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Re: Daily Market Overview by IFC Markets

Discussion in 'Fundamental Analysis' started by Akriti, Sep 17, 2013.

  1. Akriti

    Akriti New Member

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    US Dollar Moves Currency Market Ahead of Fed’s Decision

    The US dollar index drew support line at 80.94 and bounced up to 81.32 as investors focus on FOMC meeting, expecting some asset tapering of the $85B bond buying program. In addition to that traders were collecting profits by covering short positions. We will be busy today with economic announcements but we would be cautious in our trading ahead of the Fed’s monetary policy announcement tomorrow. Therefore we expect the greenback to remain in sideways until tomorrow evening between 81.32/80.94 recently created range.

    The Reserve Bank of Australia released earlier on Tuesday its September 3 meeting minutes stating that the possibility of reducing rates further is not eliminated but also a reduction is not imminent. Moreover the Central Bank considers that the exchange rate is still high and should move lower accompanying current low key rate could provide a greater degree of stimulus to the economy. The Australian dollar found resistance at 0.9385 against the greenback and dropped to 0.9284 after the RBA release of minutes but recent US dollar weakness drove the pair slightly up, it was lastly seen at 0.9319.

    The USDJPY found support yesterday at 98.63 and earlier today was capped by 99.35, retreating to 99.00. The USDCAD moved in a similar way, upside barrier at 1.0332 weighed on the pair that is currently fluctuating at 1.0323. For a second consecutive day we see mainly that the US dollar is making the moves in the currency market, thus crosses continue their consolidation. We consider that the US dollar in the longer term will be underpinned as the Fed would start asset tapering.

    Looking ahead, investors are monitoring on Tuesday UK CPI figures, Euro Zone ZEW Economic Confidence indicator and US inflation reading. However response to todays’ release would be mild as traders and other market participants are highly anticipating tomorrow FOMC Statement and Projections.
     
  2. Akriti

    Akriti New Member

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    All Eyes on FOMC Statement and Projections

    The US dollar index remains steady in 81.19/81.07 tight range ahead of the release of the two-day FOMC policy meeting outcome. It is generally expected that the Fed would start reducing its $85B program. Market consensus is that the Fed most likely will cut down purchases of the long-term Treasury securities from $45B to $35B and MBS purchases program could be tapered by $5B, falling from $40B to $35. Thus we are expecting a $10B-$15B reduction today to be announced by the Fed alongside with FOMC projections.

    As you can notice on Fundamental Analysis table, US Unemployment Rate dropped from 8.1% in August 2012, just before starting MBS purchases at $40B pace per month, to 7.3% in August 2013. Indicating that the accommodative policy succeeded in increasing employment and thus economists consider that continuation would destabilize financial markets. However, recent figure on Employment has been disappointing together with the downward revision of the July employment, as a consequence uncertainty increased over how much the bond buying program would be tapered.

    The single currency versus the greenback was also in sideways trading near its recently earned resistance at 1.3381 since it was underpinned yesterday by improved ZEW Economic Confidence indicator. It is likely to remain in 1.3381/1.3321 tight range until FOMS Statement.

    The Bank of England is also going to release its minutes of the September 5 meeting which includes the Asset Purchase Facility votes and the key rate votes. Economists’ project is that all 9 members of the committee unanimously voted to hold policy unchanged. The British pound against the US dollar eased to 1.5887 from 8-month peak at 1.5961, weighed by key resistance and amid some profit taking. Traders are reluctant to act before Bernanke’s statement.

    Lastly, the USDJPY is also fluctuating in 99.35/99.02 sideways zone looking ahead for Federal Open Market Committee announcement. Even though we have built up a consensus that Fed would modestly scale back quantitative easing we would avoid betting on that since we consider risk taking greater than potential reward.
     
  3. Akriti

    Akriti New Member

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    Fed Shocks FX Markets Holding Asset Purchases Unchanged at 85B, USDIDX to 7-month Low

    The Federal Reserve decided to shake the financial markets by leaving its asset purchase program unchanged in a highly surprising move. As we have previously addressed, surveys from Reuters and Bloomberg was giving more chances to asset tapering. However, FOMC committee said that “decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.” Therefore the US quantitative easing remains steady at $40B purchases of mortgage-backed securities per month and $45B purchases of longer-term treasury securities per month. The interest rate would remain unchanged at 0-0.25% as long as the unemployment rate is more than 6.5% and inflation projections for the next 1-2 years are not more than 2.5%.

    Starting from FX markets, we saw yesterday the US dollar losing substantially against its major peers with its index sharply dipping to support at 80.03 from earlier level at 81.15, losing more than 1.3%.

    [​IMG]

    The Euro jumped to a new 7-month high against the US dollar taking advantage of the shocking Fed decision to maintain monetary policy. The EURUSD gained more than 1.5% as penetration of key resistance at 1.3451 triggered more buy orders. The other European currency, the GBPUSD also moved sharply to fresh 8-month high, hovering above key psychological resistance at 1.60 and reaching as high as 1.6161.

    Concerning Federal Reserve Projections, the 2013 GDP growth was downgraded to 2.0-2.3% compared to June projection of 2.3-2.6%. Perhaps the decision to hold asset purchases at $85B was to support growth, while inflation is projected to be between 1.1-1.2% in 2013. For 2014 Inflation was downgraded to be between 1.3-1.8% in Sep.18 report compared to 1.4-2.0% in June 19 projections. Lastly, one of the key thresholds for key rates increase, the unemployment rate was projected to be between 7.1-7.3% in 2013 and ranging in 6.4-6.8% in 2014, almost the same compared to June report. Most members of the committee are expecting that the timing of key rate rising would be in 2015, where the highest of projected unemployment rate is at 6.3%, growth estimated to be above 3.0% and inflation approaching its 2.0% target.

    [​IMG]
     
  4. Akriti

    Akriti New Member

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    Major Pairs Go into Narrow Trading after Volatile 2-day Sessions

    FX markets extend into sideways following an eventful week. Previously we saw the Fed refraining from asset purchases reduction and as consequence US dollar was lost broadly against its major peers on Wednesday US evening session and continued its slide on Thursday as well. Although contrary to other major currencies the Japanese Yen has been under selling pressure yesterday due to risk-on. In addition, a member of BOJ board said that monetary stimulus might expand further since inflation target of 2.0% is still far away.

    The USDJPY therefore after drawing a support line at 97.76 started recovering back previous lost ground and rose even higher than before Fed’s announcement achieving resistance at 99.59.

    [​IMG]

    On Thursday evening a series of positive US data was announced and perhaps that was another reason for USDJPY’s upside unexpected performance. US Jobless Claims stood at 309K the previous week up compared to two weeks ago but well below expectations of 331K claims.

    Moreover, Existing Home Sales for August was stronger and Philly Fed Manufacturing Index for September was doubled compared to estimations suggesting that demand in US spending, investments and demand is strengthening more than estimated. Thus, in our opinion USDJPY would continue higher and the US dollar index bottomed at 80.03 likely providing a nice buy opportunity for the longer term, with data improvement of course. Fed has reiterated that is data dependent, thus we get closer to asset tapering with every positive surprise.

    Now let’s check other major pairs like the EURUSD which is consolidating in 1.3565/1.3506 tight zone after advancing by 1.58% from 1.3353 to top of the last 7-months at 1.3565. On Monday EZ PMI Manufacturing indicators would be released and we are alerted for that. We saw the GBPUSD rising to 8-month cap at 1.6161 but was weighed by sluggish Retail Sales in August retreating to 1.6024. A technical correction is always welcome as it gives the chance for further positioning in the market and indicates a healthy up trend.
     
  5. Akriti

    Akriti New Member

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    Merkel Goes For Third Term, Euro in Range Due to No Surprises

    Following German elections outcome, the Euro did not move much against the US dollar and still remains in 1.3565/1.3506 tight range since the previous week. The currency pair rose just slightly from 1.3520 to 1.3539. Merkel’s Christian Democratic Union (CDU/CSU) won 42% of the votes, winning the majority as expected. Social Democrats (SPD) are second in popularity with 26% of votes while CDU/CSU partners in the previous government Free Democrats secured just 4.7% down from 14.7% four years ago and did not make it into parliament. Now Merkel would need to form a new coalition, analysts expect that the most probable scenario is that the SPD would agree coalition with the CDU/CSU. Should the latter is achieved would rule out any uncertainty and support the common currency.

    [​IMG]

    Less importantly but usually with major impact on financial markets, the Chinese Manufacturing PMI for September stood 51.2, higher than estimated and up from previous month. That supports risk appetite and suggests that China is picking up. As a virtue of that, we saw the Aussie bouncing up from support at 0.9382 to 0.9436 as the Australian raw material exports would be benefited by improving Chinese manufacturing, since China is the biggest Aussie trade partner.

    At the same time, asset tapering is still on the table and speculation for the next Fed meeting would start soon again. The US dollar index remains in 80.52/80.26 tight range for the time being ahead of Manufacturing PMI data. The US dollar against the Japanese Yen slipped lower to support at 98.91 and we would expect the USDJPY to move as low as 50.0% of 97.76 to 99.65, at 98.63. Lastly, the sterling versus the greenback seem like it finished its corrective move after worse than expected UK Retail Sales pushed the pair to support at 1.5988 and is now hovering again above 1.60.

    To close, market participants are focusing today on European Manufacturing PMIs and in the evening on the US PMI indicators, all are estimated to improve.
     
  6. Akriti

    Akriti New Member

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    Modest Changes in Currency Markets, Uncertainty over Fed Tapering in October

    Currency markets remain mostly steady from yesterday trading with the US dollar still in 80.52/80.26 tight range following FOMC member Dudley speech. Dudley said that two tests need to be passed for the asset purchases tapering to begin, firstly evidence that labor market has shown improvement and secondly “forward momentum” creating confidence that labor market improvement would continue after tapering.

    The FOMC member added that even though unemployment rate dropped from 8.1% to 7.3% in the last year that is overstating actually labor improvement, since other indicators are not so optimistic. Concerning “forward momentum” the test is not yet passed because Dudley is not yet confident about growth sustainability due to fiscal uncertainties. Lastly, the independence between asset purchases tapering and interest rates lifting was emphasized once more.

    Thus, uncertainty increased in financial markets whether the Fed is going to slow down its bond purchases pace in October, since another FOMC member, Bullard, said on Friday that decision not to start unwinding was a close call. Thus greenback remained steady and the Japanese Yen got weak with the USDJPY bouncing above 99.00. Technically, found support around 50.0% of 97.76 to 99.66, at 98.64 suggesting that corrective move is finished and upside is resuming shifting focus to next resistance at 99.38.

    [​IMG]

    Elsewhere, the Aussie eased against the US dollar after drawing resistance line at 0.9456 with the Australian dollar upside bias losing momentum since there are not any supportive events, thus the pair is dependent on US dollars’ performance. Concerning US data, investors are focusing on Consumer Confidence later today and S&P Case-Schiller HPI. The Euro versus the US dollar did not change much with mixed PMIs yesterday not providing significant support, the pair is currently at 1.3510. Technicals are bullish for the EURUSD since it is fluctuating in a potentially “flag” pattern suggesting that uptrend would continue.

    [​IMG]
     
  7. Akriti

    Akriti New Member

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    US Dollar Index Steady Below 80.59, Wary on US Monetary Path and Debt Ceiling

    FX currency pairs are mainly moving on news events and central banks releases with the rest of the time doing sideways. Like yesterday when the US dollar rose slightly to resistance at 80.59 on positive Housing sector data and then continuing its range trading below that resistance.

    Market participants are uncertain whether the Fed would taper its monthly asset purchases in October meeting after mixed messages from FOMC members, which lead investors to seek safer currencies like the Japanese Yen. In addition, concerns are increasing regarding US debt ceiling as the US policymakers would need to approve a higher debt limit than the current of $16.7B by mid-October. US economy runs the risk of credit-rating downgrade as the Congress delays decision on raising borrowing limit. US equities reflected that risk by closing lower with S&P 500 falling by 0.26% and Dow Jones Industrial Average losing by 0.43%.

    Furthermore, NIKKEI 225 was also under selling pressure due to investors being wary over US Government funding and direction of Fed monetary path. The Japanese major index dipped by 0.76% adding selling pressure on the USDJPY that is heading back towards 61.8% of 97.76 to 99.66, at 98.48.

    Therefore we have a situation where risk appetite is mildly squeezed, the US dollar in range, USDJPY potentially could go lower, AUDUSD falling and has just breached support at 0.9366. Thus we would consider the AUDJPY could weaken further should the USDJPY also breach its key support at 98.48. At the time being the cross currency pair is down trending suggesting in technical terms is bearish.

    [​IMG]

    Elsewhere, the common currency remains under pressure against the greenback, gradually falling to 1.3464 and remaining in descending flag formation, which technically means that it remains in a bullish pattern.

    [​IMG]

    Looking ahead, market participants are focusing on US Durable Goods orders and US New Home Sales, both are expected to improve compared to previous reading.
     
  8. Akriti

    Akriti New Member

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    US Dollar Slightly Higher Ahead of Second Quarter Growth Data

    The greenback is gaining ground against its major peers on Thursday morning as previously Moody’s said that US economy credit rating would not be affected during talks of increasing Debt ceiling and they expect that eventually lawmakers would approve enhancement of borrowing limit. Thus, fears over another debt ceiling crisis are fading with the US dollar index trading higher early on Thursday, advancing by 0.18%, rising from 80.25 to 80.40. We are slightly cautious today due to risk of second quarter final growth data in the evening projected to be at 2.7% mildly higher than previous reading at 2.5%.

    In Asian trading on Thursday the Euro versus the greenback eased from resistance at 1.3536 to support at 1.3510, perhaps as investors were collecting profits from yesterday upside following upbeat German Consumer Confidence indicator. In addition, the EURUSD was fading due to greenback getting stronger, although in technical terms the pair in the medium term remains bullish and could revisit 7-month highs at 1.3568.

    The British pound surged by 0.75% to 1.6087 against the US dollar this morning and maintained its ground as the US dollar was strengthening indicating that British pound remains strong, supported by stronger than projected CBI realized Sales yesterday. Investors are monitoring later today UK second quarter final growth data expected to confirm previous reading at 0.7%.

    Global equities were under selling pressure due to risk-off triggered by US budget talks and expectations that Fed would taper assets by end of October with S&P 500 falling for a fifth consecutive day to 1692.77 and Dow Jones Industrial Average losing 0.40%. Asian stocks followed with Hang Seng declining by 0.15% and Shanghai losing by 1.91%, however NIKKEI 225 gained by 1.22%, backed by renewed talks that the Japanese government may cut corporate tax. Therefore, as demand was increasing for Japanese equities the Yen as a safer currency was losing ground with the USDJPY bouncing up from 98.26 to 99.08.

    The Aussie on the other hand corrected against the US dollar yesterday to as low as 0.9341 and early today resumed its upside reaching 0.9940. The AUDJPY cross was largely benefited by bullish AUDUSD and USDJPY in recent trading, climbing from 92.03 to 93.01, providing a 1.08% upside. We would expect the pair to consolidate somewhat below 93.01 before it resumes its upside with possible target around 93.47.

    [​IMG]
     
  9. Akriti

    Akriti New Member

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    Risk Aversion Due to Italy’s Political Turmoil, U.S Probable Shutdown, CNY Disappointing PMI

    Monday opening was not boring for sure as many global events have moved the FX market. To begin with, Italy went into a political turmoil during the weekend as five ministers members of the former Prime Minister Silvio Berlusconi party resigned from Enrico Letta’s current government. Letta decided to seek for confidence vote on October 2 from the parliament to remain in power.

    The third biggest economy of the Euro-zone enters into political crisis and may need to go for elections again in less than a year time. Political uncertainty increases risk of sovereign debt management in Italy with Italian 10-Year yield climbing from 4.53% on Friday to 4.73% today. The EURUSD became heavier just below resistance at 1.3569 and retreated early today at 1.3479, overall remains in 1.3569/1.3464 range and likely to continue like that as both Euro and greenback are slashed by negative developments.

    We consider key drivers of the currency markets this week, the previously addressed Italian political crisis, probable U.S government shutdown and Non-Farm Payrolls on Friday preceded by ADP Employment Report on Wednesday, as well as major economies’ PMI indicators during the week. Therefore, this week is perceived a risky one and volatile week to be, so we are going to trade with caution.

    First of all US Government is likely not to have money to pay federal workers from tomorrow, although interest payments are prioritized to receive payments and avoid default, because the lawmakers did not agree to raise borrowing limit. In any case, we expect to see a last minute development in the Congress and eventually avoid shutdown. In addition to that earlier today Chinese HSBC Manufacturing PMI stood at 50.2 down from expected and previous figure at 51.2, disappointing market participants and further increasing risk aversion.

    The USDJPY slipped lower since the Japanese Yen is considered safe haven, thus attracting investors’ attention. The pair dropped to support at 97.69, breaching rising trend line of the symmetrical triangle against projections of an up rise break through, thus weakness may prevail in the following trading.

    [​IMG]

    To close, risk aversion was also reflected on the Aussie vs US dollar currency pair, falling earlier today to a two week low at 0.9284, maintaining its recently established downtrend that started after peaking at 0.9521. Moreover, the safer swissy was gaining ground as investors were seeking for safer currenies, thus the USDCHF began on monday open in negative trading, easing from 0.9067 to 0.9045 .
     
  10. Akriti

    Akriti New Member

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    U.S Government Closes, 2014 Fiscal Budget Fails, USDIDX Drops to Fresh 7-month Low

    U.S. government goes into shutdown mode because Republicans and Democrats failed to agree on spending bill for 2014. Thousands of workers would remain home and many government services would not operate and should that continued would hurt business and consumer confidence. Moreover, could have a multiplied effect on GDP with economists projecting that a 21-day close down like the previous one, 17-year ago, could reduce the growth by 0.9-1.4%.

    Almost two weeks ago the Fed decided to hold its asset purchases to support weak recovery until further evidence of a sustainable growth appear and now the lawmakers seem like they live in a different country, failing to agree to fund government operations. The US dollar index as of writing dipped below key support at 80.00, confirming its downtrend and moving to fresh 7-month lows, with next stop likely at 79.66.

    [​IMG]

    Elsewhere, the RBA decided to maintain its record low key rate at 2.50% as expected, saying that a below trend growth persists as the economy adjusts to weaker mining sector, unemployment rate increased and Australian currency is still high. AUDUSD pair jumped during the Asian session from support at 0.9284 to running level now at 0.9419, underpinned by stronger Aussie Retail Sales and further lifted by greenback’s weakness.

    In Japan, NIKKEI 225 was rising in contrary to other global equity indices as Prime Minister Shinzo Abe said that Sales Tax would increase as planned from 5% to 8%, driving the USDJPY pair higher to cap at 98.71. The latter, was interpreted by market participants as a forward move to counter fight surging debt. However, risk averse due to U.S. failing to approve a budget for 2014 fiscal year and lower than projected Chinese Manufacturing PMI induced USDJPY pair to give back more than half of its previous gains, heading back towards 97.49 and was lastly seen at 97.98.

    [​IMG]

    Eyes today would be on U.S budget talks, while decision deadline to take further measures to avoid hitting Debt Ceiling looming on Oct.17. Back to today’s news European PMIs fill the European session followed by US ISM Manufacturing PMI just before US open.
     
  11. Akriti

    Akriti New Member

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    US Dollar Index Defies U.S. Government Closure, Eyes on ECB Conference

    Despite the U.S. government shut down the Wall Street closed in green yesterday looking for a quick break through of the budget gridlock. The S&P 500 rose by 0.80% to 1,695, Dow Jones Industrial Average Index gained 0.41% to 15,191.70 and NASDAQ climbed by 1.23%. The US dollar index recovered against previous expectations that uncertainty would weigh on the greenback. The US dollar index bounced up from yesterday support at 79.84 to as high as 80.25.

    Moreover, market participants are betting that U.S government closure would be short and soon Republican and Democrats would find a solution. However, should we see further enhancement of gap that separates them, uncertainty would definitely weigh over risk appetite and stocks would start the downside. Ahead lies one more high risk event, on October 17 measures applied earlier to avoid hitting U.S. borrowing limit would be outdated and current dispute between lawmakers could impact their decision also on Debt Ceiling, driving U.S government to default.

    The Euro against the greenback softened from 8-month peak at 1.3587 to support at 1.3506 ahead of ECB rate decision today. Mario Draghi is expected to hold key rate unchanged at record low at 0.50% while he said the previous week that another round of long-term refinancing operation (LTRO) is still a choice.

    Thus, investors are closely monitoring ECB press conference today for further clues, generally though is not anticipated another round of LTRO to be announced today but more likely until the end of the year or ECB is using it as a threat to hold market interest rates under control. In any way Mario Draghi could be more dovish today in an attempt to ease the common currency further and support its economy. To close, another risk for Euro-zone financial stability is that Italian Prime Minister faces today confidence vote by the parliament after Berlusconi’s party withdrew from government coalition, however many RPs of Berlusconi’s party said that would vote for Prime minister Enrico Letta to keep its government afloat.

    Elsewhere, the USDJPY is sliding on a slippery slope reaching new monthly low at 97.35 since the Japanese Yen is appreciated as a safe haven currency. The AUDUSD was under selling pressure falling by -0.62% from 0.9406 to 0.9348, on Wednesday morning amid sluggish Australian Building Approvals and widening Trade Deficit.
     
  12. Akriti

    Akriti New Member

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    US Fiscal Budget Deadlock Goes On, Debt Ceiling Looms, Euro Surges VS Greenback

    The US dollar was smashed across the board losing the most against the Euro and the Japanese Yen as budget impasse extends to next week. Yesterday meeting between Barack Obama and congressional leaders didn’t changed anything with both sides repeating themselves. Republicans want to use 2014 budget and debt ceiling to increase pressure on Obama to delay it health-care program. Every week the U.S. government is shut down, 0.1% is trimmed from economic growth and failure to expand the $16.7B debt ceiling by Oct. 17 would have greater and global implications.

    Moreover, yesterday the ADP Report said that in September employment excluding farming and public sector increased by 166K, less than projected rise of 177K adding pressure on the greenback. The US dollar index retreated below key support at 80.00 increasing technical downside bias and is likely to continue towards next support at 78.95.

    The common currency versus the greenback bounced up to 1.3622 leaving behind its 1.3568/1.3464 range zone after political crisis in Italy resolved. Berlusconi changed his mind because he saw his fellow RPs abandoning him. Eventually the five-month coalition government gained confidence vote and remains in power. At the same time, ECB held key rate at record low at 0.50% and President Mario Draghi said that accommodative policy would remain in place for an extended period and inclined that ECB was ready to use LTRO. The EURUSD remains bullish and in an uptrend with fundamentals supporting it until now, thus in our view we could see even higher prices.

    Elsewhere, the GBPUSD remained mostly unchanged fluctuating around 1.6218, with Halifax HPI, released as of typing, displaying that increased by 0.3% in September like in August but disappointing expectations of 0.6%. Lastly, the Crude Oil eased to 101.26 yesterday as Oil Inventories increased unexpectedly to 5.5M barrels for the previous week up compared to 2.6M barrels two weeks ago and higher than expectations of 2.4M.

    On the data front, Euro-zone Services PMIs are eyed while later on today concerning Jobless Claims we are not sure will be released, as well as tomorrow’s NFP are uncertain due to U.S statistical services closure.
     
  13. Akriti

    Akriti New Member

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    BOJ Holds Monetary Stance, NFP Could Be Delayed, GBPUSD Waving Down

    U.S government shut down continues for a fourth day spreading fears that Democrats and Republicans would be unable to agree on looming Debt Ceiling as well. No agreement on 2014 fiscal budget is reducing growth by 0.2% per week according to Goldman Sachs while there is an additional pressure by declining reduction as federal workers are not paid. Indirectly though economy could be further hurt by falling confidence in business and consumption.

    See more: http://www.ifcmarkets.com/en/market-overview/show/1519
     
  14. Akriti

    Akriti New Member

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    U.S Debt Ceiling Talks Eyed, Risk Appetite Squeezed as U.S Fiscal Gridlock Continues

    The new week starts with U.S. Government remaining closed for one week now with talks between Democrats and Republicans intensifying during the weekend. Republican House Speaker John Boehner is accusing the government for not discussing while at the same time he sets preconditions over raising debt ceiling. U.S. shut down continuation impasse is now really spreading fear among market participants who see that the same gridlock could extend to debt ceiling issue with more serious effects over financial markets.

    John Boehner said during the weekend that there are not enough votes in the U.S. House of Representative to approve raising borrowing limit resolution without President Barack Obama giving something in return from health care law.

    See more: http://www.ifcmarkets.com/en/market-overview/show/1520
     
  15. Akriti

    Akriti New Member

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    U.S Shut Down and Debt Ceiling Still Dominate Financial Markets

    Like the previous days U.S government remains closed down and there has been no progress regarding debt ceiling so the situation is the same, although as we approach October 17 and nothing changes risk appetite is further squeezed. Last night S&P 500 dropped by 0.85% and Dow Jones Industrial Average declined by 0.90% reflecting sentiment worsening.

    Still, Asian equities recovered today after yesterday’s losing trading with NIKKEI 225 advancing by 0.30% and Hang Seng gaining by 0.93%, despite disappointing Japanese Current Account and weaker Chinese HSBC Services PMI. Japan’s current account surplus stood at ¥161.5B for August while was estimated to be at ¥520.0B and was down from ¥577.3B the previous month. The Japanese Yen weakened against the US dollar and that backed the USDJPY to surge from 96.56 to 97.15. In addition to that prices bounced up amid short covering following recent sliding to fresh lows.

    The US dollar index yesterday was under heavy pressure and eventually drew support line at 79.86 as budget deadlock is entering new phase after House Speaker John Boehner said that it has “no clear votes for raising debt ceiling”. That is transmitting political impasse to U.S debt ceiling issue creating possibilities that U.S could default on its obligations. Market has not priced a U.S default as most of the economists are expecting that would be resolved by end of this week, also traders would grab on any development toward resolution. Obama said yesterday that he would accept a short-term raise in borrowing limit to avoid default and perhaps that’s why the US dollar recovered back many of its Monday losses rising back to 80.00.

    To close, we saw the GBPUSD climbing to resistance at 1.61 yesterday and earlier today retraced mildly at 1.6074 looking ahead for the MPC rate statement on Thursday, where no monetary changes are expected by Bank of England. The EURUSD is still fluctuating between 1.3591/1.3560 sideways zone with news coming from US being the main driver.
     
  16. Akriti

    Akriti New Member

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    Yellen Next Fed Chairman Raises Risk Capped by U.S Political Impasse and IMF Outlook Cut

    As the political standoff that drove U.S government to closure and is now threatening the world with a U.S default continues, the Japanese Yen was weakening on Barack Obama’s decision to nominate Janet Yellen to succeed Ben Bernanke at Fed’s head next year. Janet Yellen is considered quite dovish and that interpreted by market that Fed is likely to remain accommodative for a longer period, boosting demand for riskier assets and thus setting pressure on the Yen.

    Nonetheless, Barack Obama repeated that would talk with House speaker John Boehner after the shutdown ends and the risk of default is eliminated, though Republicans insist on spending cuts and modifications on Obamacare law. Therefore, Yellen effect on US dollar demand is capped by political impasse, even though we still expect a last minute resolution. In addition, yesterday the IMF cut growth outlook for emerging markets by 0.5% for 2013, while advanced economies outlook was mostly unchanged. Global economy growth outlook therefore downgraded to 2.9% for 2013 compared to 3.2% in July report, weakening further market sentiment.

    Now concerning currency moves, the greenback against its major peers was on the upside advancing from support at 79.83 to as high as 80.18, recovering to a new high of the week. The US dollar increased its value mostly against safer currencies like the Japanese Yen and the Swissy. The USDJPY climbed on Wednesday morning from 96.82 to 97.46 or by 0.66% and the USDCHF surged from 0.9015 to 0.9077, percentagewise both currency pairs had the same increase.

    As of typing though, the European markets opened in red color falling by around 0.25% weighing on the common currency, the sterling and the swiss franc, ahead of British Trade Balance and German Industrial Production releases today as well as BOE MPC Statement tomorrow. The EURUSD started its downside earlier today from 1.3603 and reached as low as 1.3523, technically is bearish, heading towards 1.3506. The GBPUSD also declined from 1.6122 to 1.6030 creating a double top in the hourly and giving back all of its yesterday gains. The USDCHF rose above 0.9077 and is now outperforming the USDJPY that remained below 97.46 on European equity session open.
     
  17. Akriti

    Akriti New Member

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    Greenback Appreciates on Yellen, FED Minutes and Hopes of Political Break Through

    The greenback was gaining ground across the board against its major counterparties after Janet Yellen was nominated as the next Fed Chairman, coupled by Fed Minutes of the 17-18 September meeting and eventually there are some chances for short term deal on debt limit to avoid default. The US dollar index advanced as high as 80.55 making its biggest corrective move after a month of declines.
    To further look into the key drivers of FX market, we firstly consider the greenback appreciated due to uncertainty ruled out about who would succeed Ben Bernanke, despite that Janet Yellen is perceived as a dove among market participants,
    Secondly, the release of the minutes showed that FOMC members talked a lot about moderating asset purchases, with some suggesting tapering by a small amount to signal that Fed moves cautiously.

    See more: http://www.ifcmarkets.com/en/market-overview/show/1523
     
  18. Akriti

    Akriti New Member

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    Failure to Break Political Gridlock Raises Risk of US Default, Nearing Deadline of Oct. 17

    Risk appetite is fading as US lawmakers failed to agree on Saturday on extending the upper limit of the US debt above $16.7T. Christine Lagarde, head of IMF warned for a “massive disruption” to the global financial markets and real economy if the borrowing limit is not raised before the 17th of October.

    On Friday, market participants saw White House meeting and talks over a short-term deal optimistically with global indices rising substantially however as talks failed during the weekend risk sentiment weighed. The S&P/ASX 200 declined by 0.44% while NIKKEI 225 is closed today on Health Sports Day. Moreover, the Senate and the House are still going to meet today on Columbus Day and US is on holiday, however hopes for resolution are weak amid Republicans have the majority of votes in the House and their conservatives are not willing to make any concessions to Barack Obama.

    See more: http://www.ifcmarkets.com/en/market-overview/show/1525
     
  19. Akriti

    Akriti New Member

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    Optimism Returns on Possible Debt Deal on Tuesday, Aussie Gains

    Hopes that US policymakers get closer to a political break through and that has improved market participants’ optimism leading risk appetite higher. US equities eventually closed in positive light after beginning in negative territory, with S&P 500 advancing by 0.41%, Dow Jones Industrial increasing by 0.42% and NASDAQ gaining by 0.62%. Asian shares followed as NIKKEI 225 was by 0.26% higher and Hang Seng climbed by 0.38%.

    Optimism among investors grew substantially yesterday after Harry Reid, a Senate Democrat majority leader and its Republican counterparty Mitch McConnel said that on Tuesday a bipartisan deal may be announced that would extend US debt ceiling and fund government budget. What is discussed for a short term solution is that federal government would be funded until January 15 2014 and borrowing limit would be increased until February 15.

    See more: http://www.ifcmarkets.com/en/market-overview/show/1526
     
  20. Akriti

    Akriti New Member

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    All Eyes on Last Chance to Break Through US Political Impasse

    There has been no progress on Tuesday regarding US debt ceiling impasse, contrary to what investors were hoping. In addition, Fitch rating agency placed the United States triple A rating on watch negative. Earlier, Empire Manufacturing dropped to 1.5 for October, while was projected at 8.2 and was down compared to 6.3 figure in September, indicating New York manufacturers confidence has weakened after a more than a 2-week government shut down. However, hopes persist in financial markets that a deal would be concluded on the last day before 17 of October when US likely will not be able to borrow to meet its obligations.

    US stocks closed in red color as traders were disappointed by failure to reach an agreement on lifting borrowing limit and funding government that is closed for a third week now. The S&P 500 declined by 0.71% to 1,698, Dow Jones lost 133.25 points to end at 15,168 and NASDAQ dropped by 0.56%. Asian stocks followed the negative path further weighed by Fitch placing US to negative watch. Shanghai Composite was down by 2.10% and Hang Seng declined by 0.77% while NIKKEI 225 was up by 0.18% contrary to overall bias.

    The US dollar index trimmed during US session the most of its hardly gained ground on European session by falling from cap at 80.67 to 80.35. In general we saw the US dollar retreating against safer currencies like Japanese Yen and Swiss franc during the US session with the USDJPY returning to support at 98.08 and USDCHF falling back to 0.9120 after drawing a resistance line at 0.9170. We would expect a last minute deal to be sealed, otherwise we don’t want to think about the global financial implications. Last two weeks of shut down harmed US economy growth by more than 0.4% and thus FED is likely to keep unchanged asset purchases setting pressure on the greenback . Also, last minute lift of the debt limit may bring a US downgrade, therefore over the medium term we would expect a weaker US dollar.

    Concerning European currencies, the Euro contra the greenback took advantage of the disappointment over the US lawmakers’ failure to agree and recovered as high as 1.3534 before extending into a consolidation momentum. Moreover, the Euro was also underpinned by stronger than expected German ZEW economic sentiment indicator. The GBPUSD remains steady in 1.6016/1.5913 tight sideways zone ahead of employment data today.
     
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