Thursday 6th November: European Open Briefing

Global Markets:

• Asian stock markets: Nikkei down 0.70 %, Shanghai Composite dropped 0.40 %, Hang Seng and ASX declined 0.20 %
• Commodities: Gold at $1144 (-0.10 %), Silver at $15.36 (-0.50 %), Crude Oil at $78.90 (+0.30 %)
• Rates: US 10 year yield at 2.334, UK 10 year yield at 2.263, German 10 year yield at 0.827

News & Data:

• Australia Employment Change 24.1k, Expected: 20k, Previous: -23.7k
• Australia Unemployment Rate 6.2 %, Expected: 6.2 %, Previous: 6.2 %
• Australia Participation Rate 64.6 %, Expected: 64.5 %, Previous: 64.5 %
• Japan Leading Index 105.6, Expected: 105.5, Previous: 104.4
• Japan Coindicent Index 1.4 %, Previous: -1.4 %

Markets Update:

It’s ECB day! Most analysts expect that the ECB will not introduce broad-based QE at this meeting, as the bank is facing political pressure on that matter. A recent Reuters report said that some members were unhappy with Draghi’s leadership style and that 7 to 10 oppose a QE programme, including Germany. Where the Euro is heading to today will depend on the hints Draghi will give regarding the possbility of such a programme. If today’s actions largely hint towards future quantitative easing, the Euro will come under renewed pressure. On the other side, if this meeting will prove as non-event, we could see a short squeeze and EUR/USD rallying above 1.2650.

Overnight, the focus in the FX market was on USD/JPY. The pair rallied up to 115.50 and then suddenly crashed 100 pips within less than an hour. It hit a low of 114.10 and is consolidating around 114.30 as we are heading into the London open. The market is rather clueless what happened earlier. Some were mentioning sovereign names as noted sellers above there, but jittery amongst speculators and poor liquidity seems like the more likely reason. Key support levels seen at 113.80 and 113.20. To the topside, resistance lies at 115.20 and 115.50.

Keep an eye on EUR/CHF as well. The pair is again approaching the 1.2030 level and looked well offered in the past few sessions. We have yet to hear of any SNB activity, but some of the Swiss banks suggest the bank could get already active around 1.2020, should the pair trade there.

The USD/JPY crash has benefited commodity currencies. AUD/USD rallied to 0.8620 overnight, but dealers report decent offers from macro funds into the 0.8650 level. USD/CAD is a tad weaker as oil prices have bounced, trading at 1.1380 currently. Support noted at 1.1340, while 1.1460 is the key short-term resistance level.

Upcoming Events:

• 07:00 GMT – German Factory Orders (2.3 % MoM)
• 09:30 GMT – UK Industrial Production (0.4 % MoM, 1.5 % YoY)
• 09:30 GMT – UK Manufacturing Production (0.3 % MoM, 2.8 % YoY)
• 12:00 GMT – Bank of England Interest Rate Decision
• 12:45 GMT – ECB Interest Rate Decision
• 13:30 GMT – ECB Press Conference
• 13:30 GMT – US Initial Jobless Claims (285k)
• 13:30 GMT – Canadian Building Permits (6.0 % MoM)
• 15:00 GMT – Canadian Ivey PMI (57.0)

Source:: Thursday 6th November: European Open Briefing