The US Federal Reserve decided in their latest Federal Open Market Committee meeting to keep rates unchanged as economic activity is “expanding at a moderate pace”, “labor market conditions improved somewhat”, household spending “appears to be rising moderately and business fixed investment is advancing.” The Committee declared that a highly accommodative stance continues to be “appropriate” as it seeks to “foster maximum employment and price stability.”
In other US news, Unemployment Claims grew at a slower pace below the 300,000 level for the third time in five weeks. CPI and PPI were flat. Empire State Manufacturing index climbed to 27.5 this September, beating median forecast of 16.4. Meanwhile, Treasury International Capital data for July showed a drop of $18.6 billion, which was a magnitude similar to June’s drop. Current Account has improved to -$99 billion and previous release was revised better to -$102 billion.
Switzerland’s SNB kept the Libor rate below 0.25 percent.
In the UK, the MPC gave no surprises as the Asset Purchase Facility votes and Official Bank Rate votes remain unchanged. MPC members Martin Weale and Ian McCafferty voted in favor of raising interest rates by 25 basis points to 0.75 percent.
In Scotland’s referendum, a majority of Scots voted “No” on Thursday, indicating most are against Scotland becoming an independent country and discontinuing the use of British Pound as main currency. However, another referendum could manifest again as the recent result was a close call.
Gold had another rough week as buyers were unable to pass the initial hurdle at $1,250. This marks the third consecutive downweek and price is getting closer to medium-term support around $1,200. This could probably be the last chance for bulls to redeem themselves before a downspiral toward $1,000.
Oil saw volatility in a $4 range as bulls attempt to reverse the course of black gold. Ultimately, sellers around $94 and $95 won and they were able to press price back down and this left Oil largely unchanged this week. The battle at $92 is expected to rage on.
Another selldown happened on EURUSD this week as the pair was unable to get even close to the 1.3000 level. Dollar strength pulled this price down by nearly 170 pips to a price area that could give bulls some assistance. 1.2700-1.2750 is a very important support area.
Unlike EURUSD, GBPUSD has continued to trend higher this week. The pair hit a near-2 week high of 1.6523 on Friday. Nevertheless, price was nearly unchanged this week. Buyers need to get a concrete foothold above 1.6500 to keep the ball on their court.
USDJPY went on to climb for the third straight week and it is now hitting a major multi-year down-trendline, which dates back to 2002. Will this trendline influence this pair? We will soon find out. Bulls ideally will post a control tower at 106-107 to prevent large price retracements.
The Week Ahead
This week will have a relatively mild news activity ahead of September’s closing in the following week.
On Monday, New Zealand kicks off the brand new week with Westpac Consumer Sentiment. This will be followed by German Bundesbank’s Monthly Report; ECB Draghi’s speech; US and Existing Home Sales.
On Tuesday, traders will keep an eye on China’s HSBC Flash Manufacturing PMI; Flash Manufacturing PMI and Flash Services PMI from France, Germany, and the Eurozone; UK BBA Mortgage Approvals and Public Sector Net Borrowing; Canada’s Retail Sales; and US Flash Manufacturing PMI. Japan will observe Autumnal Equinox Day today.
Wednesday will be unusually brief with New Zealand’s Trade Balance; Australia’s CB Leading Index and RBA Financial Stability Review; Germany’s Ifo Business Climate; and US New Home Sales.
Thursday will also be abbreviated and only publish a few releases such as RBA Governor Stevens’ speech; UK Nationwide HPI; Eurozone Private Loans and M3 money Supply; UK CBI Realized Sales; US Durable Goods Orders and Jobless Claims.
Friday will end the week quietly again. This time, we’ll only see Japan’s Tokyo Core CPI; GfK German Consumer Climate; US GDP and Revised UoM Consumer Sentiment.