Posted by arslan | Posted on 2:57 AM | Posted in
The Euro may see renewed selling pressure in European hours as Euro Zone producer prices fall for the ninth consecutive month, hinting that continued deflation may undermine the fragile economic recovery in the currency bloc.
Key Overnight Developments
• Australian Retail Sales Unexpectedly Fall on Ebbing Stimulus• Euro Consolidates, British Pound Declines in Overnight Trading
Critical LevelsThe Euro consolidated near familiar levels in overnight trading, oscillating in a well-defined 30-pip range above 1.47 to the US Dollar. The British Pound tipped slightly lower, trading down as much as -0.2% against the greenback.
Asia Session HighlightsAustralian Retail Sales unexpectedly fell in September, slipping -0.2%. Adjusted for inflation, sales fell -0.4% through the third quarter, the most in nearly five years. Spending at department stores led the metric lower, down -2.9% from the previous month. Consumers have turned timid as the effects of the A$20 billion in government handouts that supported spending through the first part of the year begin to fade. The central bank noted as much yesterday, with Governor Glenn Stevens saying that “demand may soften” as the effects of various policy initiatives are now diminishing. The RBA may keep rates on hold in December as economic data begins to turn increasingly mixed to soften the impact of the withdrawal of fiscal stimulus. The big question to be answered now is whether or not the economy will be ready to stand on its own feet after expansionary policy is unwound.The remainder of the Australian data docket looked broadly optimistic: the AiG Performance of Service Index (PSI) surged to 54.8 in October, showing the sector was expanded at the fastest pace since March 2008. AiG Chief Executive Heather Ridout said “improved demand for services [is] driven by a marked lift in consumer confidence,” which amounted to a counterbalance to the Retail Sales release. Indeed, the New Orders and Sales components the broader PSI index led the metric higher. Separately, Building Approvals rose 2.7% in September as the government continued to provide grants of as much as A$12,000 to encourage first-time homebuyers.Euro Session: What to ExpectThe Euro Zone Producer Price Index is set to drop -7.7% in the year to September, reversing some of the previous month’s upswing from the record low at -8.4% recorded in July. The release will mark the ninth consecutive month that wholesale prices has contracted, hinting at continued downward pressure on overall inflation as shops pass on lower costs on to consumers. An early estimate showed that CPI declined for the fifth consecutive month in October. It seems increasingly inevitable that continued losses will bleed into future inflation expectations, encouraging consumers and businesses to wait for the best possible bargain and delay spending and investment, threatening the fragile economic recovery and hinting that the European Central Bank may find itself with no choice but to (at the very least) delay raising interest rates for longer than is currently projected.
Key Overnight Developments
• Australian Retail Sales Unexpectedly Fall on Ebbing Stimulus• Euro Consolidates, British Pound Declines in Overnight Trading
Critical LevelsThe Euro consolidated near familiar levels in overnight trading, oscillating in a well-defined 30-pip range above 1.47 to the US Dollar. The British Pound tipped slightly lower, trading down as much as -0.2% against the greenback.
Asia Session HighlightsAustralian Retail Sales unexpectedly fell in September, slipping -0.2%. Adjusted for inflation, sales fell -0.4% through the third quarter, the most in nearly five years. Spending at department stores led the metric lower, down -2.9% from the previous month. Consumers have turned timid as the effects of the A$20 billion in government handouts that supported spending through the first part of the year begin to fade. The central bank noted as much yesterday, with Governor Glenn Stevens saying that “demand may soften” as the effects of various policy initiatives are now diminishing. The RBA may keep rates on hold in December as economic data begins to turn increasingly mixed to soften the impact of the withdrawal of fiscal stimulus. The big question to be answered now is whether or not the economy will be ready to stand on its own feet after expansionary policy is unwound.The remainder of the Australian data docket looked broadly optimistic: the AiG Performance of Service Index (PSI) surged to 54.8 in October, showing the sector was expanded at the fastest pace since March 2008. AiG Chief Executive Heather Ridout said “improved demand for services [is] driven by a marked lift in consumer confidence,” which amounted to a counterbalance to the Retail Sales release. Indeed, the New Orders and Sales components the broader PSI index led the metric higher. Separately, Building Approvals rose 2.7% in September as the government continued to provide grants of as much as A$12,000 to encourage first-time homebuyers.Euro Session: What to ExpectThe Euro Zone Producer Price Index is set to drop -7.7% in the year to September, reversing some of the previous month’s upswing from the record low at -8.4% recorded in July. The release will mark the ninth consecutive month that wholesale prices has contracted, hinting at continued downward pressure on overall inflation as shops pass on lower costs on to consumers. An early estimate showed that CPI declined for the fifth consecutive month in October. It seems increasingly inevitable that continued losses will bleed into future inflation expectations, encouraging consumers and businesses to wait for the best possible bargain and delay spending and investment, threatening the fragile economic recovery and hinting that the European Central Bank may find itself with no choice but to (at the very least) delay raising interest rates for longer than is currently projected.
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