Analytics, News, and Forecasts for CFD Markets: currency news — 09-10-2018.

The IBD/TIPP Economic Optimism Index, a leading national poll on consumer confidence, rose 3.8 percent in October with an overall reading of 57.8. The positive uptick is notable as it comes after last month's index dropped across every component. The October index also marked 25 consecutive months that the Economic Optimism Index has spent in positive territory. An index reading below 50 indicates pessimism while above 50 signals optimism for the IBD/TIPP indexes.

• Reserving Judgment if Fed Will Need to Pause on Rate Increases Next Year

• Any Overshoot of 2% Inflation Target Likely to Happen Gradually

• Jobless Rate Likely to Ebb to Mid-3% Range or Lower

The national trend in housing starts stood at a 19-month low in September, following declines in four of the last five months. The slowdown in the pace of new residential construction activity in recent months is a result of both lower single-detached and multi-starts activity and brings new residential construction closer to its long run average from the elevated levels registered in 2017.

The trend in housing starts was 207,768 units in September 2018, compared to 213,966 units in August 2018, according to Canada Mortgage and Housing Corporation (CMHC). This trend measure is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.

Small business owners continued to deliver a spectacular performance with September's third highest Index reading in the survey's 45 year history. The Index fell slightly from August's survey record breaking high of 108.8 to 107.9. Six of the ten Index components declined, three advanced and one was unchanged, exactly reversing last month's gain. Most of the decline came in the "hard" components of the Index (down 14 points) but still registered as the second highest reading since 1998, partially offset by some improvement in the expectations components (up 3 points).

EUR/USD is likely to fall further, but the declines will "probably be a slow grind," says Societe Generale. It is "obvious from the intra-day price action that the area between 1.1475 and 1.1500 is holding firm." But "positioning for the EU/Brexit dinner next week and for Italy's ratings review later in the month still favour a bearish skew" in EUR/USD, SocGen says. The 2.5% decline since end-September "may not be the end of the mini-correction that has seen the pair retreat from 1.1815 to below 1.15" - via WSJ.

• Inaction Would Be Costly To EU Businesses, Could "Strain" Derivatives Markets

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• Brexit Risks Don't Warrant Additional Capital Buffers For UK Banks

• Annual Stress Test Results For UK Banks To Be Published Dec. 5

Chinese stocks fell sharply while the yuan fell, despite the fact that Beijing said it would reduce the amount of cash that commercial lenders should postpone, releasing a net 750 billion yuan ($ 108 billion) to the banking system.

The planned reduction in reserve requirements for banks (RRR) will be the fourth reduction this year, as China weakens credit conditions to support business and calms market fluctuations amid a rising trade war with the United States.

Economists had forecast a further reduction in RRR, although the Central Bank does not expect a decline in base interest rates in the near term. Recall rates remain unchanged from October 2015. China has repeatedly stated that it will not resort to massive stimulus.

In the English-language edition of the Global Times, it is noted that China may not be able to overcome this pressure simply by continuing to improve its economic policies.

"In 2008, the Chinese government announced a stimulus package of 4 trillion yuan ($ 578 billion) to combat the effects of the global financial crisis. Now the Chinese economy is under even more severe pressure against the background of escalating trade friction," the publication said.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1655 (661)

$1.1634 (395)

$1.1601 (88)

Price at time of writing this review: $1.1475

Support levels (open interest**, contracts):

$1.1446 (3026)

$1.1418 (2706)

$1.1386 (2543)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date November, 19 is 71022 contracts (according to data from October, 8) with the maximum number of contracts with strike price $1,1600 (4545);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3262 (983)

$1.3226 (796)

$1.3187 (314)

Price at time of writing this review: $1.3084

Support levels (open interest**, contracts):

$1.2971 (1745)

$1.2940 (1753)

$1.2907 (2022)

Comments:

- Overall open interest on the CALL options with the expiration date November, 19 is 19304 contracts, with the maximum number of contracts with strike price $1,3200 (2236);

- Overall open interest on the PUT options with the expiration date November, 19 is 23807 contracts, with the maximum number of contracts with strike price $1,2850 (2040);

- The ratio of PUT/CALL was 1.23 versus 1.26 from the previous trading day according to data from October, 8.

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.

The ongoing strength in employment is especially encouraging. The only concern remains around lower forward orders - though volatile - is our best read of underlying demand. By industry, mining again is reporting the strongest outcomes and confidence. Against that retail is weak and deteriorating. After showing some signs of building price pressures in recent months, surveyed measures of costs and prices generally eased in the month. Across the states, Tasmania continues to report the strongest conditions, followed by Victoria. Confidence continues to lag in NSW.

The business conditions index edged up 1pt to +15 index points in September, and appears to have stabilised after declining earlier in the year. Business confidence also ticked up 1pt in the month to +6, to be around its long-run average.

Helen Dickinson OBE, Chief Executive, BRC:

"These figures lay bare the difficult operating environment for the retail industry. After a challenging August, constrained consumer spending in September has resulted in the weakest sales growth for five months.

"The retail industry pays a disproportionate amount of tax. It represents 5 per cent of the economy but pays 10 per cent of business tax and almost 25 per cent of business rates. A tax system skewed towards high taxes on people and property is contributing to store closures and job losses and is stalling the successful reinvention of our high streets.

"Taxes apply to all businesses, so the answer is not additional taxes solely on the retail industry. The Government urgently needs to reduce the business rates burden and create a tax system fit for the 21st century that more fairly distributes taxes right across the economy."

Morris Obstfeld, chief economist at the International Monetary Fund, said on Tuesday that he was not worried about the ability of the Chinese government to defend its currency, despite the recent depreciation of the yuan.

"No, I don't think this is a problem," Obstfeld said when asked about the problem on the sidelines of a press conference at the annual meetings of the IMF and the World Bank in Bali.

But Obstfeld also said that Beijing will face a "balancing act" between actions to foster growth and ensure financial stability.

• Forecasts 3.7% Global Economic Growth This Year, Down From 3.9% In April

• Forecasts 2.9% Growth For U.S. Economy This Year, Unchanged From Prior Estimate

Germany exported goods to the value of 105.2 billion euros and imported goods to the value of 88.1 billion euros in August 2018. Based on provisional data, the Federal Statistical Office (Destatis) also reports that German exports in August 2018 increased by 2.2% and imports by 6.2% on August 2017. After calendar and seasonal adjustment, exports were down 0.1% and imports 2.7% compared with July 2018.

The foreign trade balance showed a surplus of 17.2 billion euros in August 2018. In August 2017, the surplus amounted to +20.0 billion euros. In calendar and seasonally adjusted terms, the foreign trade balance recorded a surplus of 18.3 billion euros in August 2018.

According to provisional results of the Deutsche Bundesbank, the current account of the balance of payments showed a surplus of 15.3 billion euros in August 2018, which takes into account the balances of trade in goods including supplementary trade items (+18.2 billion euros), services (-5.6 billion euros), primary income (+6.5 billion euros) and secondary income (-3.8 billion euros). In August 2017, the German current account showed a surplus of 17.8 billion euros.