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On Thursday, the British Pound surged by 70 pips or 0.45% against the Japanese Yen. The currency pair breached the 50– hour simple moving average during yesterday's trading session.

Everything being equal, the exchange rate could continue to trend higher through the following trading hours. A breakout through the upper line of a descending channel pattern could occur.

However, the 200– hour SMA at 156.98 could provide resistance for the currency exchange rate today.

On Thursday, the Australian Dollar rose by 56 pips or 0.75% against the US Dollar. The currency pair tested the 0.7550 level during Thursday's trading session.

Technical indicators suggest buying signals on the 4H and daily time-frame charts. Most likely, buyers could continue to drive the exchange rate higher during the following trading session. The possible target for bullish traders will be near the 0.7580 area.

However, the resistance level at 0.7550 could provide resistance for the AUD/USD currency exchange rate within this session.

Upside risks dominated the EUR/JPY currency pair on Thursday. As a result, the common European currency surged by 103 pips or 0.78% against the Japanese Yen during Thursday's trading session.

Given that a breakout has occurred, bullish traders are likely to continue to pressure the exchange rate higher within this session. The potential target for buyers will be near the 133.50 level.

However, the resistance level at 132.75 could provide a barrier for the currency exchange rate during the following trading session

US equities rallied after Joe Biden unveiled his $1.75 trillion spending deal ahead of his trip to the COP26 climate conference. He said that he believes that the narrow bill will get the support of moderates Democrats like Joe Manchin and Kyrsten Sinema. The two senators have previously rejected some of the proposals by Biden and other progressives. The announcement came shortly after the US published relatively weak GDP numbers. The numbers showed that the US economy expanded by just 2% in the third quarter. This was a sharp decline from the previous quarter’s increase of 5.7%. This weakness was attributed to the Delta variant and the supply shortages.

The EURUSD pair jumped sharply during a press conference by Christine Lagarde after the European Central Bank (ECB) delivered its decision. The bank left interest rates unchanged as most analysts were expecting. It also said that it will continue with its 1.85 trillion euro stimulus package at a moderately lower pace. At the same time, Lagarde said that the bank believes that inflation will keep rising in the near term and then decline in the course of the year. Economists expect that the Eurozone inflation rose by 3.7% in October, the highest level since 2008. In Germany, inflation rose by 4.6% in October while in Spain, it rose to a 37-year high of 5.5%.

The economic and earnings calendars will have some key events today. In Europe, Eurostat will publish its preliminary consumer inflation data for October. In most cases, the preliminary data is usually the same with the final data. Eurostat will also publish the first estimate of Eurozone GDP data. The next key data will be the latest US personal consumption expenditure (PCE) data. This is an important number since it is usually the Fed’s most favourite inflation gauge. Analysts expect the data to show that prices rose by more than 4% in September. In the UK, the Bank of England (BOE) will publish the latest mortgage approvals and lending data.

EURUSD

After days of consolidation, the EURUSD pair went parabolic in the overnight session as investors reacted to the ECB decision. The pair rose to a high of 1.1692, which was substantially higher than this week’s low of 1.1582. On the hourly chart, the pair is along the upper line of the Bollinger Bands. It has also moved above the short and longer moving averages while the MACD has gained substantially. Therefore, the pair will likely keep rising ahead of the EU inflation data.

USDCHF

The USDCHF collapsed after the weak US GDP data. The pair moved to a low of 0.9115, which was the lowest level since September 1. The pair has been in a major sell-off since early this month when it rose to a high of 0.9367. On the four-hour chart, the pair managed to move below the key support at 0.9150. It also moved below the Ichimoku cloud while the Relative Strength Index (RSI) dropped below the oversold level. Therefore, the pair will likely keep falling with the next key support being at 0.9050.

USD30

The Dow Jones index rallied as strong earnings helped to offset the relatively weak US GDP data. On the daily chart, the index is above all moving averages. It has also found a lot of resistance since the current level was along the highest level in August. Oscillators are also at the neutral level. Therefore, the index will likely keep rising in the near term.

Major US indices had a record-breaking session on Thursday, but disappointment on Apple and Amazon results will likely weigh on the market sentiment before the weekly closing bell.

Nasdaq which led gains and traded at a fresh record will certainly feel the pinch of the softer-than-expected results from Apple and Amazon. And there is little to improve the mood, as Joe Biden is still struggling to pass his mega spending bill, the Covid delta-plus cases are surging and the US growth fell short of expectations in the latest read.

The US economy grew 2% in the Q3 versus 2.7% expected by analysts and 6.7% printed a quarter earlier. And there is nothing the Federal Reserve (Fed) could do to boost that number, as it is stuck with persistent and significantly above-the-target inflation. The market is aggressively pricing in a tighter monetary policy in the quarters ahead. And that tightening will likely start as soon as next week, with the announcement of the QE taper.

But don’t get demoralized just yet! Bloomberg writes that the GDP report is not as bad as it first looks, as there is no sign of stagflation, as the demand component is up by 6.6%, in line with the pre-pandemic demand, wages in private sector are up by 9.2%, covering for inflation and the services consumption continues to rebound. But people just get less for their money. And that’s called inflation!

The last thing on this week’s corporate calendar is the earnings from the oil giants Exxon and Chevron. Both companies are expected to report strong quarterly earnings thanks to the rally in oil prices. But strong expectations don’t mean a strong beat! Shell for example missed on revenue estimates yesterday and the share price dived 3.50% in London.

US crude rebounded past the $83 yesterday, as the price plunge has been seen as an opportunity to buy the dip in the actual environment of energy crisis, rising global demand and still a tight supply.

A word on the European Central Bank (ECB) meeting: As expected, Lagarde insistently insisted at yesterday’s press conference that the inflation in eurozone is transitory and will revert towards the ECB’s 2% target. How long the Germans are willing to wait for inflation to ease is yet to be seen. Overall, the message from Lagarde was dovish yesterday, but the price action on euro was hawkish. The EURUSD flirted with the 1.17 mark and has potential to price in more hawkishness no matter what Lagarde says.

Finally, Bitcoin plunged to $56K, and could see some more downside pressure during the weekend.

Market movers today

• Today is a busy day with plenty of releases. In the majors, markets will particularly be looking out for inflation figures in the euro area and the US. National releases yesterday point towards further price acceleration in the euro area in October.
• We also get flash GDP figures in the euro area. They will likely reflect that the service sector was not completely up and running in Q2 and thus, Q3 growth will remain on the high side.
• In Norway, we expect another drop in the unemployment rate, see more below.
• This morning, we published a note highlighting EM vulnerabilities to the ongoing energy crisis. As energy prices keep increasing and metal prices remain elevated, many EM importers in Europe and Asia will be hit. With rate hikes approaching in the US and a still fragile economic recovery, rising imports bill will further undermine the already weak external positions of e.g. Turkey, India and Egypt, adding pressure on FX. While exporters benefit for now, in longer term, transition to clean energy technologies implies changing fortunes, bringing opportunities for net fuel importers and metal exporters.

The 60 second overview

ECB: The ECB meeting yesterday ended with no new decisions or a signal about the decisions that are to be taken at the December meeting, as widely expected. Lagarde personally expected PEPP to end in March 22. TLTRO would be part of the December discussion.

US: GDP in Q3 disappointed consensus expectations by only growing 2.0% q/q ann. Growth has dropped back to more moderate levels after the economy expanded 6.7% q/q ann. In Q2.

President Joe Biden yesterday presented a revamped spending bill of USD1.75tn scaled down from USD3.5tn in a push to get a majority behind his spending plans and his infrastructure bill.

Equities: Equities were higher yesterday lifted by US were both S&P 500 and Nasdaq posted new record highs. Gains in US stocks very broad based while defensive ex. Energy outperformed in Europe. Small caps in strong comeback yesterday despite growth continued to outperform value. In US, Dow +0.7%, S&P 500 +1.0%, Nasdaq +1.4% and Russell 2000 +2.2%. The positive sentiment from Wall Street has not continued to Asia this morning were indices are lower including Hong Kong.

US futures are lower this morning, especially the Nasdaq index in dragged lower after heavy weight companies Apple and Amazon announced disappointing earnings results.

FI: A violent day in bond markets is probably the best description of yesterday's price action that essentially had three parts. 1) Initially the BoE and RBA decisions and comments overnight sent shockwaves triggering a massive repricing of the front end by 10bp, but also a 10s30s relentless flattening of 8bp to just hit 7bp driven by the long end. 2) Ahead of the ECB meeting, some recovering from the strong reaction materialised, however, 3) the ECB's decision not to push back on the market pricing sent front end pricing higher amid ECB didn't convince markets of its transitory inflation narrative. ECB are now priced for a 10bp rate hike in September next year, well ahead of our expectations. Bloomberg sources later reported that Lagarde's mild pushback on rates reflected a governing council agreement.

FX: Initially, markets had a hard time interpreting the ECB, but eventually EUR/USD moved higher in line with higher European rates. EUR/USD is now trading closer to 1.17, although we expect the move higher to be temporary in nature. EUR/GBP also moved higher and is now trading closer to 0.85. EUR/SEK did not react much to the ECB meeting but moved below 9.95 during the evening.

Credit: Though equities finished the day in red, credit markets were less upbeat. iTraxx Xover widened 3.3bp and closed in 258bp while Main widened 1bp and closed in 50bp. HY bonds closed the day 4bp wider and IG 0.5bp.

Nordic macro

In Norway, the decline in unemployment has slowed as the recovery effect has faded. Based on the weekly figures, we expect registered unemployment to drop to 2.4% seasonally adjusted in October, and 2.2 % non-seasonally adjusted. With the number of jobless still abnormally high, and vacancies also high, it would be alarming if unemployment were to start levelling off already.

General trend

• KDDI, Japan Tobacco, Murata Manufacturing.
• Hang Seng has remained modestly lower.
• Shanghai Composite ended morning trading slightly higher (+0.2%).
• S&P ASX 200 has declined amid the rise in Aussie bond yields [REITs drop].
• China bonds and WGBI [bond index] in focus [FTSE Russell previously stated that China bonds to be included in the WGBI over a period of 36 months, effective from Oct 29th 2021 (Fri)].
• Companies due to report during the NY morning include AbbVie, Booz Allen Hamilton, CBOE, Cameco, Charter Communications, Colgate, Carter’s, Chevron, W.W Grainger, Huntsman, Lazard, L3Harris, LyondellBasell, Newell, Phillips 66, Royal Caribbean, Weyerhaeuser, Exxon.

Headlines/Economic Data

Australia/New Zealand

• ASX opened +0.2%.
• RIO.AU Priced $1.25B in 2.75% 30-year bonds.
• (AU) ANZ bank expects RBA to eliminate Apr 2024 YCC target at next week monetary policy meeting.
• (AU) NAB expects RBA to start raising rates in Mid 2023; Expects RBA to stop YCC target next week.
• (AU) Australia Apr 2024 bond yield hits 76bps, above the 10bps YCC target.
• (AU) Australia Q3 Retail Sales M/M: 1.3% v 0.4%e.
• (AU) Australia Sept Private Sector Credit M/M: 0.6% v 0.6% prior; Y/Y: 5.3% v 5.0%e.
• (AU) Australia Q3 PPI Q/Q: 1.1% v 0.7% prior; Y/Y: 2.9% v 2.2% prior.
• (NZ) New Zealand Oct ANZ Consumer Confidence: 98.0 v 104.5 prior; M/M: -6.2% v -4.7% prior.

Japan

• Nikkei 225 opened flat.
• (JP) Japan Oct Tokyo CPI Y/Y: 0.1% V 0.4%E; CPI (Ex Fresh Food) Y/Y: 0.1% V 0.3%E.
• (JP) Japan Oct Jobless Rate: 2.8% V 2.8%E.
• (JP) Japan Sept Preliminary Industrial Production M/M: -5.4% V +0.2%E; Y/Y: -2.3% V +8.8% PRIOR.
• (JP) Japan Ruling LDP Party said to be on 'defensive' to maintain lower house majority, ruling coalition (includes Komeito) is on track to maintain majority [comes ahead of the Oct 31st general elections] - Nikkei.
• 4503.JP [Astellas Pharmaceutical] Reports H1 Net ¥71.6B v ¥72.8B y/y, Op ¥90.2B v ¥86.9B y/y, Rev ¥651.7B v ¥615.5B y/y.

Korea

• Kospi opened +0.5%.
• (KR) South Korea Sept Industrial Production M/M: -0.8% v -0.3%e; Y/Y: -1.8% v 1.4%e.
• (KR) South Korea Sept Cyclical Leading Index Change: -0.3 v -0.3 prior.
• SK Innovation Reports Q3 (KRW) Net +511B v -16.1B y/y; Op +619B v -53.6B y/y; Rev 12.3T v 8.31T y/y.

China/Hong Kong

• Shanghai Opened flat; Hang Seng Opened -0.4%.
• (CN) China PBOC sets Yuan reference rate: 6.3907 v 6.3957 prior.
• 3333.HK [Evergrande] Founder Hui's house has been pledged to repay $260M in bonds.
• (CN) China Ministry of Finance (MOF) To sell €4.0B in bonds in Hong Kong on Nov 10th.
• (CN) China PBOC conducted CNY5.0B in 3-month Central Bank Bill Swap (CBS) operation on today's session v CNY5.0B prior.
• (CN) China PBOC Open Market Operation (OMO): Injected CNY200B in 7-day reverse repos v CNY200B prior; Net inject CNY100B v Net inject CNY100B prior.
• (CN) China gas stations said to be rationing Diesel due to shortages - Press.
• Sinopec Official: China gasoline consumption expected to peak in 2025/26.
• (CN) China State Planner (NDRC): Coal production prices are significantly below current spot prices.

North America

• (US) Q3 Advance GDP Annualized Q/Q: 2.0% V 2.6%E; Personal Consumption: 1.6% V 0.9%E.
• (US) Initial Jobless Claims: 281K V 288KE; Continuing Claims: 2.243M V 2.42ME.
• (US) Sept Pending Home Sales M/M: -2.3% V 0.5%E; Y/Y: -7.2% V -3.1%E.
• KO Reportedly near deal to buy controlling stake in sports drink maker BodyArmor, valuing company at $8B - press.
• AAPL Reports Q4 $1.24 v $1.24e, Rev $83.4B v $85.5Be; Supply chain constraints hurt sales by $6B in Q4; Expects continued supply constraints in Q1 resulting in larger headwinds.
• AMZN Reports Q3 $6.12 v $8.71e, Rev $110.8B v $111.8Be; CFO: Seeing inconsistent staffing levels because of labor shortage and has become primary capacity constraint.

Europe

• (UK) UK govt reportedly has convened committee to study potential fallout from triggering Article 16 and suspending Northern Ireland cooperation - Sky News.
• (EU) ECB Policymakers said to be split about second round effect of inflation, some doubt CPI will ease below 2% in 2023.

Other

• (TW) Taiwan announces agreement with the US on cyber security.
• (SG) Singapore Sept M2 Money Supply Y/Y: 4.0% v 3.1% prior; M1 Money Supply Y/Y: 13.4% v 12.9% prior.
• (IN) Reserve Bank of India (RBI) Gov Das reappointed to additional 3-year term (second term).

Levels as of 01:20 ET

• Nikkei 225, flat, ASX 200 -1.2% , Hang Seng -0.5%; Shanghai Composite +0.3%; Kospi -0.9%.
• Equity S&P500 Futures: -0.5%; Nasdaq100 -0.8%, Dax -0.4%; FTSE100 -0.3%.
• EUR 1.1673-1.1690 ; JPY 113.39-113.71 ; AUD 0.7524-0.7556 ;NZD 0.7171-0.7206.
• Gold -0.4% at $1,796/oz; Crude Oil flat at $82.82/brl; Copper -0.1% at $4.4295/lb.

Daily Pivots: (S1) 1.1614; (P) 1.1653; (R1) 1.1724; More...

EUR/USD's rebound from 1.1523 resumed by breaking 1.1668 temporary top. Intraday basis back on the upside for further rally. Sustained break of 55 day EMA (now at 1.1690) will be a sign that larger correction from 1.2348 has completed. Stronger rally would be seen to 1.1908 resistance for confirmation. On the downside, though, break of 1.1581 minor support will turn bias back to the downside for 1.1523 low instead.

In the bigger picture, price actions from 1.2348 should at least be a correction to rise from 1.0635 (2020 low). As long as 1.1908 resistance holds, deeper fall would be seen to 61.8% retracement of 1.0635 to 1.2348 at 1.1289. Nevertheless break of 1.1908 resistance will revive medium term bullishness and turn focus back to 1.2348 high.

Dollar and Yen dropped sharply overnight on strong risk-on market, as NASDAQ finally caught up and made new record high. The greenback is additionally pressured by the delayed buying in Euro after ECB post-meeting press conference. For now, Canadian Dollar is the third weakest, following the retreat in oil price. On the other hand, Aussie is the strongest one for the week on speculation that RBA would pull ahead rate hikes, while Swiss Franc and Kiwi follow.

Technically, we're not too convinced by Euro's buying yet, even though EUR/USD did resumed near term rebound. There is no sign in bottoming in EUR/CHF as recent fall from 1.0936 is extending. EUR/AUD is kept below 1.5598 minor resistance. Nevertheless, EUR/GBP is now pressing 0.8467 minor resistance while EUR/CAD is pressing 1.4439. Break of these two levels could sign that Euro's rebound is more broad based. But, we'll see.

In Asia, Nikkei closed up 0.03%. Hong Kong HSI is down -0.52%. China Shanghai SSE is up 0.64%. Singapore Strait Times is up 0.52%. Japan 10-year JGB yield is up 0.0072 at 0.095. Overnight, DOW rose 0.68%. S&P 500 rose 0.98%. NASDAQ rose 1.39% to new record at 15448.11. 10-year yield rose 0.039 to 1.568.

Japan industrial production dropped -5.4% mom in Sep, but expected to bounce back strongly ahead

Japan industrial production dropped sharply by -5.4% mom in September, much worse than expectation of -2.4% mom. The seasonally adjusted index of production at factories and mines dropped for the third straight month to 89.5, against the 2015 100 base of 100.

But looking ahead, the Ministry of Economy, Trade and Industry said output would bounce back by 6.4% in October, and then 5.7% in November, based on a poll of manufacturers. An official said, "output may have hit bottom in September since economic activities have been returning to normal in countries such as Vietnam and Malaysia since late September, and a recovery is expected, mainly in the auto industry."

Also released, unemployment was unchanged at 2.8% in September, matched expectations. Housing starts rose 4.3% yoy, versus expectation of 7.5% yoy. Consumer confidence dropped to 39.2, below expectation of 40.4. In October, Tokyo CPI core was unchanged at 0.10% yoy, below expectation of 0.3% yoy.

Australia retail sales rose 1.3% mom in Sep, vary by state

Australia retail sales rose 1.3% mom in September, much better than expectation of 0.2% mom. That's the first monthly growth since May. For the 12-month, sales rose 1.7% yoy.

"Retail turnover continues to vary by state, based on whether restrictions were imposed, removed or extended. Queensland sales rose to their highest level ever, up 5.2 per cent, with no lockdowns in September," Ben James, Director of Quarterly Economy Wide Statistics said.

"New South Wales also experienced a rise of 2.3 per cent despite having lockdowns, as some restrictions were eased or lifted. However, turnover for New South Wales remains 11.9 per cent lower than May 2021, the month before the most recent lockdown began."

Also released, PPI came in at 1.1% qoq, 2.9% qoq in Q3, versus expectation of 0.6% qoq, 3.2% yoy. Price sector credit rose 0.6% mom in September, matched expectations.

France GDP grew 3.0% qoq in Q3, almost back to pre-crisis level

France GDP rose 3.0% qoq in Q3, above expectation of 2.4% qoq. GDP has almost returned to pre-crisis level, just -0.1% below Q4 2019 level.

Final internal demand (excluding inventory changes) contributed positively to GDP growth this quarter (+3.3 points, after +1.5 points in Q2): in particular, households' consumption expenditure accelerated very strongly (+5.0% after +1.3%), and contributed for +2.5 points to GDP growth this quarter. Gross fixed capital formation (GFCF) was almost stable (-0.1% after +2.5% in the previous quarter).

Exports accelerated this quarter (+2.3% after +1.2% in the previous quarter) while imports were stable (–0.1% after +1.7%). Foreign trade remained largely below its pre-crisis level, but its contribution to GDP growth was positive this quarter: +0.6 points, after –0.2 points in the previous quarter. Finally, the contribution of inventory changes to GDP growth was negative this quarter (–0.9 points after +0.0 points in the previous quarter).

Looking ahead

Eurozone GDP and CPI flash, Germany GDP and Italy GDP will be released in European session. UK will release mortgage approvals and M4 money supply. Swiss will release retail sales and KOF economic barometer.

Later in the data, Canada will release GDP, IPPI and RMPI. US will release personal income and spending, and PCE inflation.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.1614; (P) 1.1653; (R1) 1.1724; More...

EUR/USD's rebound from 1.1523 resumed by breaking 1.1668 temporary top. Intraday basis back on the upside for further rally. Sustained break of 55 day EMA (now at 1.1690) will be a sign that larger correction from 1.2348 has completed. Stronger rally would be seen to 1.1908 resistance for confirmation. On the downside, though, break of 1.1581 minor support will turn bias back to the downside for 1.1523 low instead.

In the bigger picture, price actions from 1.2348 should at least be a correction to rise from 1.0635 (2020 low). As long as 1.1908 resistance holds, deeper fall would be seen to 61.8% retracement of 1.0635 to 1.2348 at 1.1289. Nevertheless break of 1.1908 resistance will revive medium term bullishness and turn focus back to 1.2348 high.

Economic Indicators Update

France GDP rose 3.0% qoq in Q3, above expectation of 2.4% qoq. GDP has almost returned to pre-crisis level, just -0.1% below Q4 2019 level.

Final internal demand (excluding inventory changes) contributed positively to GDP growth this quarter (+3.3 points, after +1.5 points in Q2): in particular, households' consumption expenditure accelerated very strongly (+5.0% after +1.3%), and contributed for +2.5 points to GDP growth this quarter. Gross fixed capital formation (GFCF) was almost stable (-0.1% after +2.5% in the previous quarter).

Exports accelerated this quarter (+2.3% after +1.2% in the previous quarter) while imports were stable (–0.1% after +1.7%). Foreign trade remained largely below its pre-crisis level, but its contribution to GDP growth was positive this quarter: +0.6 points, after –0.2 points in the previous quarter. Finally, the contribution of inventory changes to GDP growth was negative this quarter (–0.9 points after +0.0 points in the previous quarter).

Full release here.