The Federal Reserve ended its two-day policy meeting last Wednesday, where consensus dictated to keep a wait-and-see stance in terms of the economy and monetary policy. The Fed decided to hold its Federal Funds Rate at less than 0.25 percent and monthly bond purchases worth $85 billion, as it awaits additional signs that the economy is improving.
Likewise, the Reserve Bank of New Zealand opted to keep its Official Cash Rate at 2.50 percent last Thursday. In his statement, RBNZ Governor Wheeler said: “The recovery in the United States and other major advanced economies remains patchy. Nevertheless, world prices for New Zealand’s export commodities are very high... Global long-term interest rates are still very low, but have been volatile recently. This volatility has largely been due to uncertainty as to when the Federal Reserve will exit from quantitative easing.”
In other relevant news, Australia’s PPI grew 1.3 percent in the third quarter of this year. Building Approvals jumped 14.4 percent last September, with the prior reading revised higher to -1.6 percent from -4.7 percent. Import Prices rose 6.1 percent compared to the 3.5 percent forecast.
In the United States, September figures showed Pending Home Sales disappointment for a fourth straight month with a 5.6 percent drop, while PPI and Retail Sales both declined 0.1 percent. October ADP Non-Farm Employment Change grew 130,000, weaker than expected. On the other hand, Chicago PMI roared upward with a 65.9 reading, the strongest level seen since April 2011.
With nearly five straight declines, it was all about pullbacks this week in Gold. Soon after reaching a $1,361 on Monday, bears took control and dominated the entire week, missing the $1,300 level by just five dollars. If they can keep the pace, bears will have to push through stops below $1,300 and aim for a break of $1,250.
Oil ended October with a strong bearish close, giving it two consecutive months of pure bear dominance. This November will be an acid test whether they really have the strength to muscle their way through $90 and attack the $84-$87 area.
Most of the bullish efforts planted in early October disintegrated last week when EURUSD dropped nearly 350 pips. The huge drop erased two weeks’ worth of advances in just four days! The pair is now trading back below the 1.3500 level buts the carnage may not be over.
In GBPUSD’s case, weakness has been evident through October as the pair failed to break through 1.6250 since late-September. The pair is back below 1.6000 and trading near the weekly consolidation low in the low-1.5900s. We could see 1.5500-1.5700 if the consolidation low breaks.
USDJPY continues with its multi-month consolidation theme as bulls emerged victorious in this week’s trading. The 98-100.50 area remains as a serious threat to any bullish advance.
The Week Ahead
This Monday, Japan will celebrate Culture Day. Australia will jumpstart Monday with the announcement of MI Inflation Gauge, Retail Sales, HPI, and ANZ Job Advertisements. These will be followed by Italian and Spanish Manufacturing PMI; Eurozone Manufacturing PMI; UK Construction PMI; and US Factory Orders.
On Tuesday, the host of economic data releases will start with UK’s BRC Retail Sales Monitor; RBA’s Interest Rate Announcement and Statement; UK Halifax HPI; and Services PMI; Switzerland’s CPI; and US ISM Non-Manufacturing PMI.
Wednesday will start off with New Zealand’s jobs data. This will be followed by BOJ’s Monetary Policy Meeting Minutes; Australia’s Trade Balance; Italian and Spanish Services PMI; UK Industrial Production and Manufacturing Production; Eurozone Retail Sales; Germany’s Factory Orders; UK NIESR GDP Estimate; and Canada’s Ivey PMI and Building Permits.
On Thursday, it will be Australia’s turn to disclose its employment data. This will be succeeded by Switzerland’s Foreign Currency Reserves; Germany’s Industrial Production; BOE and ECB Rate Announcement and Statement; US Advance GDP and Jobless Claims.
Finally, Friday will cap the week with the disclosure of RBA’s Monetary Policy Statement; China’ Trade Balance data; France’s Industrial Production; Switzerland’s Retail Sales; UK Trade Balance; US and Canada jobs data; US Core PCE Price Index, Personal Income, Personal Spending, and preliminary UoM Consumer Sentiment.