October is drawing to a close, and it has increasingly quieted down towards month-end. There was no dominant or fresh theme for the week, hence consolidation – weakness, for some – reigned. The market chewed on a raft of economic releases and is eagerly anticipating the upcoming US Presidential elections.
On Tuesday, Moody's Investors Service has downgraded Spain’s five regions, namely Extremadura, Andalucia, Castilla-La Mancha, Murcia, and Catalunya. There was a rumor that Fitch will downgrade rating of the United States, but this was subsequently denied. Fitch maintained that it will resolve the US rating by late 2013.
The US Presidential election is near, and there has been chatter last Tuesday about the helm of the US Federal Reserve. Fed Chairman Ben Bernanke hinted that he will not seek another term once his term ends in January 2014. This talk about Bernanke's position slightly lifted the dollar. In the recent past, Treasury Secretary Timothy Geithner declared that he'd resign when his term ends by the end of the year, regardless if President Obama wins or not.
Bank of Canada's Carney maintained a tightening bias on Wednesday and left rates unchanged. BOC also lowered growth expectations and said that a rate hike is ‘less imminent’. Similarly, there were no substantial changes in the US FOMC decision, with the Fed reportedly saying ‘economic activity has continued to expand at a moderate pace’. The Fed maintained its monthly purchasing program of $40 billion worth of mortgage-backed debt aimed at spurring economic expansion.
On Thursday, RBNZ left the cash rate unchanged, but RBNZ monetary statement was not as dovish as expected. Consequently, RBNZ’s Wheeler said the nation doesn’t need quantitative easing and the central bank has scope to cut rates if necessary.
On Friday, Japan’s cabinet approved $5.3 billion worth of stimulus measures. BOJ is widely expected to ease next week.
Stocks and Commodities
The Asian stock market has been dominantly down, with Friday’s best performers only limited to the indices of Singapore, Indonesia, Malysia, and the Philippines. Nikkei, Shanghai, Kospi, and Hang Seng were all down by more than one percent.
On both sides of the Atlantic, Nasdaq, Dow, FTSE 100, CAC40, and DAX eked out small gains on late Friday. S&P 500 was down on Friday and down by as much as 1.5% for the week.
Despite the better-than-expected US GDP data on Friday, Gold failed to end the day at a better price, closing for the third consecutive downweek, its worst performance in over a year. Gold had made a relentless rally starting from mid-August and peaked on October 4 at 1795, its best price in nearly a year, before declining back down to its current price of 1710.
For this week, EURUSD printed a bullish close on Monday and spent the rest of the week below 1.3000. After a healthy rally and bullish peak in mid-September, price has continued its consolidation from that point on. EURUSD ended the week confined in last week's range.
Unlike EURUSD, AUDUSD and GBPUSD ended the week at better prices. GBPUSD tested the bull’s resolve as price broke below the important 1.6000, only to reverse and close the week higher, even pushing price enough to close slightly above 1.6100. AUDUSD stayed inside last week's range, just like EURUSD did.
USDCAD barely made a move this week and preferred to stay in a 100-pip range.
It closed the week with a mere 20 pips increase from its gap-up weekly open at 0.9943.
The Week Ahead
Next week, Monday would be relatively quiet, and the raft of news releases would get unevenly heavy towards the end of the week. On Tuesday, the market will set its sights on Japan's rate announcement and Monetary Policy statement, BOJ Outlook Report, BOJ press conference, ECB Draghi’s speech, Italian 10-year bond auction, US Consumer Confidence; On Wednesday, there are Australia Building Approvals data, and Canada's GDP; On Thursday, China Manufacturing PMI, UK Manufacturing PMI, US ADP Non-Farm Employment Change, Unemployment Claims, and ISM Manufacturing PMI; and finally on Friday, Australia PPI, UK Construction PMI, Canada and US employment data, particularly the always-anticipated US Non-Farm Payroll data.
Moving forward, the near-term risks and events with widespread implications are the arrival of supposed 'Frankenstorm' and Hurricane Sandy, and the much-awaited US Presidential Elections on November 6.