According to the latest Minutes from the US Federal Reserve’s Federal Open Market Committee policymakers opted to wait for further evidence before they put the tapering option on the table. There was no change in the forward guidance as well as on the Federal Funds Rate (less than 0.25 percent rate).
The Federal Reserve Bank of Philadelphia announced that its Manufacturing Index surged to 22.3 in September, the strongest expansion since March 2011.
Meanwhile, US TIC Long-term Purchases surprised to the upside as purchases went up $31.1 billion. This is the first advance since January.
In other news, the Swiss National Bank held its LIBOR rate unchanged at less than 0.25 percent. SNB affirmed its protection of the minimum EURCHF rate at 1.20.
Minutes from the Bank of England’s Monetary Policy Committee showed a consensus among the officials to retain the status quo in terms of policy. MPC policymakers voted 0-0-9 to keep the asset purchase facility and Official Bank Rate unchanged.
Gold had a very volatile week with the US FOMC’s “no taper” announcement mid-week. Price had traded below $1,300 several hours prior the FOMC announcement and found support at $1,291. And then the FOMC announcement drove price higher toward $1,367 just ahead of the New York close one hour later. With the absence of follow-through momentum, price slid back down and ended the week at $1,325, the same closing price printed during the prior week. If the latest price action is an indication of inherent weakness, we could see price drift further down toward $1,250-70.
Oil bulls are in bad shape as price printed its second consecutive weekly close last week – and below $105 to boot. It is the first weekly close below $105 since mid-August and we could see further declines next week. $102-$103 could be seen next week.
Majors had an amazing run-up this week and EURUSD was no exception as it flew high past 1.3500 for the first time since early February. The pair started the week with a gap up and launched higher by 200 pips on Wednesday. The strong weekly close above 1.3500 could indicate a possible move toward 1.3600-50 quickly.
Like EURUSD, GBPUSD flew high on Wednesday but more than 50 percent evaporated by Friday after sellers dominated after the FOMC announcement. The only consolation for bulls was that the pair held firm just above the 1.6000 psychological levels. The near-term topside goals come at 1.6250-1.6300, while sellers want to bring price back towards 1.5700.
USDJPY enjoyed a nice bullish weekly close despite the gap-down seen on Monday. The FOMC announcement on Wednesday pulled the pair from 99.32 to a low of 97.75, but price reversed strongly on Thursday. Not much price movement was seen on Friday and the week closed near the high at 99.35. Bulls should aim to gate crash through 100.00 in the coming week.
The Week Ahead
On Monday, a host of Flash Manufacturing PMI and Flash Services PMI data will be released and they will come from China, France, Germany, Euro-zone, and US (Flash Manufacturing PMI only). A host of speeches will also come from top officials such as ECB President Mario Draghi, SNB Chairman Thomas Jordan, MPC Member Ben Broadbent, and US FOMC Member William Dudley.
On Tuesday, the market will only have a couple of key economic data to look at, particularly Germany’s Ifo Business Climate, UK BBA Mortgage Approvals, Canada’s Retail Sales, US S&P/CS Composite-20 HPI, and US CB Consumer Confidence.
Wednesday starts early with New Zealand’s Trade Balance, RBA’s Financial Stability Review, Germany’s Gfk Consumer Climate, UK CBI Realized Sales, US Durable Goods Orders, and US New Home Sales.
Thursday news release will start somewhat late as the Asian session will be devoid of important economic data. ECB will release M3 Money Supply, then this will be followed by UK’s Current Account and Final GDP; US Jobless Claims, Final GDP, and Pending Home Sales.
Friday will be the most jam-packed news day in the coming week, starting with Japan’s Tokyo CPI; New Zealand’s ANZ Business Confidence; Germany’s Prelim. CPI; France Consumer Spending; Switzerland’s KOF Economic Barometer; ECB Draghi’s speech; US Core PCE Price Index, Personal Income, Personal Spending, and Revised UoM Consumer Sentiment. FOMC Members Rosengren, Evans, and Dudley will also give their respective speeches.