Tuesday, October 16, 2012

Chinese inflation eases

Today's Highlights


FX Market Overview

You are probably like me in thinking Tom Daley?s dives from the 10 metre board look scary so stepping off of a platform 24 miles above the Earth and free falling nearly all the way down is about as daunting as it gets. Felix Baumgartner did just that yesterday and fell at faster than the speed of sound in the first part of his descent before opening a chute and touching down gently. The word awesome is massively overused these days but this is one occasion where it is the only superlative to employ.

A neat segway from that and into the market news would be to identify a currency which fell in a comparable way but there isn?t a story like that out there at the moment. Exchange rates are treading water as uncertainty over the future of Europe and the spluttering recovery in the US keep traders? hands in their pockets.

We did get a 2nd consecutive rise in Eurozone industrial production last month. That was reported on Friday and helped to settle some of the nerves in Europe. The rise was better than forecast. In fact many analysts had predicted a fall so the euro could have strengthened considerably but it didn?t. Fears over a potential bailout call from Spain and further concerns over Greece were at the heart of that inactivity.

The US Dollar had a reasonable Friday after a rise in wholesale prices and an even more substantial rise in consumer sentiment which took the University of Michigan index back up to pre-recession levels. This week brings retail sales, industrial production and inflation data from the US along with a smattering of housing and manufacturing data. The third week of the month is generally a volatile one for all of these reasons and this one looks set to keep that tradition alive.

Sterling traders are still in a quandary; is the Pound a slave to the US Dollar or the Euro? Lately the Euro link has been the stronger but, with the British Government following a different path to both of those entities, Sterling may finally decouple form both to some degree. IF that is going to happen then this could be the week for it. We have inflation, government debt, retail sales and unemployment data to contend with along with the minutes from the last Bank of England meeting. Whether the week is a pivotal one is yet to be determined but it will undoubtedly be volatile for the Pound and that offers opportunities to buy or sell at levels which are attractive to you. Let you Halo Financial consultant know your plans and we can discuss your needs in this context and agree a strategy.

Overnight we heard that Chinese inflation rose at 1.9% in the year to August on the CPI index. That?s down from last month?s 2.0% but bang on market expectations. China also announced a slight rise in overseas trade but no ground breaking rebound so the markets were calmed and the commodity related currencies like the Australasian Dollars were not too badly affected. Tomorrow?s release of the minutes from the last Reserve Bank of Australia meeting is eagerly awaited. Having cut their base rate, traders are wondering whether there are further cuts to come and hoping the tone of the meeting will offer some clues. We will also get inflation data from both countries over the next 48 hours so it is not surprising that both the Australian and New Zealand Dollars are a little weaker this morning. Whether they will continue to weaken in the short term depends, to some extent on the strength or weakness of that inflation data but more definitely on the strength or weakness of Chinese data. The risk averse amongst you may want to buy your Aussie and Kiwi Dollars early in the week.

And finally, if your garden is more incapability green than Capability Brown and more marsh tip than Titchmarsh, beware. Adrian Woodyatt of Gloucestershire has been fined ?600 and made to pay ?2,000 in costs after his neighbours complained about his overgrown and under-groomed front garden. I?ll leave it there. I am off to buy a strimmer.

Source: http://www.fxstreet.com/fundamental/market-view/daily-currency-insight/2012-10-15.html

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