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London Session Recap

  • U.K. jobless claims falls by 41,700 vs. 30,000 expected
  • U.K. unemployment rate drops from 7.7% to 7.6%
  • EZ industrial production at -0.5% vs. -0.3% expected
  • BOE now predicts 7% jobless rate in Q3 2015 vs. Q2 2016 previous
  • Carney says “glass is half full,” cuts inflation and raises growth rate forecasts

The early London session was dominated by the pound as the U.K. presented two tier 1 reports. The unemployment numbers started the party for the bulls when it came in better-than-expected, but it was the BOE’s quarterly speech on inflation and growth forecasts that sealed the deal for the bulls. The central bank now expects a 1.6% growth rate in 2013 (from 1.4%) and a 2.8% growth in 2014. Inflation is also expected to hit the 2% target “over the next year or so.”

Despite the onslaught of positive news, traders are remarking on GBP/USD’s rally, which is capped at 1.6000 as of writing. Apparently, the BOE officials did a good job of moderating pound demand by emphasizing issues that need to be improved. For example, BOE’s Charles Bean said that there’s a “substantial slack in the U.K.” as the workers aren’t getting the working hours that they want. Mark Carney also hinted that the BOE isn’t likely to raise rates as long as inflation remains subdued.

Unfortunately, the good vibes seem centered on the pound. The euro took hits against its counterparts after the region’s industrial production missed its expectations while the comdolls are trading just above their major support levels after China’s 3rd plenum disappointed the markets.

Will the other high-yielding currencies catch up to the pound’s gains? Only the federal budget balance at 8:00 pm GMT is scheduled until New Zealand prints its quarterly retail sales numbers at 10:45 pm GMT. NZD/USD is sitting on a major support level right now, so y’all might want to watch the retail sales numbers closely!

Asian Session Recap

  • Housing book lifts AU Westpac consumer sentiment from -2.1% to 1.9%
  • Japan core machinery orders -2.1% vs. -1.8% expected
  • AU Q3 wage price index at 0.5% vs. 0.8% expected
  • China’s 3rd plenum disappoints

The high-yielding currencies gave up some of its gains from the U.S. session after investors reacted to the lack of detailed plans from China’s 3rd plenum. It also didn’t help that the lack of major data paved the way for the return of Fed taper speculations. USD/JPY is still around the 99.50 area, EUR/USD found resistance at 1.3554, GBP/USD is stuck below 1.5900 and AUD/USD, USD/CAD, and NZD/USD are having trouble bouncing from technical support and resistance levels.

Let’s see if the London session will give us clues. At 10:30 am GMT we’ll see the U.K.’s employment numbers, which will be followed closely by the quarterly inflation report and BOE Governor Mark Carney’s speech. With the recent U.K. reports posting upside surprises, market players are looking for optimism from Carney. Be careful though, as he could also inject cautiousness and limit his optimism in order to avoid too much GBP strength.

U.S. Session Recap

  • EUR and GBP erase their London session losses
  • Fed’s Fisher believes that monetary accommodation grows riskier by the day
  • Fed’s Kocherlakota believes that tapering too soon would be drag on the economy
  • RBNZ to start rate hikes next year

The return of the U.S. session traders and the lack of scheduled economic reports didn’t do the Greenback any favors as investors bought higher-yielding currencies. EUR/USD and GBP/USD erased most of their London session losses, USD/JPY hit a wall on its way to 100.00, and the comdolls’ selloff found support around significant technical levels.

A while ago we saw the RBNZ’s financial stability review. The central bank said that while they’re planning on hiking rates next year, they’re worried about its potential impact on the Kiwi. RBNZ Governor Wheeler also said that while New Zealand financial system is stable, imbalances in the housing market pose stability risk.

Up ahead we have Australia’s Westpac consumer sentiment and quarterly wage price index reports and Japan’s core machinery orders data. Also watch out for Nikkei’s performance as it could affect the yen crosses’ price action for the rest of the day.

Bonnie and Clyde, peanut butter and jelly, Justin Bieber and his hair. Some things just go well together.

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