British pound plunges as BoE refrains from rate hike, yen and franc closes

The pound falls sharply after the BoE held on, disappointing those expecting a rise. The euro is currently the second weakest of the day. On the other hand, the yen and Swiss franc are rising broadly, supported by lower benchmark yields in Germany and the UK. The dollar is also firm as general investor sentiment is cautious, pending tomorrow’s nonfarm payroll report.

Technically, GBP / CHF is continuing the recent decline and is so far reaching 1.2350. The choppy fall from 1.3070 is seen as a corrective move. Therefore, we expect strong support at 1.2259 to limit the downside to bring a rebound. However, a firm break of 1.2259 would support the medium term trend has already reversed. If that happens, the medium term decline in the pound would be confirmed if the EUR / GBP also breaks the resistance at 0.8656.

In Europe, at the time of writing, FTSE is up 0.43%. The DAX is up 0.54%. The ACC is up 0.39%. The German 10-year rate is down from -0.022 to -0.189. Earlier in Asia, the Nikkei rose 0.93%. Hong Kong’s HSI rose 0.80%. China Shanghai SSE rose 0.81%. The Japanese 10-year JGB yield fell from -0.0021 to 0.082.

In the United States, initial jobless claims fell to 269, with claims continuing to 2.1 million

Initial jobless claims in the United States fell from -14,000 to 269,000 in the week ending October 30, better than expectations of 277,000. This is the lowest level since March 14, 2020 The four-week moving average of initial claims fell from -15,000 to 285,000, the lowest since March 14, 2020 as well. Continuing claims fell from -134k to 2105k in the week ending October 23, the lowest since March 14, 2020. The four-week moving average of continuous claims fell from -156k to 2357k, the lowest since March 21, 2020.

Also published, the US trade deficit widened to -80.9 billion dollars in September, against -74.5 billion dollars expected. Non-farm productivity fell by -5.0% in Q3 against an expectation of -1.5%. Unit labor costs rose 8.3% against an expectation of 5.2%. Canada’s trade surplus stood at C $ 1.9 billion in September, below expectations of C $ 2.3 billion.

BoE stands tall, sees need to increase in coming months

The BoE kept the bank rate unchanged at 0.10% by 7-2 votes today. Famous hawks Dave Ramsden and Michael Saunders voted for a 0.25% increase. The MPC also voted 6-3 to continue buying government bonds with £ 875 billion. Catherine Mann, Dave Ramsdan and Michael Saunders voted to cut bond purchases by £ 20 billion.

In the forward guidance, the BoE said that if incoming data, particularly on the labor market, is in line with the central projections of the Monetary Policy Report, it will be “necessary over the next few months to raise the rate. director in order to bring CPI inflation back to the target level of 2.% over the long term. “

UK PMI construction rose to 54.6 in October, worst supply tightening may have passed

UK Construction PMI rose to 54.6 in October from 52.6, slightly above expectations of 54.0. The recovery in construction accelerated from the eight-month low in September. Homebuilding has regained its place as the top performing category. But severe staff and equipment shortages continued.

Tim Moore, Director at IHS Markit, said: “UK construction companies achieved faster expansion in production volumes in October, despite headwinds due to severe supply constraints and escalating costs… . “However, the volatility of prices and the supply environment added to commercial uncertainty and continued to hamper contract negotiations… Numerous reports indicated that shortages of materials and personnel had disrupted work on the site, while rising fuel and energy prices added to cost pressure.

“Nonetheless, the worst phase of the supply crisis may have passed, as the number of construction companies citing supplier delays fell to 54% in October, from 63% in September. Reports of increased purchasing costs continued to decline from the records recorded this summer. ”

Eurozone PPI rose 2.7% mo, 16.0% yoy in September, well above expectations

Eurozone PPI rose 2.7% mo, 16.0 yoy in September, above expectations of 1.9% mo, 15.2% yoy. Over the month, industrial producer prices rose 7.7% in the energy sector, 1.0% for intermediate goods, 0.5% for capital goods, 0 , 4% for durable consumer goods and 0.3% for non-durable consumer goods. Prices in industry as a whole excluding energy rose 0.6%.

The EU’s PPI grew 2.7% month-on-month, 16.2% year-on-year. Industrial producer prices increased in all Member States, with the highest monthly increases recorded in Ireland (+ 23.2%), Denmark (+ 8.4%) and Greece (+ 5.8 %).

Eurozone composite PMI finalized at 54.2, still in line with quarterly GDP growth of 0.5%

The Eurozone Services PMI was finalized at 54.6 in October, down from 56.4 in September. The Composite PMI was finalized at 54.2, up from 56.2 in September. For some Member States, Ireland’s Composite PMI hit its 2-month high at 62.5. Spain fell to its 6-month low at 56.2. France fell to its 6-month low at 54.7. Italy fell to a 6-month low at 54.2. Germany fell to its lowest level in 8 months at 52.0.

Chris Williamson, Chief Economist at IHS Markit, said: “Eurozone growth slowed sharply at the start of the fourth quarter, with manufacturing crippled by supply constraints and services losing momentum as the rebound blockages fade away.

“Despite the slowdown, the rate of expansion remains consistent with quarterly GDP growth of 0.5%, but there is a worrying lack of clarity on the direction of travel in the coming months.

“With supply shortages worsening rather than improving in October, manufacturing growth is expected to remain subdued for some time to come. This would leave the economy dependent on the service sector to drive growth, and there are already signs that the growing number of virus cases is dragging down activity in many companies in the service sector, notably – but by no means exclusively. – in Germany.

“The current supply shortages suggest that the high price pressures will persist into the next year, but there are as yet no signs of continued strong wage growth, which would be of greatest concern for longer-term inflation prospects. “

Retail sales in Australia grew 1.3% mo in September, down a record -4.4% qoq in the third quarter

Retail sales in Australia increased 1.3% month-on-month and 1.7% year-on-year in September. For the quarter, sales fell a record -4.4% quarter-on-quarter.

Ben James, director of quarterly economic statistics, said: “The Delta outbreak in late June resulted in prolonged lockdowns in many mainland jurisdictions, with restrictions causing many retailers to close their physical stores throughout. of the September quarter. This resulted in the largest quarterly decline in domestic sales volumes on record. “

Also reported, exports of goods and services fell -6% month-on-month to AUD 44.97 billion in September. Imports of goods and services fell -2% month-on-month to AUD 32.73 billion. The trade surplus stood at AUD 12.24 billion, compared to an expectation of AUD 12.22 billion.

BoJ Kuroda: YCC will continue even after pandemic

BoJ Governor Haruhiko Kuroda said he met with new Japanese Prime Minister Fumio Kishida today and discussed Japan, global economies and financial markets.

Kuroda said he explained the BoJ’s monetary policy to Kishida and reiterated the goal of meeting the 2% inflation target. Asked about the Fed’s tapering, he explained that the BoJ is in a different situation than Western central banks.

In addition, Kuroda said control of the yield curve will continue even after the pandemic is brought under control.

Midday GBP / USD Outlook

Daily Pivots: (S1) 1.3632; (P) 1.3662; (R1) 1.3717; Following…

GBP / USD’s fall from 1.3833 resumes after brief consolidation and so far reaches 1.3531. Intraday bias is back on the downside for a retest of 1.3410 low. The strong breakout will resume a larger fall from 1.4280 to 1.3164 at the Fibonacci level in the medium term. On the upside, the breakout of 1.3697 will transform the intraday bias upward to resistance at 1.3833 instead.

Overall, the structure of the fall from 1.4248 suggests that this is a correction to the uptrend from 1.1409 (2020 low) only. While a deeper fall cannot yet be ruled out, a decline should be contained by a 38.2% retracement from 1.1409 to 1.4248 to 1.3164, at least at the first attempt, to bring a rebound. On the upside, a firm breakout of key resistance at 1.4376 (2018 high) will add to the event of a longer term bullish reversal. However, sustained trading below 1.3164 will rekindle some medium-term decline and target a 61.8% retracement at 1.2493.

Update of economic indicators

GMT Ccy Events Real Forecast Previous amended
00:00 NZD ANZ commodity prices October 2.10% 1.00% 1.50%
00:30 EUR Trade Balance (AUD) Sept. 12.24B 12.22B 15.08B 14.74B
07:00 EUR Germany Factory orders M / M Sep 1.30% 2.00% -7.70%
08:00 CHF SECO Consumer Climate Q4 4 5 8
08:45 EUR Italy PMI Services Oct 52.4 54.5 55.5
08:50 EUR France Services PMI Oct F 56.6 56.6 56.6
08:55 EUR Germany Services PMI Oct F 52.4 52.4 52.4
9:00 a.m. EUR Eurozone Services PMI F oct. 54.6 54.7 54.7
09:30 GBP Construction PMI Oct F 54.6 54 52.6
10:00 a.m. EUR Euro zone IPP M / M Sept. 2.70% 1.90% 1.10%
10:00 a.m. EUR Euro zone IPP Y / Y Sept. 16.00% 15.20% 13.40%
11:30 USD Job cuts at Challenger Y / Y Oct -71.70% -84.90%
12:00 GBP BoE rate decision 0.10% 0.10% 0.10%
12:00 GBP Ease of purchasing BoE assets 875B 875B 875B
12:00 GBP MPC Official Discount Rate Votes 2–0–7 0–0–9 0–0–9
12:00 GBP Votes for ease of purchasing MPC assets 0–3–6 0–2–7 0–2–7
12:30 p.m. GOUJAT Trade Balance (CAD) Sept. 1.9B 2.3B 1.9B
12:30 p.m. USD Initial jobless claims (October 29) 269K 277K 281K 283K
12:30 p.m. USD Trade balance (USD) Sept. -80.9B -74.5B -73.3B -72.8B
12:30 p.m. USD Non-agricultural productivity Q3 P -5.00% -1.50% 2.10%
12:30 p.m. USD Unit labor costs Q3 P 8.30% 5.20% 1.30%
2:30 p.m. USD Natural gas storage 1.5B 87B

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