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Weekly analysis

AUD: Will the downtrend continue?

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This week will be of high importance for AUD/USD currency pair. According to the weekly chart, the downtrend might continue in the medium term. The fundamental data from Australia and the U.S. might also reflect a downtrend continuation. The Reserve Bank of Australia (RBA) is expected to keep rates steady at a historical low of 1.5 percent. Australia's current account deficit doubled in the June quarter, blowing out to $9.6 billion. Today’s data are expected to be $8.8 billion. The retail sales will remain unchanged at 0.3%, according to the data. Gross domestic product growth for the quarter is now likely to be 0.7 percent, less than in the previous quarter, 0.8%. According to the expectations, U.S. unemployment rate should remain unchanged at 4.1%. The U.S. is expected to gain 198K in November, fewer than 261K in October.

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What will happen to Gold, based on Jerome Powell’s speech?

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The precious metal has been supported recently due to the bearishness around the U.S. dollar based on Fed's cautious rhetoric when it comes to raising interest rates.
The DXY was down to near a two-month low last week, losing -0.4% on the session and closing up at around 92.80.
Gold prices rose today as the dollar touched a two-month low versus the euro, but gains were limited despite a retreat in Asian equities led by China.
However, we think it’s a high probability this week Gold to fall, as the USD will rise based on tomorrow’s potential dovish statement of Jerome Powell, the next Federal Reserve chairman.

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EUR/USD: Why you should prepare for volatility this week

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This week could be particularly interesting to keep an eye on the most widely traded FX pair. If you have trading positions on EUR/USD, you should focus on FOMC minutes, Wednesday, and on ECB minutes, Thursday.
Today’s Mario Draghi speech might also cause a short-term volatility. Tomorrow, Janet Yellen, Chair of the Federal Reserve, will participate in a panel discussion at the New York University Stern School of Business.Friday. According to most of the analyst, United States Manufacturing PMI is expected to be 55 and will meet expectations.
Our traders consider that EUR/USD pair will rise in the medium term as there are signs of more European economic growth.

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Japan Q3 GDP: What will happen to the USD/JPY pair and the Nikkei 225 index?

 

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Gross Domestic Product of Japan is expected to grow 0.6% in the last quarter of 2017 compared to the previous quarter. Most of the economists believe that the Nikkei 225 index will continue to rise based on Japan’s great data.
Another important data, this time for the USD/JPY pair, will be US retail sales on Wednesday. According to the forecast, US retail sales might stagnate (0.0%).
U.S. retail sales were up 1.6% in September following an upwardly revised decline of 0.1% in August, which was negatively affected by hurricanes Harvey and Irma.

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What will happen to the canadian dollar after the BoC Governor’s speech ?

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The Canadian dollar might be lower on Tuesday after the Bank of Canada (BoC ) Governor’s speech in Montreal.
Bank of Canada Governor Stephen Poloz will have a speech tomorrow at at an event hosted by the Chartered Financial Analyst Society of Montreal and the Montreal Council on Foreign Relations.
The most of the analysts had widely predicted Bank of Canada Governor Stephen Poloz would keep the monetary policy on hold.

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Will Eurozone data outshine U.S. data? (October 30- November 3)

  

 

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EUR/USD currency pair might rise in the first part of the week, according to preliminary estimates. This is because Eurozone GDP might rise at 2,3% year-on-year (actual 2.1% year-on-year) and the Consumer Price Index might rise at 1.6% year on year (actual 1.5% year-on-year).

However, a stream of positive data on the U.S. economy might continue to flow in, at the end of this week. The EUR/USD pair might assume a bearish bias after the release of the U.S. data.According to the analysts estimates, U.S. ADP might add 200k and NFP might add 310k new jobs. The unemployment rate is expected to remain unchanged at 4.2%.

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NZD falls sharply after the new coalition

The New Zealand Dollar slumped last week after New Zealand First Party agreed to form a new government with Labour Party leader Jacinda Ardern (37 years), ending the National Party’s decade in power.
The result deals a blow to incumbent Prime Minister Bill English, who has served three terms and whose party secured a greater share of the vote than Labour and Greens put together.
The announcement of the new government drove the New Zealand dollar down around 1.7 percent to its lowest levels in four and half months, as markets worried about more protectionist policies.
“The chances of a sharper slowdown are higher under Labour”
Labour had an even chance as National to form a government after inconclusive elections on Sept. 23 gave neither party enough seats to form a majority in parliament.“Their tighter immigration proposals and more restrictive housing policy all suggest economic growth could be a little bit weaker than the Nationals’ policy,” according to Paul Dales, chief Australia and New Zealand economist at Capital Economics. “The chances of a sharper slowdown are higher under Labour”. Record net migration of more than 70,000 annually has fuelled demand for housing in New Zealand, far outstripping supply and pushing house prices prohibitively higher, pricing ordinary New Zealanders out of the housing market.
A more restrictive trade could hurt New Zealand’s reputation
Market’s had feared a Labour, New Zealand First and Green Party coalition the most because this grouping is likely to pursue more aggressive reforms of the Reserve Bank of New Zealand and a sharp reduction in the number of migrants who are granted work visas.
More restrictive trade and foreign ownership could also hurt New Zealand’s reputation as an open economy and antagonize the likes of China, a key trading partner. Labour said it would stick to its campaign promise to change the central bank's mandate, seek to renegotiate the Trans-Pacific Partnership trade deal and prioritize an effort to ban foreign ownership of certain types of housing.
Trade between the two countries has grown to more than NZ$20 billion ($14.4 billion) a year and Chinese President Xi Jinping called the relationship “unprecedented” in its depth.

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UK: Should interest rates go up as Brexit approaches?

 

Britain’s economy grew at its slowest pace since 2013 in the 12 months after Brexit vote. The Bank of England might prepare to raise interest rates for the first time in a decade.

The world’s fifth-biggest economy was just 1.5 percent bigger than a year earlier in the second quarter. The weakest expansion in more than four years and down from a rate of 1.8 percent in the first three months of the year.

Britain’s Office for National Statistics had previously estimated second-quarter growth at 1.7 percent. None of the economists had expected such a big downward revision.

Sterling fell after the UK data

The recent data also showed a monthly fall in output for the services sector in July, boding poorly for third-quarter growth. Sterling fell after the data and prompted some economists to reconsider their prediction of a rate hike at the end of the BoE’s next meeting on Nov. 2.

BoE Governor Mark Carney said last week the economy was on track for a rate hike “in the relatively near term”, two weeks after the BoE jolted markets by flagging a rate rise “in the coming months,” despite weak growth this year. The BoE has downgraded its estimate of how fast Britain’s economy can grow without generating excess inflation because of the impact of Brexit.

The U.S. economy grew faster

In the same time, the U.S. economy grew a bit faster than previously estimated in the second quarter, recording its quickest pace in more than two years, Gross domestic product increased at a 3.1 percent annual rate in the April-June period, the Commerce Department said in its third estimate on Thursday. The upward revision from the 3.0 percent rate of growth reported last month reflected a slightly faster pace of inventory investment.

Growth last quarter was the quickest since the first quarter of 2015 and followed a 1.2 percent pace in the January-March period. Economists had expected that the second-quarter GDP growth rate would be unrevised at 3.0 percent.

The U.S. still have a strong labor market despite hurricanes

Estimates for the growth rate in the July-September period are just above 2.2 percent.Harvey and Irma continue to impact the labor market and are expected to cut into job growth this month. In a third report, the Labor Department said initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 272,000 for the week ended Sept. 23. Claims have now been below the 300,000 threshold, which is associated with a robust labor market, for 134 straight weeks. That is the longest such stretch since 1970, when the labor market was smaller.

Yellen: FED needs to continue gradual rate hikes

Prices for U.S. Treasuries held losses after the data and the dollar fell to a session low against a basket of currencies. U.S. stock index futures were trading lower. The Federal Reserve needs to continue gradual rate hikes despite broad uncertainty about the path of inflation, Fed Chair Janet Yellen added that acknowledged the central bank’s struggles to forecast one of its key policy objectives.

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Gold falls to near 4-week low while the dollar, banks rally on rate outlook

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The Federal Reserve announced it would begin selling off its $4.5 trillion debt that it accumulated since 2008 by buying up investors’ toxic mortgage and T-bonds at above market rates.
Chair Janet Yellen set October as the start of the unwinding of the central bank’s balance sheet and stuck to the predicted one rate hike left for 2017. U.S. equity markets continued to churn in one of the tightest ranges in history. The investors are reluctant to add to bets that have pushed benchmark indexes to records.
Gold fell about 1 percent to its lowest in nearly four weeks on Thursday. Before the Federal Reserve announcement, the dollar had its worst slump, battered by political drama in Washington and shifting bets on central-bank policy. Managers of $3 trillion say the carnage has gone on long enough.

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When will UK interest rates rise?

Britain’s economy likely expanded by 0.4 percent in the three months to August, speeding up from 0.2 percent in the three months to July but below its long run trend of quarterly growth of about 0.6 percent.

The Bank of England may raise interest rates in early 2018, the National Institute of Economic and Social Research (NIESR) estimated last week.“If indeed economic growth is sustained at the 0.4-0.5 percent level, we prescribe a 25 basis-point increase in Bank Rate in the first quarter of 2018 to reverse some of the emergency stimulus that the Bank of England injected into the economy last August in response to the EU referendum result” said Amit Kara, head of UK macroeconomic forecasting at NIESR.

 The British public’s expectations for inflation remained stable in the three months to early August, a Bank of England survey showed last week, despite this year’s rise in price growth after the Brexit vote.

British consumer price inflation held steady at 2.6 percent in July after reaching 2.9 percent, its highest level in nearly four years, in May. Britain’s Brexit-bound economy is showing little sign that its leaden performance in the first half of 2017 is improving much.

The Office for National Statistics said manufacturing output rose 0.5 percent in July, above economists’ forecasts in a Reuters poll, after car production reversed a dip in the previous month.But growth in the broader measure of industrial output slowed to 0.2 percent. This is in line with forecasts as a lack of summer maintenance of North Sea oil fields boosted production more than usual for the time of year.

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