Last week, a second consecutive outstanding employment report boosted support for the Canadian dollar. The British pound also rallied as hope of a Brexit deal emboldened traders to buy sterling.
Positive noise about a China trade deal kept equity markets buoyant and gold receded to close the week below 1500 oz. The US Consumer Price Index remained constant at 1.7% Y/Y for September.
This week, inflation reports are released from China, New Zealand, the UK and Japan. The US releases its latest retail sales figure, and Australia will print its employment report. Bank of England Governor Carney testifies to a parliamentary committee on Tuesday and the UK parliament will meet on Saturday 19th October to debate the latest Brexit developments. China announces its GDP statistics.
China CPI is released on Tuesday morning with expectations of a small boost to 2.9% Y/Y for September. Beware on Tuesday for potential turbulence in the tech area of US equity markets. Millions of shares of Pinterest (NYSE: PINS) and Zoom Video Communications (NASDAQ: ZM) will be unlocked from their post IPO holding period and thus will be eligible to be traded.
New Zealand 3rd quarter CPI is likely to fall to 1.4% Y/Y when it is announced late Tuesday night/early Wednesday morning. UK CPI, also out on Wednesday is expected to rise to 1.8% Y/Y for September. Analysts are expecting a slight decline in US retail sales to 0.3% M/M for September. Late on Wednesday evening, Bank of England Governor Carney attends and speaks at a Harvard Kennedy School event.
We are greeted on Thursday morning with the latest employment report from Australia with expectations of a rise of 15,000 new jobs created and the unemployment rate stable at 5.3%. Reserve Bank of Australia Governor Philip Lowe will speak later that evening at an event in Washington.
Friday’s early morning releases are Japanese CPI, expected at 0.2% Y/Y for September and Chinese 3rd quarter GDP expected at 6.1% Y/Y.
Optimism is a wonderful human quality, but it is proven that trading optimism can suffer unfortunate consequences in the markets as they have a habit of crushing irrational exuberance. Brexit and US/China trade are two areas where trading caution is advised.
In my view, it seems that the reaction to positive news often provokes a rather exaggerated response. Remember that news is just noise until it is substantiated by fact or action. Optimism bias kills off many novice and professional traders. There is nothing tangible in buying wind.
Last Good luck and good trading! Ben Robson
Ben Robson is the CEO of Spectrex Commodities and author of Currency Kings- How Billionaire Traders Made Their Fortune Trading Forex And How You can Too.
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