Despite the NFP data delivering the first negative reading for seven years on Friday, at -33k, Wall Street and global investors failed to sell off the U.S. dollar, accepting that the jobs growth figure and result was an outlier, entirely due to hurricane season hitting the USA economy hard and preventing the creation of jobs in the month of September. The belief is that the low number is irrelevant in relation to the Fed’s ambition to begin shrinking its $4.5 trillion balance sheet and to begin a process to normalize the interest rate, by the end of 2018. Encouraging wage growth both annualized and month on month, also helped to support the view that the NFP print was a one off.
One of the most highly anticipated and outstanding highlights of the week’s economic calendar events, will be the release of the FOMC minutes relating to the meeting, which culminated with the September 20th announcement of no change to the current main interest rate in the USA. The FOMC published a hawkish narrative with the announcement, suggesting that quantitative tightening would begin, although the chair of the Fed Janet Yellen pre-warned investors not to expect the squeeze to be too rapid. The FOMC also suggested that the central bank may rise rates once more in 2017, to fulfil the original commitment made earlier in the year; of three rate rises in 2017.
Therefore, on Wednesday, at 18:00 hrs GMT, investors will be ready to rapidly analyses the specific matting minutes to establish how hawkish the current mood and how deep the consensus is at the FOMC and Fed. We can expect price action in relation to the U.S. dollar versus its major peers depending on the detail revealed in the minutes, as in theory it could set off a chain reaction at the end of 2017 and the first two quarters of the beginning of 2018, which could see the Fed begin to normalize rates to perhaps 3%, by the end of the year.
Taking a customary and cursory view of the latest commitment of traders report (COT) published on Friday October 6th, reveals that large investors remained and increased their bullish bias on: the euro, the Canadian dollar and the U.K. pound. Bullish sentiment on the Australian and New Zealand dollar reduced, as did bullish long positions on: gold, the SPX and WTI oil. Bearish net positions increased versus the Swiss franc, and bearish sentiment also increased versus yen.
Monday is a relatively quiet day for economic calendar news, especially given that it’s a bank holiday in the: USA, Canada and Japan, which could impact on the liquidity and trading opportunities pertaining to certain currencies, due to thin trading. Germany’s industrial production data is released, the forecast suggests a fall to 3% growth for August, from 4% YoY in July. Whilst the month on month figure is predicted to reveal growth at 0.9%, after a fall in growth in July. Other Eurozone news concerns the Sentix investor confidence reading, expected to come in at 28.5 for October, from 28.2 in September.
Late evening New Zealand publishes key economic data, on retail and credit card spending, the UK’s BRC will reveal details regarding the “like to like” retail sales and late evening Japan’s latest trade balance will be published. Forecast to come in at ¥264.9b versus ¥566.6b, such a reduction may take yen investors by surprise.
