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FOREX: UK Jobless Claims Impact Likely Limited, Fed Minutes in Focus

FOREX: UK Jobless Claims Impact Likely Limited, Fed Minutes in Focus

2011-10-12 07:55:00
Ilya Spivak, Sr. Currency Strategist
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Talking Points

  • US Dollar a Touch Lower Despite Sentiment-Negative News Flow
  • FOMC Meeting Minutes in Focus as Traders Gauge QE3 Probability
  • UK Jobless Claims Unlikely to Have Lasting Impact on Price Action

Currency markets seemed to shrug off much of the negative news-flow that came across the wires heading into the overnight session, with the safe-haven US Dollar lower and risk-sensitive currencies on the upswing ahead of the opening bell in Europe. An easily-defined catalyst is not readily apparent for the curious price action, but general downward pressure on the greenback may be explained by portfolio adjustment after speculative net-long positions hit the highest since February 2010 in the first week of this month.

The headwinds facing risk sentiment had arguably strengthened over the past 24 hours after Slovakia failed to ratify the expanded powers granted to the EFSF bailout fund in a closely-watched Parliamentary vote. The government tied the retooled EFSF approval to a no-confidence vote, seemingly inviting a “no” outcome, with the opposition Smer party using the poll as an opportunity to topple the ruling coalition. Smer then promptly announced it was prepared to pass the EFSF amendments in a second vote having now strengthened its political position domestically, leaving the Euro in limbo as Slovak lawmakers begin negotiations anew.

Meanwhile, investors got their first taste for the impact of the global slowdown on corporate profits after aluminum giant Alcoa Inc – the first major company to report third-quarter results – fell short of analysts’ expectations on its headline earnings figure. The firm cited a “dramatic” decline in European orders amid economic uncertainty in the region as a leading catalyst behind the disappointing outcome.Reports from Host Hotels Inc and PepsiCo are up next, promising readings on the trends in discretionary spending and consumer sentiment.

The spotlight then turns to the publication of minutes from September’s Federal Reserve monetary policy meeting. That sit-down culminated with the unveiling of the balance sheet neutral “Operation Twist” in lieu of another round of QE3, and traders will be keen to gauge the variables that went into that decision. Specifically, markets will want to understand what triggers can be set off to bring QE3 back into the policy debate, with any clues hinting that this is possible in the near term likely to prove supportive for stocks-correlated currencies at the expense of the US Dollar (and vice versa).

UK Jobless Claims figures are in focus on the European docket, with expectations calling for a 24,000 increase in September that pushes the Claimant Count – a proxy for the unemployment rate – to the highest in nearly two years at 5 percent. While such an outcome may certainly put pressure on the British Pound, the report’s impact is unlikely to prove lasting considering it offers nothing materially new to the already acutely dovish monetary policy outlook after the Bank of England re-launched quantitative easing last week.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

22:00

NZD

REINZ House Sales (YoY) (SEP)

21.1%

-

21.1%

22:00

NZD

REINZ Housing Price Index (SEP)

3279.2

-

3223.7

22:00

NZD

REINZ Housing Price Index (MoM) (SEP)

1.7%

-

0.5%

23:00

NZD

QV House Prices (YoY) (SEP)

0.7%

-

0.1%

23:30

AUD

Westpac Consumer Confidence (OCT)

0.4%

-

8.1%

23:30

AUD

Westpac Consumer Confidence s.a. (MoM) (OCT)

97.2

-

96.9

23:50

JPY

Machine Orders (MoM) (AUG)

11.0%

3.9%

-8.2%

23:50

JPY

Machine Orders (YoY) (AUG)

2.1%

-3.6%

4.0%

0:30

AUD

Investment Lending (AUG)

1.8%

-

1.9%

0:30

AUD

Home Loans (AUG)

1.2%

1.0%

1.9% (R+)

0:30

AUD

Owner-Occupied Home Loans (MoM) (AUG)

0.6%

-

1.8% (R+)

6:00

JPY

Machine Tool Orders (YoY) (SEP P)

20.3%

-

15.2%

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

5:30

EUR

French CPI (YoY) (SEP)

2.5%

2.2%

Low

5:30

EUR

French CPI Ex Tobacco Index (SEP)

122.91

122.59

Low

5:30

EUR

French CPI - EU Harmonized (MoM) (SEP)

0.1%

0.6%

Low

5:30

EUR

French CPI - EU Harmonized (YoY) (SEP)

2.6%

2.4%

Low

5:30

EUR

French CPI (MoM) (SEP)

0.1%

0.5%

Low

6:00

EUR

German Wholesale Price Index (YoY) (SEP)

-

6.5%

Low

6:00

EUR

German Wholesale Price Index (MoM) (SEP)

-

0.1%

Low

6:45

EUR

French Current Account (euros) (AUG)

-

-4.5B

Low

8:30

GBP

Claimant Count Rate (SEP)

5.0%

4.9%

Medium

8:30

GBP

Jobless Claims Change (SEP)

24.0K

20.3K

High

8:30

GBP

ILO Unemployment Rate (3M) (SEP)

8.0%

7.9%

Medium

8:30

GBP

Average Weekly Earnings (3M/YoY) (SEP)

2.8%

2.8%

Medium

8:30

GBP

Weekly Earnings ex-Bonus (3M/YoY) (SEP)

1.9%

2.1%

Low

9:00

EUR

Euro-Zone Industrial Production (YoY) (AUG)

2.1%

4.4%

Medium

9:00

EUR

Euro-Zone Industrial Production (MoM) (AUG)

-0.8%

1.1%

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3576

1.3748

GBPUSD

1.5544

1.5704

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow me on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com

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