Today’s highlights:
- · Wholesale Sales (MoM) + Core CPI (MoM) (CAN, 13:30 GMT)
Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said battling unemployment may mean keeping interest rates close to zero for four years, reversing his view that borrowing costs might have to rise as soon as this year. As long as inflation doesn’t exceed 2.25 percent, the Fed “should keep the fed funds rate extraordinarily low until the unemployment rate has fallen below 5.5 percent,” Kocherlakota said.
Greek Prime Minister Antonis Samaras struggled to clinch agreement with his coalition partners on an 11.5 billion euro ($14.9 billion) budget-cut package that’s key to receiving international aid funds. Samaras was handed the third refusal in less than two weeks yesterday from Democratic Left leader Fotis Kouvelis and Pasok leader Evangelos Venizelos, the junior partners in the coalition who met to discuss proposed cuts to wages, pensions and benefits. Finance Minister Yannis Stournaras and the “troika” of inspectors from the European Commission, the European Central Bank and the International Monetary Fund have been locked in talks for two weeks on carving out savings.
EU authorities are presumably, according to FT reporters Peter Spiegel and Miles Johnson, working behind closed doors on an aid package to Spain as well as preparing for an open-ended bond purchases program by the ECB. Brussels is reportedly helping Madrid to pull an economic reform plan thought to be announced next week, the FT reports.
EUR/USD: The EUR/USD dropped significantly yesterday on some week economic data in the Eurozone, U.S and China, adding to evidence that central banks will need to do more to spur growth. The pair was trading slightly up this morning at 1.29842 at the time of writing on market correction. Investors seems to have jumped on the sidelines awaiting some news in the Eurozone to better assess the trend of the EUR/USD as no major economic data related to EUR is expected. Market's attention will focus on Spain again after better than expected outcome from the 10 year bond auction yesterday, as it is Friday and the Spanish Council of Ministers meeting takes place, and there's growing expectation on when finally the request will be asked. While in the U.S, only the ECRI Weekly Annualized (WoW) is expected. Speculation and sentiment will be driving the market today. Investors should be very prudent. Any news from the Eurozone regarding Spain, Greece and Italy will affect the trend of the pair. Moreover, news from China might also contribute to fluctuations. The resistance level is at 1.30579 and the support level is at 1.29146.
USD/CAD: The USD/CAD was trading lower at 0.97367 at the time of writing on market correction after the pair increased to the highest level in two weeks on disappointing U.S. jobless claims and a string of weak economic reports from the euro zone and China, adding to concerns over the global economic outlook. Market sentiments remain bullish on the CAD ahead of the key risk events, Wholesale Sales (MoM) and Core CPI (MoM) in Canada. Canada’s inflation rate in August from a year earlier is expected to hold steady at 1.3 percent and the Wholesales sales is expected to remain at flat at -0.1%, when the reports are released today. While in the U.S, only the soft ECRI Weekly Annualized (WoW) data is expected. Investors should remain cautious and keep an eye on the latest developments in the Eurozone regarding Spain, Greece and Italy to get more visibility on the pair, as the news will affect market sentiments for riskier assets. The resistance level is at 0.97691 and the support level is at 0.97094.
GOLD: The yellow metal was trading slightly up at 1772.11 at the time of writing after disappointing data underlined concerns over the weak U.S. labor market. The Fed said it will buy $40 billion a month of mortgage debt to bolster the labor market and probably hold the federal funds rate near zero until at least the middle of 2015. Gold is one of the commodities that will benefit most from quantitative easing. Market sentiments remain bullish on the commodity as manufacturing activity in China remained in contraction territory for the 11th consecutive month, adding to fears over a deeper-than-expected slowdown in the region’s largest economy. The ongoing uncertainty over whether Spain is about to ask for more financial aid and Greece failure to clinch agreement with his coalition partners are also weighing on the price of gold. Gold often trade inversely to the USD. Investors should be very prudent and wait for some news to come in the market to get some indications on the movement of the commodity. The resistance level is at 1786.67 and the support level is at 1761.45.
Good luck in trading….