The EUR/USD pair ended a strongly bullish week, supported by the European summit’s cheerful results, which eased jitters and rising debt woes and could support the return of confidence to the market, where European leaders have finally found common grounds and provided markets with a comprehensive plan to contain the debt crisis and prevent the contagion from spreading into larger economies.
The sentiment improved in the market and optimism was seen after leaders agreed on 50% haircut on Greek bonds, and expanded the firepower of the European Financial Stability Facility to one trillion euros. Leaders have also agreed to increase the core capital requirements for banks to 9% by mid 2012 in attempts to strengthen the banking sector and secure European banks from the debt crisis.
This week, we expect volatility and heavy fluctuations to dominate the markets and the EUR/USD pair precisely,especially after the strong rally, awaiting heavy fundamentals from Europe and the world’s largest economy with the European Central Bank rate decision, the FOMC rate decision, the U.S. jobs report and finally the G20 leaders’ two-day meeting in France on November 3 and 4.
This week, all eyes will be focused on the European Central Bank and the Federal Reserve, awaiting the steps and actions to be taken by policy makers to support growth and revive recovery, with expectations that both of the central banks will leave rates unchanged, especially when the U.S. economy grew 2.5% in the third quarter, while the European leaders started to find solutions to overcome the debt crisis and support the economy.
We recommend caution despite the optimism seen during the past week, where further details on the procedures taken by European leaders are required which remains a missing link for the market, along with implementing the measures which is also not set yet…
Other news from the euro area and the U.S. economy to affect the pair this week:
Monday October 31:
The euro zone will starts the week at 10:00 GMT with the consumer price index annual estimate for October, which is expected to decline to 2.8% from 3.0%.
The euro zone will also release the unemployment rate at 10:00 GMT, with expectations that unemployment lingered at 10% in September.
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 1:
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 2:
Germany will start the session at 08:55 GMT with the unemployment figures for October, where the unemployment change gauge is predicted to show drop of 10 thousands from the previous 26 thousands. In addition, the unemployment rate is expected unchanged at 6.9%.
At 08:55 GMT Germany will also release the PMI manufacturing index final reading for October with expectations for unrevised index of 48.9.
At 09:00 GMT the euro zone will release the PMI manufacturing index final reading for October, where the index is expected to linger at 47.3.
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 theUnited Stateswill 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 3:
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 thousands 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 the United States will 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 4:
Germany will start the day at 07:55 GMT with the final reading of the PMI services indicator for October, where the indicator is expected to linger at 52.1.
The euro area will join the session at 09:00 GMT with the final reading of the PMI composite and service for October, where the composite indicator previous reading was 47.2, while the PMI services is projected unchanged at 47.2.
At 10:00 GMT the euro zone will provide the monthly and annual PPI indexes for September, with expectations that the monthly index could have expanded by0.3% from the previous drop of 0.1%, while the annual index is expected lower at 5.8% from 5.9%.
At 11:00 GMT Germany will release the Factory orders index for September, where the annual non-seasonally adjusted index is expected to improve by 7.9% from 3.9%, while the seasonally adjusted monthly index is predicted steady from a 1.4% previous drop.
At 12:30 GMT the United States will 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%.
The pound continued its rise against the dollar to reach the highest level in seven weeks as the improvement in the sentiment damped demand on the dollar as a favorite refuge. The pair was affected by the optimism that prevailed in markets after the debt deal reached by European leaders during their meeting in Brussels and after upbeat U.S. data.
European leaders agreed to make private sector bondholders bare 50% of losses of Greek debt to cut it by 100 billion euros, while leveraging the firepower of the EFSF to 1 trillion euros from the current 440 billion euros.
On the other hand, data from the U.S. releases last week showed progress; especially growth data which showed the U.S. economy grew 2.5%, the fastest pace in a year, from the second quarter’s expansion of 1.3%.
This week, the main highlight will be on the infamous jobs report from the US as it will give an update regarding the status of the labor sector, after September’s report had shown better-than-expected reading. Yet, before the release of the jobs report eyes will be growth figures from the United Kingdom.
For this week, the release of the data will be as follows:
Monday October 31:
As of 08:30 GMT,UK mortgage approvals will retreat to 50.5 thousands in Sep. from 52.4 thousands in Aug., according to median estimates, where the U.S. will release Chicago Purchasing Manager at 13:45 GMT which is predicted to retreat to 59.0 in October form 60.4 a month earlier.
Tuesday November 1:
The British economy will release important data starting with nationwide house prices for October, yet more focus will be at U.K. PMI manufacturing for Oct., due at 09:30 GMT, which is expected to show an ease in expansion to 50.0 from the 51.1 recorded in September. However, the main highlight of the day will be GDP advanced figures for the third quarter due at 09:30 GMT. The data may show that the U.K. expanded 0.3% in the third quarter compared with the 0.1% expansion in the second quarter, while on the annual basis the reading will record an expansion of 0.3 from the prior 0.6%.
In theU.S., the main focus will be on ISM manufacturing for Oct., as of 14:00 GMT, which is predicted to show a widening expansion to 52.3 from 51.6 in September.
Wednesday November 2:
As of 09:30 GMT, the U.K. will release PMI construction for the month of October, where the U.S will release important data. As of 11:00 GMT, MBA mortgage approvals for Oct. 28 will be available. At 12:15 GMT, the U.S economy is to release ADP employment change where it is expected to show an increase to 101,000 in Oct. from the previous 91,000. Thereafter, specifically at 16:30 GMT, eyes will be on FOMC rate decision which is expected to show no change as the Fed will probably leave borrowing cost at its low level of 0.25%.
Thursday November 3:
Services gauge for the U.K. will show a drop to 52.0 in October from the prior 52.9, as of 09:30 GMT.
On the other hand, the U.S. economy will release initial jobless claims for the week ended Oct. 28 and continuing claims for the week ended Oct. 21 will be available at 12:30 GMT, followed by ISM non-manufacturing for Oct., as of 14:00 GMT, which is predicted to show widening expansion to 54.0 from the prior 53.0.
Friday November 4:
Amid the absence of data from the U.K., the main focus of the week which is the awaited non-farm payrolls report from theUnited Stateswill be due at 12:30 GMT. Expectations refer that change in non farm payrolls will retreat to 100,000 in October, lower than the previous 103,000 while unemployment will stagnate at 9.1%.
The USD/CHF showed decline for the third week as the improvement in the sentiment damped demand on the dollar as a favorite refuge. The pair was affected by the optimism that prevailed in markets after the debt deal reached by European leaders during their meeting in Brusselsand after upbeat U.S. data.
European leaders agreed to make private sector bondholders bare 50% of losses of Greek debt to cut it by 100 billion euros, while leveraging the firepower of the EFSF to 1 trillion euros from the current 440 billion euros.
On the other hand, data from theU.S.releases last week showed progress; especially growth data which showed the U.S. economy grew 2.5%, the fastest pace in a year, from the second quarter’s expansion of 1.3%.
This week, the main highlight will be on the infamous jobs report from the US as it will give an update regarding the status of the labor sector, after September’s report had shown better-than-expected reading. Yet, before the release of the jobs report eyes will be on manufacturing data from both economies.
For this week, the release of the data will be as follows:
Monday October 31:
The week starts with the release of no data from the Swiss economy, where theU.S.will release Chicago Purchasing Manager at 13:45 GMT which is predicted to retreat to 59.0 in October form 60.4 a month earlier.
Tuesday November 1:
The Swiss economy will release retail sales for the year ending Sep. at 07:15 GMT followed by PMI manufacturing for Oct., as of 07:30 GMT.
In the U.S., the main focus will be on ISM manufacturing for Oct., as of 14:00 GMT, which is predicted to show a widening expansion to 52.3 from 51.6 in September.
Wednesday November 2:
While the Swiss economy lacks fundamentals, the U.S will release important data. As of 11:00 GMT, MBA mortgage approvals for Oct. 28 will be available. At 12:15 GMT, the U.S economy is to release ADP employment change where it is expected to show an increase to 101,000 in Oct. from the previous 91,000. Thereafter, specifically at 16:30 GMT, eyes will be on FOMC rate decision which is expected to show no change as the Fed will probably leave borrowing cost at its low level of 0.25%.
Thursday November 3:
The Swiss economy release UBS real estate bubble index at 07:00 GMT, yet it is not expected to have a slight effect on the pair’s movements.
On the other hand, the U.S. economy will release initial jobless claims for the week ended Oct. 28 and continuing claims for the week ended Oct. 21 will be available at 12:30 GMT, followed by ISM non-manufacturing for Oct., as of 14:00 GMT, which is predicted to show widening expansion to 54.0 from the prior 53.0.
Friday November 4:
First, the Swiss economy will release foreign currency reserves at 08:00 GMT, and then the main focus of the week which is the awaited non-farm payrolls report from theUnited Stateswill be due at 12:30 GMT. Expectations refer that change in non farm payrolls will retreat to 100,000 in October, lower than the previous 103,000 while unemployment will stagnate at 9.1%.
The USD/JPY pair ended last week with losses, where the Japanese yen dominated the pair’s movements and drove the pair down to its post-war levels. The BOJ’s stimulus and the European summit didn’t affect the pair, and it continued to advance versus the weak dollar despite the improvement in the sentiment.
The EU second crisis summit held in Brussels showed that the EU leaders will increase the European Financial Stability Facility by 1 trillion euro, in addition announced 50% haircut of Greek bondholders.
On the other hand, the BOJ kept the interest rate steady near zero level, in addition to expand the asset-purchase fund by 20 trillion yen and the credit-loan program to 55 trillion yen.
The Japanese yen retreated against European currencies but it held its gains against the dollar, since greenback dropped against other major currencies with the return of confidence to financial markets after the EU announcement.
The BOJ didn’t intervene till now in the FX market, but the bank indicated that the current currency levels in addition to the EU debt crisis are hurting the Japanese economy, which kept uncertainty into the yen’s trading
This week we need to focus on the G20 meeting as the Japanese finance minister assured that the yen’s excessive gains will be discussed and the nation cannot accept further currency gains and high volatility that is affecting the economy.
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 USD/JPY pair’s trading:
Monday October 31:
On Monday at 05:00 GMT, Japan will release the Construction Orders for September where the previous reading was 9.3%.
The annual Housing Starts for September will be also released at 05:00 GMT, which is expected to drop to 0.906 million from the prior reading of 0.934 million.
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 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 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%.
 |
"Simply a Must Read for Every Serious Forex Beginner" Available at Amazon Now also for Kindle
|
