Dear Friends and Traders,
With tomorrows important market events coming out form the USA we have compiled a quick report for you to understand what tomorrow has in store for us,
The FOMC meeting tomorrow is unlikely to provide us with much new information. We expect to receive a statement but no updated projections or press conference. Along with consensus, we expect no change in policy at the meeting.
We believe the Fed wants to keep all doors open at this point and will try to signal that a December rate hike is an option but by no means given. If markets keep still after the statement, we think the Fed can declare its mission accomplished.
The tone on recent economic developments is likely to be more downbeat than in September but global economic and financial developments should have become less of a risk.
In our view, the forward-looking part of the statement is likely to be kept broadly unchanged, as the Fed awaits more data before changing its view on the outlook.
We continue to believe that the first fed funds rate hike will come at either the December or January FOMC meeting, with the highest odds on a January move. The combined soft tone from the ECB on Thursday followed by easing from the Chinese central bank on Friday and possible policy easing from the Bank of Japan and Swedish Riksbank this week, means the trade weighted US dollar has gained 2% over the past one and a half weeks. While on the margin this has tightened financial conditions, the rally in risky assets has largely offset this move. What is left is the positive demand boost from easier monetary policy and diminishing risks of an even more severe global growth slowdown. Hence, we believe that this latest round of policy easing is welcomed by the FOMC.
Here are the main market movers for today,
In the UK the first estimate of Q3 GDP growth is released. Based on the key economic figures for Q3 released so far (we only have 44% of all information), we estimate GDP growth slowed to 0.5% q/q in Q3 from 0.7% q/q in Q2. If right, this would, however, still be at trend growth
Euro area money supply figures for September are also due for release and we expect a further improvement to 5.0% y/y. This should follow as the bank lending survey released last week showed a continued increase in demand for loans. For enterprises, the increase in demand for loans was due mainly to the general level of interest rates, as well as to increased needs for fixed investments.
In the US, Real US capital goods orders ex aircraft and defence showed a significant increase in Q3 after a very weak run over the prior three quarters. August data showed a moderation in growth and September durable goods order data will show whether this was a one-off or if order growth is coming down further in response to global weakness. Also in the US, October data for the Conference Board’s measure of consumer confidence will give us valuable input about the strength of the labour market with the gauge on ‘jobs plentiful’ and ‘jobs hard to get’. The preliminary Markit PMIs and the S&P Case Shiller House price index will also attract attention.
Global risk sentiment has lost steam after the ECB and People Bank of China (PBoC) induced rally over the previous two sessions. Markets have gone into wait-and-see mode ahead of the upcoming central bank meetings with not least FOMC tomorrow and Bank of Japan on Friday. Sentiment in Asia overnight has also been influenced by Chinese industrial profit figures revealing a y/y and YTD y/y decline of 0.1% and 1.7%, respectively
Commodities prices remain under pressure. While base metals and oil initially rallied on PBoC’s announcement on Friday of additional easing, markets soon questioned the motivation behind further stimulus amid speculations of the validity of last week’s Chinese GDP figures. Brent crude has shredded almost 2% in the last 24 hours, also aided by renewed US stockpile concerns.
New home sales in the US surprised significantly to the downside yesterday, dropping 11.5% y/y and bringing the pace back to 2014 levels. The release was at odds with a series of recent data that suggested that the housing market remains solid. Importantly, the new home sales release is notoriously volatile.
In New Zealand trade balance figures revealed a wider-than-expected trade deficit. The decline was especially due to disappointing export figures but imports also surprised to the upside. The NZD weakened on the release.
The US Navy has tested Chinese territorial claims as a US destroyer has sailed through two artificial islands in the South China Sea.
Mr Markets Trade of the Day
Entry: We are on standby just before the 10:30 news from the UK
TP: Depends on the scenarios below, but we are looking at around 50 – 80 pips
SL: A stop of about 20 – 30 pips would be fine
Tip: As stated above, even a 0.5% print would be counted as postive and taking into account that only 44% of the necessary information is added to the 0.5% expectations there is still a whole 56% of other important data that could move this pair, we have a feeling it will be good for the GBP.
Within expectations: 0.4% to 1.1%. In such a scenario, GBP/USD is likely to rise within range, with a small chance of breaking higher.
Above expectations: 1.2% to 1.6%: An unexpected higher reading can push the pair above one resistance line.
Well above expectations: Above 1.6%: A surge in the reading would push the pound higher and the pair could break a second line of resistance as a result.
Below expectations: -0.1% to 0.3%: In this scenario, GBP/USD could drop below one support level.
Well below expectations: Below -0.1%. A very weak reading could hurt the pound, and the pair could fall below a second level of support.
Watch the one ahead of you, and you’ll learn why he is ahead. Then emulate him.
One of the surest ways to achieve success is to observe the actions of successful people, determine what principles they regularly employ, and then use them yourself. The principles of success, as Andrew Carnegie said, are definite, they are real, and they can be learned by anyone willing to take the time to study and apply them. If you are truly observant, you will find that you can learn something from almost everyone you meet. And it isn’t even necessary that you know them. You may choose great people who are no longer alive. The important thing is to study their lives, and then learn and apply in your own life the specific principles these people used to achieve greatness.