacturing) for October. Composite is forecast at 57.6 (from 57.7), Services is forecast to be unchanged at 55.6 and Manufacturing is forecast at 60.0 (from 60.6).

At 09:00 BST, Markit Economics will release Eurozone PMI (Composite, Services & Manufacturing) for October. Composite is forecast at 56.5 (from 56.7), Services is forecast at 55.7 (from 55.8) and Manufacturing is forecast at 57.8 (from 58.1).

At 14:45 BST, Markit Economics will release US PMI (Composite, Services & Manufacturing) for October. Composite previous was 54.8, Services is forecast at 55.2 (from 55.3) and Manufacturing is forecast at 53.5 (from 53.1).

This article is written by FxPro

Abenomics Continue Into 2021?

Japanese Prime Minister Shinzo Abe’s party has won a resounding, albeit not surprising, victory in Japan’s election on Sunday. The victory will maintain Japan’s ultra-easy monetary policy for the foreseeable future. The markets had been concerned that Abe’s economic policy would have been disrupted if his party did not maintain their “super majority” two-thirds win in Japans 465-member lower house. It is now apparent that, with an uninterrupted economic policy, the Bank of Japan will continue its “Abenomics” policy of mega-stimulus. The markets initially reacted with Japanese equities climbing higher, whilst JPY declined. However, as we enter the European trading session, the markets are behaving with a “business as usual approach” which has resulted in the Japan225 and USDJPY both retracing from earlier highs.

The EUR weakened over the weekend, as Spain’s Senate is expected to approve Prime Minister Rajoy’s call to impose direct rule on Catalonia. Catalan leader Puigdemont commented on Saturday that the anticipated move by Madrid as being the “the most serious attack on Catalonia’s foundations and principals since the dictatorship of Franco”. He also stated on Spanish TV that he would consult with the regional parliament on how to react to “these attacks on democracy”. The markets are concerned as to the economic fallout that may occur as Catalan contributes over 20% to Spain’s economy and how this will affect the greater Eurozone.

The Czech Republic has “voted in” their own version of Trump with the weekend victory of Czech Business mogul Andrej Babis in the country’s general election. Mr. Babis, a populist business billionaire, was voted in as Czech Prime Minister on a manifesto focusing on cutting taxes, increasing public investment and reducing immigration (sound familiar?). Babis is the latest “nationalist” to secure a victory in Europe which could bring into question the strength, and unity, of Eurozone members.

EURUSD is is lower 0.25% from Friday. Currently, EURUSD is trading around 1.1755.

USDJPY is 0.15% lower in early Monday trading. Currently, USDJPY is trading around 113.81.

GBPUSD is 0.1% higher in early session trading. Currently, GBPUSD is trading around 1.3195.

Gold is 0.2% lower in early trading. Currently, Gold is trading around $1,277.

WTI is little changed from Friday’s close. WTI is currently trading around 52.19.

Major data releases for today:

At 09:00 BST, Markit Economics will release Eurozone Manufacturing, Services & Composite PMI for October. Manufacturing is expected to come in at 57.8 from the previous 58.1, Services at 55.9 from 55.8 and Composite at 56.6 from 56.7.

At 14:45 BST, Markit Economics will release US Manufacturing, Services & Composite PMI for October. Manufacturing is expected to come in at 53.5 from the previous 53.1 & Services at 55.5 from 55.3.

This article is written by FxPro

Bank of England Faces Conundrum, Pound Trades Lower

On Wednesday, data released by the UK Office for National Statistics (ONS) showed average weekly earnings (excluding bonuses) rose 2.1% in August – slightly higher than the 2% forecast. However, in real terms, due to higher inflation, they fell 0.4% on the year before. The swaps market is expecting an 80% chance of a rate rise next month but the prospect of hiking rates when real wages are in a negative territory will make any potential hike difficult to justify. The conundrum faced by the Bank of England is: raise rates because inflation is high and unemployment is low, but, if you raise rates it puts extra pressure on the consumer and a sharp break on the economy as we close out 2017. The markets are convinced there will be a rate hike in November but, faced with the above conundrum, this may be difficult for the Central Bank to impose.

Data released early on Thursday showed economic growth in China slowed marginally as expected in Q3. The National Bureau of Statistics data showed the Chinese economy grew at 6.8%, slightly down on the previous release of 6.9%. The markets had been expecting a slight slowdown in growth as borrowing costs have been pushed higher, following a government campaign against riskier lending and a cooling in housing prices, as property investment and construction has softened. GDP in Q3 grew 1.7% quarter-on-quarter, compared with growth of 1.8% in Q2, which was revised up from an initially reported 1.7% growth.

EURUSD is 0.25% higher in early trading. Currently, EURUSD is trading around 1.1816.

USDJPY is little changed overnight, currently trading around 112.64.

GBPUSD is currently trading around 1.3189, marginally higher from last nights close.

Gold is 0.43% higher in early trading, currently trading around $1,288.

WTI is down 0.86%, currently trading around $51.60.

Major data releases for today:

At 09:30 BST, the UK Office of National Statistics will release Retail Sales (MoM) for September. Consumer spending is forecast to come in at -0.1% from the previous reading of 1.0%. August’s robust release surprised the markets. The recent 5-year high CPI release of 3.0% and the fact that basic pay is lagging is putting a squeeze on UK consumers, thus resulting in an expected poor Retail Sales figure for September. A release significantly outside of the consensus will result in GBP volatility.

At 13:30 BST, Initial Jobless Claims for the week ending October 13th will be released by the US Department of Labor. The consensus is calling for a slight decrease to 240K from the previous release of 243K. The US Labor market continues to demonstrate the robustness and there is nothing to suggest that this release will be any different than expected. If we see a markedly different release we will expect to see USD volatility.

This article is written by FxPro

UK Inflation at 5-Year High, Pound Falls on Carney’s Comments

The likelihood of a rise in UK interest rates, for the first time in a decade, gained momentum on Tuesday as UK CPI edged up from 2.9% to 3.0% – its highest level since April 2012. Bank of England Governor Mark Carney did nothing to dispel a rate hike as he gave evidence to the UK Treasury select committee where he stated that the fall in the value of GBP, since the Brexit vote last year, has resulted in higher prices paid for imported goods which will take up to three years to “work its way through the economy”. With poor economic data, uncertainty over the Brexit process and a squeeze on real earnings the Bank of England’s decision to hike rates is delicately balanced.

With raised tensions in the Middle East, the price of Oil rose on Tuesday as the markets are concerned that supply distribution could be disrupted. The API report out of the US showed a bigger than expected drawdown in US inventories which, when added to the fighting in Kirkuk, Iraq and the continued tensions between Iran and the US, helped push Oil prices higher. Official US fuel inventory will be released today by the EIA which may help push Oil prices higher if, as forecast, there is a significant drawdown.

China’s President Xi Jinping delivered a keynote speech to the Communist Party congress in Beijing. The twice-a-decade congress is expected to cement the power of Xi who stated early on in his speech that the “market will be allowed to play a decisive role in allocating resources”. “Currently, conditions domestically and abroad are undergoing deep and complicated changes, our country is in an important period of strategic opportunity in its development,” he said in a calm, steady voice. “The outlook is extremely bright; the challenges are also extremely grim.” The markets will be watching the congress meeting this week for any suggestion of whether Xi may be looking to appoint a successor to take over after his traditional second five-year term in office.

EURUSD is little changed in early Wednesday trading. Currently, EURUSD is trading around 1.1760.

USDJPY is trading close to Tuesday’s close. Currently, USDJPY is trading around 112.52.

GBPUSD is currently trading near early session lows around 1.3182.

Gold is 0.12% higher in early trading. Currently, Gold is trading around $1,285.

WTI is 0.2% higher on Wednesday to currently trading around $52.02.

Major data releases for today:

At 09:10 BST, ECB President Mario Draghi is scheduled to present the opening speech at the ECB Conference “Structural reforms in the euro area” in Frankfurt, Germany.

At 09:30 BST, UK National Statistics are scheduled to release Average Earnings including bonus (3Mo/Yr) for August. The consensus is calling for an unchanged 2.1%. The markets will be keen to see if UK average earnings are rising in line with inflation. If they are, we can expect the Bank of England to raise rates in the near future. If they are lagging inflation, then real earnings are lower and it may be difficult for the Central Bank to justify a rate hike.

At 13:00 BST, New York Federal Reserve Bank President William Dudley and Dallas Federal Reserve Bank President Robert Kaplan are scheduled to speak in New York & Texas (respectively) at the Centers of Growth breakfast conversation at Hearst, in New York.

At 13:30 BST, the Us Census Bureau, at the Department of Commerce, is scheduled to release Housing Starts Change for September. The previous poor release of -0.8% is expected to be improved upon with consensus suggesting a release of -0.5%. Whilst the data is still expected to be negative, the markets are aware that the recent Hurricanes are still impacting building in certain states.

At 15:30 BST, the US Energy Information Administration will release data for Crude Oil Stocks change for the week ending October 13. The consensus is calling for a drawdown of -4.750M compared to the previous draw of -2.747M. Expect volatility in Oil if the released number is significantly different from the consensus.

This article is written by FxPro

Iraqi Tensions Impact Oil Prices, UK Inflation at Highest Since 2012

On Monday, Iraqi forces moved to take control of the city of Kirkuk that had been under control of a Kurdish faction since 2014 and had recently voted for independence in a referendum with Baghdad objections. Kirkuk is home to over 10% of Iraq’s oil reserves and the “takeover” brought concerns to the markets regarding supply disruptions, which helped pushed WTI up to a 3-week high before retracing overnight.

The Reserve Bank of Australia released the minutes of their October 3rd meeting earlier today. The minutes reveal that the RBA appears to be in no hurry to hike interest rates, as many of its global peers are moving towards reducing monetary stimulus. The RBA noted that recent data pointed to reduced price pressures with a relatively strong labor market expected to support the higher consumer spending that is restricted by slow growth in real wages and high levels of household debt. Whilst the Australian economy is improving, it is evident that the RBA is not thinking about raising interest rates anytime soon. AUDUSD is little changed in the early Tuesday trading session at 0.7857.

On Monday, Spain’s deputy prime minister, Mrs. Soraya Sáenz de Santamaría, says that Catalonia’s leader didn’t give an adequate response to his letter about the region’s independence and has until Thursday to comply with the country’s laws. Catalonia Leader Puigdemont’s letter issued two hours before a Monday deadline and didn’t clarify whether he, in fact, declared Catalonia’s independence from Spain. He called for talks with Spain’s government. Puigdemont now has until Thursday to give a response – the Spanish Government wants a simple “yes” or “no” – before Spain could activate Article 155 of the Constitution, which would allow the central government to take over parts of Catalonia’s self-governance.

At 09:30 BST, UK National Statistics released its Consumer Price Index (YoY) for September. UK inflation is at the highest rate since April 2012 at 3.0% from the previous release of 2.9%. The figure of 3.0% puts pressure on the Bank of England to raise UK interest rates sooner rather than later.

EURUSD is 0.25% lower in early trading. Currently, EURUSD is trading around 1.1767.

USDJPY is little changed overnight, currently trading around 112.15.

GBPUSD is unchanged from Monday’s close to currently trade around 1.3266.

Gold is 0.8% lower overnight, currently trading around $1,292.50.

WTI gave back Monday’s gains to trade 0.5% higher in early Tuesday trading. WTI currently trades around $52.13.

Major data releases for today:

At 14:15 BST, the Board of Governors of the Federal Reserve will release Industrial Production (MoM) for September. The last release was greatly affected by the Hurricanes and came in at -0.9%. With the rebuilding process well underway and many factories back in operation, the release is expected to show a positive figure of 0.2% for September. A positive figure will be seen as inflationary and will help the Fed in justifying a rate hike before the end of the year.

This article is written by FxPro

Politics Influence Markets

With fears abating surrounding the threat of Catalan independence, the EUR moved higher overnight. Catalan President Puigdemont stated that, although the October 1st referendum had given him the mandate to pursue independence, he would “suspend” the result for a period of a few weeks whilst he has discussions with Spain’s Prime Minister Rajoy’s administration. He commented that the greater European Union should be involved in any discussions as he tries to reassure many Catalan based companies that are threatening to leave the region.

UK Prime Minister Theresa May appears to have “won back” several of her recent critics of her leadership. Many so-called “Brexit Hardliners” in her own Cabinet have supported her recent comments on her contingency plans for leaving the European Union without a “deal”. GBP recovered from its recent losses but will be sensitive to any further political “unrest” in the UK.

In the US, President Trump has dismissed the recent “war of words” he had with Senator Corker over his, and his administration’s, ability to govern. Trump has failed miserably during his tenure to get any of his policies approved and needs support, especially from within his own Republican Party, in order to get his Tax Reform policy through the US Senate. The recent “spat” between Trump and Corker put the Tax Reform “front and center” and resulted in a slight USD sell-off, again those fears appear to be abated, but the markets will be closely watching for any more “Trumpisms” that could bring his leadership into question.

Finally, the IMF raised its global growth rate targets for 2017 up to 3.6% from the previous 3.5% July estimate. For the US, growth is expected at 2.2% (prev. 2.1%), China expected at 6.8% (prev. 6.7%), Eurozone expected at 2.1% (prev. 1.9%) and Japan expected at 1.5% (prev. 1.3%). However, the IMF downgraded the UK’s growth target to 1.7% (prev. 1.9%).

EURUSD is up slightly overnight and currently trading around 1.1839.

USDJPY is little changed overnight, currently trading around 112.27.

GBPUSD is lower by 0.1% in early Wednesday trading. Currently, GBPUSD is trading around 1.3206.

Gold is slightly lower in early trading at around $1,289.

WTI is 0.5% higher overnight, following news that Saudi Arabia will cut its Oil exports by 560K barrels a day in November. Currently, WTI is trading around $50.99.

Major data releases for today:

At 19:00 BST, The US Federal Reserve will release the minutes from their recent Federal Open Market Committee meeting (FOMC) held in September. Currently, the CME FedWatch tool is indicating an 89% probability of a rate hike in December. The majority of the FOMC members support the move, but there are some members who want to wait until US inflation moves higher.

This article is written by FxPro

US Unemployment at Lowest Level Since 200, US Dollar Remain Stable

On Friday, the US Department of Labour released Nonfarm Payrolls for September. The meager forecast of 88K was beaten with an even worse release of -33K, showing the US lost 33K jobs from the previous release. This is the first negative NFP since September 2010, as the recent Hurricanes impacted jobs in the leisure and hospitality sector. With the rebuilding effort fully underway, the markets expect NFP to increase in the coming months as workers are hired with businesses reopening and tourism improving. The markets had expected the Hurricanes to impact NFP, but not to such an extent. A more positive one followed, the release of US Unemployment which, at 4.2%, is the lowest rate since February 2001.

More positive data from the US was released showing US average hourly earnings rose to an annual pace of 2.9% in September, an improvement on the August release of 2.7%. It has been well documented that the Fed has been eager to see higher levels of earnings growth, which had been missing as employment grew. With such an improvement in average hourly earnings, that should help push inflation higher, this will provide additional impetus for the Fed to hike rates, for the third time this year, in December.

The markets are concerned about news from Russia’s RIA News Agency that North Korea is preparing to test a long-range missile which it believes can reach the west coast of the US. With renewed tensions between North Korea and the US, the markets have moved into safe havens – buying JPY and Gold in early Monday trading.

EURUSD is little changed since Friday’s close, currently trading around 1.1730.

USDJPY is currently trading around 112.68.

GBPUSD has recovered from Friday’s lows to currently trading around 1.3112.

Gold has moved 0.5% higher from Friday to currently trading around $1,282.25.

WTI is 0.4% higher in early Monday trading. Currently, WTI is trading around $49.50.

Today, several markets have National Holidays: Columbus Day in the US, Health Sports Day in Japan and Canadian Thanksgiving, therefore there are no noticeable, high impact, economic data releases for Monday.

This article is written by FxPro

GBP Suffers on Poor Data

On Tuesday, the UK HIS Markit/CIPS construction Purchasing Managers Index (PMI) for September fell to 48.1 from the previous data release in August of 51.1. With market consensus expecting an unchanged figure for September, the markets reacted negatively and GBP was sold against its peers. The contraction is blamed on weak new orders and this is the first time the index has been below the key 50-change threshold in just over a year – with this release indicating the fastest decline in construction since July of last year. Such poor data, along with the political and economic uncertainty surrounding Brexit, continues to worry the market. In the last week, GBPUSD has fallen 2%, albeit aided by a stronger USD. The markets will be keenly watching today’s’ Service PMI for further clarity as to the “state” of the UK economy.

There is speculation that President Trump’s choice for the next Chairperson of the Federal Reserve could be a more hawkish candidate than many expect. With current Fed Chair Janet Yellen’s term expiring in February, there appears to be a number of “front runners” who both recently had interviews at the White House last week. One such candidate is Kevin Warsh, who was the first candidate to be interviewed and is rumored to be Trump’s preferred choice. Warsh has been vocally critical of the Fed’s bond-buying program and its current policy, and he is considered much more hawkish than Janet Yellen. Indeed, a Warsh nomination would most likely result in higher interest rates and a stronger USD.

EURUSD is 0.2% higher in early Wednesday trading, at 1.1757.

USDJPY is little changed overnight and currently trades around 112.56.

GBPUSD has retraced higher from yesterday’s lows, gaining 0.3% in early trading. Currently, GBPUSD is trading around 1.3270.

Gold has improved against USD overnight to currently trade around $1,276.

WTI is unchanged from last nights close, currently trading around $50.08.

Major economic data releases for today:

At 08:00 BST, the European Central Bank will hold a Non-Monetary Policy Meeting in Frankfurt, Germany.

At 08:55 BST, Markit Economics will release German Services PMI and Composite PMI for September. Composite is forecast to be unchanged at 57.8 and Services also unchanged at 55.6.

At 09:00, Markit Economics will release Eurozone Services PMI and Composite PMI for September. Composite is forecast to be unchanged at 56.7 and Services also unchanged at 55.6.

At 9:30, Markit Economics and the UK Chartered Institute of Purchasing & Supply will release UK Services PMI for September. The release is expected to be unchanged from the previous reading of 53.2.

At 18:15 BST, ECB President Mario Draghi is scheduled to provide opening remarks at the Inauguration of the ECB Visitor Centre in Frankfurt, Germany.

At 20:15, Federal Reserve Chair Janet Yellen gives brief welcome remarks before the Community Banking in the 21st Century Research and Policy Conference, hosted by the Federal Reserve Bank of St. Louis, Missouri.

This article is written by FxPro

Daily Markets Brief – Upbeat Data Boosts USD

On Monday, the US Institute for Supply Management (ISM) released data showing the index of national factory activity surged to a reading of 60.8 in September, the highest reading since May 2004, from 58.8 in August. The gains appear to be attributive to the re-build, following the devastation caused by Hurricanes Harvey & Irma, with gains in new orders and raw material prices. Further data released on Monday indicated a rebound in Construction Spending in August, which will further harden expectations the Fed will raise rates in December.

With higher than expected construction spending in August, and the surge in factory activity in September, the Atlanta Federal Reserve’s GDP Now forecast model is indicating that the US economy is on target to grow at 2.7% annualized in Q3. The previous forecast, on September 29th, had suggested a 2.3% growth rate.

Eurozone data released on Monday showed factories, in the eurozone, having their strongest month for over 12-months. However, whilst such data would normally see a rise in EUR, the violence-marred independence vote in Spain’s Catalonia region has created concern in the markets with the political risk this could cause to the European Community. Spain now faces its biggest constitutional crisis in decades, as reports suggest that over 90% of voters have chosen to “leave” Spain. Investors will be keenly watching the Spanish Governments response and if this could lead to a “decoupling” of Catalonia.

As expected, the Reserve Bank of Australia left interest rates unchanged at 1.5% earlier today. The Aussie trade slightly lower versus the USD.

EURUSD continued its recent downward trend, falling 0.4% on Monday and continuing lower in early Tuesday trading. Currently, EURUSD is trading around 1.1744.

USDJPY is relatively unchanged overnight, currently trading around 113.06.

GBPUSD continues to move lower with the uncertainty surrounding Brexit negotiations and Prime Minister Theresa May’s apparent lack of party support. Currently, GBPUSD is trading around 1.3279.

After dropping 0.35% on Monday, Gold has retraced slightly in early Tuesday trading to currently trading around $1273.

WTI suffered a near 2.5% loss on Tuesday on oversupply fears. Currently, WTI is trading around $50.65.

Major economic data releases for today:

At 09:30 BST, the UK Chartered Institute of Purchasing & Supply and Markit Economics will release UK PMI Construction for September. The consensus is calling for a reading of 50.8, slightly worse than the previous release of 51.1, which is very close to the 50 level that would suggest stagnation. A reading of 50.8 underlines the uncertain economic outlook facing the UK and the difficulty the Bank of England has in gauging economic growth. A release considerably different from consensus will see GBP experience high volatility.

At 9:00 BST, Eurostat will release Eurozone PPI (YoY) for August. The forecast is for a higher reading of 2.3% (previously 2.0%). A reading of 2.3% or above could see EUR strengthen and add further impetus for the ECB to reign in stimulus and possibly look at raising interest rates.

This article is written by FxPro

UK Output Data Falls but Expectations Rise, Pound Drops against the Dollar

On Sunday, The Confederation of British Industry released their monthly indicator of output for UK manufacturers, retailers and service companies. The release, of +11, was down from +14 for the June to August period. CBI Chief Economist Rain Newton-Smith commented that “Growth in the economy has held steady through the summer, although at a slightly slower pace than expected by many firms”. Overall output expectations for the following 3 months edged higher to +18 (+2 from August). The data is unlikely to influence Bank of England Policy makers as long as the economy is growing and prices are rising. So, a UK rate hike is still a strong likelihood before this year is over – possibly as early as November.

Data released on Friday indicated US Consumer spending hardly rose in August, with Harvey blamed for lower than expected Auto sales. Further data indicated that US inflation, annualized, grew at its slowest pace in more than 24-months. With such lethargic data, it is highly likely that US economic growth is likely to be somewhat subdued for Q3.

Friday’s Eurostat data release of Eurozone inflation data was below forecasts. The poor growth of inflation endorses the European Central Bank’s stance that stimulus within the Eurozone should be pared back gradually.

On the Geo-Political front, there has been no new “war of words” between the US and North Korea over the weekend. However, on Sunday, President Trump dismissed the prospects of talks with North Korea as a waste of time. This followed a comment made on Saturday by the US Secretary of State who said “the United States was maintaining open lines of communication with North Korean leader Kim Jong Un” – according to the White House “Pyongyang had shown no interest in dialogue”.

EURUSD loss nearly 0.63% in early Monday trading, as the markets watched the referendum in Catalonia – early suggestions are that 90% of the “unofficial” vote have called for independence from Spain. Currently, EURUSD is trading around 1.1743.

USDJPY is 0.2% higher in early Monday trading, even with a higher than expected factory data release from Japan earlier in the trading session. Currently, USDJPY is trading around 112.90.

GBPUSD is slightly lower following calls from senior government officials that Theresa May’s tenure as Prime Minister may be coming to an end. GBPUSD is currently trading around 1.3312.

Gold is down 0.64% in early trading, as risk-on sentiment has pushed the precious metal down to levels last seen over 7 weeks ago. Currently, Gold is trading around $1,274.

WTI is little changed from Friday, currently trading around $51.50pb.

Major economic data releases for today:

At 15:00 BST, Markit Economics will release the Markit Manufacturing PMI for September. As manufacturing forms a major component of total GDP, this release is an important indicator of business conditions and the overall economic condition in the US.

At 15:00 BST, the US Institute for Supply Management (ISM) will release Manufacturing PMI and Prices Paid for September. Akin to the Markit PMI released at the same time, the ISM PMI is also an important indicator as to the “health” of the US economy. PMI is expected to come in at 58 (Prev. 58.8) and prices paid are expected to come in at 64 (Prev. 62).

This article is written by FxPro