Market Sentiment 30th of October

Jarratt Davis

Special Consultant to the FPA
Today we will be looking out for Eurozone Flash CPI for October where a miss may see the EUR weighed upon in anticipation of further easing by the ECB. Conversely, a solid beat may see some of the recent euro losses parred. Watch my weekly Forex news events overview here to recap this release and read my analysis of current market sentiment below to familiarize with the latest market changes.

The BOJ kept their current policy unchanged, which was expected by 23 out of 37 analysts. The Bank also released their Outlook Report where they cut forecasts for both GDP and CPI. The cut in forecast CPI for 2016 from 1.9% to 1.4% and the adjustment of CPI target to second half of 2016 caused strength in yen as it suggest that the BOJ are less likely to expand QE in the near term.

Yesterday's NY session was relatively light in the wake of this week's major events. US Advance GDP for Q3 came in slightly lower than expected at 1.5% versus 1.6%, but it was not enough to cause any notable move in the buck. Later in the session, Pending Home Sales missed at -2.3% versus 1.1% expected. Major pairs traded mainly sideways.

Early in the Asian session New Zealand ANZ Business Confidence showed the first positive reading in four months at 10.5. The Kiwi rallied over 60 pips in subsequent hours.

Inflation figures from Japan showed that Tokyo-area CPI excluding food & energy for October ticked down to 0.4% from a prior of 0.6%, below expectations of 0.5%. Nationwide CPI excluding food & energy for September ticked up to 0.9%, in line with expectations, up 0.8% from prior. Given that the Tokyo figured is the most timely data, the move lower in core-core inflation of 0.2% keeps probabilities reasonably high for further easing by the BOJ in coming months.

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