#Forex Daily Outlook Oct. 7, 2016

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follow a new Daily Currency Outlook. Oct. 7, 2016
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EUR/USD 
The dollar secured further significant gains on Thursday with the trade-weighted index at a fresh two-month high. The ECB minutes were generally dovish with the bank concerned that there was no sign of any upward pressure on inflation while there were still downside risks to the growth outlook. The comments tended to cast further doubts on the potential for any tapering of bond purchases in the short term which will also tend to limit Euro support.   The US jobless claims was better than expected with a decline to 249,000 in the latest week from 254,000 previously which maintained confidence in the labour market ahead of Friday’s employment report. The Euro overall declined to lows just below the 1.1150 level during the US trading session as wider dollar gains dominated. The US employment report will be watched very closely on Friday with an inevitable short-term market impact. There will still be expectations of a December Fed tightening unless the data is notably weak while there will be serious pressure on the Fed to tighten policy if there is a much stronger than expected release. Sterling’s dramatic plunge dragged the Euro to lows just above 1.1100 in Asia on Friday with further volatility in prospect following the US employment data.
JPY
The dollar secured further significant gains on Thursday with the trade-weighted index at a fresh two-month high. The ECB minutes were generally dovish with the bank concerned that there was no sign of any upward pressure on inflation while there were still downside risks to the growth outlook. The comments tended to cast further doubts on the potential for any tapering of bond purchases in the short term which will also tend to limit Euro support.   The US jobless claims was better than expected with a decline to 249,000 in the latest week from 254,000 previously which maintained confidence in the labour market ahead of Friday’s employment report. The Euro overall declined to lows just below the 1.1150 level during the US trading session as wider dollar gains dominated. The US employment report will be watched very closely on Friday with an inevitable short-term market impact. There will still be expectations of a December Fed tightening unless the data is notably weak while there will be serious pressure on the Fed to tighten policy if there is a much stronger than expected release. Sterling’s dramatic plunge dragged the Euro to lows just above 1.1100 in Asia on Friday with further volatility in prospect following the US employment data.
GBP 
Sterling remained under pressure on Thursday with a fresh slide to 31-year lows against the dollar and lows close to the 1.2600 level. The Euro also pushed to fresh five-year highs just above the 0.8850 level before fading slightly. There were further concerns surrounding EU negotiations and the risk of damage to the UK financial sector if there is no access to the single market with tough talk from French President Hollande adding to negative sentiment.  There were comments from Bank of England Carney that he was in agreement with comments from Prime Minister May on Wednesday that there were negative side-effects to the policy of very low interest rates and quantitative easing. Carney also remarked that monetary policy was over-burdened, maintaining the underlying central bank theme of the need for fiscal policy and structural reform to do more. There was further sharp downward pressure on gilt prices on reduced expectations of a further cut in interest rates, but Sterling failed to benefit given fears over underlying policy divisions and the risk of capital outflows. Volatility exploded in early Asian trading on Friday with Sterling suddenly plunging by over 5 cents against the dollar to just above 1.2000 in a flash crash with a suspicion of wild algorithm trading as the Euro peaked above 0.9200. The currency recovered back above 1.2400, but was still well below New York closing levels.
CHF
The Euro was able to find support above the 1.0900 and edged higher to 1.0935, although moves were limited while the dollar moved back above the 0.9800 level, although still hitting resistance at higher levels. The inflation reading was weaker than expected with consumer prices falling 0.2% in the year to September which will maintain pressure for a weaker currency. The further shift out of defensive assets including gold and the yen had some negative impact on the franc, although the impact was limited with markets braced for further underlying volatility.
Regards All. Users!
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