Several key news events this week have been foreshadowed by Federal Reserve’s exit on its (QE) on Wednesday and more importantly, the surprise QE decision by the Bank of Japan on Friday.
The Reserve Bank of New Zealand on Wednesday decided to keep its Official Cash Rate at 3.50 percent. The central bank made a less-dovish hint as it dropped the word “neutral” from its BC Rate Statement. Meanwhile, Statistics Canada said Retail Sales posted its second monthly decline following six monthly advances. Retail sales and its core reading both slipped 0.3 percent in August, with 7 of the 11 subsectors posting sales declines. Consumer Price Index and its core reading both nudged up 0.1 percent.
The Bank of Japan surprised the markets on Friday as it decided to expand its own QE policy. BOJ Governor Kuroda along with several policymakers won the decision to expand monetary stimulus to assist the central bank in its inflation and growth aims.
In the United States, CB Consumer Confidence jumped to 94.5 in October, a seven-year high as US consumers enjoy cheaper gas and improved job market conditions. The September reading was also positively revised to 89.0 from 86.0. Jobless Claims for the prior week stood at 287,000. Chicago PMI advanced to 66.2 in October, beating median expectations of 60.2. Advance GDP came in better than expected at 3.5 percent.
Gold bears made a statement this week as they pushed yellow gold $74 lower, breaking the triple bottom clearly. The weekly close at $1,172 was the lowest weekly close in about 4 years, and this could set a precedent in the coming weeks or months. November could provide the clues as to the near-term direction of Gold.
Oil posted a milder price action compared to Gold as the former stayed inside the range set two weeks ago. $80 remains pivotal as traders decide on where to push price. A descending triangle is forming, so we might see a short-term upside pop.
EURUSD ended the week with another bearish close, as buyers failed to gain foothold above the 1.2600-1.2700 area. The pair is set to reach July 2012’s 1.2041 low if bulls won’t act this November.
GBPUSD also printed its second bearish weekly close but the former is doing a little better as it hangs on the 1.6000 psychological level. Bulls still need a strong push higher so they can reduce the bearish momentum that lingers on this pair.
USDJPY bulls pushed forward, aided by BOJ’s decision to expand QE on early Friday. The pair surged 330 pips, and other JPY pairs did well too. With not much resistance in sight, price could move up to as high as 120-122 in the coming weeks or months.
The Week Ahead
Starting Sunday (November 2), clocks will be moved backward by 1 hour to implement DST (Daylight Savings Time shift) exit in Canada and the United States.
This Monday, we’ll witness the release of Australia’s Building Approvals and ANZ Job Advertisements; China’s Non- Manufacturing PMI and HSBC Final Manufacturing PMI; Switzerland’s SVME PMI; Spain, Italy and UK Manufacturing PMI; and US ISM Manufacturing PMI.
Tuesday is a big day for Australia with its Retail Sales, Trade Balance, and RBA Rate Announcement and Statement. This will be followed by Spain’s Unemployment Change; UK Halifax HPI and Construction PMI; Canada and US Trade Balance; US Factory Orders; and New Zealand’s GDT Price Index.
Wednesday will start early with New Zealand’s Employment Change, Jobless rate, and Labor Cost Index; Japan’s Average Cash Earnings; China’s HSBC Services PMI; UK, Spain and Italy Services PMI; Eurozone Retail Sales; US ADP Non-Farm Employment Change and ISM Non-Manufacturing PMI.
On Thursday, investors will be alert with a lot of economic releases to digest. There will be BOJ Monetary Policy Meeting Minutes, which will be followed by Australia’s jobs data; Germany’s Factory Orders; Eurogroup Meetings; UK Manufacturing and Industrial Production, Asset Purchase Facility and Rate Announcement, and Statement; ECB Rate Announcement and Press Conference; Canada’s Building Permits and Ivey PMI; US Jobless claims, Prelim Nonfarm Productivity and Prelim Unit Labor Costs.
Friday will remain active with RBA’s Monetary Policy Statement; France’s Industrial Production; Switzerland’s Foreign Currency Reserves and Retail Sales; UK Trade Balance; ECOFIN Meetings; Canada and US jobs data. US Fed Yellen will also give a speech.