Forex Strategy Video: The Top Eurusd, Spx, Dollar Risk Is Still The Taper

Analysts were caught off guard since the consensus had been for a drop to 59.8 from Septembers 60.3. The UK PMI surveys are signalling a stronger recovery than that envisioned by the Bank of England earlier in the year, meaning that the BoEs projections for economic growth and employment are likely to be revised upwards in its November Inflation Report. In the August report, the UKs central bank expected annual growth of 1.4 percent for 2013, whereas Markits analysis of the correlation between the All-sector PMI and change in GDP posits that 2013 growth will be at least 1.6 percent. Markit added that the strong PMI surveys suggest quarterly economic growth of 1.3 percent, up sharply from 0.8 percent between July and September (see left chart below). The Composite PMI Index indicates that new business rose at a record pace and employment growth surged to an all-time high in the surveys 14-year history.

Dollar Retreats To Start Busy Forex Week

Reserve Bank of India (RBI) had provided a special dollar swap window to Indian Oil, Hindustan Petroleum and Bharat Petroleum in late August in order to shore up the rupee. RBI Governor Raghuram Rajan has said that until the public sector companies fully return to the market it couldn’t be described as having stabilised. The market expects the window to be withdrawn in the next few weeks, which could bump up demand for US dollar by more than $400 million a day. Dealers expect a gradual return so that the market can absorb the demand for dollars and there is no sudden exchange rate movement. The window was introduced on August 28, when the rupee hit its record-low of 68.85. “We expect OMCs to begin buying dollars in a calibrated fashion,” Yes Bank chief economist Shubhada M Rao told ET.

Economists expected a third-quarter increase of 0.6%. New Zealand’s unemployment rate fell to 6.2% in the third quarter from 6.4% in the prior quarter. Economists expected a third-quarter reading of 6.3%. Statistics New Zealand added that New Zealand’s labor cost index was unchanged at 0.4% last quarter. Economists expected a third-quarter reading of 0.5%.

“We expect the ECB to soon make clear its intentions regarding arresting deflation concerns,” analysts at Barclays Capital wrote in a note to clients. “We anticipate a looser monetary stance to be adopted at the December meeting, but the ECB’s intentions to be aired ahead of it. We remain short EUR via a put spread.” A notable performer overnight was sterling, which gained strongly after data showed the UK services sector expanded at its fastest pace in 16 years. Sterling rose 0.5 percent to $1.6063 and hit a one-month high against the euro, which slid to 83.94 pence .

The ‘Taper’ headlines seem to have abated recently, but this important fundamental theme will return to the forefront on key event risk (NFPs, policy speeches) just when technicals are threatening breakouts. Alone this eventuality has direct implications for the dollar, but its true influence comes through its potential impact on general risk trends. And, there are few other market contingencies that have the level of authority over this elemental dynamic of the financial system. In today’s Forex Strategy Video, we discuss: why the Taper is important; how it impacts the broader markets; what to watch for and how it can influence our trades.

Prior to last weeks Fed meet, the dollar bears had been expecting U.S. policymakers to have a more pessimistic click here. view of their own economy. Some investors were looking for the U.S. to downgrade its economic outlook after the shutdown on Capitol Hill and the budget impasse that followed. The FOMCs statement played it safe, and in turn, it allowed investors betting the dollar would fall much further to be closed out.

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