10/11/2015

Fundamental Analysis

Tuesday, November 10, 2015 08:30 GMT

Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com

Major events this week (November 9-13)

Day/Time (GMT) Flag Currency Event Period Actual Forecast Previous

MONDAY

All Day EUR Eurogroup Meetings

TUESDAY

12:30am AUD NAB Business Confidence October 2 5

1:30 am CNY CPI YoY October 1.3% 1.6%

9:00 am GBP Inflation Report Hearings

8:00 pm NZD RBNZ Financial Stability Report

WEDNESDAY

5:30am CNY Industrial Production YoY October 5.7%

9:30 am GBP Average Earnings Index 3m/y September 3.0%

1:15 pm EUR ECB President Draghi Speaks

THURSDAY

12:00 pm AUD Unemployment Rate October 6.2%

12:30 pm USD Unemployment Claims November 7 276K

FRIDAY

7:00 am EUR German Prelim GDP QoQ Quarter 3 0.4%

1:30 pm USD Retail Sales m/m October 0.1%

3:00 pm USD Prelim UoM Consumer Sentiment November 90.0

Tuesday, November 10, 2015 08:30 GMT

Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com

UK The Bank of England pushed the first hike in interest rates since 2009 further into the future, saying inflation would pick up more slowly than originally predicted. Only one BoE official, Ian McCafferty, voted to raise interest rates this month, while the other eight members on the Monetary Policy Committee opted to keep them at a record-low 0.5%. BoE Governor Mark Carney has previously said a decision on whether to raise interest rates would become clearer around the turn of this year. Economists expect a first interest rate rise by the BoE in the second quarter of 2016. Australia The Reserve Bank of Australia reiterated its view that interest-rate reductions this year and the Aussie Dollar's depreciation are supporting growth, suggesting rates are likely to remain on hold. Nevertheless, the central bank said that recent inflation data provided room to ease monetary policy further if needed. Traders are pricing in a 25% chance of a rate reduction at the December meeting, climbing to an almost 60% in February. Japan Bank of Japan Governor Haruhiko Kuroda reassured that the central bank would not hesitate to adjust monetary policy if needed to achieve 2% inflation target. Even though the slowdown in emerging markets, particularly in China, affected Japan's exports and production, Kuroda believes that the fundamentals of the world's third biggest economy remain sound and the environment surrounding companies and households has markedly improved. The estimated real economic growth rate for fiscal 2015 was downgraded to 1.2% compared with the expected 1.7% in the July 2015 Outlook Report. Euro zone The European Central Bank said that its bank lending and asset-buying programmes have significantly improve credit conditions in the Euro zone and supported the ongoing recovery in lending activity. The programmes have increased the size of the central bank's balance sheet and has raised the money supply. Both programmes reduced banks' funding costs, incentivising them to pass on the cost relief to final borrowers. Such a development should underpin the recovery in lending and economic activity, pushing inflation up to the ECB's goal in the medium term.

Key highlights of the week ended November 6

EUR

“Imports are currently growing faster than exports, and this has a lot to do with the lull in Brazil and Russia” - Rainer Sartorius, HSBC Trinkaus economist

Tuesday, November 10, 2015 08:30 GMT

Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com

S&P/ASX 200 Index 0.29% 5,408.24

S&P/ASX 300 Index 0.28% 5,360.32

Trends* Q4 15 Q1 16 Q2 16

MAX 1.38 1.21 1.24

75% percentile 1.13 1.11 1.12

Median 1.09 1.07 1.07

25% percentile 1.06 1.05 1.03

MIN 0.96 0.97 0.95 * the data is based on international banks’ forecasts

Impact

German exports improved in September, investor confidence strengthens

High

German trade surplus increased in September, as both exports and

imports rose in the reported month, according to Destatis. Monthly

exports surged 2.6% to 105.9 billion euros, following a 5.2% plunge

in August. Outbound shipments to the European Union soared 7.7%.

In the nine months through September, German exports grew by

7.0% year-on-ear to total almost 896 billion euros. At the same time

imports rose 3.6% in September after dropping 3.2% a month

earlier. As a result, the nation’s trade surplus rose to 22.9 billion

euros, compared with the 15.4 billion recorded in the preceding

month.

Meanwhile, a separate report showed Euro zone investor

confidence improved more than expected in November. The

investor confidence index climbed to the highest level in three

months of 15.1 in the reported month, up from 11.7 in October. It

was also above the expected result of 12.7. The current conditions

index improved to 16 from 13 in the preceding month. Likewise, the

expectations index increased to 14.3 in November from 10.5 in

October. Moreover, the investor sentiment index for Germany also

strengthened in November, to 20.1 from 17.8 a month earlier.

09.11 open price 09.11 close price % change

EUR/USD 1.0735 1.0752 +0.16%

EUR/GBP 0.71358 0.71127 -0.32%

EUR/CHF 1.0798 1.07898 -0.08%

EUR/JPY 132.25 132.43 +0.14%

CNY

“Because of the recent weak recovery in the global economy and downward pressure in the domestic economy, manufacturers still face a severe import and export situation” - Zhao Qinghe, a senior statistician at the NBS

Tuesday, November 10, 2015 08:30 GMT

Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com

S&P/ASX 200 Index 0.29% 5,408.24

S&P/ASX 300 Index 0.28% 5,360.32

Trends* Q4 15 Q1 16 Q2 16

MAX 0.82 0.78 0.82

75% percentile 0.65 0.64 0.65

Median 0.63 0.62 0.61

25% percentile 0.61 0.60 0.60

MIN 0.59 0.56 0.55 * the data is based on international banks’ forecasts

Impact

China’s manufacturing activity continues to decline in October

High

30.10 open price 30.10 close price % change

AUD/NZD 1.0568 1.0532 -0.34%

EUR/NZD 1.6401 1.6241 -0.98%

GBP/NZD 2.2873 2.2767 -0.46%

NZD/USD 0.6693 0.6778 +1.27%

JPY

“Returns on Japanese investment overseas are expected to continue growing for now, which have sustained the upward trend of its current account surplus” - Yasunari Ueno, chief market economist at Mizuho Securities

Tuesday, November 10, 2015

Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com

S&P/ASX 200 Index 0.29% 5,408.24

S&P/ASX 300 Index 0.28% 5,360.32

Trends* Q4 15 Q1 16 Q2 16

MAX 157 157 162

75% percentile 137 136 137

Median 134 134 134

25% percentile 132 131 131

MIN 115 121 121 * the data is based on international banks’ forecasts

Impact

Japan’s current account remains in surplus for 15th straight month in September

High

Japan’s current account remained in surplus in September for a 15th

straight month as low oil prices and a weak Japanese Yen boosted

income from overseas. Japan logged a 1.5 trillion yen excess in the

broadest measure of trade, compared with economists’

expectations for a 2.15 trillion yen surplus. Low energy import bill

and the weaker Yen combined with influx of tourists from overseas

improves Japan’s trade picture. The strength in the current account

shows that firms are continuing to accumulate wealth, which could

be used for more investment and wage increases to help the world’s

third biggest economy that has struggled to gain steam.

In addition to that, Japan’s current account surplus more than

quadrupled in the six months to September due to an improving

trade picture and buoyant returns on investments abroad. The 8.7

trillion yen excess for April-September was well up from the 2.0

trillion yen a year earlier, according to official data. The data comes

after the finance ministry said Japan’s trade deficit contracted more

than 80% in September due to a slump in the value of energy

imports.

09.11 open price 09.11 close price % change

AUD/JPY 86.832 86.799 -0.04%

CAD/JPY 92.612 92.7 +0.10%

EUR/JPY 132.25 132.43 +0.14%

USD/JPY 123.13 123.18 +0.04%

AUD

“Business confidence remains somewhat fickle, despite persistent strength in business conditions” - Alan Oster, NAB’s chief economist

Tuesday, November 10, 2015 08:30 GMT

Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com

S&P/ASX 200 Index 0.29% 5,408.24

S&P/ASX 300 Index 0.28% 5,360.32

Trends* Q4 15 Q1 16 Q2 16

MAX 1.03 0.86 0.88

75% percentile 0.72 0.71 0.71

Median 0.70 0.69 0.69

25% percentile 0.69 0.68 0.67

MIN 0.66 0.64 0.62 * the data is based on international banks’ forecasts

Impact

Australia’s business conditions remain strong High

Even though Australia’s business confidence faded in October amid

financial market volatility and concerns over emerging markets,

business conditions remained strong with sales, profits and

employment all in green territory. According to National Australia

Bank’s survey of around 400 firms, the index of business conditions

was unchanged at 9, whereas the business confidence gauge

declined form 5 in September to 2 last month. A reading above zero

indicates improvement in conditions, while a reading below zero

shows deterioration. NAB's report showed the outperformance of

sectors most exposed to a weaker Australian Dollar and all-time low

interest rates. The survey sub-index of sales edged up to a

historically high +15, while profitability measure lost a point to +8.

Additionally, the sub-index of employment held at +3, the highest

since 2011. The outlook for non-mining business investment

remained upbeat with the corresponding measure falling by a point

to +6 and above its long-term average.

The RBA made minor adjustments to its growth outlook last week,

revising its 2015 forecast by 25 basis points to 2.25%, but leaving its

2016 estimate unchanged at 2%-3%. Economists expect rates to

remain on hold throughout next year, with only a downgrade of GDP

growth forecast from 3% to 2.50% triggering rate cut.

09.11 open price 09.11 close price % change

AUD/JPY 86.832 86.799 -0.04%

AUD/USD 0.7041 0.7047 +0.09%

EUR/AUD 1.52413 1.52585 +0.11%

GBP/AUD 2.138 2.1452 +0.34%

CNY

“It’s quite clear, China is facing deflationary pressure. The issue is how to revive growth that’s been below target, while restructuring the economy to reduce overcapacity.” - Shen Jianguang, economist at Mizuho Securities Asia Ltd.

Tuesday, November 10, 2015 08:30 GMT

Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com

S&P/ASX 200 Index 0.29% 5,408.24

S&P/ASX 300 Index 0.28% 5,360.32

Trends* Q4 15 Q1 16 Q2 16

MAX 0.82 0.78 0.82

75% percentile 0.65 0.64 0.65

Median 0.63 0.62 0.61

25% percentile 0.61 0.60 0.60

MIN 0.59 0.56 0.55 * the data is based on international banks’ forecasts

Impact

China clearly feels the ill winds of deflation High

China’s inflation eased more than expected in October, while

producer prices extended their decline to the 44th consecutive

month, pointing to persistent deflationary pressure in the world’s

second biggest economy. China’s consumer-price index climbed

1.3% in October from a year earlier, slower than the 1.6% year-on-

year rise in September and compared with the 1.4% gain expected

by economists. At the same time the producer price index dropped

5.9% in the reported month from a year earlier. Lower price

pressure gives the People Bank of China leeway to continue easing

its monetary policy, which has so far failed to underpin a pickup in

growth despite six interest rate cuts and other measures to spur

lending and borrowing. More stimulus is required to ensure the

Chinese government growth target of no less than 6.5% in the next

five years, to help the economy focus on a consumption-led growth

model.

Top officials signalled that they would not tolerate a sharp

slowdown. President Xi Jinping said last week that average annual

growth should be no less than 6.5% in the next five years to reach

the nation's goal of doubling 2010 GDP and per capita income by

2020.

09.11 open price 09.11 close price % change

AUD/NZD 1.0798 1.0786 -0.11%

EUR/NZD 1.645 1.6458 +0.05%

GBP/NZD 2.3087 2.3139 +0.23%

NZD/USD 0.6526 0.6533 +0.11%

Tuesday, November 10, 2015 08:30 GMT

Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com

Major events of the previous week (November 2-6) )

Day/Time (GMT) Flag Currency Event Period Actual Forecast Previous

MONDAY

12:30 am AUD Building Approvals MoM September 2.2% 1.8% -9.5%

1:45 am CNY Caixin Manufacturing PMI October 48.3 47.7 47.2

9:30 am GBP Manufacturing PMI October 55.5 51.3 51.5

3:00 pm USD ISM Manufacturing PMI October 50.1 50.0 50.2

TUESDAY

3:30am AUD RBA Rate Statement

9:30 am GBP Construction PMI October 58.8 58.9 59.9

7:00 pm EUR ECB President Draghi Speaks

9:45 pm NZD Unemployment Rate Quarter 3 6.0% 6.0% 5.9%

WEDNESDAY

12:30am AUD Retail Sales MoM September 0.4% 0.4% 0.4%

9:30 am GBP Services PMI October 54.9 54.6 53.3

1:15 pm USD ADP Non-Farm Employment Change October 182K 183K 190K

THURSDAY

12:00 pm GBP BOE Inflation Report

12:30 pm USD Unemployment Claims October 31 276K 263K 260K

FRIDAY

12:30 am AUD RBA Monetary Policy Statement

1:30 pm USD Unemployment Rate October 5.0% 5.0% 5.1%

12:30 pm CAD Unemployment Rate October 7.0% 7.1% 7.1%

Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com

Chart SMA (55) – Simple Moving Average of 55 periods SMA (200) – Simple Moving Average of 200 periods Forecasts

EXPLANATIONS

Third Quartile – separates 25% of the highest forecasts

Second Quartile – the median price based on the projections of the industry

First Quartile – separates 25% of the lowest forecasts

Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com

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Technical Indicator

The trade surplus in Switzerland contracted in August, as the strength of the Swiss Franc hit demand in the European Union and China. According

to the FSO, Switzerland's trade balance amounted to 2.87 billion francs in the August, compared with a downwardly revised 3.58 billion francs

registered in the previous month. However, the actual figure beat the market expectation of 2.75 billion francs surplus. The latest report also

showed that real exports slipped by 2.4% on a monthly basis in the reported period after decreasing a revised 2.3% in July. Year-on-year, exports

decreased by real 2.1% in August but slower than the 4.9% decline seen in July. Similarly, real imports declined 4% versus a 1.8% drop a month

ago. On an annual basis, imports slid 7.4%, reversing July's 1.7% increase.

Meanwhile, the Swiss foreign trade remains under the pressure due to the strengthening Franc and the recent SNB's monetary changes. The

appreciation in the Swiss Franc from mid-January has been reflected in sharp declines in both export and import prices. In the meantime, the SNB

kept its benchmark rate on hold last week at a record low of -0.75% and revised its inflation expectations downward, as a result of the drop in oil

prices.