The US seems to have lost its momentum with the arrival of autumn, as Non-Farm Payrolls for September disappointed at 148K, missing a predicted estimate of 180K substantially and acting as a stark contrast to August's impressive figure of 193K. Adding fuel to the fire was September's unemployment rate, which at 7.2% indicated a measly drop from the 7.3% of the previous month and in terms of year-over-year change proved to be rather insubstantial. The bad news wounded the US dollar and caused the EUR/USD to soar by 0.82% to 1.3799. The week continued to prove sour for the US, as Existing Home Sales declined for the first time since June, the increase in both prices and mortgage rates discouraging buyers and causing purchases to fall to 5.29M. On a more positive note, US Durable Goods Orders increased 3.7% in September, exceeding expectations of a 2.0% rise. The boost to this figure is said to be a result of an increase in aircraft orders according to the Commerce Department. The most important news in the pipeline for the US this week include the Fed's Monetary Policy Statement and Press Conference which are taking place on Wednesday October 30th, and the Consumer Price Index (YoY) for September which is forecast at 1.2%.
Europe showed signs of optimism last week as data released on October 23rd revealed that Consumer Confidence in the eurozone climbed to -14.5% for the month of October, improving from the -14.9% recorded in September and indicating a small, albeit important lift in spirits amongst eurozone households. The Markit Manufacturing PMI for the eurozone climbed to 51.3 in October according to data released on October 24th, but despite being an improvement from September's 51.1, it disappointed expectations of a rise to 51.4. The same can be said for the Markit Services PMI for October, which at 50.9 was substantially below expectations of an increase to 52.4. At the two day EU Summit which took place on October 24th and 25th, the topics which were at the top of the agenda included migrant deaths off the Italian island Lampedusa, allegations of the US Intelligence monitoring the phone calls of EU politicians and talks of a eurozone banking union. This week in the eurozone, the most important data due is the Consumer Price Index and the Core Consumer Price Index for October, both due to be released on October 31st.
The Bank of England Meeting Minutes released on October 23rd pointed towards satisfactory economic progress in the UK, with no member rooting for more stimulus measures and new data showing that the economy is enjoying a 1% quarterly growth rate. The reasons for this rapid recovery have been the strength of the housing sector, the lower market interest rates and a strong GBP. In addition, wages appear to be on the rise slowly but gradually and employment figures have been better than what was estimated in the August Inflation Report. This week will see the release of a variety of data from the UK including the Gfk Consumer Confidence and Nationwide Housing Prices for October, due on October 31st, the Unemployment Rate for September due on the same day and the Markit Manufacturing PMI for October, due on November 1st.
Japan is steadily continuing in its mission to end the years of deflation and is making significant steps towards its goal; government data released on October 25th revealed that Japan's Core Consumer Prices climbed 0.7% in September in comparison to September 2012, reaching almost as high an increase as August's 0.8% which was the fastest growth recorded in 5 years. On the political front, Japanese Prime Minister Shinzo Abe has replied to China's call to power by affirming that Japan will not allow China to rock the balance of power in Asia and intends on adopting a more dynamic role in Asian politics. Such political tensions tend to scare investors into risk aversion, which in turn usually leads them to the yen which is a safe haven. The most important news expected in Japan this week is the Bank of Japan Interest Rate Decision which will be announced on October 31st. Other fundamental news include the release of the Annualized Housing Starts and the Nomura/ JMMA Manufacturing Purchasing Managers Index for October.
What to Watch this Week
Fed's Monetary Policy Statement and Press Conference on Wednesday October 30th: If the Fed Conference is negative the EUR/USD will overwrite the 1.3835 level, making 1.3835 a possible resistance level. If the EUR/USD breaks up, it will become a strong support level with the next resistance at 1.3900 psychological and 1.4350. The nearest support level is 1.3560; if it is broken, the next support levels are likely to be 1.3460 and 1.3160.
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