Another day, another round of unexpectedly weak economic data. This time around in the form of trade and machinery orders data from Germany and Japan, which suggest that recovery momentum is stalling in two of the world’s largest economies. The Bank of England held interest rates firm at 0.50% and did not change the level of QE, keeping it firm at 375 billion pounds per year. Yesterday’s technical bounce in oil aided the commodity currencies with AUD and CAD being the biggest winners. This afternoon, we get a peek inside last month’s FOMC policy meeting with the Minutes release at 2pm EST. The US dollar, which lost a bit of ground on Wednesday, has continued to edge lower as North American trading kicks off.
Japanese stocks were lower by 1% while the yen lost a bit of ground on speculation the Bank of Japan may need to ramp up the printing presses again, to stave off deflationary pressures. Machinery orders took a big dip in August, falling 3.5% over the same period in 2014, and as these weak data points mount it brings into question earnings season which kicks off around the world next week. While in Germany, it was determined that exports fell 5.2% in August which illustrated their biggest monthly decline since 2009. Speaking of earnings, Deutsche Bank – Germany’s largest, most influential bank – is preparing markets for losses as high as €7 billion last quarter after writing down the value of its two biggest divisions. Deutsche Bank might also scrap its dividend for next year. As the euro has experienced a nice bounce at the greenback’s expense, this news coinciding with more bad news presumed from VW could weigh on Europe’s currency. In the US, Alcoa kicks off earnings this afternoon, reporting after the bell.
Turning towards North America, per usual the slate kicks off with US weekly jobless claims at 830am. This week, Wall Street is anticipating 276k Americans filed first time unemployment claims during the week ending October 2nd. This remains very low and despite a blip a few weeks back, comfortably below the psychological 300k number. As August and September non-farm payroll reports missed expectations and August’s results were revised lower, there may be extra special attention paid to this morning’s jobless number. At 930am, FOMC member Bullard will be addressing the Children’s Saving Account Symposium hosted by the Federal Reserve Bank of St. Louis. These remarks will kick off a busy slate over the next twenty four hours as Fed members Williams and Evans will also be speaking to US monetary policy.
At 2pm EST today, the most recent minutes from the Federal Reserve’s September policy meeting will be released. The market should be expecting a similar cautious tone that we saw last month. The US dollar has been trading within a very tight range this week, although losing some ground to the so-called commodity currencies as oil has made a strong technical bounce to the key $50-per-barrel mark. It was reported on Wednesday that US crude stocks increased to more than 3.07 million barrels, putting into question the level of output for the fourth quarter of 2015. One currency that has benefited greatly this week as oil prices have recovered has been the Canadian dollar.
One day before their own September jobs report, the Canadian dollar reached its highest level in three weeks. On Friday, markets are expecting an increase of 20k jobs, bolstered by part time employment.Wednesday was the sixth straight session the Loonie traded higher buoyed by employment optimism and assumed rising in oil demand. As the Canadian dollar has rallied nearly 3.5% over the last month, it will be interesting how far the Canadian dollar can continue to run. For now, long term support remains a bit lower current USD/CAD spot and only a very sharp increase in employment can spark another dip in the rate.
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