27 November, 2015
FX News Today
U.S. calendar empty today, bond and stock markets will close early. FX markets are mostly quite over the last 24 hours , with the dollar up slightly versus the EUR and GBP, and 0.1% down on the yen.
The Shanghai Composite closed 5.5% lower its worst daily decline since August. Other markets in the Asia region fared better, though most were down. The catalyst behind the sell-off in China was news that a number of brokerages are being investigated for alleged violation of securities regulations.
Data out of Japan today were mixed, and didn’t have a big impact on markets. Headline CPI 0.3% y/y in October, but the core figure was -0.1%, and household spending dove 2.4% last month, adding to a 0.4% decline in September. Japanese unemployment fell to a 20-year low of 3.1% in October, down from 3.4%, but this was down to a shrinking labour force. The most-recent survey by Reuters found nearly all respondents expecting the BoJ to expand monetary policy at its January meeting, and today’s data shouldn’t change this picture much.
NYMEX crude has drifted lower, in line with broader commodity retreat. A 961k bbl rise in crude stocks. Analyst had been expecting a 1.0 mln bbl increase. Meanwhile, gasoline supplies, seen up 0.5 mln bbls actually rose 2.5 mln bbls, while distillate stocks were up 1.0 mln bbls, versus expectations for a 0.5 mln bbl fall. Refinery usage rose to 92.0% from 90.3%.
Main Macro Events Today
• EUR German Import Price Index: fell to -4.1% y/y in October, from -4.0% y/y in the previous month. Expectations had been for a slight rise and the fall back will add to the arguments of the doves at the ECB ahead of next week’s council meeting, especially excluding energy the annual rate dropped to 0.3% y/y from 0.7% y/y, as basic goods prices drop -2.1% y/y. Annual rates for capital goods as well as consumer goods remained steady with the latter at 2.1% y/y, highlighting that energy and basic goods prices remain the main drag on the headline rate.
• UK house price inflation: has come off a bit according to November data from Nationwide, which reports prices rose by 3.7% y/y, down from 3.9% y/y in October. The Bloomberg market median had been for a 4.2% rise. Price increases have oscillated between 3% and 4% y/y over the past six months, which have been “broadly consistent” with earnings, by the estimates of Nationwide, though the lender still points to a “dearth” of supply. Strong BBA mortgage approvals data this week suggests that the demand side of the equation will remain strong in the months ahead.
• EUR Consumer Confidence: Italian consumer confidence jumped to a 20-year high of 118.4 in November, from 117.0 in the previous month. The much stronger than expected reading backs the unexpected improvement in preliminary Eurozone consumer confidence released last week and ties in with the upside surprises in PMI and Ifo readings, which in turn suggest that today’s ESI is also likely to come in higher than anticipated. Not much there to back the arguments of the doves at the ECB, but with Draghi and Co reviving deflation fears, this won’t prevent the central bank from further action next week. French consumer spending dropped -0.7% m/m in October, a much sharper than anticipated decline that brought the annual rate down to 2.1% y/y from 2.6% y/y in September. These are numbers from before the Paris attacks, which together with the mixed French PMI readings this month highlight that the second largest Eurozone economy remains subject to downside risks.
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