When will the Fed move on interest rates?

Unscheduled comments from Williams who said a June liftoff is ‘reasonable’ amid soft job gains in an interview with Bloomberg.
•June interest rate rise ‘probably a close call’
•‘Wage and price data are still soft’
•US labor continuing ‘strong momentum’

Williams has a reputation as a dove but it’s not deserved and mostly because he’s from Yellen’s San Francisco Fed. This is inline with his recent rhetoric.

Deal Struck! What’s Next?

MTFXLogoMarket Snapshot (near-term 48 hour outlook)
USD/CAD:  Slightly Bearish. Spot at 1.0312
EUR/CAD:  Bullish. Spot at 1.4073
GBP/CAD:  Bullish. Spot at 1.6594
EUR/USD:  Strongly Bullish. Spot at 1.3659
GBP/USD:  Strongly Bullish. Spot at 1.6116
Today’s Commentary
USD/CAD CommentaryThe CAD weakened against the USD yesterday after U.S. Senators agreed on terms to end a fiscal impasse that closed the federal government and had threatened to throw the U.S. into default. Senate Majority Leader Harry Reid, a Democrat, and the Senate’s top Republican, Mitch McConnell, said they agreed on a plan to end the fiscal impasse needed to reopen the government as well as extend Washington’s borrowing authority to avoid defaults.

The budget deal will give the Treasury the authority to continue borrowing through Feb. 7 and fund the government through Jan. 15, but will also add in spending cuts, which appeased Republicans. The Treasury was due to hit its debt ceiling on Thursday, after which the government could not guarantee payments on obligations for much longer. House Speaker John Boehner said earlier the House would not block the compromise. U.S. credit ratings agency Fitch Ratings on Tuesday placed the U.S. ‘AAA’ debt on “rating watch negative” due to congressional inability to pass a spending package.

The budgetary gridlock in the US caused little reaction in the FX markets as for the most part a resolution had already been priced in. The lack of volatility in the markets is in part due to the reaction of the Fed and expectations that they will push tapering out to counterbalance the US fiscal woes.  Over the medium term, the Fed is likely to push tapering out further than originally predicted and as such it also pushes out our call for a stronger USD.

An interesting article published by World Economics Today suggests that the Canadian dollar is overvalued by more than 10 per cent; this still pales in comparison to several other countries. The groups World Price Index looks at the value of currencies against the U.S. greenback based on a basket of goods and services at purchasing power parity. Though this overvaluation may seem staggering it should be taken with a grain of salt as the report also showed that euro in Italy, Spain and France are even more overvalued than the CAD.

Short term technicals continue to remain mixed.  Though the USD/CAD has traded to new lows over the last few days we see dips on the pair to be well supported into the 1.0230/1.0330 levels.  Only a clear break of 1.0231 would argue a major trend reversal.

Today’s expected trading range is 1.0275 – 1.0375

EUR/USD CommentaryThe dollar moved higher against the euro on Wednesday as markets digested news that U.S. lawmakers have struck a spending deal needed to reopen the government and avoid throwing the country into default.  The pair closed the trading day at 1.3530.

The fundamental data out of Europe remained uninspiring.  Data released on Wednesday showed that the annual rate of consumer inflation in the euro zone was unchanged from a preliminary estimate of 1.1% in September. A separate report showed that the euro zone’s trade surplus widened to EUR12.3 billion in August from EUR11 billion in April, broadly in line with forecasts.

Short term technicals remain mixed with the pair likely to find support at 1.3462, the low from Sept. 25, and resistance at 1.3598, Monday’s high.

Today’s expected trading range is 1.3575 – 1.3725

GBP/USD CommentaryThe pound erased gains against the U.S. dollar on Wednesday, while investors hoped for a last minute U.S. budget deal before Thursday’s deadline to raise the debt limit and avoid a sovereign default.

GBP/USD pulled away from 1.6058, the pair’s highest since October 9, to close the trading day at 1.5950. The pound found support earlier; after data showed that the number of people claiming unemployment benefits in the U.K. posted the largest decline since June 1997 in September.

The Office for National Statistics said that the U.K. claimant count fell by 41,700 in September, outstripping expectations for a decline of 25,000 people. The previous month’s figure was revised to a drop of 41,600 people from a previously reported decrease of 32,600. The rate of unemployment held steady at 7.7% in August, in line with expectations and unchanged from July. The ONS said the average earnings index rose 0.7% in August, below expectations for a 1% increase, after rising by 1.1% in the previous month.

Short term technicals remain mixed.  The GBP will have to rally above the 1.6084 for there to be any shift away from the current bearish signals.

Today’s expected trading range is 1.6025 – 1.6175

Opening FX Rates (USD)
USD/CAD 1.0312
EUR/USD 1.3659
GBP/USD 1.6116
USD/JPY 97.83
AUD/USD 0.9622
USD/HKD 7.7537
USD/PLN 3.0567
USD/THB 30.990
Opening FX Rates (CAD)
USD/CAD 1.0312
EUR/CAD 1.4073
GBP/CAD 1.6594
CAD/JPY 95.01
AUD/CAD 0.9908
CAD/HKD 7.5307
CAD/PLN 2.9678
CAD/THB 30.1176
Opening Commodities (USD)
Oil 101.69
Gold 1317.30
Silver 22.07
Economic and Event Calendar
GBP Retail Sales Oct 17
USD Initial Jobless Claims Oct 17
USD Fed Manufacturing Survey Oct 17
CNY Gross Domestic Product Oct 18
CAD Consumer Price Index Oct 18

Default of No Default? Fitch Warns the US Government


Market Snapshot (near-term 48 hour outlook)
USD/CAD:  Neutral. Spot at 1.0369
EUR/CAD:  Slightly Bullish. Spot at 1.4065
GBP/CAD:  Bullish. Spot at 1.6621
EUR/USD:  Bullish. Spot at 1.3560
GBP/USD:  Bullish. Spot at 1.6024
Today’s Commentary
USD/CAD CommentaryU.S. stocks fellon Tuesday after lawmakers hit a fresh snag in their efforts to approve a spending package needed to reopen the federal government and also steer the country awayfrom possible defaults. At the close of U.S. trading, the Dow Jones Industrial Average finished down 0.87%, the S&P 500 index fell 0.71%, while the Nasdaq Composite index fell 0.56%.

Negotiations among lawmakers to find a way to fund the government and avoid possible defaults hit a snag on Tuesday after the Democratically-controlled Senate said it would stop working on a way out of the impasse until the Republican controlled House comes up with a new proposal.

The news sent stocks falling by catching investors by surprise, who were upbeat earlier when both the Senate and the House of Representatives prepared roadmaps to end the crisis that were viewed by many as compatible.

While the dollar avoided losses amid sentiments that budget talks have hit a pothole but weren’t dead in the water yet, stocks stayed in negative territory, mainly on concerns that House Speak John Boehner will present a new plan with previsions previously rejected by Democrats.

Any potential deal will still have to be approved by the House of Representatives, where Speaker John Boehner would have to decide whether to allow a vote or demand federal spending cuts. If an agreement to raise the government borrowing limit is not struck ahead of Thursday’s deadline, the U.S. will face an unprecedented sovereign debt default.

Meanwhile, data released on Tuesday showed that an index of manufacturing activity in the New York region came in below expectations this month. The Federal Reserve Bank of New York said that its general business conditions index fell to 1.52 in the current month from 6.29 in September. Analysts had expected a reading of 7.0.

The USD/CAD closed yesterday’s trading session at 1.0380. There is very little data out today and focus will likely remain on US politics and growth implications.   Later this week we get the Canadian CPI numbers, which are expected in at just 1.0% on the headline number and 1.4% y/y on the core reading.  Markets are pricing in a very small chance of 16% for a BoC rate hike over the next twelve months.

Short term technicals continue to remain mixed with the pair trading in a very narrow range.  Initial resistance comes in at 1.0420.  A decisive break there should open up 1.0500.

Today’s expected trading range is 1.0300 – 1.0425

EUR/USD CommentaryThe euro fell to two-week lows against the firmer dollar on Tuesday.  EUR/USD hit 1.3480 during U.S. morning trade, the lowest since September 30; the pair subsequently consolidated to close the trading day at 1.3525.

The single currency shrugged off data showing that German economic sentiment improved more-than-expected in October, rising to the highest level since April 2010. The ZEW Centre for Economic Research said that its index of German economic sentiment rose by 3.2 points to hit 52.8 in October from September’s reading of 49.6. Analysts had expected an unchanged reading.

FX markets continue to focus on the US political deadlock and seem not too interested in the political problems brewing in Europe.  There is quite a bit of uncertainty on the bank stress tests that are expected over the next few weeks and how the banks will find ways to recapitalize.  Furthermore, Germany’s finance minister suggested earlier this week that Greece has a significant financial gap of 5 –6 billion euros and that creditors are going to have to do more to manage the gap.  Amidst all the uncertainty surrounding Europe, the EU countries are on tap to present their budgets over the coming weeks, which will only further highlight the ongoing uncertainty of the region and medium term outlook for Europe.

Short term technicals continue to remain bearish with the pair looking for a near term test of 1.3392.

Today’s expected trading range is 1.3475 – 1.3625

GBP/USD CommentaryThe GBP closed yesterday’s trading session just shy of the 1.6000 level.  CPI numbers released out of the UK yesterday showed a stronger than expected reading of 2.7% y/y and a headline reading of 2.2% on core.  Though inflation is a primary ingredient to the BoE’s expectations, today’s unemployment data is will be the key data point that will drive policy expectations.  The release is expected to show job growth of 125K jobs with an unemployment rate steady at 7.7%.

Short term technicals continue to remain bearish with the pair looking to target the 50 day moving average of 1.5798.

Today’s expected trading range is 1.5950 – 1.6100

Opening FX Rates (USD)
USD/CAD 1.0369
EUR/USD 1.3560
GBP/USD 1.6024
USD/JPY 98.44
AUD/USD 0.9533
USD/HKD 7.7542
USD/PLN 3.0772
USD/THB 31.242
Opening FX Rates (CAD)
USD/CAD 1.0369
EUR/CAD 1.4065
GBP/CAD 1.6621
CAD/JPY 94.86
AUD/CAD 0.9885
CAD/HKD 7.4788
CAD/PLN 2.9659
CAD/THB 30.1551
Opening Commodities (USD)
Oil 100.93
Gold 1279.30
Silver 21.24
Economic and Event Calendar
 GBP Unemployment Data Oct 16
 EUR Consumer Price Index Oct 16
 CAD Manufacturing Shipments Oct 16
 USD Fed Beige Book Oct 16
 GBP Retail Sales Oct 17

A Critical Week for the US on Debt Ceiling Woes

MTFXLogoMarket Snapshot (near-term 48 hour outlook)
USD/CAD:  Neutral. Spot on 1.0360
EUR/CAD:  Slightly Bearish. Spot on 1.3975
GBP/CAD:  Neutral. Spot on 1.6509
EUR/USD:  Bearish. Spot on 1.3489
GBP/USD:  Bearish. Spot on 1.5932
Today’s Commentary
USD/CAD CommentaryThis is a critical week for the US and the outcome of political negotiations could have a big impact on the markets. Although we believe that the most likely outcome at this stage is a temporary increase in the ceiling until the end of November or potentially until the end of this year, the final outcome is still extremely uncertain. So rather than try to second guess capricious politicians, we prefer to identify a few scenarios and then explain potential market scenarios:

The debt ceiling is raised for the long-term:

This is the most risk-friendly outcome over the next few days as it would dramatically reduce the chance of a US default and credit rating downgrade. We believe this is unlikely to happen due to the on-going stalemate in Washington.  However, if they can come up with a solution, then we could see the markets rally.  This would be good news for the USD and we could see the currency claw back some of its recent losses.  It would also give the Fed the green light to taper its asset purchase program in the coming months.

Ceiling is temporarily raised:

This is probably the most likely outcome.  This outcome would delay a potential US default and credit rating downgrade.  However, this would only kick the can down the road leaving the markets in the same position in 6-8 weeks’ time.   Given the market movements we think that this solution is probably already priced in after the short term relief rally that occurred last week.   Overall we would see the USD grind lower, similar to how markets have performed over the last two weeks.

The debt ceiling is not raised:

This is the worst of the three outcomes.  Should there be no deal by the 17th of October then we would see a sharp selloff in stocks, emerging market currencies and commodity linked currencies.  A Sell off in short term US T-bills would ensue pushing T-bill yields up in the short term.  Performance of the USD is less clear cut.  Our prediction in the short term is that the USD may rally as investors search for more liquid currencies; however, investors will begin to lose patience in the USD and will inevitably move to other more liquid currencies such as the EUR or GBP.  Added to this, hitting the debt ceiling also makes a prolonged period of QE from the Federal Reserve more likely, which may limit the greenback’s upside.

USD/CAD ended Friday’s session at 1.0358, after rising to five-week highs of 1.0418 on Thursday. The greenback found support as House Republicans and the Obama administration began a second day of negotiations on a deal to reopen the government and raise the U.S. debt ceiling in the short term.

Meanwhile, concerns over the economic impact of the political deadlock in Washington fuelled expectations that the Federal Reserve will further delay plans to start phasing out its USD85 billion a month asset purchase program. Last Wednesday’s minutes of the Fed’s September meeting said the decision not to begin tapering stimulus was a “close call,” with all but one voting member opting to leave the program unchanged.

Data released on Friday showed that U.S. consumer sentiment fell to the lowest level in nine months in October, as concerns over the impact of the government shutdown weighed. The University of Michigan’s consumer sentiment index declined to 75.2 from a final reading of 77.5 in September, and below expectations for a reading of 76.0.

The Canadian dollar was boosted after data released on Friday showed that the unemployment rate declined to an almost five year low in September. Statistics Canada said the economy added 11,900 jobs last month, more than expectations for jobs growth of 10,000. The unemployment rate ticked down to 6.9% from 7.1% in August.

Short term technicals remain mixed.  With very little data out of the US given the government shutdown we could be in for a very volatile week.

Today’s expected trading range is 1.0300 – 1.0425

EUR/USD CommentaryWe expect the EUR/USD to remain at the mercy of US lawmakers this week as we wait to see if the debt ceiling is lifted by the 17th of October.  From a trading perspective this means that moves are likely to be short term in the lead up to the 17th and ther could be large shifts in sentiment so expected the unexpected.

German final CPI for September came in as expected at 0.0 percent, while the German WPI at 0.7 percent beat the expected 0.5 percent.  The market is looking little unsure this week. The investors across the globe await for the decision on US debt ceiling. The third quarter euro-zone GDP growth is due out next week. The GDP may improve at a slower pace due to mixed economic readings that appeared in third quarter. Traders and analysts expect the GDP to likely turn lower, unlike the September’s reading. Another important data point that is expected out this week is the euro zone trade balance and ECB current account data.  Markets expect to see a major downward correction which may have major impact on the currency.

Short term technicals remain mixed.  The US debt ceiling negotiations is holding most traders hostage and we expect a very volatile week.  Direction of the pair purely depends on the outcome of the debt ceiling negotiations.

Today’s expected trading range is 1.3400 – 1.3550

GBP/USD CommentaryThe GBP/USD traded above the 1.6000 level on Monday after cable took a tumble last week where several data reports missed expectations casting doubt on the overall recovery seen in the prior month’s numbers. The US dollar continued to weaken as the debt ceiling moved closer and politicians seem unable to reach agreements. The British pound depreciated 0.30% against the greenback and settled at 1.5957 to close out the week. The nine-member Monetary Policy Committee of the Bank of England headed by Mark Carney decided to keep the benchmark rate at its historic low of 0.50% and maintained monthly bond buying program at 375Bn pound. The UK industrial production and manufacturing production declined unexpectedly in the month of August pressurized pound against the dollar. However, the improving housing sectors limited the losses in pound. The trade balance also improved in August along with exports trades. The pound may remain under pressure due to concerns over UK economic growth. The UK producer price index and consumer price index may remain weak due to slowing down of consumption and spending. The retail price is also expected to decline in the month of September which may pressurize the pound. The unemployment rate may remain unchanged. On the whole, the economic data may have slight negative impact on pound.

The markets will be focused on US lawmakers and their comments and decisions will be the overall controlling factor this week.

Short term technicals remain mixed as the markets continue to await a resolution on the US debt ceiling debate.  We continue to expect a volatile week on the GBP/USD.

Today’s expected trading range is 1.5850 – 1.6000

Opening FX Rates (USD)
USD/CAD 1.0360
EUR/USD 1.3489
GBP/USD 1.5932
USD/JPY 98.30
AUD/USD 0.9522
USD/HKD 7.7541
USD/PLN 3.0972
USD/THB 31.252
Opening FX Rates (CAD)
USD/CAD 1.0360
EUR/CAD 1.3975
GBP/CAD 1.6509
CAD/JPY 95.02
AUD/CAD 0.9864
CAD/HKD 7.4831
CAD/PLN 2.9882
CAD/THB 30.186
Opening Commodities (USD)
Oil 101.30
Gold 1262.65
Silver 20.70
Economic and Event Calendar
 GBP Consumer Price Index Oct 15
 EUR Economic Sentiment Oct 15
 GBP Unemployment Rate Oct 16
 EUR Consumer Price Index Oct 16
 GBP Retail Sales Oct 17

USD Remains Mixed After Yesterday’s Data Print

MTFXLogoMarket Snapshot (near-term 48 hour outlook)
USD/CAD:  Slightly Bullish. Spot at 1.0319
EUR/CAD:  Bullish. Spot at 1.3973
GBP/CAD:  Strongly Bullish. Spot at 1.6613
EUR/USD:  Bullish. Spot at 1.3555
GBP/USD:  Strongly Bullish. Spot at 1.6100
Today’s Commentary
USD/CAD CommentaryU.S. economic reports, as ongoing speculation over the future of the Federal Reserve’s stimulus program continued to dominate. Official data showed that the U.S. economy expanded by 2.5% in the second quarter, confounding expectations for a 2.6% expansion.In addition, the U.S. Department of Labor said that the number of people who filed for unemployment assistance in the U.S. in the week ending September 20 fell by 5,000 to a seasonally adjusted 305,000, from a downwardly revised 310,000 the previous week.  Analysts had expected the number of people who filed for unemployment assistance to rise by 15,000 to 325,000 last week. The data came after a recent string of economic reports underlined concerns over the outlook for the U.S. economic recovery. Last week, the Fed said it wanted to see more evidence of a sustained economic recovery before it reduced stimulus.Separately, U.S. budget concerns weighed on market sentiment as Republican leaders in the U.S. House of Representatives notified members that a vote on raison the debt limit could come as early as Friday. The U.S. Congress is struggling to pass a spending bill to keep the government funded beyond October 1.

Yesterday the CAD was weak touching weekly lows.  The CAD continues to remain a mid performer and is torn between the optimism for global growth and the negativity of the US political gridlock. There are no domestic data points to be released today leaving the CAD to the mercy of broader market movements.

Short term technicals are mixed and the Spot rate continues to trade between 1.0223 and 1.0356.  A break of 1.0356 should encourage further gains to 1.04 and above.   On the downside a break of 1.0182 will open up 1.0100.

Today’s expected trading range is 1.0275 – 1.0375

EUR/USD CommentaryEURUSD has traded in a fairly tight range so far this week with 1.3460 capping the downside, and EUR bulls failing to break above 1.3555, close to the 1.3570 high recorded after the FOMC decision last week.Interestingly, at the same time as the EUR has been able to hold onto most of its recent gains the fundamental data has not been supportive of the single currency.Manufacturing PMI data for the currency bloc, and Germany and France in particular, slipped in September, suggesting a slight pull back in the recent economic recovery.

Money supply data for August may have been in line with expectations, but lending to consumers and non-financial businesses contracted for another month in August. Without credit growth, it is hard to see how Europe’s recovery can be sustained, and the ECB may have to step in with extra measures to boost lending.

ECB President Mario Draghi said during a testimony to the EU Parliament in Brussels earlier this week that the Bank could embark on another round of quantitative easing if necessary if necessary.

Other ECB speakers including influential Jorg Asmussen have reiterated the ECB’s forward guidance and said that rates will remain steady or lower, not higher, in the future.

Some Fed speakers have also been hawkish, including voting member Bullard who said the Fed could start its tapering next month; non-voter Lacker also  said if the Fed did not start tapering at its next meeting than it risked its credibility.

Thus, the EUR seems to be moving higher, not on its own steam, but rather because the dollar is sluggish, which has made markets cautious about the EUR’s potential to move above these levels.

Short term technicals remain bullish, however upside momentum has eased. A break of the 7 session range of 1.3462 – 1.3569 will provide near term direction.

Today’s expected trading range is 1.3475 – 1.3625

GBP/USD CommentaryThe US economic recovery story seems to be coming off the rails, now the UK’s gravity-defying economic bounce might be starting to show some cracks. The second reading of Q2 GDP was unrevised at 0.7% quarterly growth, most of the focus so far has been on the broad-based nature of the economic recovery and the pick-up in the manufacturing and construction sectors, which made up for a decline in household and government spending. Wages and employee compensation was also a bright spot in the report, the quarterly rate of wages, salaries and pension contributions increased by 2.4% in Q2, which is the highest quarterly increase since Q3 2000.Amid all the good news there was a large downward revision to business investment, which declined at an 8.5% annual pace. This is concerning, without investment, how can the economy continue to grow and create jobs in the future? Although overall investment grew by 0.8% last quarter, it was mostly driven by an increase in general government investment. This is problematic when the UK is trying to cut public spending and reign in its deficit, which is proving to be a tougher and longer task than Chancellor George Osborne first anticipated. In an environment of fiscal austerity it’s not a good idea to rely too heavily on government investment to boost growth.The worst possible scenario is that the UK’s economic growth is reliant on unsustainable bubbles, such as the housing market, to keep it going. If so, then don’t expect it to last, as the Bank of England’s Financial Policy Committee, headed by BOE Governor Mark Carney, stated earlier this week that it is alert to the risks of a housing market bubble and it has a range of tools to address any risks from a housing bubble.

Short term technicals continue to remain bullish, however similar to the EUR upside momentum is weighing. A break of the near term trading range is required to provide momentum.

Today’s expected trading range is 1.6025 – 1.6150

Opening FX Rates (USD)
USD/CAD 1.0319
EUR/USD 1.3555
GBP/USD 1.6100
USD/JPY 98.42
AUD/USD 0.9313
USD/HKD 7.7544
USD/PLN 3.1202
USD/THB 31.255
Opening FX Rates (CAD)
USD/CAD 1.0319
EUR/CAD 1.3973
GBP/CAD 1.6613
CAD/JPY 95.36
AUD/CAD 0.9610
CAD/HKD 7.5137
CAD/PLN 3.0238
CAD/THB 30.3130
Opening Commodities (USD)
Oil 102.97
Gold 1338.82
Silver 22.02
Economic and Event Calendar
GBP Nationwide Housing Prices Sep 30
EUR President Draghi’s Speech Sep 30
EUR Consumer Price Index Sep 30
USD Personal Spending Sep 30
USD Michigan Consumer Sentiment Sep 30

Fed Talk Will Continue To Dominate Markets

MTFXLogoMarket Snapshot (near-term 48 hour outlook)
USD/CAD:  Slightly Bullish. Spot at 1.0309
EUR/CAD:  Bullish. Spot at 1.3929
GBP/CAD:  Bullish. Spot at 1.6545
EUR/USD:  Slightly Bullish. Spot at 1.3505
GBP/USD:  Bullish. Spot at 1.6044
Today’s Commentary
USD/CAD CommentaryThe USD/CAD traded on either side of the 1.03 level yesterday and was relatively flat for the day.  The CAD approached the three-month high versus its U.S. peer as retail sales gained 0.6 percent after June’s worst monthly decline of the year. The sales gain followed improvements in wholesale and manufacturing sales during the same period, and slower inflation for the first time in four months in August.The numbers printed are those of the summer retail sales and most market analysts expect the numbers to pick up into the year end. However, the overall picture for Canada will be tied to the U.S as domestic growth is expected to be mediocre as best. Retail sales rose to C$40.3 billion ($39.1 billion) following a 0.6 percent decline in June, Statistics Canada said in Ottawa. Economists surveyed by Bloomberg News forecast a 0.5 percent increase, based on the median of 22 projections. Sales in July were led by a 3.2 percent gain at gasoline stations. Clothing and accessory stores posted a 1.9 percent gain and home furnishing retailers boosted receipts by 1.6 percent. Sales rose in eight of 11 categories making up 52 percent of total receipts.USD/CAD short term technicals continue to remain bearish as the pair trades in the middle of the 100 and 200 day moving averages between 1.0231 and 1.0351.

Today’s expected trading range is 1.0250 – 1.0350

EUR/USD CommentaryThe EUR/USD slid yesterday to close below the 1.35 level after German Ifo data printed below expectations. Analysts also warned that the passing of the German elections could see attention switch back to the crisis rumbling across the eurozone. The euro fell against the dollar on Tuesday after German sentiment data came in slightly below expectations and on further signs the European Central Bank was not ready to exit its crisis measures. German business morale improved slightly in September to touch a 17-month high, data
from the Ifo think tank showed. The September reading was better than August’s  but the euro dipped as it fell short of the consensus forecast.It is feared Greece will need a third bailout while looming stress tests on eurozone banks by the ECB and talks over banking and fiscal unions in the  region are also likely to cause friction. Unemployment remains painfully high in countries such as Greece, Spain, Italy and Portugal, with many critics blaming economic stagnation on German demands for austerity. The front page of one Greek newspaper yesterday mocked-up a photo of Merkel on a throne with the headline: Triumph for the Queen of Austerity.The European common currency area remains “a considerable source of risk” even though the systemic risk from its debt crisis is scaling back, the Organization for Economic Cooperation and Development’s chief economist said on Tuesday. The OECD’s Pier Carlo Padoan told a conference in Lisbon positive economic growth in the euro zone should return only in 2014, expecting growth to be still negative this year despite a recovery in many countries, including Portugal.

Short term technicals remain mixed with the pair trading within a tight range.  Support lies at 1.3400 while resistance lies at 1.3569.

Today’s expected trading range is 1.3425 – 1.3575

GBP/USD CommentaryThe GBP/USD traded down yesterday as the US dollar recovered and BBA mortgages missed expectations. Sterling fell against the dollar and the euro, on growing expectations the Bank of England will tighten policy sooner rather than later amid signs of a broad-based recovery in the British economy. Although two members of the MPC seemed to say the opposite yesterday weighing on the pound.The Fed’s postponement of tapering along with a downgrade of growth forecasts last week contrasted with signs of sustained recovery in the British economy and improvements in the labor and housing markets. Indeed, latest data from the Commodity Futures Trading Commission showed speculators had cut their bets against sterling to 6,310 contracts in the week to Sept. 17 from 38,166 contracts a week before.With short positions cut in a big way, traders said sterling will need further evidence of a recovery to test recent highs. There is little significant UK data this week, except for the final reading of second-quarter growth data. But a host of speakers from the Federal Reserve are lined up and could sway the dollar if their comments cause traders to revise views on whether the Fed will withdraw stimulus or not in coming months.

Ben Broadbent an MPC member said in a speech late on Monday that the surprisingly strong acceleration in UK growth may settle down soon.

Short term technicals remain bullish.  Studies will remain in buy territory as long as the pair remains above 1.5904.

Today’s expected trading range is 1.5975 – 1.6125

Opening FX Rates (USD)
USD/CAD 1.0309
EUR/USD 1.3505
GBP/USD 1.6044
USD/JPY 98.53
AUD/USD 0.9356
USD/HKD 7.7538
USD/PLN 3.1205
USD/THB 31.275
Opening FX Rates (CAD)
USD/CAD 1.0309
EUR/CAD 1.3929
GBP/CAD 1.6545
CAD/JPY 95.54
AUD/CAD 0.9646
CAD/HKD 7.5181
CAD/PLN 3.0256
CAD/THB 30.3477
Opening Commodities (USD)
Oil 103.70
Gold 1322.04
Silver 21.64
Economic and Event Calendar
USD Durable Goods Sep 25
USD New Home Sales Sep 25
EUR Retail Sales Sep 26
GBP Gross Domestic Product Sep 26
ECB Draghi’s Speech Sep 27

CAD Retail Sales Out Today

MTFXLogoMarket Snapshot (near-term 48 hour outlook)
USD/CAD:  Neutral. Spot at 1.0283.
EUR/CAD:  Slightly Bearish. Spot at 1.3860
GBP/CAD:  Slightly Bearish. Spot at 1.6413
EUR/USD:  Slightly Bearish. Spot at 1.3467
GBP/USD:  Slightly Bearish. Spot at 1.5959
Today’s Commentary
USD/CAD CommentaryThe USD/CAD closed yesterday’s trading at 1.0280 as the CAD is unable to sustain gains against the weak US dollar. Last week’s data continues to weigh on the CAD, with CPI reporting above expectations and wholesale sales missing expectation there is nothing positive to say for the Canadian economy, except that it is being supported by the recovery in the US. Gold and oil are both lower which is weighing on the CAD. The weak greenback continues to limit the losses of the Loonie. Today’s retail sales data is expected to miss expectations which will weigh on the CAD. While the US dollar deals with a barrage of press from Fed members all predicting a large tapering in October, which might support the recovery of the US dollar.The dollar fell to its lowest level since February as markets were whipsawed by Federal Reserve communications on keeping monthly bond purchases unchanged depending on the strength of the US economy. The US currency fell against the majority of its 16 most- traded peers for a third-straight week as the US central bank announced September 18 it kept $85 billion in monthly bond purchases unchanged, compared to numerous market analysts expecting a $10billion tapering. The dollar rose on Friday after Fed Bank of St Louis President James Bullard said a “small tapering” was possible in October.Short term technicals remain bearish but signals are wavering.  Support lies at 1.0217 while first resistance lies at 1.0348.  Today’s retail sales will provide direction on the pair.

Today’s expected trading range is 1.0225 – 1.0350

EUR/USD CommentaryThe EUR/USD traded in the red for most of yesterday’s session after French, German and Eurozone PMIs all reported under expectations. The positive news was that Angela Merkel was re-elected as Chancellor by a strong margin but will still need to form a coalition government. The US dollar continues to remain weak ever since the FOMC decision to hold rates and policy. Traders are closely monitoring Fed speaker who seem to indicate a larger tapering process will begin in October if data supports the US recovery. The debt ceiling debate continues in Washington weighing on the US dollar. Fed policy makers said on Sept. 18 that they want more proof of an economic recovery before curbing their bond-buying program, known as quantitative easing, surprising analysts. Fed Bank of St. Louis President James Bullard said in a Sept. 20 interview on Bloomberg Television that a small reduction in the pace of the central banks $85 billion of monthly bond purchases is possible in October.Short term technicals remain bullish and has some room to the upside prior to reaching overbought territory.Today’s expected trading range is 1.3400 – 1.3550
GBP/USD CommentaryThe GBP/USD continued to excel, adding almost half a cent and closing close the 1.6050 yesterday.  The GBP rose against the dollar and the euro on Monday, on growing expectations the Bank of England will tighten policy sooner rather than later amid signs of a broad-based recovery in the UK economy. Sterling struck an eight-month peak of $1.6164 on September 18 after the U.S. Federal Reserve’s surprise decision not to start withdrawing its
monetary stimulus.The Fed’s postponement of tapering along with a downgrade of growth forecasts last week contrasted with signs of sustained recovery in the British economy and improvements in the labor and housing markets.  Although traders are expecting BoE Governor Carney to keep to his forward guidance so a lot is dependent on the labor market the same as in the US. There is little significant UK data this week, except for the final reading of second-quarter growth data. But a host of speakers from the Federal Reserve are lined up and could sway the dollar if their comments cause traders to revise views on whether the Fed will withdraw stimulus or not in coming months. Fed speak will be the focus of the global markets this week as another month draws to a close. Traders will also monitor the debt ceiling debates in the US.Short term technicals remain bullish with the next level of resistance at 1.6381.

Today’s expected trading range is 1.5875 – 1.6025

Opening FX Rates (USD)
USD/CAD 1.0283
EUR/USD 1.3467
GBP/USD 1.5959
USD/JPY 98.65
AUD/USD 0.9391
USD/HKD 7.7533
USD/PLN 3.1390
USD/THB 31.327
Opening FX Rates (CAD)
USD/CAD 1.0283
EUR/CAD 1.3860
GBP/CAD 1.6413
CAD/JPY 95.91
AUD/CAD 0.9654
CAD/HKD 7.5406
CAD/PLN 3.0507
CAD/THB 30.4937
Opening Commodities (USD)
Oil 102.74
Gold 1314.16
Silver 21.54
Economic and Event Calendar
CAD Retail Sales Sep 24
USD Consumer Confidence Sep 24
USD Durable Goods Sep 25
GBP Gross Domestic Product Sep 26
ECB Draghi’s Speech Sep 27
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