Bullet Report – Dollar Trades at 7 month Highs. An action-packed week ahead

The week ahead is packed with important news, including 2 Central Bank meetings and rate decisions. Bank of Canada and the ECB are both expected to leave their monetary policies unchanged. Housing data as well as Inflation data will be released from the US, while the UK will release CPI, Retail Sales and job data. The markets will again be looking for a possible impact of Brexit and thus the possibility for more GBP weakness. Last week, the USD Index posted new highs as the probability of a December rate hike jumped to over 70%. Today, the main focus will be on the US industrial production figures from September and ion Fed members Stanley Fischer speech.

Currencies: The USD Strengthened on Friday despite relatively week data from the US, as the Currency was supported from Fed member Eric Rosengreen on Friday saying that the market’s pricing of a December hike (currently around 66%) sounds about right and that the FOMC might hike rates faster than the market is pricing in. EURUSD slipped to a 2,5-month low of 1.0964 while the USDJPY traded near its 2.5-month high of 104.62, at 104.36. Also notable is the Continued depreciation of the CNY (Chinese Yuan) at 6.74, a new 10 months high.

Stocks: Markets are flat in Asia with Nikkei up 0.1% Shanghai +0.15%. Last week, U.S. stocks were higher after the close on Friday, as gains in the Technology, Financials and Industrials sectors led shares higher. At the close in NYSE, the Dow rose 0.22%, while the added 0.02%, and the NASDAQ gained 0.02%. The Dow Jones, while ending Thursday well off its early triple-digit decline, fell for the sixth time in nine days to close at its lowest level in 2½ weeks.

Oil and Gold: Gold might be up 18% for the year, but the first full week of October marked its worst 7-day performance in over three years; it also posted a 3-month loss of nearly 6% on a continuous basis. The yellow metal trades at $1253, not far away from its recent lows at $1241. Crude futures fell in early Asian trade Monday, dragged lower by the increase in active oil rigs in the U.S. and a stronger Dollar. As oil is traded in dollars, a stronger dollar makes oil more expensive for traders holding a different currency. Even though OPEC members reached a preliminary agreement to cut output to 33 million barrels a day from the current 33.4 million barrels a day last month, market participants have reacted with skepticism as OPEC members have a very bad record of not disclosing their true production levels.

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