Forex facing fundamentals on multiple fronts

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Fundamental Headlines

European Stocks Nudge HigherWall Street Journal

China Car Boom Spurs Business on the RoadWall Street Journal

• Yen at Fresh High amid Intervention Talk - Financial Times

BOE Stimulus on Hold for Now after Panel Standoff on Economy - Bloomberg

German August Industrial Production Jumps More Than Forecast– Bloomberg

EUR/USD: As widely expected, the European Central Bank kept rates unchanged at 1.00 percent for the month of October. Meanwhile, President Jean Claude Trichet said that rates remain "appropriate," and went on to add that underlying momentum is positive. During the question and answer section of the press conference, Mr. Trichet said that excessive forex moves have adverse implications. Looking ahead, we may see increased volatility in the currency markets as U.S. nonfarm payrolls are scheduled to be released tomorrow. As of late, economists are forecasting a 1K rise in payrolls for the month of September after figures tumbled 54K the previous month. With uncertainty in the world’s largest economy gaining momentum, and concerns of QE measures linger, tomorrow’s NFP report will set the stage for price action next week as many currencies trade in overbought/oversold levels.

GBP/USD: Halifax house prices plunged 3.6 percent in September after climbing 0.4 percent the previous month amid economists’ expectations of a 0.2 percent decline. At the same time, the three month average slowed to 2.6 percent from 4.6 percent in August. The data does not bode well for the U.K. as the property market in Great Britain will come under increased pressure in the coming months as unemployment remains high, while austerity measures will weigh on growth. Meanwhile, industrial and manufacturing topped economists’ forecasts in August. However, the spotlight for the U.K. was placed on the Bank of England rate decision. As expected, the central bank held rates at 0.50 percent and refrained from adding further QE measures. Going forward, the focus for GBP traders will turn to the meeting of the minutes, which will be released October 20th. Indeed, there is a chance that market participants could see a three way split as policy member Adam Posen called for further QE measures, while Andrew Sentence will likely continue to push for a rate hike.

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