Week Ahead: Trading Outlook

Key Events This Week: October 4th – 9th

Mon: USD- ISM Non Manufacturing
Tue: AUD – RBA Rate Decision
Thur: CHF – Unemployment Rate, GBP – BOE Rate Decision, USD – September FOMC Minutes Release
Fri: CAD – Unemployment Rate & Net Change in Employment

Overview

  • USD Traded sharply lower following the disappointing NFP data which saw a swift move by markets to begin pricing out a December lift-off with focus now turning toward a March 2016 date. CME Fed Watch now shows only a 25% probability of a lift off in December.However, losses were reversed into the close as USD was strongly bid. Key focus this week will be on the September FOMC minutes release though the relevance of comments is questionable now given the very poor September jobs report that has been released since that FOMC meeting.
  • EUR The Euro was sharply higher following the NFP as risk sentiment saw the Euro supported via its inverse risk correlation as equity markets fell into the NY open, however gains were quickly reversed over the American session on Friday. Inflation data midweek showed the EuroZone had dipped into deflation printing -0.1% in September, with German CPI similarly showing a -0.2% reading, leading players to anticipate further ECB easing in the coming months.
  • GBP Weaker PMI data saw GBP trading lower over the week, shrugging off encouragement from better lending and mortgage approvals data. The post NFP USD weakness saw GBP trade back up into 1.52 before stalling and reversing, Growth concerns are now plaguing the UK economy once more with investors pushing out expectations of a UK rate hike. Attention will be fixed on the BOE on Thursday which is expected to see the Central Bank striking a Dovish tone.
  • JPY USDJPY finally broke out of the triangular range it has held since August 24th only to reverse and close back inside the range. No September rate hike from the Fed and a very weak September Jobs report is increasing pressure on the BOJ to increase stimulus.
  • AUD The Aussie had recovered some ground in the week as risk sentiment improved following better Chinese data early in the week. Pressure is mounting on the RBA to ease further in the absence of a US rate hike and with expectations pushed further out following Friday’s weak NFP data. The RBA rate decision this week is expected to see the RBA on hold with risks skewed towards a further rate reduction.
  • CAD The Canadian Dollar was stronger this week due in part to better domestic data by way of consensus GDP data and a slight rebound in oil prices. A stabilisation in Chinese data this week also saw commodities firmer. Traders will turn their attention to the domestic unemployment rate on Friday where a positive print will encourage a stronger trading outlook for the Canadian Dollar.
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