Economists expect an increase in the interest rate of the Bank of England next week. Do not forget that a new month begins, which means that on Friday we are also in for the Non-Farm Payrolls publication.
Inflationary pressure in Australia declined
The consumer price index of the third quarter of 2017 is published, according to which the Reserve Bank of Australia receives an inflation pullback, and apparently it “firmly” forces to keep its interest rate unchanged at a level of 1.5% (at the next meeting on November 7) for an indefinite term (for now).
Fact (Deviation), forecast
AU CPI - Trimmed Mean [y/y] 1.8% (-0.2%) 2 %
AU CPI [q/q] 0.6% (-0.2%) 0.8 %
AU CPI - Trimmed Mean [q/q] 0.4% (-0.1%) 0.5 %
AU CPI [y/y] 1.8% (-0.2%) 2 %
The Bank of Canada has not touched, and will not touch the current level of the rate
On Wednesday, October 25, 2017, the Bank of Canada expectedly left the interest rate at 1%, and an hour later the Bank held a press conference.
This year, the Bank of Canada raised its interest rate twice (in July and September), reaching a level from 0.5% to 1.0%. As a rule, after such a series of actions, the Regulator needs to wait for some time to determine if the effect of such actions has appeared or not.
The fresh and mediocre economic statistics of Canada, published in October, testifies that the period of such waiting is really actual as never before, which is confirmed by the bank itself in the person of the manager Stephen Poloz, who notes:
The growth of wages lags behind the growth of jobs
The economy can present any kind of surprises
Exports are growing at a slower pace than expected due to the strengthening of the Canadian dollar
Reaching the inflation of 2% is postponed until the second half of 2018 due to the strength of the Canadian dollar
British roller coaster of the sterling
The main driver of volatility this week for GBP as expected was a publication of a preliminary estimate of GDP in the third quarter, which turned out to be somewhat “better” than the market forecasts, as well as the expectations of the Bank of England itself.
UK GDP [y/y] 1.5% (0.1%) 1.4 %
UK GDP [y/y] 0.4% (0.1%) 0.3%
Such a small positive deviation of the fact of the indicator from its forecast was sufficient for bulls who managed to disperse GBPUSD to the whole pattern after the report was published (Wednesday), but on the next day (Thursday) the sharp growth of the pair was leveled by the same sharp rates of pullback.
Considering this behavior of the pound, we come to the conclusion that the meeting of the Bank of England (already next week) may be quite heated ... All attention is on November 2 (Thursday) ...
And a small remark on Brexit: The British Parliament expects to vote for the Brexit deal by the end of 2018 or early 2019
The Golden Rule accompanies the Euro
On Thursday, at the ECB’s meeting, investors were more interested in hearing Mario Draghi's comments rather than seeing how the interest rate will remain at 0.0% (which was predicted). The press conference, which took place in the traditional 45 minutes after the publication of the ECB’s decision, brought down EURUSD, in practice, to two patterns.
This is an excellent practical example of the saying "buy the rumors, sell the news", because the ECB’s actions were almost comparable to market expectations - no miracle happened, there is no surprise: the European Regulator is reducing the program of redemption of assets from 60 to 30 billion since January 2018, while extending it for another nine months.
Draghi, who expressed some optimism about the growth of the Eurozone at the press conference, remained cautious about the sluggish inflation in the region, which may require continued intensive stimulation from the ECB in the form of the QE program.
Apparently, we definitely will not see the ECB rate above 0% in 2018 ...
And Catalonia is over ...
The Parliament of Catalonia voted for independence. Spain calls such actions criminal, enacts Article 155 of the Constitution and establishes direct government. Meanwhile, the central government holds an extraordinary meeting of the Cabinet of Ministers.
Dollar is positive
The dollar continued to luxuriate in publications of positive economic statistics and to enjoy some successes of Republicans on their way to tax reform in the USA. Some investors believe that the tax reform will contribute to the growth of the US economy and the Fed will accelerate the increase in interest rates.
Despite the negative weather phenomena that shook the USA with hurricanes in the third quarter of this year, the US economy overcame the challenges - the published GDP growth brought positive news contrary to weak forecasts:
US GDP Annualized 3% (0.4%) 2.6 %
US GDP Price Index 2.1% (0.3%) 1.8 %
US PCE Prices [q/q] 1.5% (0.3%) 1.2 %
US PCE - Cores [q/q] 1.3% 1.3 %
Nevertheless, after the positive growth, the dollar pulled back immediately, apparently closing the week with Friday fixations of traders, which makes the opening of a new week much more interesting ...
It seems that Janet Yellen will leave her post as head of the Fed next year; next probable candidates are Taylor/Powell.
Weekly report on processed trading signals
CA BOC INTEREST RATE
The interest rate is expected to be published at the level of 1%, while there was a spike with the movement of 20/50 (down/up) in the market, which was primarily triggered by the text protocols accompanying the release. Algorithmic trading in such a situation is certainly out of place.
Trimmed mean value is published with a deviation of -0.1% that did not break the trigger +/- 0.2%, which is needed for the minimum safe signal. Note that there are three types of CPI for publication, but the first is Trimmed Mean. The Australian delay does not give us enough space for maneuvers, which, however, is well described on the page of the indicator. Always read the details on the page of the indicator.
Data above the forecast by + 0.1%, which triggered a signal to buy the initial first level triggers. On the eve of the meeting of the Bank of England, this gave a good result, as after the publication the pair passed about 100 points purposefully.
The data is + 0.4% higher than the forecast, which triggered a signal for the purchase of the second level. Despite the disproved negative expectations of the markets (tornadoes and hurricanes were supposed to bring down GDP), the dollar passed only 25 points up within a minute after publication, apparently the rapid growth of USD before the release was manifested.
Autoclick was updated to version 7.5
We upgraded the autoclick to version 7.5. Among the noteworthy changes that you can notice: we brought the version number of the autoclick to the graphical interface, and also made receiving messages from the server more noticeable, since sometimes messages are important cheats for your trade.
Calendar for the next week
CA GDP, Tuesday, a potential but not attractive indicator, a delay is possible.
NZ Unemployment Rate, Tuesday, is a fairly complicated quarterly indicator.
UK Markit Manufacturing PMI, Wednesday, please pay attention.
US ADP Nonfarm Employment Change, Wednesday, special attention.
US ISM Manufacturing PMI, Wednesday, an indicator of weak attention.
US EIA Crude Oil Stocks Change, Wednesday, not recommended.
US Fed Interest Rate Decision, minutes are more interesting (an interest rate increase is expected in December).
UK PMI Construction, Thursday, a mediocre indicator.
UK BOE Interest Rate, Thursday, special attention (market forecast for interest rate increase).
US EIA Natural Gas Storage Change, Thursday, not recommended during the heating season.
UK Markit Services PMI, Friday, the best one of PMI for Britain.
US Nonfarm Payrolls, Friday - this is it, NFP!
The Bank of Canada will receive two publications next week, which can be taken into account: GDP growth, as well as labor market statistics. The regulator will pay special attention to wage indicators (not for nothing, Poloz recalls them), but unfortunately for us and you, this publication will be closed for trading by the powerful shadow of the American Non-Farm Payrolls, which is scheduled for release at the same time, and American potential and influence through cross-rates do not allow to trade the Canadian calmly even in a pair where there is no USD (look, for example, at EURJPY - it also reacts to NFP). Summarizing the foundation, now any negative attitude towards CAD will be perceived by the market with flying colors!
The publication of the American Non-Farm Payrolls may turn out to be rather unusual. First, the market has shifted its full attention from the NFP to the Average Hourly Earnings indicator. Secondly, this time, data from the previous release can be put into game. It should be recalled that last time the deviation of the fact of NFP from the forecast was -113K (this is a lot). In this release, the -113K indicator can be revised, and since the figure is decent, the refinements on it can be decent as well, which makes the whole release more difficult to work with.
Bank of England. The forecasts already suggest an increase in the interest rate from 0.25% to 0.5% next Thursday. The market has already densely digested this event in this form. In view of this, do not be swayed by the actual raise of the rate in this framework, since it has already won back. To generate a signal, the discrepancy of the fact from the forecast will be required, and the rate increase to 0.5% is a fact = a forecast and no surprise. To a greater extent, in this scenario, the market will be interested in whether this increase (if it happens) will lead to a number of BoE actions to tighten monetary policy or whether the increase will remain a single case of the Regulator's desperation which will be pressed by high inflation.