Forex headlines for Oct 8, 2014:
IMF forecasts generally downgraded, especially Europe
- IMF cuts global growth forecast to 3.3% from 3.4%
- IMF sees US at 2.2% from 1.7% in 2014, sees 3.1% in 2015
- IMF lowers German, French and Italian forecasts for 2014
- IMF cuts Japan forecast to 0.9% from 1.6%
- UK forecast flat, Canada forecast rises 0.1 pp
- IMF sees higher changes or recession, lower long-term growth
- Dudley: Expects 1.9% inflation by Q4 2015, risks to the downside
- US job opening rise to the highest since 2001 in JOLTS report
- Kocherlakota: It’s inapproriate for the Fed to raise rates in 2015
- September 2014 UK NIESR GDP estimate 0.7% vs 0.6% prior
- US August consumer credit $13.5B vs $20.0B expected
- Canadian August building permits -27.3% vs -6.5% exp
- US sells 3-year notes at 0.994% vs 1.000% WI
- Gold up $3 to $1210
- WTI crude down $1.51 to $88.82
- S&P 500 closes at lowest since Aug 12, down 30 points to 1935
- JPY leads, CAD lags
So the unemployment rate is at 5.9% and job openings are at the highest since 2001? How’s inflation?
That’s the question the market is asking and Fed members Dudley and Kocherlakota answered it Tuesday. It was no surprise for Kocherlakota to be so dovish but Dudley sounds like someone who is in absolutely no reason to hike.
The doves are now pointing to inflation more than ever. Dudley sees PCE at 1.9% at the end of next year and Kocherlakota sees it below 2% until 2018.
The US dollar repeatedly tested the pre-NFP extremes and yesterday’s low and then finally broke through late in the day as the stock market began to absolutely crater.
USD/JPY cut through 1.0800 to a low of 107.82 but is tracking back to the big figure so the dollar bulls might not be done just yet. The next level of support is 107.57.
EUR/USD fought an epic battle below 1.2665 and then finally broke up to 1.2682. Again, the follow through has been limited so far.
The pattern was a bit different in cable. It broke up to 1.6129 in the early going but then sagged back down and has remained below the previous high.
CAD was out of the headlines. That dismal building permits number came after three strong reports so it’s not as bad as it might seem. USD/CAD climbed as high as 1.1196 from 1.1150 at the get-go.
The commodity complex overall wasn’t a big story. AUD continues to consolidate near this week’s highs. Commodities overall were mixed with agriculture strong and oil soft. Support around $88.50 in WTI is barely holding.