Monday FX Trading Update

Happy Monday from the city that loves to trade, and I’m talking about New york city baby! My name is Kiana Danial, a former Electrical Engineer who moved into finance and the founder and CEO of Invest Diva, where I teach people just like you how to make money the right way.

It is a bank holiday in Japan today so don’t expect much moves after the jaw dropping fall in the Japanese yen last week.

The London session kicked off with the Italian Manufacturing PMI at 9:45 am GMT that came in lower than expected followed by the UK  Manufacturing PMI at 10:30 am which came in better than expected at 53.2. the US ISM Manufacturing PMI is expected to be out at 4 PM which came in better than expected at 59.

The final important piece of data is out at 6:50 PM GMT when Bank of Canada’s governor Stephen Poloz makes a speech about the legacy of the financial crisis at the Canadian Council for Public-Private Partnerships, in Toronto.

Start of the week should be slow but we do expect more up-moves for the US dollar.

Friday’s trading was only going to go one way, after Japan’s move to increase its asset purchases and diversify its pension investment portfolio led the Nikkei higher by almost 5%. The momentum from this left the FTSE as probably the worst performing equity market in Europe and even that was up by more than 1.25%. In the US, the S&P500 and Dow Jones both closed the week at fresh record highs, the bounce back follows a fall of almost 7% from mid-September highs.

The moves in the currency market were mostly driven by the big fall in the Yen versus the Dollar, which led the Dollar to pick up some strength against its other G10 peers and breaking the Euro back down to the bottom of its recent, ‘post ECB turns negative’, trading ranges. The Pound sits on the back foot against the Dollar, but remains in its relatively tight trading ranges for the time being.

The mood in equity markets doesn’t look like it’s carried its way through the weekend though, with Asian bourses all having a disappointing day, with the only exception being Japan, which is closed for a public holiday, but the futures market indicates a rally of about 3% is in store when it opens up late tonight/Tuesday morning.

The drivers for the poor start in Asia have been slightly worse than expected Chinese manufacturing data, as well as some concerns that elections in Ukraine’s eastern states have shown overwhelming support for a separatist leader.

On the political stage this weekend, Angela Merkel has apparently warned David Cameron that any changes to the freedom of movement, instigated by the UK could lead to a British exit from Europe. Ms Merkel doesn’t want to see any immigration restrictions applied to fellow EU members and doing so could lead Germany to change their stance on fighting to keep Britain in the EU. Apparently Mr Cameron will now aim to rework his ideas on how to curb immigration to keep Angela Merkel happy and stretch the existing policies, rather than re-write them. More can be read about it in this Bloomberg article.

A couple of other interesting pieces from the weekend press; According to the FT, hedge funds are getting in on peer to peer lending, as they see solid returns from either lending their own cash to businesses via online portals, or by taking stakes in the lending platforms themselves. Marketwatch are reporting that petrol prices in the US fell below $3 per gallon this weekend for the first time since 2010. The $3 level has always been significant for US motorists, with 40% of them claiming that fuel above this level is too expensive. The interesting figure is that the saving with fuel prices now versus when they were at $3.68 per gallon is an astonishing $250m per day – which in theory makes its way straight back into the US economy in other areas.

Items to look for this week, in order of importance, are:

1- ECB’s rate decision and press conference

Bond buying by the ECB has got off to a slow start and a number of analysts think that Mario Draghi will announce the Banks’ intention to start buying different assets with much wider availability to speed up the process of expanding their balance sheet to the point that it actually makes an economic difference.

2- US Non-Farm Payrolls

In the US, Friday’s payrolls data will be closely watched, with many expecting a print that backs up the Fed’s move to end QE and also supports the strong Q3 GDP reading we saw last week.

3- Australia’s Jobs Data

the Land Down Under will be printing its monthly jobs data for October. Now this one can be a hit or miss, as the past releases have alternated between coming in way above expectations and falling significantly short of consensus.

We’ve got a Bank of England rate announcement on Thursday, but the only interesting thing about this will be when the minutes from the meeting are released later in the month.