Fundamental Analysis – 13/10/2015

Good Morning,

Economic data will feature German, British, and Chinese CPI, Japanese machine tool orders, and the German ZEW economic sentiment survey. Even though the headline reading for the U.K. Consumer Price Index (CPI) is expected to hold flat for the second consecutive month in September, and uptick in the core rate of inflation may spur a bullish reaction in GBPUSD as it puts increased pressure on the Bank of England (BoE) to normalize monetary policy sooner rather than later. European shares paused on Monday after their strong start to the fourth quarter while USD dipped towards three-week lows, with investors unconvinced the U.S. Federal Reserve would raise interest rates this year. Later in the week, trading could also be impacted by reports on retail sales, industrial production, and producer and consumer price inflation. The European stocks wiped out opening gains and turned negative, bringing an end to the recent streak of gains, and completely shrugged-off the strong performance seen on the Chinese bourses. USDCHF is trading at 0.9626 while GBPUSD is trading at 1.5342.

ISE Sentiment Index is 109.0 +17.20%. All countries’ export growth near zero, with alarming deflation. With no U.S. economic reports scheduled for release and bond markets closed for Columbus Day, the liquidation of long USD positions continued. The Fed made investors uneasy at the annual autumn meeting of the IMF and World Bank in Lima, Peru. The Dow Jones industrial average, coming off its biggest weekly gain since February, ended modestly higher Monday to post its seventh-straight session of gains as Wall Street awaited the barrage of corporate earnings reports starting Tuesday. Chairman of Fed Janet Yellen's September press conference raises the question, "Will the Fed have any more visibility into what is happening in China by the October or December meetings?" U.S. stocks closed mildly higher Monday in low volume trade as investors readied for the first major earnings reports due Tuesday. The session closes with the NASDAQ Composite Index at 4,838.64. Crude oil futures tumbled on Monday on profit-taking and a report of higher OPEC production, while pressure lingered on the USD as markets priced the possibility that the Federal Reserve would not begin a tightening cycle this year. EURUSD is trading at 1.1355 while USDJPY is trading at 120.01.

China's Caixin Manufacturing Purchasing Managers' Index (PMI) stayed below a reading of 50 for the seventh consecutive month in September, falling to 47.2, a reminder that China's immense manufacturing sector is contracting. Lower oil prices are still very likely to provide a positive effect on Chinese oil demand and the overall economy. The mood in Shanghai was further bolstered by remarks from the PBoC’s deputy governor that the stock market correction was “almost over”, and the Composite index jumped 3.28% to a seven-week high. New Zealand's median house price rose to a record in September, led by a 25.4% annual jump in Auckland's median price to an all-time high as demand for property in the city spread into nearby regions. New Zealand failed to secure substantial market access for its dairy products in the US, Canada, Mexico and Japan. Futures markets in Australia seem fairly convinced that the cash rate will be cut once again to 1.75% by Q2 2016. USDCAD is trading at 1.3000 while AUDUSD is trading at 0.7354.

Daily Performances (00.00 am. GMT);

I hope you all have a nice day.

All the figures are as at the writing time.