parmveer.sunnar's picture

Trending Economic: Morning Brief (28 October 2015)

All eyes today will be on the numerous Central bank releases and markets are expected to remain fairly subdued in early European trading. However starting off proceedings will be the Riksbank rate decision at 0830GMT although market expectations are of an unchanged release at -0.35%. Although pressure is now mounting on the Riksbank as further monetary easing now seems inevitable by the ECB.  With regards to overnight, we saw the release of relatively weak inflation data out of Australia with CPI q/q coming out at 0.5% vs. 0.7% exp and Trimmed mean CPI q/q coming out at 0.3% vs. 0.5% exp. Naturally the AUD has dipped on the back of this as expectations of rate cut by the RBA next Tuesday increase.

Most attention will however today be placed on the Federal Reserve with the FOMC Statement and Federal Funds Rate due out at 1800GMT. Market expectations are of an unchanged federal funds rate as hopes of a 2015 rate rise drift further and further away. As we do not see the Fed tightening monetary policy in today’s meeting, attention will shift towards the December meeting, although the emphasis is still on data dependence. Recent data out of the US has lagged somewhat with retail sales, industrial output and durable goods yesterday all falling short of expectations.  The other main release out of the U.S today will be Goods Trade Balance (1230GMT) and expectations are of a release around -64.9B vs. -67.2B previously.

The other main central bank release today will be the official cash rate and the RBNZ rate statement (0800GMT) and much the same as other central bank releases today, expectations are for the official cash rate to remain unchanged at 2.75%. Commodity currencies remain notably weak as Oil prices continue to be hit hard as evidenced by yesterday’s sharp fall in crude down to $42.58. Importantly Oil Inventory data will be released at 1430GMT and expectations are of a fall of around 3.7M barrels vs. 80M previously. Considering that both the Fed and inventory data are due out today volatility is expected to be quite high in both emerging markets as well as the commodity currencies. The Major area of support for Oil will today be at $42.50 and we expect this area to hold firm ahead of the Inventory data.