11/11/2015

Fundamental Analysis

Wednesday, November 11, 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 5.6% 5.8% 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

Wednesday, November 11, 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

“The sector contributed to growth in the third quarter and could do it again in the fourth.” - Maxime Sbaihi, an economist at Bloomberg Intelligence in London.

Wednesday, November 11, 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

French industrial output surpasses forecasts, while Italy’s industrial production rises less than expected

High

Industrial production in France, the Euro area’s second largest

economy, kept its rising tendency in September month-on-month,

the National Institute of Statistics and Economic Studies reported.

The French industrial production stepped up 0.1% on a monthly

basis, compared with 1.7% posted in August. The figure was not in

line with economists’ projections of a 0.4% decline in September.

Measured on an annual basis, industrial output advanced 1.8% in

the ninth month of the year, completely matching analysts’

expectations. In contrast to the French industrial production, the

Italian one increased at a slower-than-expected pace in September,

booking a gain just in one sector and reversing the prior month’s

decrease. Industrial output in Europe’s third largest economy

climbed up by a seasonally adjusted 0.2% month-on-month,

compared to a drop of 0.5% from a month ago, the National

Statistics Institute Istat stated. Analysts forecasted an increase of

0.6%. In yearly terms, industrial output in Italy rose 1.7% in

September, beating economists’ expectations of a 1.4% gain.

Meanwhile, in his speech, ECB governing council member and

Bundesbank President Jens Weidmann expressed his concerns about

monetary policy being too loose for a too long period of time.

10.11 open price 10.11 close price % change

EUR/USD 1.0752 1.0724 -0.26%

EUR/GBP 0.71127 0.70938 -0.27%

EUR/CHF 1.07898 1.07926 +0.03%

EUR/JPY 132.43 132.08 -0.26%

AUD

“This is a cracking result. Apart from the brief surge we saw following last May's Budget this is the highest print for the Index since January 2014" - Bill Evans, Westpac chief economist

Wednesday, November 11, 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 consumer confidence strengthens in November

High

Consumer confidence in Australia strengthened this month, as

Australians became markedly upbeat on the economic outlook,

adding to signs that further cuts in interest rates might not be

necessary. According to the latest Westpac-MI Australian consumer

sentiment report, the gauge rose 3.9% to 101.7, reaching the

highest level since May. It also showed that optimists outnumbered

pessimists for the first time in past six months. The index of 101.7

was 5.3% higher than in November last year. The improvement

came despite the recent decision by major Australian banks to raise

their mortgage rates.

Respondents were markedly sanguine about the economic outlook.

The survey’s gauge of confidence in the economy over the next five

years advanced 24.2% to the highest level since September 2013. At

the same time the measure of economic conditions over the next 12

months also surged 5.8%, following a steep gain last month.

Moreover, Australian retailers may enjoy a strong trading period

ahead, as the index of whether it was a good time to purchase a

major household item increased 4.8% in November. However, the

survey’s gauge of family finances compared to a year ago declined

2.2%, while the outlook for the next 12 months plunged 9.1%.

10.11 open price 10.11 close price % change

AUD/JPY 86.796 86.603 -0.22%

AUD/USD 0.7047 0.7032 -0.21%

EUR/AUD 1.52586 1.52528 -0.04%

GBP/AUD 2.1452 2.1503 +0.24%

NZD

“The increasingly stretched Auckland market is at risk of a damaging correction, especially if economic conditions deteriorate” - Reserve Bank of New Zealand

Wednesday, November 11, 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

Auckland’s house market, dairy prices pose risk to NZ economy

High

Low milk prices and Auckland’s soaring housing market remained

the key risks to the New Zealand’s financial system, while the lower

New Zealand Dollar is helping to cushion the nation’s economy, the

Reserve Bank of New Zealand said. The central bank reported that

risks to financial stability increased since May due to build up in

Auckland house prices relative to incomes, ongoing weakness in

global dairy prices, as well as China’s slowdown and its impact on

commodity prices. Global dairy prices plunged more than 50% from

a peak in early 2014 to mid-2015. Even though prices rebounded

around 30% between August and September, they remain well

below profitable levels for many New Zealand farmers. Governor

Graeme Wheeler has slashed interest rates three times this year as

the slump in milk prices curbs economic growth and damps inflation.

At the same time he remained concerned that lower borrowing

costs could further fuel housing demand in Auckland, where the

central bank estimates prices surged almost 27% in the year to

September.

The RBNZ on November 1 tightened lending rules for Auckland

residential property investors, requiring them to have a deposit of at

least 30% for a mortgage. Latest data suggest those measures are

starting to curb demand in Auckland.

10.11 open price 10.11 close price % change

AUD/NZD 1.0786 1.077 -0.15%

EUR/NZD 1.6458 1.6428 -0.18%

GBP/NZD 2.3139 2.3158 +0.08%

NZD/USD 0.6533 0.6529 -0.06%

CNY

“China’s economy is still in a downward trend, weighed by both domestic and international pressures” - Xia Le, economist at Banco Bilbao Vizcaya Argentaria SA

Wednesday, November 11, 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 industrial output rises below expectations; retail sales surge

High

China's industrial production and urban fixed investment continued

to slow in October, while retail sales rose, suggesting the world’s

second biggest economy shifted toward greater reliance on

consumer consumption as old growth engines faltered. Industrial

output, which measures the economy’s manufacturing, mining,

utilities and other output, increased 5.6% last month from a year

earlier, the weakest pace of growth since 2008. The reading missed

economists’ expectations for a 5.8% gain and came below

September’s 5.7% rise. Measured on a monthly basis, industrial

production climbed 0.46% in October, following a 0.38% gain a

month earlier. At the same time, urban fixed investment soared

10.2% in January to October compared to the same period a year

earlier, slowing from the 10.3% pace seen previously. Yet, the data

beat economists’ predictions for a 10.1% gain.

Good news, however, came from the nation’s retail sector, where

sales surged by 11% from a year earlier in October, marking the

fastest annual increase since December 2014. Beijing would

welcome the data, as policy makers are seeking to transition the

economy away from export and investment-driven growth to a

consumption-led model.

10.11 open price 10.11 close price % change

AUD/NZD 1.0786 1.077 -0.15%

EUR/NZD 1.6458 1.6428 -0.18%

GBP/NZD 2.3139 2.3158 +0.08%

NZD/USD 0.6533 0.6529 -0.06%

Wednesday, November 11, 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.