The Bank of England’s Monetary Policy Committee, through its meeting minutes, declared on Wednesday that all of the nine Committee members decided to keep the Official Bank Rate and Asset Purchase Facility at the same rate, 0.50 percent and GBP375 billion, respectively. The Committee noted that the economy is in the path of sustained recovery and is at no significant risk of inflation hence the bank does not foresee any urgency in terms of raising interest rates.
In the same light, the US Federal Open Market Committee decided to keep the same pace of its asset purchase program ($85 billion per month, $45 billion per month of which is for purchases of Treasuries). QE tapering could be seen “in the coming months,” but the FOMC noted that the pace of asset purchases would continue to be appropriate for as long as the inflation and unemployment thresholds are not breached.
The us Department of Labor reported on Thursday that the prior week’s Unemployment Claims declined to 323,000, its lowest in seven weeks. Flash Manufacturing PMI rose to 54.3 after posting 51.8 on October. However, Philly Fed Manufacturing Index sunk to 6.5, the lowest reading in the last six months.
Gold resumed its downhill move after making a brief pause just below the $1,300 level in the prior week. It was pretty much all about the bears this week starting Monday as bulls failed to even make a short revisit to $1,300. Price has now reached a near-five month low, and we expect the same thing next week if Gold cannot recover back above $1,300.
Oil continued to struggle around $95 this week. Price has been plowing through the same tight range ($92.50-$95.50) for 14 straight trading days, but we suspect that we will see some developments in the very near future. Tough support is seen below $95, so we could see a move toward $100 next week.
Though the trading range has been somewhat average, EURUSD traders had a volatile week particularly in the last three days after price whipsawed on either side of 1.3400. Large selling in the upper-1.3500s took price down briefly through 1.3400 on Wednesday, but buyers were quick to scoop up and absorb selling. If what we saw was serious buying, we could see the pair trading back in the 1.3600s again.
Price action-wise, GBPUSD performed better than EURUSD this week as the former was able to close in on its own October resistance area in the 1.6250s. If EURGBP breaks down further next week, we could see GBPUSD punch through 1.6250 easily.
USDJPY went on to create its fourth consecutive bullish weekly close after bulls triumphed in conquering 100 and 101, confidently closing above the latter on Friday. The only thing that blocks the way toward May 22’s 103.70 high is the early July high of 101.52.
The Week Ahead
Asia will be quiet for a second consecutive Monday. The European session will start off with
Switzerland’s Employment Level data, followed shortly by the UK’s BBA Mortgage Approvals, and later on by the US Pending Home Sales.
On Tuesday, the Bank of Japan will release its latest Monetary Policy Meeting Minutes. Then the UK will provide the Inflation Report Hearings, succeeded by a raft of US data which includes Housing Starts, Building Permits, S&P/CS Composite-20 HPI, and CB Consumer Confidence.
Wednesday will start very early with New Zealand’s Trade Balance data. Australia will follow a few hours later with Construction Work Done; Germany’s Gfk Consumer Climate; UK’s Second Estimate GDP, Preliminary Business Investment, and CBI Realized Sales; US Durable Goods Orders, Jobless Claims, Chicago PMI, and Revised UoM Consumer Sentiment.
On Thursday, activity will be relatively even throughout the day with Japan’s Retail Sales; ANZ Business Confidence; Australia’s Private Capital Expenditure and HIA New Home Sales; Switzerland’s GDP; Germany’s Preliminary CPI and Unemployment Change; BOE Carney’s speech and BOE Financial Stability Report; Canada’s Current Account, IPPI, and RMPI. The United States, meanwhile, will celebrate Thanksgiving Day.
Finally, Friday will end the week with New Zealand’s Building Consents; Japan’s Household Spending, Tokyo Core CPI, and Preliminary Industrial Production; Australia’s Private Sector Credit; Germany’s Retail Sales; Switzerland’s KOF Economic Barometer; UK’s Net Lending to Individuals; Eurozone CPI Flash Estimate and Jobless Rate; and Canada’s GDP.