[EUR - ECB Press Conference] = The press conference is about an hour long and has 2 parts - first a
prepared statement is read, then the conference is open to press
questions. The questions often lead to unscripted answers that create
heavy market volatility. The press conference is webcasted on the ECB website with a slight delay from real-time. It's the primary method the ECB uses to communicate with investors
regarding monetary policy. It covers in detail the factors that
affected the most recent interest rate and other policy decisions, such
as the overall economic outlook and inflation. Most importantly, it
provides clues regarding future monetary policy
Our measures will enhance the functioning of the monetary policy
transmission mechanism, support financing conditions in the euro area,
facilitate credit provision to the real economy and generate positive
spillovers to other markets. They will thereby further ease the monetary
policy stance more broadly, support our forward guidance on the key ECB
interest rates and reinforce the fact that there are significant and
increasing differences in the monetary policy cycle between major
With the measures that have been put in place, monetary policy has
responded to the outlook for low inflation, a weakening growth momentum
and continued subdued monetary and credit dynamics. Our accommodative
monetary policy stance will underpin the firm anchoring of medium to
long-term inflation expectations, in line with our aim of achieving
inflation rates below, but close to, 2%. As they work their way through
to the economy, our monetary policy measures will together contribute to
a return of inflation rates to levels closer to our aim.
However, looking ahead, and taking into account new information and
analysis, the Governing Council will closely monitor and continuously
assess the appropriateness of its monetary policy stance. Should it
become necessary to further address risks of too prolonged a period of
low inflation, the Governing Council is unanimous in its commitment to
using additional unconventional instruments within its mandate. The
Governing Council has tasked ECB staff and the relevant Eurosystem
committees with ensuring the timely preparation of further measures to
be implemented, if needed."
EUR/USD Drops to 1.2380 on Draghi’s Stimulus Pledge (based on marketpulse article)
The euro fell to a more than two-year low as European Central Bank
President Mario Draghi deepened his commitment to stimulus and signaled
policy makers are ready to implement additional measures if needed.
Europe’s shared currency dropped for the first time in six days
versus the yen as Draghi told reporters in Frankfurt that the central
bank’s bond-buying program will last at least two years and, together
with targeted loans, move its balance sheet toward early-2012 levels.
The pound weakened to a 14-month low as the Bank of England left
interest rates unchanged. The dollar rose to its highest since April
2009 before jobs data tomorrow. Russia’s ruble slid.
“Draghi’s trying to prepare the market for what he sees as a very
likely expanded program of quantitative easing, maybe not in size but in
terms of the assets purchased,” said Collin Crownover, the head of
currency management at State Street Global Advisors Inc. “The fall in
the euro, while not massive in historical terms, has been pretty
significant. I think we drift a little bit lower but I think we’ll
struggle to touch $1.20 this year.”
Trading the News: U.S. Non-Farm Payrolls (based on dailyfx article)
The U.S. Non-Farm Payrolls (NFP) report may generate a further decline
in the EUR/USD as market participants anticipate a pickup in job growth.
What’s Expected:Why Is This Event Important:
At the same time, Average Hourly Earnings are also expected to uptick to
an annualized 2.1% from 2.0% in September, and stronger employment
paired with growing wage pressures should heighten the bullish sentiment
surrounding the greenback especially as the Federal Open Market
Committee (FOMC) moves away from its easing cycle.How To Trade This Event Risk
Bullish USD Trade: NFPs Exceed Market Expectations
Trading Video: Next EURUSD, USDJPY and SPX Moves Require Greater Conviction (based on dailyfx article)
GBPUSD Fundamentals (based on dailyfx article)
GBP/USD may face increased volatility next week as U.K. wage growth is
projected to uptick in September, while the Bank of England (BoE) is
widely expected to retain a cautious outlook for the region.
Indeed, another 20.0K decline in Jobless Claims paired with a pickup
in Average Hourly Earnings is likely to highlight an improved outlook
for the U.K. economy, but the data may fail to remove the bearish
sentiment surrounding the British Pound as Governor Mark Carney largely
continues to implement a wait-and-see approach.
Despite bets for faster wage growth, the updated forecasts along with
the fresh batch of central bank rhetoric may further dampen the appeal
of the sterling as the committee remains in no rush to normalize
monetary policy. The BoE may lower its growth forecast as the
Euro-Zone, the U.K.’s largest trading partner, stands at risk of
slipping back into recession, and we may see a growing number of
central bank officials adopt a more dovish tone for monetary policy as
easing energy prices reinforces the argument for weak inflation.
With that said, the BoE Minutes due out on November 19 is likely to
show another 7-2 split within the Monetary Policy Committee (MPC), and
the British Pound remains at risk of facing a further decline over the
remainder of the year should the fundamental developments coming out of
the U.K. drag on interest rate expectations.
In turn, a more dovish statement from the BoE may put increased
downside pressure on GBP/USD especially as the Relative Strength Index
(RSI) fails to preserve the bullish momentum from back in September,
with the next key downside objective coming in around 1.5720, the 61.8%
Fibonacci retracement from July 2013.
USDJPY Fundamentals (based on dailyfx article)
The Japanese Yen has been distinctly unloved since the Bank of Japan’s
surprise expansion of monetary stimulus last week, with the currency
sinking to a six-year low against its leading counterparts. The
beleaguered unit’s fortunes may reverse in the week ahead however as
markets come to terms with the new BOJ status quo and the spotlight
shifts back to risk sentiment trends.
The central object of speculation dominating the financial markets’
attention is the degree to which a post-QE3 US recovery is able to
countervail weakness in the Eurozone and China. The dominant consensus
looks increasingly worrisome, with a survey of economists polled by
Bloomberg showing that the baseline 2015 global GDP growth outlook has
fallen to a 20-monh low of 2.9 percent.
The deterioration in the growth outlook has played out against a
backdrop of ECB and BOJ stimulus expansion, meaning traders do not
believe these efforts will meaningfully offset the gradual withdrawal
of Fed support. For its part, the US central bank has clearly
demonstrated a willingness to look past near-term downswings in the
business cycle as it marches toward tightening, meaning its conviction
will be easily swayed.
In the week ahead, expected improvements in US Retail Sales figures
(+0.2% m/m in October vs. -0.3% in September) as well as the University
of Michigan Consumer Confidence gauge (87.5 in November vs. 86.9 in
October) stand to reinforce the Fed’s trajectory. Meanwhile, a
worrisome news-flow from the Eurozone and China may amplify headwinds
facing global growth.
The first estimate of third-quarter Eurozone GDP is due to show that
output added 0.1 percent after stalling in the prior period.
Separately, October’s Chinese Industrial Production figures are seen
registering an 8 percent year-on-year increase, unchanged from the
previous month. Economic data outcomes from both the currency bloc and
the East Asian giant have broadly disappointed relative to consensus
forecasts recently however, opening the door for downside surprises.
Disappointing European and Chinese news-flow coupled with another
round of evidence supporting the Fed’s steady progression toward
interest rate hikes in 2015 will probably make for a toxic mix of
sentiment cues. The ensuing bout of risk aversion threatens to trigger
liquidation of Yen-funded carry trades, sending the Yen broadly higher
against most of its counterparts.
AUDUSD Fundamentals (based on dailyfx article)
AUD/USD finally breached the critical 0.8660 barrier
over the past week. Yet it was not the abundance of top-tier domestic
economic event risk that catalyzed the ‘breakout’. Indeed, a status-quo
RBA decision left steadfast policy bets intact and muted the impact of
local data prints. Rather it was broad-based US Dollar gains that
finally pushed the pair off the precipice.
Local business and consumer confidence data are on
offer next week. Patchy readings from the leading indicators over recent
months are not encouraging for broader domestic growth. Yet, we would
likely need to see a severe deterioration over future months in order to
elicit any response from policy makers. Until then the releases may
prove non-events for the AUD, and it may look for guidance from other sources.
Elsewhere in the region; Chinese Retail Sales,
Industrial Production, CPI and Aggregate Financing figures are on the
docket. Yet the Aussie has witnessed a lackluster response to recent
economic releases from the Asian giant. This suggests there is a high
threshold for the upcoming China data to impact the commodity currency.
Outside of monetary policy expectations general
market conditions remain an important consideration for the AUD. Implied
volatility has recently rocketed to its highest level this year,
suggesting traders are anticipating large swings amongst the majors in
the near-term. Such expectations generally bode ill for the high-yield
currencies as they suggest traders will be less tempted into carry
trades. This in turn could leave the Aussie vulnerable to further
Speculative trader positioning in the futures market
remains well off the extremes witnessed last year. This indicates there
may still be room in the AUD short trade before it becomes
GOLD Fundamentals (based on dailyfx article)
Gold prices were softer this week with the precious metal off by a mere
0.10% to trade at $1171 ahead of the New York close on Friday.
Although this marks the third consecutive weekly loss, a substantial
rally post NFPs on Friday pared nearly the entire weekly decline which
saw gold off by as much as three percent. Although the immediate bias
favors the topside targets in the days ahead, the correction is likely
to remain capped as USD strength and the broader technical outlook
keeps the focus on the short-side of the trade.
The release of the US October Non-Farm Payrolls on Friday was the main
event this week with the data showing a gain of 214K jobs as
unemployment ticked down to 5.8%. Although the print was slightly
softer than the 235K consensus estimates, there was an upward revision
of last month’s blowout read from 248K to 256K as the participation
rate climbed to 62.8% after rebounding off its lowest levels since the
The release prompted a massive rally in bullion which posted its
largest single-day advance since in nearly five months as the USD
pulled back from fresh 5-year highs.
Despite the weaker-than-expected employment print, the macroeconomic
developments due out next week may continue to heighten the appeal of
the greenback amid growing concerns surrounding the global economy.
Indeed, China CPI and Euro-Zone 3Q GDP may generate increased demand
for the reserve currency as the U.S. growth prospects outpace its major
counterparts. Looking ahead to next week investors will also be
closely eyeing the US data flow with the Dow Jones FXCM US Dollar Index
looking vulnerable near-term after failing to close the week above the
From a technical standpoint, gold looks poised for further topside in
the near-term with Friday’s price action posting a massive outside
reversal candle. The snap-back from extremes in the momentum signature
suggests this is likely to be a simple bear market rally with topside
objectives eyed at $1180, 1192 & 1206/07 (where we would be looking
for favorable short entries). Interim support stands at $1150 and is
backed by $1125/30. Longer-term support objectives are eyed the 1.618%
extension off the 2014 high at $1100. Bottom line: looking higher
near-term for favorable short entries with only a breach above $1207
invalidating our broader directional bias.