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European Market Update: Countdown to the FOMC Decison; T-Minus 8 Hours and 30 Minutes
Update: Countdown to the FOMC Decison; T-Minus 8 Hours and 30
ECONOMIC DATA ***
Â· FR Jan Business Survey: 11 v 18e || Prior
revised from 19 to 20
Â· SP Dec Retail Sales Y/Y: -1.9% v 0.2%
Â· SP Dec Adjusted Retail Sales Y/Y: -1.9% v 0.2%
Â· IT Jan Retailers Confidence: 108.4 || Prior revised from 110.
1 to 109.9
Â· IT Jan Services Survey: 12 v 15 prior
Â· IT Nov
Large Company Employment: 0.7% v 0.5% prior
Â· NO Dec Retail Sales:
M/M -0.7% v 0.3%e || Y/Y 5.6% v 7.2%e
Â· NO Nov Unemployment Rate: 2.
5% v 2.5%e
Â· UK Dec Final M4 Money Supply: M/M 1.5% v 1.5% prior ||
Y/Y 12.3% v 12.3% prior
Â· UK Dec Final M4 Sterling Lending: Â£17.4B v
Â· UK Dec Net Consumer Credit: Â£600M v Â£1.1Be || Prior
revised from Â£1.1B to Â£1.2B
Â· UK Dec Net Lending Secured on
Dwellings: Â£8.6B v Â£7.5Be || Prior revised from Â£7.8B to Â£8.0B
Dec Mortgage Approvals: 73K v 79Ke || Prior revised from 83K to
Â· SZ Jan KOF Leading Indicator: 1.70 v 1.95e || Prior revised
from 1.99 to 1.84
Â· *** SPEAKERS/COMMENTS ***
Wiseman Bofinger says that the Euro posses downside risk to the German
economy || Consumer spending to drive Germany's 2008 growth as foreign
demand to be much lower than 2007 || Sees no cause for concern in the
Germany mortgage sector || More fed cuts and Euro gains may push ECB rate
Â· UK The UK government to propose a new law that would increase
the power of authorities to intervene if a bank fails
Â· ECB's Wellink: To tell Dutch lawmakers today that the
US sub-prime crisis is not a major problem for banks in the Netherlands
Â· Alan Greenspan: The probability of a US recession is 50% -
Â· *** FIXED INCOME/FX/COMMODITIES/ERRATUM
Â· On the commodity front spot gold is off of recently made highs
as profit taking sets in ahead of the FOMC's interest rate announcement
later on today. Consensus expectations are for a 50bps interest rate cut to
3.00%, with fed fund futures currently pricing in about a 75% chance of a
50bps cut. A 50bps cut should weaken the dollar and strengthen gold,
however some analysts believe that this is already priced in. Front month
copper futures are down following the decline in Asian equities overnight,
as well as the lower open across the European bourses. According to one
analyst report overnight Chinese copper smelters may halt production for
two weeks due to the recent storms that have paralyze much of the country.
Front month crude oil futures are currently trading in positive territory,
but have been on the decline since the close in the US. Crude pushed back
above the $90 level at the start of the week as sub-zero temperatures
forced Syncrude Canada, the world's largest oil sans producer to halt
production. While no set target has been set, it will reportedly take
several days to restart production at the 350K Syncrude facility.
Inventories will be in focus today; Current forecasts predict that crude
inventories will show a 2M barrel rise, while gasoline supplies are
expected to post a 1.9M barrel rise, and distillate inventories are
expected to post a 2.13M barrel decline. Inventories data is due out at
Â· Fixed income futures are trading off of earlier highs.
Futures were higher at the open, rising on the back of safe haven flows as
continued uncertainty about the outlook for the financial sector has market
participants on edge. There has been a slight steepening across the German
curve as the 2/10 year spread widened slightly overnight. New supply will
took center stage in Italy over the recent political uncertainty. Italy
sold â‚¬3.5B in 2014 floating rate notes with an average yield of 4.20% and a
bid-to-cover of 1.42x, as well as â‚¬2.5B in 10-year 4.50% bonds with an
average yield of 4.31% and â‚¬3.0B in 3-year 4.50% bonds with an average
yield of 3.64% and a bid-to-cover of 1.44x. Over in the UK long-gilts are
trading just above the unchanged level after being higher by 30 tics in the
session. Gilts were unmoved by the net lending data released early on
during the session as were also unmoved by the reappointment of Mervyn King
as the governor of the BOE. Above all else the focus continues to remain on
the FOMC decision scheduled for release later today. While many are already
pricing in a 50bps interest rate cut, probabilities have eased from late
last week indicating that perhaps the general consensus in not such a sure
thing. According to a handful of analysts, regardless of the outcome of
today's meeting, treasuries are likely to enter a holding patter in the US.
Many market participants have shinned their bells and whistles for Friday's
jobs number as well. The jobs number due for the month of January, and will
kick February at a fast pace.
Â· The European indices opened lower
in today's session following the trend seen in Asian trading on speculation
of further writedowns and losses in the financial sector. During Asian
trading Mizuho Financial reportedly boosted its sub-prime loss provisions
to Â¥250B. Swiss bank UBS reported an $11.4B net loss for the fourth-quarter
overnight, which was almost double what was expected. In Franc BNP Paribas
reported fourth-quarter net income at â‚¬1.0B, below the â‚¬1.6B expected.
Despite this BNP did boost their dividend by 8% to â‚¬3.35/share. Amongst
some of the big names due out ahead of the equity open in the US today are
Dow components Boeing, Merck, and Altria, as well as heavy hitters UPS,
Kraft, and Kellogg.
Â· The USD was softer against the major
currencies ahead of the FOMC decision later today. The EUR/USD took out an
alleged option barrier at the 1.48 level ahead of the NY open led buy good
buying from US brokerage names. The risk aversion theme remains prevalent
after UBS reported an additional $4B in sub-prime related writedowns for
the fourth-quarter. Rumors resurfaced about Merrill Lynch possibly
announcing an additional $10B in mortgage related writedowns, coupled with
rumors that monoline insurers faced an imminent downgrade by the major
credit agencies. JPY and CHF carry trade was unresponsive to the latest
mortgage concerns EUR/JPY at 158.30 while USD/JPY hovered around the 107-
handle. The NOK was softer following weak Retail sales data for the month
of Dec. The USD/NOK is at 5.4460, off 150 pips for the trading session.The
AUD was a touch lower during the session with dealers attributed the
weakness to month-end hedging related to equity markets.
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Amazing Trader EVENT RISK Calendar:
Mon 16 Oct /ul>
01:30 CN- CPI
21:45 NZ- CPI
Tue 17 Oct
08:30 GB- CPI
09:00 DE- ZEW Survey
09:00 EZ- Final HICP
Wed 18 Oct
12:30 US- Housing Starts & Permits
14:30 US- EIA Crude
Thu 19 Oct
01:30 AU- Employment
08:30 GB- Retail Sales
12:30 US- Weekly Jobless
Fri 20 Oct
12:30 CA- Retail Sales & CPI
14:00 US- Existing Homes Sales
John M. Bland, MBA
- POTENTIAL PRICE RISK: HIGH Tue-- 08:30 GMT GB- CPI top tier confirmation of Inflation.
- POTENTIAL PRICE RISK: Medium Tue-- 09:00 GMT DE- ZEW Survey second most important German monthly Survey.
- POTENTIAL PRICE RISK: Medium Tue-- 09:00 GMT EZ- final HICP revision to flash report. Revisions are usually minor.
- POTENTIAL PRICE RISK: Medium Tue-- 13:15 GMT US- Industrial Production. Top output indicator.
- POTENTIAL PRICE RISK: Medium Wed-- 12:30 GMT US- Housing Starts and Permits revision to flash report. Useful housing leading indicator.
- POTENTIAL PRICE RISK: Medium Wed-- 14:30 GMT US- EIA Crude. Top WTI inventory measure.
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