RBA : Don’t rock the boat baby

RBA: Don’t rock the boat baby
The RBA proved yet again to be one of more predictable  G-10 Central Banks offering up standard fare of no rate cut with no serious attempt to adjust forward guidance. Given the growing ASX momentum lifted by gains in local miners on the back of surging commodity prices, the Aussie dollar bears may be better-served waiting for Fridays Statement of Monterey Policy. And specifically, the RBA’s possibly revamped  CPI projections given the tepid Q3 CPI data, which continues to track below the lower end of the RBA’s 2-3 % inflation band.  But to be honest anything other than the glass half full approach from the RBA would be a surprise at this stage.
The Aussie initially moved higher  because some thought the RBA would tack dovish, so bearish bets unwound

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DBS Q3 net profits collapse 23%

SINGAPORE: DBS reported a surprise 23 per cent year-on-year drop in its net profit for the third quarter, largely due to hefty provisions on its exposure to the oil and gas industries.

The bank, Southeast Asia’s largest lender, said on Monday (Nov 6) that net profit for the three months ended Sep 30 was S$822 million, down from S$1.07 billion in the same period last year.

Net allowances surged 87 per cent from S$436 million to S$815 million, with the bank classifying its remaining weak oil and gas support service exposures as non-performing assets.

DBS CEO Piyush Gupta said the move will “enable investors to return their focus to our operating performance and digital agenda”.

Mr Stephen Innes, head of trading (APAC) at OANDA, said the bank’s move to shift these provisions forward bodes well for the lender.

“It reassures the investors that the bank is moving back towards its primary business, which is loans and commercial loans and making money of spreads. This is a positive move for DBS to get the bad loans off its book right now. The timing of this move is also good, that’s because one of the key things is that the lender’s stock is on a high right now so investors are not so negative on the stock.”

Profit before allowances was up 4 per cent to a record S$1.8 billion, propelled by loan and fee income growth and offsetting the impact of less favourable interest rates and trading income.

“Business momentum has been strong as we continued to capture opportunities in a reflationary environment across the markets we operate in,” Mr Gupta said.

Channel News Asia

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USD/CAD Canadian Dollar Higher After Dollar Struggles

The Canadian dollar appreciated 0.29 percent on Monday. Trading opened for the USD/CAD at 1.2771 and is now on track to end near the 1.2721 price level. The economic calendar looks sparse this week, but geopolitical developments around the world are driving market movements. Oil prices have surged due to the high profile arrests in Saudi Arabia that have consolidated the power of crown prince Mohammed bin Salman.

Canadian purchasing managers remain optimistic about the economy. The Ivey PMI survey beat expectations with a 63.8 reading reaching a 21 month high. The Canadian economy had a strong first half that defied expectations that prompted the Bank of Canada (BoC) to lift the benchmark interest rate twice by 25 basis points. The slowdown in the second half has been forecasted, but as the Canadian jobs number last week and today’s PMI shows there are still positive signs in Canada.


usdcad Canadian dollar graph, November 6, 2017

The USD/CAD lost 0.29 percent on Monday. The currency pair is trading at 1.2721 after the US dollar struggled on Monday after concerns about the tax reform rose. The US dollar did not get a strong boost form the employment numbers released on Friday. The greenback fell when the U.S. non farm payrolls (NFP) report showed the US economy added 261,000 jobs, 50,000 short of the forecast. Despite the upward 18,000 revision to the September figures the biggest miss was the hourly wages remaining flat. The U.S. Federal Reserve is expected to raise interest rates in December, but lack of inflationary pressure will make further tightening more complicated.

The Canadian economy added 35,300 jobs with the gains coming in full time employment. Forecasters had predicted a 15,000 gain. Wages also rose to the biggest gain in 18 months boosting the loonie agains the dollar for a 0.38 percent gain on Friday. The improvement in economic data once again has put forth the argument for another rate hike before the end of the year. The BoC already hiked twice in 2017, but only by enough to return to 2015 levels. The Canadian benchmark rate stands at 1 percent.

Marketpulse analyst Kenny Fisher wrote about the nomination of Jerome Powell to the position of Chair of the U.S. Federal Reserve:

On Thursday, US President Trump nominated Federal Reserve Governor Jerome Powell to head the Federal Reserve. Powell will take over in February 2018 when Yellen’s term expires. Powell is expected to hold the course with monetary policy, which has been marked by incremental and small rate hikes since December 2015. It’s all but a given that the Fed will raise interest rates in December, but the forecast for 2018 is less clear. If the US economy continues to grow at current levels, we could see up to three rate hikes next year. Powell will also be tasked with continuing to trim the Fed’s huge balance sheet of $4.2 billion. Last month, the Fed has started trimming the balance sheet by $10 billion/mth, but these cuts are expected to increase in size next year.

US President Donald Trump deliver his nomination before embarking on an Asian trip. The Trump administration is hard at work pushing the tax reform into fruition but it faces the usual obstacles that have plagued other policy initiatives as there are plenty of divisive points that could urge caution from even Republican senators ahead of next year’s primaries.


West Texas Intermediate graph

The price of energy is surging on Monday. West Texas Intermediate is trading at 57.23 after rising 3 percent. The crackdown in Saudi Arabia which resulted in high profile arrests raised concerns about the stability of the kingdom. Saudi Arabia’s crown prince Mohammed bin Salman has risen as the next in line to succeed his father. He has been the main driver of reform to diversify away from oil revenues and this move could end up silencing the most powerful critics of his plans.

Prince Mohammed bin Salman was the main force behind the economic boycott against Qatar in June and a showdown with Iran seems to be a question of when, not if it will happen. The Organization of the Petroleum Exporting Countries (OPEC) decision to cut production alongside Russia and other energy supplying nations has provided stability to the energy market.

Disruptions have been the main factor lifting prices above current ranges, but this last move by Saudi Arabia could unravel the OPEC as it pits major members against each other.

Weekly inventory releases will get further scrutiny, but will not have their normal effect in current rarified market conditions. The Energy Information Administration (EIA) will release oil stocks on Wednesday, November 8 at 10:30 am EDT.

Market events to watch this week:

Tuesday, November 7
1:45 pm CAD BOC Gov Poloz Speaks
Wednesday, November 8
11:30 am USD Crude Oil Inventories
4:00 pm NZD Official Cash Rate
4:00 pm NZD RBNZ Rate Statement
5:00 pm NZD RBNZ Press Conference
Thursday, November 9
9:30 am USD Unemployment Claims
8:30 pm AUD RBA Monetary Policy Statement
Friday, November 10
5:30am GBP Manufacturing Production m/m

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

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Gold Starts Week With Strong Gains

Gold has posted considerable gains in the Monday session. In North American trade, the spot price for an ounce of gold is $1282.27, up 1.05% on the day. On the release front, there are no major events on the schedule. William Dudley, President of the New York Federal Reserve, announced his retirement. On Tuesday, Fed Chair Janet Yellen will speak at an event in Washington.

US numbers ended the week on a disappointing note, as payrolls and wage growth missed their forecasts. After a decline in September, a result of the hurricanes which battered the US, nonfarm payrolls rebounded sharply with a reading of 261 thousand. This was a respectable number, but still fell short of the forecast of 312 thousand. Wage growth also disappointed, slowing to 0.0%, short of the estimate of 0.2%. This marked the first time in 2017 that wage growth did not increase, underlining persistent weak inflation. Although Fed Chair Yellen and other Fed policymakers have expressed confidence that inflation levels will rise, this is still yet to occur, despite strong growth and a labor market at capacity.

The Federal Reserve remains in the news, after FOMC member William Dudley announced that he will retire in mid-2018. This move could have implications for monetary policy, depending on who will replace Dudley. A possible candidate is Kevin Warsh, who made the short list for the successor to Fed Chair Janet Yellen. Warsh is in favor of higher rates and favors less regulation of the banking sector, and if he would certainly support a more hawkish stance on monetary policy.

 

XAU/USD Fundamentals

Monday (November 6)

  • 12:10 US FOMC Member William Dudley Speaks
  • Tentative – US Loan Officer Survey

Tuesday (November 7)

  • 14:30 US Federal Chair Janet Yellen Speaks

*All release times are GMT

*Key events are in bold

 

XAU/USD for Monday, November 6, 2017

XAU/USD November 6 at 12:20 EST

Open: 1268.90 High: 1280.84 Low: 1266.02 Close: 1282.27

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1213 1240 1260 1285 1307 1337
  • XAU/USD showed little movement in the Asian and European sessions. The pair has posted strong gains in North American trade
  • 1260 is providing support
  • 1285 is the next resistance line
  • Current range: 1260 to 1285

Further levels in both directions:

  • Below: 1260, 1240 and 1213
  • Above: 1285, 1307, 1337 and 1367

OANDA’s Open Positions Ratio

In the Monday session, XAU/USD ratio is showing long positions with a majority (72%). This is indicative of trader bias towards XAU/USD continuing to move towards to higher ground.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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German Factory Orders Grow Unexpectedly In September

Germany's factory orders increased unexpectedly in September driven by foreign demand, while domestic orders remained weak. Factory orders grew 1 percent month-on-month in September, but slower than August's revised 4.1 percent increase, data from Destatis revealed Monday. This was the second consecutive rise and came in contrast to the expected decrease of 1.1 percent.

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This Week’s Economic Calendar 6 November 2017

Last week was an extremely active macroeconomically – the BoE increased its interest rate for the first time in a decade, the NFP came in significantly under expectations and the EU saw a drop of its GDP from the previous period and came in under expectations 2.3%.

 

Monday – 6/11

Today Governor Kuroda has already delivered his speech, noting that signs of economic growth are plentiful – pointing towards his expectation that Japan’s inflation target of 2% soon.  This saw the JPY slipping slightly – because even though Kuroda’s overarching message was positive, his speech was received as dovish by markets. Otherwise Monday is poised to be a quiet day.

 

Tuesday – 7/11

More on the safe-haven, no interest hike front – tomorrow, Tuesday, at 03.30 GMT the RBA will announce its rate decision – or lack thereof. At the moment analysts and markets are expecting it to hold, that may pull the AUD down slightly, like it did JPY today.

So its seems that this week has a theme – since CAD (another safe-haven) might be affected by BoC Governor’s speech on Tuesday. The BoC has also been dovish recently so much like its Japanese and Australian counterparts – markets will keep an ear to the ground for anything hinting towards a future rate hike.

 

Wednesday – 7/11

The EU non-monetary meeting is slated for 08.00 on Wednesday and although it won’t deal with monetary policy, there might be statements made hinting towards a change in their recent dovish approach.

NZD traders will be looking out for the RBNZ Interest Rate Decision at 20.00 GMT.

 


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Thursday – 8/11

It seems that even markets need to rest – and Thursday is the day, since no significant economic events are scheduled. Which is appropriate considering its National Ample Time day.

 

Friday – 9/11

Another relatively quiet day with the only news being the RBA Monetary Policy Statement report, which reveals whether the risk/reward ratio of a rate hike is appropriate, or if monetary policy should remain loose.

 

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The USD dollar comes back from the NFP wobble

Post NFP
While the NFP came below the market towering expectations, but with a +90k revision to Aug-Sept jobs, the data implies the hurricane influence was bad, but not as had been reported, so this months  print was less influential

However, wage growth came in dismally low, but with the hurricane’s distorting effects thought to be skewing the data, there should be no muss or any fuss from the Fed. And while the” inflationista’s” on the FOMC will fret but given the booming US economy, the Fed is pushing forward with December rate hike despite the skinny paychecks expecting an eventual bounce on wages due to the strength in the other payroll headlines.

After the USD knee-jerk, astute traders bought dollar on the dip, and ISM non-manufacturing confirmed that fading the primary post-NFP USD weakness was the correct call. The index has come in at 60.1 for October vs 58.5 expected and all but greenlighted a wave USD buying into the weekend.

Jay Powell
Munchin got his man convincing Trump that continuity and stability at the Fed helm were essential and Jay Powell appointment suggests just that. The presumption is he will not deviate too far from current Fed policy trajectory  while supporting Trump’s self-proclaimed stance of being a ” low-interest rate person.”

Tax Reform -Trump – Asia

While a relatively light US economic diary next week, there will be no lack of political bluster as the tax reform debate rages on while Trump will be dealing with North Korea nuclear ambitions and regional trade wars during his Asia tour. In a  show of US  military might, an entourage of F-35’s  will accompany Trump( actually deployed to Okinawa), and the mainstay of the US Navy’s power projection, two more Aircraft Carriers will be positioned in the Western Pacific bringing the unprecedented regional total to three.

Danger Downunder

Next week both the RBA and RBNZ policy meeting take centre stage

The Aud remains vulnerable to RBA dovish guidance even more so post a dismal nationwide plummet in retails sales. The market should continue sour on Aussie trade.

The NZD is a bit more complicated given extended short positions established on local political noise suggesting these trades are incredibly vulnerable to a more hawkish RBNZ  bias than the market is forecasting.
The market has been selling Kiwi the better part of two weeks and my start to unwind shorts ahead of the RBNZ

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Market Update: NFP falls short of prediction

After the shocking NFP number released back in October which came in at -33K, there was expectation that Novembers Non-Farm Payroll would show a strong come back with a forecast of 310,000 new jobs created.  However, though there was a bounce back the final number wasn’t quite as strong as the NFP came in at 261k new jobs.

The Average hourly earnings also missed its forecast of 2.7%, instead coming in at 2.4%.

However, US unemployment came in at 4.1%, which beat the expectations of 4.2%.

 


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With talk of the Fed raising interest rates once again in December, there was a lot of anticipation that a strong job figure would add more fuel to the fire that the FOMC will indeed act.  Though this slightly disappointing NFP number doesn’t completely rule that out from happening, on the initial announcement it did bring in the USD bears into the market.  However, at the time of writing the market has returned pretty much to the levels it was trading before the final number was released.

At the time of writing, the EUR/USD is trading at 1.1654, USD/JPY 114.02 and Gold is at $1277.15.

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Market Update: NFP falls short of prediction

After the shocking NFP number released back in October which came in at -33K, there was expectation that Novembers Non-Farm Payroll would show a strong come back with a forecast of 310,000 new jobs created.  However, though there was a bounce back the final number wasn’t quite as strong as the NFP came in at 261k new jobs.

The Average hourly earnings also missed its forecast of 2.7%, instead coming in at 2.4%.

However, US unemployment came in at 4.1%, which beat the expectations of 4.2%.

 


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With talk of the Fed raising interest rates once again in December, there was a lot of anticipation that a strong job figure would add more fuel to the fire that the FOMC will indeed act.  Though this slightly disappointing NFP number doesn’t completely rule that out from happening, on the initial announcement it did bring in the USD bears into the market.  However, at the time of writing the market has returned pretty much to the levels it was trading before the final number was released.

At the time of writing, the EUR/USD is trading at 1.1654, USD/JPY 114.02 and Gold is at $1277.15.

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EUR/USD – Euro Steady Ahead of US Nonfarm Payrolls, Wage Growth

The euro continues has ticked lower in the Friday session. Currently, EUR/USD is trading at 1.1644, down 0.09% on the day. On the release front, there are no eurozone indicators on the schedule. Employment data will be in the spotlight on Friday, as the US releases Average Hourly Earnings, Nonfarm Payrolls and the unemployment rate. The markets are expecting NFP to rebound to 311 thousand, but Average Hourly Earnings is forecast to slow to 0.2 percent. No change is expected in the unemployment rate, with an estimate of a sizzling 4.2 percent. As well, the US releases ISM Non-Manufacturing PMI, which is expected to drop to 58.5 points.

A strong manufacturing sector has been an important factor in the stronger eurozone economy, and September Manufacturing PMIs continue to point to expansion early in the fourth quarter. The German Manufacturing PMI held at 60.6, its highest level since April 2011. Eurozone Manufacturing PMI isn’t far behind at 58.6, and accelerated for a third straight month. The German employment market remains robust, as unemployment rolls have declined for three straight months. Unemployment rolls have now dropped in all but two readings since June 2015.

There were no surprises from the Federal Reserve on Wednesday. The Fed’s rate statement was little more than a run-up to the December rate decision, as the Fed maintained interest rates at a range of 1.00 percent to 1.25 percent. The Fed indicated that a rate increase is very likely at the December meeting, and was careful not to change any of the wording in its statement regarding future rate hikes. The rate statement noted that hurricanes which hit the US had caused a decline in payrolls in September, but the Fed did not expect the hurricanes to “materially alter the course of the national economy over the medium term.” The markets are expecting a strong rebound in nonfarm payrolls – the forecast for US nonfarm payrolls is a robust 311 thousand, after a decline of 33 thousand in September. Still, wage growth, which was remained soft despite the strong economy, is expected to slow to 0.2 percent, as inflation remains the Achilles heel of a robust US economy.

EUR/USD Fundamentals

Friday (November 3)

  • 8:30 US Average Hourly Earnings. Estimate 0.2%
  • 8:30 US Nonfarm Employment Change. Estimate 311K
  • 8:30 US Unemployment Rate. Estimate 4.2%
  • 8:30 US Trade Balance. Estimate -43.3B
  • 9:45 US Final Services PMI. Estimate 55.7
  • 10:00 ISM Non-Manufacturing PMI. Estimate 58.5
  • 10:00 US Factory Orders. Estimate 1.3% 
  • 12:15 US FOMC Member Neel Kashkari Speaks

*All release times are GMT

*Key events are in bold

EUR/USD for Friday, November 3, 2017

EUR/USD for November 3 at 5:50 EDT

Open: 1.1659 High: 1.1668 Low: 1.1640 Close: 1.1648

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1366 1.1489 1.1611 1.1712 1.1876 1.1996

EUR/USD inched higher in the Asian session but has retracted in European trade

  • 1.1611 is providing support
  • 1.1712 is the next resistance line

Further levels in both directions:

  • Below: 1.1611, 1.1489 and 1.1366
  • Above: 1.1712, 1.1876, 1.1996 and 1.2018
  • Current range: 1.1611 to 1.1712

OANDA’s Open Positions Ratio

EUR/USD is showing little movement in the Friday session. Currently, short positions have a majority (63%), indicative of EUR/USD reversing directions and moving upwards.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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