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BoE is not ‘Fed light’: Expect first hike in Q1 17 – Danske Bank

Research Team at Danske Bank, notes that the Bank of England has made it clear that it is definitely not ‘Fed light’.

Key Quotes

“There are many reasons for the BoE to stay on hold for a long time: subdued wage inflation, ECB on an easing bias and Brexit uncertainties to mention a few.

As a consequence, we have moved our call for the first BoE hike to Q1 17, probably in February (previously Q2 16, probably in May).

We have lowered our UK interest rates forecasts across the curve but we still project higher UK interest rates over the medium-term horizon as the BoE is priced too dovishly.

We see EUR/GBP trendless and volatile in the coming months but stress that risks are skewed to the upside around the time of the EU in/out referendum.”

Research Team at Danske Bank, notes that the Bank of England has made it clear that it is definitely not ‘Fed light’.

(Market News Provided by FXstreet)

Foreign exchange market. Asian session: the U.S. dollar gained slightly

Economic calendar (GMT0):

Time/ Region/ Event/ Period/ Previous/ Forecast/ Actual

00:30 Australia Retail Sales, M/M December 0.4% 0.5% 0.0%

00:30 Australia RBA Monetary Policy Statement

05:00 Japan Leading Economic Index (Preliminary) December 103.2 Revised From 103.5 102.8 102.0

05:00 Japan Coincident Index (Preliminary) December 111.9 111.2

07:00 Germany Factory Orders s.a. (MoM) December 1.5% -0.5% -0.7%

The U.S. dollar climbed against the euro after the recent decline. This week the dollar index, which measures the value of the greenback against a basket of ten major currencies, fell by 2.4% amid speculation that the Federal Reserve will delay its next rate hike.

Today market participants are waiting for U.S. employment data. The number of employed is expected to have grown by 190,000 in January compared to a rise of 292,000 in December. The U.S. Labor Department reported that the number of initial jobless claims rose by 8,000 to 285,000 in the week ending January 30. The reading exceeded expectations for growth to 280,000. The number of claims has remained below 300,000 for 48 weeks in a row (the longest series since 1970s).

The Australian dollar fell after the Reserve Bank of Australia cut its short-term inflation forecast and 2017 GDP forecast. The GDP is expected to expand by 3% in 2017 compared to an earlier forecast of a 3.5% gain. Inflation is likely to bу 1.5% in 2016 compared to 2.0% expected earlier. The central bank’s inflation target range is 2%-3%.

Retail sales volume was unchanged in Australia in December, while economists had expected growth of 0.5%. Sales expanded by 0.4% in the previous month.

EUR/USD: the pair fluctuated within $1.1185-15 in Asian trade

USD/JPY: the pair traded within Y116.55-00

GBP/USD: the pair fell to $1.4545

The most important news that are expected (GMT0):

(time / country / index / period / previous value / forecast)

07:45 France Trade Balance, bln December -4.63 -4.4

13:30 Canada Trade balance, billions December -1.99 -2.2

13:30 Canada Unemployment rate January 7.1% 7.1%

13:30 Canada Employment January 22.8 5.5

13:30 U.S. Average hourly earnings January 0% 0.3%

13:30 U.S. Average workweek January 34.5 34.5

13:30 U.S. International Trade, bln December -42.37 -43

13:30 U.S. Unemployment Rate January 5% 5%

13:30 U.S. Nonfarm Payrolls January 292 190

15:00 Canada Ivey Purchasing Managers Index January 49.9 50

20:00 U.S. Consumer Credit December 13.95 16

GBP/USD extends post-BOE retreat to 1.4550

The offered tone around the GBP keeps growing bigger as we head into the early European trades, now pushing GBP/USD to fresh session lows.

GBP/USD eyes Thursday’s low

The GBP/USD pair drops -0.23% and trades near fresh session lows reached at 1.4551 few minutes ago. The cable extended the retreat from post-BOE highs and ran through fresh sellers near 1.4610 region in overnight trades, knocking-off GBP/USD further towards Thursday’s low posted at 1.4527.

Mixed BOE event that took place yesterday, with the BOE Chief Carney sounding more hawkish, while the lone hawk Ian McCafferty switching sides for no rate hike as seen in the voting composition, left markets unimpressed somewhat. Hence, the cable is witnessing a gradual descent and has almost reversed the entire BOE inspired rally to 1.4667 highs.

Amid a data-empty UK docket today, attention shifts towards the key US non-farm payrolls data for fresh incentives on the major.

GBP/USD Levels to consider

The pair has an immediate resistance at 1.4600 (round number), above which 1.4667 (post-BOE highs) would be tested. On the flip side, support is seen at 1.4527/17 (Feb 4 Low/ 5-DMA) below which it could extend losses to towards 1.4476/67 (Jan 13 High/ 1h 100-SMA).

The offered tone around the GBP keeps growing bigger as we head into the early European trades, now pushing GBP/USD to fresh session lows.

(Market News Provided by FXstreet)

Some further policy easing may be needed over the coming year – RBNZ’s Wheeler

RBNZ Governor Wheeler was on the wires last minutes and reiterated, “If concerns deepen around the prospects for the global economy and its impact on New Zealand, some further policy easing may be needed over the coming year.”

RBNZ Governor Wheeler was on the wires last minutes and reiterated, “If concerns deepen around the prospects for the global economy and its impact on New Zealand, some further policy easing may be needed over the coming year.”

(Market News Provided by FXstreet)