EC Animal Spirits Remain Animated

India made it official. After dragging its feet and playing obstructionist, India formally dropped out of the region's China-led trade-bloc (Regional Comprehensive Economic Partnership). It is parallel bloc to the Trans-Pacific Partnership, and the trade agreement does not appear as extensive. Ultimately, India pulled out for similar reasons that the US withdrew from the TPP. It did not fit into the domestic agenda of the government.   

The dollar dipped below JPY108 at the end of last week, but recovered yesterday and is extending those upticks today has nearly returned to JPY109, where the 200-day moving average is found (~JPY109.05). Last week's high was recorded around the FOMC announcement (~JPY109.30). There does not seem to be the near-term optionality around JPY109 that may have helped stymie last week's assault. The Australian dollar is firm within its recent ranges. A move above $0.6930 targets the $0.6950-$0.6955 area. There are options for A$1.5 bln struck between $0.6900 and $0.6905, which expire today.  

Europe

Ahead of tomorrow's service and composite PMIs for the eurozone, the UK remains the main focus today. Here electioneering and the new speaker are the talking points. The UK reported slightly better than expected service and composite PMIs. Both reached the 50 boom/bust level from 49.5 and 49.3, respectively. Perhaps the less noted development was the continued build in BOE reserves. In October, reserves rose by $2.2 bln. Through the first ten months of the year, UK reserves have risen by an average of $1.53 bln a month. Last year reserves rose by an average that was half as much (~$721 mln).  

The minutes from Sweden's Riksbank meeting late last month was slightly more dovish than the initial statement suggested. The minutes acknowledged that the economic and inflation outlook lacked clarity. It still suggested it would hike rates to zero in December. However, it seemed to imply there is no commitment after that. No country that has adopted negative interest rates has been able to emerge so far. Meanwhile, the Swedish economy is weakening. The October composite PMI fell to 48.6, a new six-year low. Separately, industrial orders fell in September by 0.2% and have not risen since May.  

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Read more by Marc on his site Marc to Market.

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Bill Myers 1 year ago Member's comment

Great read.