Forex-novosti i prognoze od 12-11-2019

The main US stock indices rose slightly due, first of all, to the growth of shares in the health and technology sectors.

The focus was also on the speech of US President Donald Trump, who said that the United States and China are close to completing the "first phase" of the trade agreement, but added: "It is we who decide whether we want or do not want to conclude an agreement." The president said his duty policy has seated countries at the negotiating table. “But we will accept the agreement only if it is useful for the United States and our employees, as well as for our wonderful companies,” he added.

Trump said the United States and China reached an agreement in principle last month after the Chinese negotiators arrived in Washington. After that, both sides worked on the final conditions in order to find a way to ensure a meeting between President Trump and President Xi Jinping in order to sign the first part of the agreement. Although the first part is expected to be limited in scope, Trump said the second and third phases will touch on the larger structural issues of the Chinese economy.

Recall, on Friday, the US president said that he had not yet agreed to the abolition of existing tariffs on Chinese imports, but China would "like" to do so. So he reacted to the statement of the Ministry of Commerce of China that Washington and Beijing agreed to simultaneously cancel a number of existing tariffs on goods imported to each other. On Saturday, Trump also announced his intention to conclude a trade agreement with China only if it would be a “right deal” for the United States, adding that negotiations were progressing more slowly than he would have liked.

Most of the DOW components completed trading in the red (17 of 30). Outsiders were shares of Exxon Mobil Corporation (XOM; -1.50%). The biggest gainers were The Walt Disney Co. (DIS; + 1.32%).

Most S&P sectors recorded a decline. The largest decline was shown in the base materials sector (-0.5%). The health sector grew the most (+ 0.4%).

At the time of closing:

Dow 27,691.49 0.00 0.00%

S&P 500 3,091.84 +4.83 +0.16%

Nasdaq 100 8,486.09 +21.81 +0.26%

Previewing Wednesday's inflation report from the United States, TD Securities' analysts said they are expecting the headline inflation to remain unchanged at 1.7% y/y in October (0.3% m/m), partly aided by an increase in energy prices.

• "In effect, we expect a 1% jump in gasoline prices to support inflation in the non-core segment.
• Conversely, core inflation should decline a tenth to 2.3% y/y, reflecting a 0.2% m/m advance. We expect core goods inflation to recover m/m, but for core services inflation to slow moderately to 0.2% m/m after four straight increases at 0.3%. We anticipate OER to advance at 0.2% m/m, following a 0.3% monthly gain, and also for the ex-shelter segment to slow modestly on a monthly basis."

Data released today showed the Small Business Optimism Index rose modestly to 102.4 and analysts at Well Fargo note the index remains close to its cycle high and noted most key components rose, including capital spending plans and hiring plans. 

• “Small business owners continue to express a high degree of confidence in overall economic conditions and the outlook for their business.
• Relief that a truce in the trade war may be at hand is likely boosting confidence.
• Small business owners today are also more upbeat about capital spending than larger businesses are, a finding we saw in our own small business survey.
• Hiring plans inched one point higher to 18% but remains off its recent high. Firms are having a tough time filling openings.”

FX Strategists at UOB Group note the stance on NZD/USD remains bearish and the door stays open for a move to the 0.6300 region in the next weeks.

• "24-hour view: Our expectation for the weakness in NZD to “extend lower” was incorrect as it rebounded to a high of 0.6372. While downward pressure has dissipated, the current movement is viewed as part of consolidation phase and not the start of a sustained recovery. In other words, NZD is expected to trade sideways for today, likely between 0.6340 and 0.6390.
• Next 1-3 weeks: While we held the view that a “short-term top is in place” and NZD is likely to “trade sideways” since last Tuesday, we highlighted on Thursday (07 Nov, spot at 0.6365) that “if NZD were to close below the bottom of the expected 0.6350/0.6450 range”, it would “increase risk of a pull-back to 0.6300”. NZD dropped to 0.6323 last Friday before ending the day at 0.6328 (-0.65%). In other words, instead of trading sideways, NZD is now expected to trade with a downward bias towards 0.6300. At this stage, the prospect for a sustained decline below this level is not high (there is another support at 0.6285). On the upside, only a move above 0.6400 (‘strong resistance’ level) would indicate that current downward bias has eased."

• We have definitely not exhausted all our options
• We are well aware of side effects of art monetary policy, will hold side effects up to even closer scrutiny in future
• Real threat at present is extended phase of extremely low growth
• Inflation expectations have recently shown a marked decline but they have not yet become be anchored

U.S. stock-index futures traded flat on Tuesday as investors awaited a speech from U.S. President Donald Trump, which could give clues to the status of U.S.-China trade talks.

Global Stocks:

(company / ticker / price / change ($/%) / volume)

Travelers (TRV) resumed with a Neutral at JP Morgan; target $140

ING analysts note that global risk sentiment has continued to benefit from the optimistic news flow about the Sino-American trade relationships over the last two weeks. 

• "However, markets did not rush away from G10 safe-havens as demonstrated too by the relatively small decrease (compared to the high-yielders) in JPY and CHF net positioning.
• EUR/USD net speculative positions retracted marginally (-0.9% of open interest) into deeper negative territory and now amount to -11% of open interest. Latest dynamics in euro positioning tend to endorse the notion that the EUR is cementing its role as one of the preferred funding currencies, hence moving broadly in line with the other low-yielders JPY and CHF. Accordingly, we expect a continued resilience in risk sentiment as unlikely to aid any short-squeezing effect on EUR/USD.
• Elsewhere, GBP positioning remained broadly stable around its 5-year average, signalling market’s wait-and-see approach ahead of the UK elections on December 12th. Investors seem to be pricing in a Conservative majority as the base-case scenario, which is widely seen as a market-friendly outcome. Accordingly, should the risk of a hung parliament start to emerge from the polls, another rise in GBP shorts may be on the cards."

Analysts at Rabobank note that Bloomberg's survey indicates that 16 out of 21 forecasters expect the RBNZ to cut the Official Cash rate (OCR) tomorrow to a record low of 0.75%.

• “The money market had been harbouring more doubts but on the back of this morning’s release of soft inflation expectations data from the RBNZ, a move this week almost appears as a done deal. A rate cut tomorrow would underpin our view that NZD/USD is heading lower towards 0.60 on a 12-month view.
• In the run-up to this month’s RBNZ policy meeting market expectations regarding whether or not the RBNZ would cut rates have been particularly volatile.
• In spite of the criticism, the RBNZ has adopted a very pre-emptive position on policy this year. It was the first G10 central bank to ease in 2019 and its 50 bps move in August was larger than expected. By taking the market by surprise the RBNZ was arguably able to increase the impact of its rate cuts and accentuate the impact on the NZD. Relative to its March highs NZD/USD is currently trading over 8% lower. That said, despite the softening in monetary conditions, inflation expectations have failed to push higher.
• This morning release of the RBNZ’s measure of 2 year ahead inflation expectations showed a fall to 1.80% in Q4 from 1.86% in Q3. The 1 year ahead measure dropped to 1.66% from 1.71% in the last reading. The release created a surge in expectations that the RBNZ will bite the bullet and announce an additional cut in rates at tomorrow’s meeting.
• Supporting another rate cut tomorrow is the news that some of the steam has been taken out of the domestic housing market in recent months.
• A crucial part of tomorrow’s communication from the RBNZ will be the guidance offered for 2020. Given the constraints of household debt and the models of the banking system, there is a significant concern that the RBNZ may be reaching the lower floor for interest rates. Any acknowledgment of this, however, could lessen any downward pressure on the NZD from a policy move.”

Tyson Foods (TSN) reported Q4 FY 2019 earnings of $1.21 per share (versus $1.58 in Q4 FY 2018), missing analysts’ consensus estimate of $1.27.

The company’s quarterly revenues amounted to $10.884 bln (+8.9% y/y), generally in line with analysts’ consensus estimate of $10.934 bln.

TSN fell to $79.95 (-3.36%) in pre-market trading.

Analysts at TD Securities note that the German ZEW survey posted a big jump higher in expectations, rising from -22.8 to -2.1 in November (mkt -13.0).

• “The ZEW institute noted an improvement in the international economic policy environment, with a greater chance for a Brexit deal, less likely US auto tariffs, and a potential agreement in the trade conflict between the US and China. The current assessment posted a smaller improvement, rising from -25.3 to -24.7 (mkt -22.0).”

• Will strengthen support for the real economy
• Will accelerate upgrade of manufacturing sector
• Will use counter-cyclical adjustment measures more effectively

FX Strategists at UOB Group note EUR/USD remains under pressure and could extend the drop below the 1.10 handle in the near term.

• "24-hour view: We highlighted yesterday “lackluster momentum suggests any weakness below the strong 1.1000 level is unlikely to be sustained”. The 1.1000 level was unchallenged as EUR traded in a quiet manner and within a relatively narrow range of 28 pips (between 1.1015 and 1.1043). The price action is viewed as part of a consolidation phase and EUR could continue to trade sideways. Expected range for today, 1.1020 and 1.1065.
• Next 1-3 weeks: EUR closed lower for the fifth straight day last Friday as it dropped to 1.1015 before closing at 1.1016. The price action is in line with our view from last Wednesday (06 Nov, spot 1.1075) wherein EUR is expected to “trade with a downside bias towards 1.1000”. After the relatively weak daily closing on Friday, the risk for a sustained decline below 1.1000 has increased slightly. However, there is another strong support at 1.0970 and only a clear break of this level would suggest EUR is ready to tackle 1.0930. All in, EUR is expected to stay under pressure unless it can move above 1.1090 (‘strong resistance’ level was at 1.1125 last Friday)."

James Smith, a developed markets economist at ING, notes that the headline measure of employment fell by 58,000 in the three months to September, albeit this was better than expected.

• "Dig a little deeper, however, and the picture is a little more blurry. The recent fall in employment has been predominantly driven by 18-24 year-olds, and once that group is stripped out, jobs growth is still positive. A large chunk of the fall has also been led by part-time employees. It’s not clear whether these two factors are linked, but both can be reasonably volatile parts of the jobs data.
• Either way, the outlook for the jobs market looks challenging. The level of vacancies has been consistently falling over recent months, while the PMIs are pointing to reduced hiring appetite – and in some cases, redundancies. With the investment outlook likely to remain clouded as we move into 2020, regardless of the election outcome, we expect the challenges facing the jobs market to persist.
• That said, it’s still early days and the jury is still out on whether this merely reflects a jobs market that is no longer tightening, or whether it is something more serious. Either way, this raises some question marks over wage growth – a key pillar in the Bank of England’s hawkish rationale over recent years. At 3.6%, pay growth has fallen back but still looks pretty respectable.
• Given that some of these things are structural rather than cyclical (the impact of reduced EU migration and demographic factors), we’d expect the trend to continue for the time being.
• Partly for that reason, we think it’s still probably too early to be pencilling in Bank of England rate cuts just yet. However it’s clear that the jobs market holds the key, and a further material deterioration could easily see policymakers inch closer to easing policy in 2020."

Ho Woei Chen, an economist at UOB Group reviews the recent higher-than-expected CPI figures in the Chinese economy.

The National Federation of Independent Business (NFIB) reported on Tuesday the Small Business Optimism Index increased by 0.6 points to 102.4 in October, following a 1.3-point decline in September.

According to the report, the October gain in the headline index was buoyed by advances in eight of the 10 components, led by GDP-producing plans for job creation, inventory investment, and capital spending, while talk of a recession waned. Actual job creation in October exceeded that in September, as small businesses continued to hire and create new jobs. Reports of actual capital spending increased and inventory investment improved from a modest negative level in September. The reported increase in sales put pressure on inventory stocks, reducing them. Owners reporting inventory increases remained unchanged at a net 0 percent. Meanwhile, the uncertainty index fell 4 points but remains historically high heading into an election year.

“Labor shortages are impacting investment adversely - a new truck, or tractor, or crane is of no value if operators cannot be hired to operate them,” noted NFIB Chief Economist William Dunkelberg. “The economy will likely remain steady at its current level of activity for the next 12 months as Congress will be focused on other matters, and an election cycle will limit action. Any significant change in trade issues will impact financial markets more than the real economy during this period. Adjustments to a new set of ‘prices,’ such as tariffs, will take time.”

Karen Jones, analyst at Commerzbank, suggests that USD/JPY has rallied higher last week above the 200 day ma and into 5 month highs.

“It is losing upside momentum ahead of tough resistance which extends from current levels up to the 2015-2019 downtrend at 110.79 (the 55 and 200 week moving averages are found ahead of here at 109.57/109.98). This is formidable resistance and it should hold the topside. Near term the market is bid while above the uptrend at 108.36 and we would allow for some upside probes. Failure at the recent low of 107.89 is needed to alleviate upside pressure and trigger losses to the 106.48 October low. Failure at 106.48 will target 106.00, then 105.32/78.6% retracement which is the last defence for the 104.46 August low.”

Survey data from the Bank of France showed that France economic growth is expected to slow slightly in the fourth quarter.

Gross domestic product is forecast to grow 0.2% in the fourth quarter, which is slower than the 0.3% expansion seen in the third quarter.

The confidence index in manufacturing rose to 98 in October from 96 in September. The reading was expected to rise marginally to 97.

Business leaders forecast industrial production to slow down in November, particularly in the automotive sector.

Meanwhile, the services confidence index fell to 98 from 99 in the previous month. Services activity expanded moderately in October. Business leaders expect the same pace of growth in November. The confidence index in construction held steady at 105 in October. Although activity remained strong in October, business leaders expect growth to be weaker in November.

According to the report from Leibniz Centre for European Economic Research (ZEW), indicator of economic sentiment for Germany has increased substantially in November 2019. Currently standing at -2.1 points, the indicator climbed 20.7 points compared to the previous month.  For the current survey, the assessment of the economic situation in Germany has again improved slightly by 0.6 points, with the corresponding indicator increasing to a current reading of -24.7 points.

“There is growing hope that the international economic policy environment will improve in the near future, which explains the sharp rise in the ZEW Indicator of Economic Sentiment in November. In the meantime, the chances for a agreement between Great Britain and the EU and thus for a regulated withdrawal of Great Britain have noticeably increased. Punitive tariffs on car imports from the EU to the United States are also less likely than the projections a few weeks ago. An agreement in the trade conflict between the USA and China is appearing more likely too,” comments ZEW President Professor Achim Wambach.

Financial market experts’ sentiment concerning the economic development of the eurozone has also improved greatly, bringing the indicator to a current level of -1.0 points for November, 22.5 points higher than in the previous month. The indicator for the current economic situation in the eurozone rose significantly by 6.8 points, with the new value increasing to a current reading of -19.6 points.

According to the report from Office for National Statistics, the UK unemployment rate was estimated at 3.8% from July to September; 0.2 percentage points lower than a year earlier and 0.1 percentage points lower than last quarter. Unemployment was expected to remain at 3.9%.

The UK employment rate was estimated at 76.0%; 0.5 percentage points higher than a year earlier but 0.1 percentage points lower than last quarter. The UK economic inactivity rate was estimated at 20.8%; 0.3 percentage points lower than a year earlier but 0.1 percentage points higher than last quarter.

Estimated annual growth in average weekly earnings for employees in Great Britain was 3.6% for both total pay (including bonuses) and regular pay (excluding bonuses). Economists had expected a 3.8% increase. In real terms (after adjusting for inflation), annual growth in total pay is estimated to be 1.8% and annual growth in regular pay is estimated to be 1.7%.

For August to October 2019, there were an estimated 800,000 vacancies in the UK, 18,000 fewer than for the three months to July 2019 (this is the ninth consecutive fall on the previous three months) and 53,000 fewer than a year earlier (this is the fifth consecutive annual fall).

Economist at UOB Group Lee Sue Ann assessed the recent BoE event.

“As widely expected, the Bank of England (BoE) kept its monetary policy unchanged at their November meeting. What came as a surprise, though, was the split 7–2 vote by the nine-strong Monetary Policy Committee (MPC) to maintain the Bank Rate at 0.75%. MPC members Michael Saunders and Jonathan Haskel both opted for a 25bps rate cut, saying their vote was driven by reduced job vacancies and downside risks from the global economic slowdown and Brexit. As reflected in the minutes and subsequent press conference by BoE Governor Mark Carney, the BoE makes it clear that, although the current UK growth slowdown is due “partly” to the weakening global economy, it is above all caused “by increasingly entrenched Brexit-related uncertainties. The Bank’s latest Monetary Policy Report, for the first time, included precise Brexit assumptions based on the withdrawal agreement struck with Brussels. It believes leaving the EU will lead to the economy growing more slowly, but had previously been basing its forecasts on the average impact over 15 years. Despite the dovish tilt at the latest meeting, we expect the BoE to be in a wait-and-see stance. We would prefer to wait for the outcome of the impending election and its subsequent impact on how Brexit may proceed, before making changes to our forecasts”.

Bank in the euro zone are taking advantage of the European Central Bank's multi-tier deposit and excess liquidity is already being traded across borders, ECB board member Benoit Coeure said.

"On the first day of operation of the two-tier system we observed a considerable redistribution of excess liquidity, often away from liquidity-flush countries such as Belgium, Germany and the Netherlands and towards countries with unused allowances, such as Italy," Coeure said in a speech.

Coeure added that about one-third of the more than 1 trillion euros worth of excess liquidly needs to be traded across banks so lenders enjoy the full benefit of the scheme and around 30 billion euros would need to be traded across borders.

Karen Jones, analyst at Commerzbank, points out that GBP/USD has recently sold off to and recovered from the 1.2764/ 23.6% retracement, implying that the market is well placed for another attempt at the psychological resistance at 1.3000.

“Directly above here we have the 200 week ma at 1.3122 and the 1.3187 May high and these remain our short term targets, but we look for the market to be capped here. Failure at 1.2764 will see a slide to the 200 day ma at 1.2703. This guards 1.2582. Below 1.2582 lies the 1.2382 17th July low and the 1.2403 uptrend. The uptrend guards 1.2196/94. Below the current October low at 1.2194 lies the early and mid-August lows at 1.2091/15 and major support lies at the 1.1958 September low.”

The Italian government’s 0.6% growth forecast for 2020 is “reasonable” while the target of 1% set for 2021 is reachable, the Bank of Italy’s deputy governor said.

Rome should seize the opportunity offered by low interest rates to start lowering Italy’s debt-to-GDP ratio, Luigi Federico Signorini said during a parliamentary hearing on the 2020 budget.

Karen Jones, analyst at Commerzbank, suggests that USD/CHF is showing signs of failure at the .9976 6 month downtrend and while capped here a negative bias is entrenched and attention reverts back to the .9844/41 September and October lows.

“Failure at the next lower .9799 September low would push key support at .9716/.9659 to the fore. It is the location of the January, June, midand late August lows. Below here sits the .9659 August low and the September 2018 low at .9543. The market is negative. Above the mid-June high at 1.0014/28 on a closing basis targets the 1.0128 mid November 2018 high and the 1.0240 April high.”

Chinese policymakers should pursue a proactive fiscal policy and cut interest rates to support flagging economic growth, a financial magazine quoted Sheng Songcheng, an adviser to the People’s Bank of China (PBOC), as saying.

But as China does not face the same deflationary pressures that exist overseas, fiscal policy measures should be the first consideration, with monetary policy playing a supporting role, Yicai quoted Sheng as saying.

The comments comes as debate grows in financial market circles over whether China is moving quickly and forcefully enough to prevent a sharper economic slowdown.

However, consumer inflation has recently quickened to an almost eight-year high of 3.8%, and policy makers remain concerned about rising debt risks, posing a dilemma for the PBOC.

Sheng said a recent jump in pork prices “has certainly inhibited monetary policy, but core inflation and PPI (producer price inflation) remain on a downward trend.”

“Because of this, monetary policy shouldn’t be a flood, but there still is a need for structural adjustments.”

Karen Jones, analyst at Commerzbank, explains that EUR/USD held steady yesterday, having recently eroded the 55 day ma and the 50% retracement the market has an uphill battle to stabilise and recover.

“It has now failed for the past 4 weeks at the 1.1180 level, and near term rallies will need to regain 1.1100 in order to trigger a retest of 1.1180. The move lower has neutralised the chart– it is unclear if the market will recover from here to the 200 day ma at 1.1186 and the top of the channel at 1.1269 (however this is slightly favoured as we suspect the slide lower was just an ‘a-b-c’ correction). Or if we will see one more final leg down to the base of the channel at 1.0865 and the 1.0814 Fibo retracement before a sustained recovery is seen. Below 1.0879 we have the January 2017 low at 1.0829 and the 78.6% Fibonacci retracement of the 2017-2018 advance at 1.0814.”

Former U.S. Federal Reserve Chairman Alan Greenspan said that there is no need for central banks to issue digital currency.

“There’s no point for them to do it,” Greenspan said at Chinese finance magazine Caijing’s annual economic outlook conference.

He pointed out that national currencies are backed up by sovereign credit, something no other organization can offer.

“The fundamental sovereign credit of the United States is far in excess of anything Facebook can imagine,” Greenspan said.

The social network company made waves earlier this year by announcing plans for a cryptocurrency project called Libra that had key partnerships with major global payment processing companies. However, last month Visa, Mastercard, PayPal, Stripe and eBay said they were dropping out of the coalition behind Libra, amid increased scrutiny from the U.S. government.

Meanwhile, the People’s Bank of China has been pressing ahead with work on its own digital currency, although it’s unclear how soon it will be released.

Danske Bank analysts point out that after the surprisingly dovish policy message from Bank of England last week, the UK jobs report for September will be interesting today, as the past couple of months have shown decreasing employment.

“In Continental Europe, the ZEW indicator for November will be released. Last month the expectations - current conditions spread turned positive again for the first time since May, boding well for a further stabilisation in PMI manufacturing. A further improvement today will strengthen this signal. Central bank speakers from the ECB (Coeuré and Mersch) and the Fed (Harker and Clarida) will also be scrutinised by markets for any news. Yesterday we updated our Fed call, now expecting only one more cut in 3 to 6 months (previously three more cuts). In Scandinavia, Swedish labour statistics and inflation expectations as well as Norwegian Q3 GDP and wage growth figures are in focus.”

U.S. President Donald Trump is expected to announce this week he is delaying a decision on whether to slap tariffs on cars and auto parts imported from the European Union, likely for another six months, EU officials said.

"We have a solid indication from the administration that there will not be tariffs on us this week," one EU official said.

The Trump administration has a Thursday deadline to decide whether to impose threatened "Section 232" national security tariffs of as much as 25% on imported vehicles and parts under a Cold War-era trade law. U.S. Commerce Secretary Wilbur Ross said on Nov. 3 the United States may not need such tariffs after holding "good conversations" with automakers in the European Union, Japan and South Korea.

Trump last May delayed a decision on the tariffs by six months, and another delay would cause automakers across the globe to breathe a sigh of relief.

EU officials said while a further six-month delay was likely, Trump's actions were unpredictable and he would likely keep the threat of car tariffs hanging over them as the United States and European Union pursue trade negotiations in the coming year.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1168 (4647)

$1.1131 (2422)

$1.1083 (1570)

Price at time of writing this review: $1.1036

Support levels (open interest**, contracts):

$1.1006 (3563)

$1.0975 (3071)

$1.0937 (3067)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date December, 6 is 95901 contracts (according to data from November, 11) with the maximum number of contracts with strike price $1,1200 (5392);

GBP/USD

Resistance levels (open interest**, contracts)

$1.2974 (2306)

$1.2928 (734)

$1.2898 (2177)

Price at time of writing this review: $1.2860

Support levels (open interest**, contracts):

$1.2793 (1611)

$1.2739 (1427)

$1.2706 (804)

Comments:

- Overall open interest on the CALL options with the expiration date December, 6 is 32318 contracts, with the maximum number of contracts with strike price $1,3000 (8338);

- Overall open interest on the PUT options with the expiration date December, 6 is 30539 contracts, with the maximum number of contracts with strike price $1,2200 (2317);

- The ratio of PUT/CALL was 0.94 versus 0.84 from the previous trading day according to data from November, 11

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.