The EUR/CHF continued the heavy fluctuations last week within a limited range, and despite the downside bias for the pair, it ended almost flat.
Last week’s movements reflected a clear signal for the pair’s tendencies for now, which is the fact that the SNB has the biggest influence on the pair now and accordingly it continues to lack major momentum to move.
We saw strong gains for the euro versus majors on optimism that the announced measures by the EU will help contain the debt crisis, yet the pair was still biased to the downside and swissy remained strong as it gained grounds against the dollar.
The pair started to turn lower as speculation for the SNB to raise the floor receded and the pair is steady above 1.20. This week the market awaits major data and the volatility is ongoing, yet with the developments focused on the euro we still expect little major change on the pair unless anything new from the SNB is seen and accordingly on foreign currency reserves for October can affect the franc much.
From the euro area we have major data queued for release and most importantly will be the ECB rate decision, the first chaired by new President Mario Draghi. The market will also track the developments in Cannes in the G20 summit for any comments on the plan announced by Europe and how the global community intends to support after they said they are ready to help contain the crisis.
Other news from the euro area and the Swiss economy to affect the pair this week:
Other news from the euro area and the U.S. economy to affect the pair this week:
Monday October 31:
The week from the euro area starts with the CPI estimate for October at 10:00 GMT which is expected to ease back to 2.8% from 3.0%.
Also the euro area unemployment is due at the same time which is expected to hold at 1.0% in September.
Tuesday November 01:
Switzerland will release the Retail Sales for the year to September at 08:15 GMT after the previous month it was reported with 1.9% drop.
Also from Switzerland at 08:30 GMT we have the PMI Manufacturing for October hoping to see some improvement after the sector contracted the previous month as the index fell below 50 at 48.2.
Wednesday November 02:
The euro area final PMI Manufacturing for October is due at 09:00 GMT and expected unrevised at 47.3.
Thursday November 03:
The day will be dedicated to the first ECB, where new President Mario Draghi will chair his first policy meeting and the bank is expected to keep rates at 1.50% and the decision will be announced as usual at 12:45 GMT.
The decision will be followed by the usual press conference, but this time will be for Mario Draghi at 13:30 GMT as investors will be looking for any signals from the new president and the rhetoric that he will take from now on.
Friday November 04:
Switzerland will end the week with the foreign currency reserves for October at 08:00 GMT after it rose to a record the previous month of 282.4 billion.
As for the euro area, the week will end with the final PMI Services for October at 09:00 GMT which is expected steady at 47.2 and the Composite PMI which is also expected to remain unrevised at 47.2.
The euro area September producer price index is due at 10:00 GMT and expected with 0.3% rise on the month after 0.2% drop and on the year to ease to 5.8% from 5.9%.
The Australian currency, nicknamed Aussie, gained versus its major counterpart the US dollar after the European Finance Ministers announced a plan to contain the debt crisis, which supported the risk appetite and supported demand for high yielding currencies.
The Australian dollar soared to the highest level in more than seven weeks against the greenback on European optimism, supporting demand for Aussie. The EU leaders announced the plan that focused on bank recapitalization, 50% Greek bonds write-downs and expanding the firepower of the EFSF to one trillion euros.
This week the focus will be on the RBA rate decision alongside more Chinese manufacturing data that is Australia’s main export market. Despite the reported decline in inflationary pressures, the RBA is still expected to keep rates on hold and easing market tension will lower expectations for a cut for now.
Also the FOMC from the U.S. and the infamous October jobs report will have the main focus this week as investors need to see more positive signs to ensure sustained growth, especially as the GDP from the states last week helped as well in easing recessionary fears and the worries over the outlook.
Major highlights for this week that will affect the AUD/USD pair’s trading:
Monday October 31:
At 13:45 GMT, the U.S. economy will release the Chicago Purchasing Manager for October which is expected to ease to 59.0 from 60.4.
Tuesday November 01:
The Australian economy will release critical economic data that have a medium and high impact on the Australian currency’s movements, starting with the AiG Performance of Manufacturing Index at 22:30 GMT (Monday) after it recorded 42.3 the previous month.
At 00:30 GMT Australia will release the quarterly reading for house price index for the third quarter, which had a prior reading of -0.1%. On the year it had a previous of -1.9%.
At 03:30 GMT the RBA will announce the rate decision and the bank is expected to keep rates steady at 4.75%.
At 05:30 GMT we have the monthly RBA Commodity Price Index for October that has a medium impact on the market, which had a previous reading of 115.4, along with the annual RBA Commodity Index SDR that inclined 26.6%.
The U.S. economy will issue the Construction Spending for September at 14:00 GMT, where it’s expected to come at 0.3% from the prior reading of 1.4%.
The ISM Manufacturing for October will be released at the same time, and expected at 52.3 from the previous reading of 51.6.
Wednesday November 02:
At 00:00 GMT, Australia will release the monthly new home sales figures for September which had a prior reading of 1.1%.
At 00:30 GMT will be the release of the monthly building approvals for September, where the prior reading rose 11.4%, and on the year it had a previous of 5.5%.
The U.S. economy will release the ADP employment change for August at 12:15 GMT, where it’s expected at 101 thousands from the previous reading of 91 thousands.
At 16:30 GMT, the Federal Open Market Committee will announce its Rate Decision, which is expected to be steady between 0.0% and 0.25%; and at 18:15 GMT Fed’s Governor Bernanke will speak at the Fed Press Conference.
Thursday November 03:
At 22:30 GMT (Wednesday) Australia will release the AiG performance of service index for October which recorded 50.3 the previous month.
At 00:30 GMT we the Retail Sales for September, which had a prior reading of 0.6%, along with the quarterly reading for retail sales excluding inflation for the third quarter, while it had a prior reading of 0.3%.
On Thursday at 12:30 GMT, the U.S. economy will release the Non-Farm Productivity for the third quarter, where the preliminary reading is expected to come at 2.5% from the prior reading of –0.7%.
The Unit Labor Costs for the third quarter is expected to come at –0.4% from the previous reading of 3.3%.
At 12:30 GMT, U.S. economy will issue its weekly initial claims numbers, where the number of people filing for first-time claims for the state unemployment insurance increased 402 thousand last week.
The U.S. ISM Non-Manufacturing Composite for September will be released at 14:00 GMT, where it’s expected to come at 54.0 from the prior reading of 53.0.
Friday November 04:
The United States of America will release the non-farm payrolls at 12:30 GMT, which is expected to show that the U.S. economy added 100 thousand jobs during the month of October compared with the previous reading of 103 thousand jobs.
Unemployment rate during the month of October is expected to be steady at 9.1%, while the yearly average hourly earnings index had a previous reading of 1.9%.
The USD/CAD pair extended its drop last week for a fourth consecutive week amid rising optimism in markets after EU leaders agreed on plans to support Greece and ease the euro zone debt crisis, which boosted demand for higher yielding assets, leading the Canadian dollar to rise as a result, especially as commodities including crude oil prices gained as well, which provided the CAD with strong bullish momentum that pushed the USD/CAD pair further to the downside.
The USD/CAD pair though fluctuated heavily throughout last week, as the Bank of Canada left the benchmark interest rates unchanged at 1.00% in line with projections, however, the BOC signaled it could cut interest rates over the coming period, as the BOC revised their growth projections lower for 2011 and 2012, while also expecting inflation rates to ease to 1% by mid 2012 before rising back in 2013, which fueled projections that the BOC could cut its interest rates as soon as the next meeting, and that put downside pressure on the Canadian dollar earlier in the week. Nonetheless, the huge wave of optimism that spread through global markets as a result of the EU debt deal provided the CAD with huge bullish momentum to rise back against the USD.
The highly anticipated EU summit revealed the plans to ease the euro zone debt crisis, which included pledging more support to Greece in addition to agreeing 50% in writedowns to Greek debt, increasing the size of the European Financial Stability Facility EFSF to 1 trillion through leveraging of 4 to 5 times.
The EU deal was highly welcomed by participants around global markets, while data from the United States provided mixed results, where on one hand the Gross Domestic Product advanced estimate for the third quarter showed the U.S. economy expanded by 2.5%, following the prior expansion of 1.3% in the second quarter, while the income report showed personal income remained weak in September, while personal spending improved in line with projections, and the Fed’s favorite gauge for inflation, Core PCE showed inflationary pressures eased in September.
Meanwhile, important fundamentals will be released from all around the globe next week, where the focus next week will turn to Europe’s inflation rates, in addition to the European Central Bank’s rate decision, where the ECB is expected to leave the benchmark interest rates unchanged at 1.50%.
As for the United States, the week is full of important economic fundamentals, where the FOMC rate decision is expected to dominate the highlights early in next week, where some analysts argue that the Fed could embark on another round of quantitative easing, although majority in markets believe the Fed will keep the current monetary policy unchanged. Traders will be also eyeing the Fed’s Chairman Ben Bernanke, as he will deliver the Fed’s latest projections on economic growth, unemployment, and inflation.
Meanwhile, Canada will release the GDP and jobs reports this coming week, and we should expect the USD/CAD pair to fluctuate accordingly.
After that the attention will turn to the infamous jobs report from the United States, where U.S. employers are expected to add 100,000 jobs in October, compared with the prior increase of 103,000 jobs back in September, however, unemployment is still expected to remain unchanged at 9.1%, since the current rate of job growth remains insufficient to reduce unemployment rates.
Moreover, traders will be also eyeing the G20 meeting on Thursday and Friday, where the G20 delivered a strong statement at their previous meeting, as they committed more efforts to support EU leaders in finding a solution to the euro zone debt crisis.
If optimism persists in markets, it could push the USD/CAD pair further to the downside, but the outcome of the EU summit will be the major market mover. We should also note that the Bank of Canada will announce its decision on interest rates amid expectations the BOC will leave rates unchanged. Overall, we expect high volatility levels to continue to dominate markets next week, and accordingly, we could see the USD/CAD pair fluctuating heavily throughout next week.
Highlights for this week that will probably affect the USD/CAD pair’s direction are:
Monday October 31:
Canada will release the industrial product price index for September at 12:30 GMT, where the index is expected to rise by 0.1% following the prior rise of 0.5% in August, while the raw materials price index is expected to drop in September by 2.4% following the prior drop of 3.2% in August.
Canada will also release the Gross Domestic Product estimate for August, where GDP is expected to expand by 0.2%, compared with 0.3% in July, while compared with a year earlier GDP is expected to expand by 2.2%, compared with 2.3% in the prior estimate.
The United States will join the session with the Chicago purchasing manager at 13.45 GMT, with expectations that the indicator could have retreated to 59.0 from 60.4 in October.
Tuesday November 01:
The United States will start the day at 14:00 GMT with the construction spending figures for September, with expectations that the index will expand by 0.3% from the previous 1.4% expansion.
The ISM manufacturing will also be released at 14:00 GMT, where the indicator is expected to show improvement to 52.3 from 51.6 in October.
Wednesday November 02:
The United States will join the session at 12:15 GMT with the ADP employment change for October, as employment is expected to increase by 101 thousand jobs from 91 thousand.
At 16:30 GMT the United States will release the FOMC rate decision, with expectations for a steady rate of 0.25%.
At 18:15 GMT, the Fed’s Chairman Ben Bernanke will speak at a Fed Conference to discuss the latest projections and outlook for the U.S. economy.
Thursday November 03:
The United States will start the day at 12:30 GMT with the nonfarm productivity for the third quarter in a preliminary reading, which is expected to expand by 2.5% from the prior drop of 0.7%. In addition, the unit labor costs for the same period is expected to drop by 0.4% from the previous expansion of 3.3%.
The United States will also provide markets with the initial jobless claims (October 28), which was 402 thousand in last week.
At 12:45 GMT the European Central Bank will announce interest rates, which is expected unchanged at 1.50%.
At 14:00 GMT theUnited Stateswill release the ISM non-manufacturing composite for October, which could have improved to 54.0 from 53.0.
Moreover, the United States will release the factory orders index for September, with expectations for 0.1% further drop from the previous 0.2%.
Friday November 04:
Canada will release the jobs report for October at 11:00 GMT, where the unemployment rate is expected to remain unchanged at 7.1% in line with the prior estimate, and the net change in employment is expected to increase by 20.0K jobs in October, compared with the prior rise of 60.9K jobs in September.
Canada will release the building permits for September at 12:30 GMT, where building permits fell by 10.4% in August.
At 12:30 GMT theUnited Stateswill join the session with the monthly jobs report for October, where the change in nonfarm payrolls is expected at 100 thousand new jobs from 103 thousands in September. In addition, the unemployment rate is expected unchanged at 9.1%.
Canada will release the Ivey PMI for the month of October at 14:00 GMT, where the Ivey PMI is expected to ease to 54.5 from the prior estimate of 55.7 back in September.
New Zealand dollar climbed last week against the most major currencies as measures to contain the debt crisis in Europe fueled optimism and a rally across the board which supported kiwi and weakened the dollar. Demand for the kiwi was supported after Reserve Bank Governor Alan Bollard signaled that borrowing costs may need to rise as the domestic economy rebounds next year.
Kiwi increased against its major currencies, while it continued its upside movement versus the US dollar after the Asian stock markets rose, increased the demand for higher yielding currencies.
The commodities prices increased, which supported the New Zealand’s currency to gain versus the American dollar, also it increased after data showed consumer confidence rose.
Meanwhile, the New Zealand economy is benefiting from demand from developing nations, where the demand for raw materials is increasing, especially from China, which is supporting the manufacturing sector and accordingly Kiwi’s upside movement.
This week we will focus on the market sentiment and developments in Europe that keeps markets sensitive and also turn to the United States for key data. From New Zealand the labor data are also the most critical for the week as we assess the ongoing recovery in the nation.
The FOMC from the U.S. and the infamous October jobs report will have the main focus this week as investors need to see more positive signs to ensure sustained growth, especially as the GDP from the states last week helped as well in easing recessionary fears and the worries over the outlook.
Major highlights for this week that will affect the NZD/USD pair’s trading
Monday October 31:
The New Zealand economy is to start the week’s fundamental data with the building permits index for September at 21:45 GMT (Sunday), after in August it surged 12.5%.
At 02:00 GMT, New Zealand will issue the money supply M3 for the year ending September where the preceding reading inclined 5.5%.
At 13:45 GMT, the U.S. economy will release the Chicago Purchasing Manager for October which is expected to ease to 59.0 from 60.4.
Tuesday November 01:
At 21:45 GMT (Monday) NZD average hourly earning for the third quarter is due after it recorded a 1.2% rise in the second quarter.
The U.S. economy will issue the Construction Spending for September at 14:00 GMT, where it’s expected to come at 0.3% from the prior reading of 1.4%.
The ISM Manufacturing for October will be released at the same time, and expected at 52.3 from the previous reading of 51.6.
Wednesday November 02:
The U.S. economy will release the ADP employment change for August at 12:15 GMT, where it’s expected at 101 thousands from the previous reading of 91 thousands.
At 16:30 GMT, the Federal Open Market Committee will announce its Rate Decision, which is expected to be steady between 0.0% and 0.25%; and at 18:15 GMT Fed’s Governor Bernanke will speak at the Fed Press Conference.
Thursday November 03:
On Thursday eyes will be focused on the most important data this week from New Zealand. The unemployment figures for the third quarter at 21:45 GMT. Unemployment is expected to fall to 6.4% from 6.5% and employment change is expected to rebound with 0.6% after it remained unchanged the previous quarter.
At 12:30 GMT, the U.S. economy will issue the Non-Farm Productivity for the third quarter, where the preliminary reading is expected to come at 2.5% from the prior reading of – 0.7%.
The Unit Labor Costs for the third quarter is expected to come at –0.4% from the previous reading of 3.3%.
At 12:30 GMT, U.S. economy will issue its weekly initial claims numbers, where the number of people filing for first-time claims for the state unemployment insurance increased 402 thousand last week.
The U.S. ISM Non-Manufacturing Composite for September will be released at 14:00 GMT, where it’s expected to come at 54.0 from the prior reading of 53.0.
Friday November 04:
The United States of America will release the non-farm payrolls at 12:30 GMT, which is expected to show that the U.S. economy added 100 thousand jobs during the month of October compared with the previous reading of 103 thousand jobs.
Unemployment rate during the month of October is expected to be steady at 9.1%, while the yearly average hourly earnings index had a previous reading of 1.9%.
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