- Australian Building Permits Slump, Deflate RBA Rate Hike Outlook
- UK Shop Prices Rise but Retail Landscape Discouraging, Says BRC
- Euro Declines, British Pound Unchanged vs USD Ahead of FOMC
Critical Levels
CCY | SUPPORT | RESISTANCE |
EURUSD | 1.3932 | 1.4081 |
GBPUSD | 1.5969 | 1.6088 |
The Euro edged lower in overnight trade, down 0.3 percent against the US Dollar and probing back below the critical 1.40 figure. The British Pound was virtually static, drifting sideways in a narrow band below 1.6050 to the greenback. We remain short EURUSD and flat GBPUSD.
Asia Session Highlights
CCY | GMT | EVENT | ACT | EXP | PREV |
AUD | 22:30 | AiG Performance of Service Index (OCT) | 50.7 | - | 45.6 |
JPY | - | Japanese Market Closed for Culture Day | - | - | - |
GBP | 0:01 | BRC Shop Price Index (OCT) | 2.2% | - | 1.9% |
AUD | 0:30 | Building Approvals (MoM) (SEP) | -6.6% | 0.0% | -4.8% (R-) |
AUD | 0:30 | Building Approvals (YoY) (SEP) | -11.6% | -3.7% | 4.2% (R-) |
CNY | 1:00 | China Non-manufacturing PMI (OCT) | 60.5 | - | 61.7 |
CNY | 2:30 | China HSBC Services PMI (OCT) | 56.4 | - | 55.2 |
Currency markets were little changed in overnight trade as traders braced for the upcoming US Federal Reserve monetary policy announcement, an event that has preoccupied investors across the spectrum of financial assets for months and which promises to set the direction for risk appetite at least through the end of the year.
UK Shop Price Index rose 2.2 percent in the year through October according to a report from the British Retail Consortium. BRC Director General Stephen Robertson struck a negative tone however, saying “retailers are shielding customers from the full impact of the increasing commodity costs” and adding that “weak consumer confidence and a sluggish housing market mean retailers are competing even more fiercely [through discounting and promotions] for the limited discretionary spending available.”
Australian Building Approvals unexpectedly slumped for the sixth consecutive month, falling 6.6 percent to record the largest drawdown since May. Permits fell 11.6 percent from the previous year, the most in 15 months. The result was chalked up to rising borrowing costs and seemed to weigh heavily on RBA rate hike expectations despite yesterday’s hawkish turn in the central bank’s rhetoric, with the markets now pricing in a mere 8 percent chance of another rate hike at December’s policy meeting and just 34bps in tightening over the next 12 months, the lowest in 6 weeks, according to data compiled by Credit Suisse.
Euro Session: What to Expect
CCY | GMT | EVENT | EXP | PREV | IMPACT |
CHF | 8:15 | Retail Sales (Real) (YoY) (SEP) | - | 0.1% (R-) | Medium |
GBP | 8:30 | Purchasing Manager Index Services (OCT) | 52.6 | 52.8 | Medium |
GBP | 8:30 | Official Reserves (Changes) (OCT) | - | $1935M | Low |
The short European economic calendar seems altogether negligible as markets looks ahead to theFederal Reserve’s monetary policy decision amid expectations Ben Bernanke and company will announce renewed quantitative easing (QE). Such an outcome is seen as supportive for the spectrum of risky assets and risk-correlated currencies in that it would offer a lifeline to the world’s top consumer market amid overwhelming evidence of a broad-based global economic slowdown (at least) through the end of 2010. Expectations of renewed QE have been roundly damaging for the US Dollar given both the greenback’s inverse relationship with risk appetite as well as fears that the Fed’s policies may overshoot and let loose undesirable inflation, debauching the currency.
The whisper number circulating around the markets calls for $500 billion in additional asset purchases. This much has likely been priced in already and may not prove market-moving in and of itself. Should this materialize, the focus will fall on the language of the Fed statement as traders size up how much (if any)more QE the central bank plans to do and what parameters it is watching to guide its thinking. A dovish-leaning statement hinting the Fed is on standby with additional firepower promises to boost the spectrum of risky assets at the US Dollar’s expense; alternatively, should the central bank come off as uneasy or reluctant about greater stimulus, the opposite result can be expected. Needless to say, the same range of outcomes applies in the event that the asset purchase amount is more or less than is expected.
US stock index futures are understandably flat ahead of the Fed announcement, showing risk trends on pause until the FOMC sets the tone going forward, although FTSE 100 futures are up 0.2 percent ahead of the opening bell in London.
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