D-Day

September 16, 2015 in Fundamental Outlook, High Impact Data, Pinned Posts by Jason Tong

High Impact Data & Key FX Fundamentals
Thursday, 17 September 2015

  1. Dollar weakness finding support ahead of FOMC
  2. Commodity and equity markets making a comeback
  3. Bond markets stall as precious metals climb

150917

EUR/USD: neutralised trend, bullish bias
Fundamental sentiment: uncertain (risk aversive/range bound)
Seasonal factors: Unusual trading day, highly anticipated Fed decision
Global outlook: uncertain due to China and other geopolitical risks/impacts
Technical bias: structurally neutral, bullish advantage, wedged above former downtrend and within historic uptrend channels
Emotive story: short term bias at risk of changing, topside extremes valid based on Fed timing (2015 hike: hold, 2016 hike: breach)

Previous HID:

  1. EUR Final CPI y/y – did not meet expectations adding to easing bias
  2. USD Core CPI m/m – inflation mandate did not support Fed expectations removing weight to Fed hike bias
  3. EUR German ZEW Economic Sentiment – no material impact though added weight to easing bias
  4. USD Core Retail Sales m/m – initial reaction USD negative, previous revisions bridge jobs disparity gap

Forecast HID:

  1. 0830 USD Building Permits, Unemployment Claims – may have some knee jerk reaction but mainly muted due to FOMC
  2. 1000 USD Philly Fed Manufacturing Index – may have some knee jerk reaction but mainly muted due to FOMC
  3. 1400 USD FOMC Federal Funds Rate. Statement, Economic Projections – key event, rate hike forecast downgraded
  4. 1430 USD FOMC Press Conference – key event where markets will be looking for hawkish assurance/timing

Futures:

  1. Net short bias increasing after 4 weeks of position unwinding
  2. Uncertainty in long positioning, investors holding onto long bets
  3. USD beginning to correlate but not enough conviction due to uncertainty

Focus:

  1. Uncertainty of global impacts resulting from the timing of Fed rate hike
  2. Speculative ECB easing bias in light of Euro zone growth slowdown
  3. Timing of Fed lift off and pace of normalisation
  4. Expectations for the Fed to remain hawkish

Fears:

  1. USD inflation mandate moving against Fed expectations, affecting Fed decision
  2. Fed does not deliver on September rate hike: USD longs at risk
  3. Fear of Fed rate hike implications in current global conditions
  4. Impacts from global slowdown affecting Fed hike decision
  5. Overvalued Euro in contrast to risk aversive sentiment

GBP/USD: bullish trend pressure approaching key topside levels
Fundamental sentiment: uncertain (risk aversive/consolidative)
Seasonal factors: Unusual trading day, highly anticipated Fed decision
Global outlook: uncertain due to China and other geopolitical risks/impacts
Technical bias: structurally bullish, might not correct given reduced USD risk appetite, range/consolidation likely
Emotive story: short term bias at risk of changing, topside extremes valid based on Fed timing (2015 hike: hold, 2016 hike: breach)

Previous HID:

  1. GBP Average Earnings Index 3m/y – strong labour market in support of BOE hawkish stance
  2. GBP Claimant Count Change – unemployment on track in line with BOE hawkish stance
  3. USD Core CPI m/m – inflation mandate did not support Fed expectations removing weight to Fed hike bias
  4. GBP CPI y/y – muted impacts due to USD focus and print meeting expectations (failed to add hawkish strength)
  5. USD Core Retail Sales m/m – initial reaction USD negative, previous revisions bridge jobs disparity gap

Forecast HID:

  1. 0430 GBP Retail Sales – relevant with significant impacts, stability required to maintain positive GBP outlook this week
  2. 0830 USD Building Permits, Unemployment Claims – may have some knee jerk reaction but mainly muted due to FOMC
  3. 1000 USD Philly Fed Manufacturing Index – may have some knee jerk reaction but mainly muted due to FOMC
  4. 1400 USD FOMC Federal Funds Rate. Statement, Economic Projections – key event, rate hike forecast downgraded
  5. 1430 USD FOMC Press Conference – key event where markets will be looking for hawkish assurance/timing

Futures:

  1. Net short bias increasing though strength is decreasing
  2. Long positions continue to cut though degree is waning
  3. USD adverse correlation where positioning suggests uncertainty

Focus:

  1. GBP jobs market correlate to sustained growth and renewed BOE inflation hawkishness (sooner)
  2. Timing of Fed lift off and pace of normalisation in contrast to the BOE
  3. Expectations for the Fed to remain the leader in the rate race

Fears:

  1. USD inflation mandate moving against Fed expectations, affecting Fed decision
  2. Remaining GBP data this week does not correlate to BOE hawkish optimism
  3. Impacts from global slowdown affecting both Fed and BOE policy decisions
  4. Fed does not deliver on September rate hike: USD longs at risk
  5. Fear of Fed rate hike implications in current global conditions