Intraday Market Thoughts Archives

Decent US Sep jobs report (103K vs exp 60K & upward Aug revision to 57K from 0K) powers up risk appetite, EURUSD and every asset against USD & JPY. All of our targets were hit in EURUSD, EURJPY and USDCAD. Silver was stopped out, gold is in progress. We have FOURTEEN trades up. USDCAD, ES, DJA, CLick here for direct access: http://www.ashraflaidi.com/products/sub01/access/?a=516 Nonsubscribers click here: http://www.ashraflaidi.com/products/sub01/

GBP is the day's strongest performing currency followed by Aussie, NOK & CAD in the G10 universe. Our latest Premium Intermarket Insights are up. Click on the link for direct access http://www.ashraflaidi.com/products/sub01/access/?a=514 NONsusbcribers can obtain a trial here: http://www.ashraflaidi.com/products/sub01/

UK Input and Output PPI rose; German industrial production fell; Canadian labor market data robust. Market turns to NFP. Ashraf's Pre-NFP Premium Trades will be released at approx 7:45 EST (11:45 GMT, 12:45 BST)

Yesterday's risk rally fueled by ECB announcement of multiple fixed rate, full allotment liquidity facilities and new round of QE by BOE continued throughout Asia but started to stall during the London session. USD is generally little changed since London open.

GBP continues to be the relative strength winner despite the new round of QE and Moody's cut of 12 UK financial institutions. Various inflation measures confirm persisting price pressure: UK PPI input prices rose 1.7% in September from -1.8% a month earlier which translates to a 17.5% increase from 16.2% on annual basis. Monthly Producer output prices increased 3.8% and annual prices soared 6.3% which is the highest since 10/2008. BOE has been expecting that inflation will start to decline but prices relentlessly continue on their upward trajectory.

German industrial production fell -1.0% in August after a solid 3.9% increase in July. Even though the print was above expectations of -1.5%, going forward industrial production is expected to decline further as a consequence of fewer orders.

Canadian Net Change in employment in September printed robust 60.9K from previous -5.5K and better than expected 15.2K. The unemployment rate declined to 7.1% from 7.3%. Unless the NFP disappoints and equity markets sell off, solid data combined with substantial oil gains should keep the loonie underpinned.

The eagerly anticipated September NPF figure is due at 8:30 am ET and is seen at 55K from previous unchanged reading. The unemployment rate is expected unchanged at 9.1%.

Wednesday's ADP report showed not only better than expected result (91K vs. 76K exp.) but also a slight improvement compared to August (89K) so the possibility of a significant disappointment is lower to a certain degree. Nevertheless, even a print that is in line with expectations will not change the bleak outlook for the US economy.

Average Hourly earnings are seen slightly higher at 0.2% in September compared to -0.1% in August. The last data release will come at 10:00 am ET. August wholesale inventories are seen lower at 0.6% from previous 0.8%

UK producer prices set to push higher in September, after QE2 surprise, German industrial production set to plunge, Bank of Japan keeps monetary policy unchanged, US employment report. 7 Premium trades hit all targets, 1 stopped out, & 3 are points away from completing all targets. Today's Premium piece will be released ahead of US jobs report.

Yesterdays surprise move by the Bank of England to inject an extra 75bn into the UK economy over the next four months could prove highly controversial, especially if inflation continues to remain high. Today's release of producer input prices are expected to rise again from 16% to 17%, while output prices are expected to push higher as well from 3.6% to 3.7%.

Mervyn King's assertion that the global economy is facing the worst financial crisis seen since the 1930s was behind the banks decision to act now, however it is hard to see what difference it will make unless governments not only here but also in Europe start doing the jobs entrusted to them.

The MPCs assertion that inflation will eventually slip back in 2012 is cold comfort when prices are set to push up towards 5% next week. Given the banks track record on inflation in the past 3 years that is by no means a given.

Moody's downgraded 12 UK banks; 1-notch downgrade of Lloyds TSB Bank plc (to A1 from Aa3), Santander UK plc (to A1 from Aa3), Co-Operative Bank plc (to A3 from A2), a two-notch downgrade of RBS plc (to A2 from Aa3) and Nationwide Building Society (to A2 from Aa3); and downgrades of one to five notches of 7 smaller building societies. The ratings of Clydesdale Bank were confirmed at A2 (negative outlook).

7 of Thursday's 10 PREMIUM Intermarket Insights hot all targets, 3 in progress & 1 stopped out. Find out here: http://ashraflaidi.com/products/sub01/access/?a=513 To become a member, join here: http://ashraflaidi.com/products/sub01/

Later on German industrial production foe August is set to drop sharply by 2%, following in the wake of yesterdays factory orders data which also fell back 1.4%. It makes all the more puzzling the reluctance of the ECB to cut rates yesterday, though the lack of any comment about monetary policy being accommodative could well open the door to a cut next month.

The additional liquidity measures by the ECB have eased the pressure on the banking sector and could well buy time for European governments to cobble together a recapitalisation plan as Greece heads for default.

The Bank of Japan as expected kept interest rates unchanged in a range of 0% to 0.1%, but they also extended a post earthquake lending program by six months. The board said that the Japanese economy was continuing to recover though it did express its concern over the slowdown in global economic growth.

In the US the big event of the day is the September employment report which, it is hoped will be an improvement on Augusts disappointing number of zero jobs added.

Signs that the US may skirt recession continued to fuel optimism as risk trades gained for a third day. AUD, NZD and EUR were the top performers while USD and GBP lagged. The Bank of Japan rate decision is the highlight of the upcoming session. Thursday's Premium Trades Intermarket Insights had 9 trades, 2 of which hit all targets (EURUSD & US crude oil), while the remaining 7 have remain in progress.

Better-than-expected data on jobless claims and position squaring ahead of Fridays non-farm payrolls report helped risk assets. In the US, initial jobless claims rose to 401K but this was less than the 410K consensus. The S&P 500 gained 1.8% to 1164.Oil built on strong gains a day ago, adding 3.6% to 85.52.

The current was strong enough to boost GBP back to nearly unchanged against the dollar after deep earlier declines after the BOE announced a fresh round of asset purchases. The euro climbed after the ECB left rates unchanged but announced it will resume covered bond purchases.

7 of Thursday's 9 PREMIUM Intermarket Insights trades remain in progress. Access them directly here: http://ashraflaidi.com/products/sub01/access/?a=513 To become a member, join here: http://ashraflaidi.com/products/sub01/

Ashraf's TWITTER FOLLOWERS @alaidi and @alaidiPremiumFX saw his EURUSD prediction for 1.3360-1.3400 hit the target when the pair was at 1.3260s.

A risk in the day ahead comes with the Senate voting on a bill aimed to punish China for manipulating the yuan. Although the penalties will initially be modest at around $6m per year, this type of bickering could always escalate and a trade war between the US and China would certainly end in a drastic recession. If the Senate votes to adopt the bill (as expected) the legislation would then pass to the House.

Although markets are awash in optimism at the moment, nothing much has changed. Europe remains in a crisis and the threats to growth in developing and developed nations are rising. Non-farm payrolls are expected at +55K but any reading of less than +200K does almost nothing to alter the picture of an economy thats failing to move forward.

Asia-Pacific Preview

The BOJ decision has no set time but is generally delivered around midnight GMT. Policymakers are considering further measures to expand lending for reconstruction projects in the area around Fukushima but nothing substantial for the broader economy. Nikkei reported earlier this week that the BOJ is expected to forecast inflation of below 1% for the year beginning in April 2013. Although far off, this gives them leeway to loosen monetary policy further through asset purchases or other, more creative measures. The risks to the yen are to the downside on fresh asset purchases or via jawboning.

The only other indicator on the calendar is the AiG performance of construction index for Australia at 2230 GMT. Its expected to slip to 30.0 from 32.1. It may have a small effect on AUD but it will not be lasting.

Trichet's masterful policy move; giving the Germans their rate hold (no change)-- & to the rest of the Eurozone an unprecedented combination of liquidity injections by creating one 12-month liquidity facility and one 13-month liquidity facility, as well as a 40 bln covered bond purchases program. This, not to mention, the prevailing securities markets program, currently at 152.5 billion. OUR TWITTER FOLLOWERS @alaidi and @alaidiPremiumFX saw our prediction for 1.3360-1.3400 call when the pair was at 1.3260s. See our LATEST PREMIUM CALLS here: http://ashraflaidi.com/products/sub01/access/?a=513 To become a member, join here: http://ashraflaidi.com/products/sub01/

BoE held rates steady and increased the Asset Purchase Facility to 275 bln from 200 bln; Swiss CPI rose; German Factory Orders fell; Market turns to Trichet's press conference, US jobless claims and Canadian Ivey PMI.

The risk rally that started yesterday on the back of bank recapitalization talks continues today underpinned by the president of the European Commission Barroso who said that coordinated action by member states to recapitalize banks is being proposed. EURUSD gained almost 60 pips and reached to 1.3398.

German factory orders fell -1.4% in August from -2.6% in July. EURUSD lost about 20 points on the news but it is likely to stay within a narrow range as traders' attention will shift to ECB rate announcement at 7:45 am ET and the press conference at 8:30 am ET. The ECB is generally expected to hold rates steady and announce additional liquidity facilities. Last Friday's Eurozone CPI that soared to 3.0% from 2.5% makes the rate decision difficult to predict because fundamentals have shown a significant deterioration over the past few months.

Ashraf is predicting a 25bp cut and reintroduction of 1 year liquidity measures.

BoE held rates steady at 0.5% as expected and announced new QE in form of an increase of the Asset Purchase Facility to GBP 275 bln from GBP 200 bln. Asset purchases will resume next week and will take four months to complete. GBPUSD dropped 200+ points on the announcement.

Swiss CPI jumped 0.3% in September from -0.3% in August. Annual CPI rose to 0.5% from 0.2%. CHF traders were more excited about a comment by Swiss State Secretariat for Economic Affairs that CHF should be capped at 1.30 or even 1.40 against the EUR. EURCHF jumped from 1.2330 to 1.2425 on the news but has since fallen back to pre-statement level.

The New York session will start with ECB press conference at 8:30 am ET. Traders will be watching for any hints that the ECB could cut rates during its November meeting. Jobless claims that are due at the same time are expected at 411K from previous 391K.

At 10:00 am EST Canadian Ivey PMI for September is due and is seen higher at 58.2 from 57.6.

Bank of England expected to hold, ECB seen following suit but may add liquidity measures, Swiss inflation expected to turn positive, US weekly jobless claims. US Crude longs hit targets, joining, USDCAD, gold and ES (S&P500 futures). See below for trades which are in progress.

Yesterdays disappointing downward revision to UK Q2 GDP to 0.1% has certainly strengthened the hand of habitual dove and MPC member Adam Posen's call for a further round of asset purchases.

Against that there is the fact that September services PMI confounded expectations, coming in above expectations at 52.9, as well as coming in above its European counterparts, and this will in all likelihood, keep the Bank on the sidelines for now.

Expectations amongst some economists that the Bank will alter the balance of vote is likely to be wide off the mark, especially in view of the arithmetic on the committee. Posen would need to win over at least four other members of the committee to his way of thinking, and that doesnt seem likely given recent data, though the publication of the minutes in two weeks time could well be illuminating.

Later on in the day Jean Claude Trichet will likely hold rates unchanged but could decide to extend the liquidity measures it has recently introduced and extend the term to around 12 months.

It will be the tone of his press conference that markets need to look for clues, which is where he may well prepare the ground for a rate cut in November. The subtext of what he says will be just as important and it will certainly be interesting to see if he maintains that monetary policy remains accommodative. ASHRAF WILL POST A NEW PREMIUM INTERMARKET INSIGHTS AHEAD of the 11:45 GMT decision.

US Crude longs hit targets, joining the PREMIUM TRADES in USDCAD, gold and ES (S&P500 futures). See EURUSD, EURGBP and DJA (Dow-30 futures) as they remain in progress, http://ashraflaidi.com/products/sub01/access/?a=512 Free Trial here : http://ashraflaidi.com/products/sub01/access/

Swiss inflation is expected to come under scrutiny again today after last months sharply deflationary fall of 0.3% caused by the rise in the Swiss franc. The expectation is that prices in September will rise slightly by 0.1%, however the strong franc continues to be an issue with chatter this week continuing to plague the market about the SNB raising the peg further.

Yesterdays better than expected ADP numbers have raised expectations that the job market may be starting to pick up again, certainly last weeks weekly jobless claims were a pleasant surprise, dropping below 400k to 391k, however this weeks are likely to pick back up again with expectations of a rise back to 410k.

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Ashraf on CNBC Arabia discusses the latest bounce in the euro, the technical parameters of EURUSD, AUDUSD, USDCAD and the latest from the Fed & the ECB

http://www.youtube.com/cnbcarabiatv#p/u/2/jXapjkWV-XU

The risk rebound continued Wednesday on better-than-expected US economic data. The commodity currencies were top performers while CHF and GBP lagged. There are no scheduled economic data releases in Asia-Pacific trading as the market quiets ahead of the ECB and BOE decisions.

The September ISM non-manufacturing index slipped to 53.0 from 53.3 in August but it was better than the 52.7 consensus. One source of worry was a slide in the employment component to 48.7 from 51.6. The ADP private sector employment index painted a different picture as it showed private payrolls up 91K in September versus the +75K consensus.

European bank recapitalization remains the dominant theme. Germanys Merkel introduced the idea of using the EFSF to recapitalize banks while the IMFs Borges said the IMF to buy bonds in Spain and Italy.

EUR/USD trading was choppy for most of the session but made a decisive move higher late in the US session, matching the weekly high at 1.3384 before edging lower at the close. The S&P 500 gained 1.8% to close at 1144.

Todays premium trades have hit all targets in USDCAD, gold and ES (S&P500 futures). EURGBP and DJA (Dow-30 futures) nearing completion of all targets, while the 2nd trade in EURUSD was stopped out by 3 pips. Direct access to todays Premium trades is here: http://ashraflaidi.com/products/sub01/access/?a=512 Trial here: http://ashraflaidi.com/products/sub01/

The largest moves in markets came in commodities and that spilled over into CAD, AUD and NZD. Oil gained 5.4% after US supplies declined for the 10th consecutive week and that drove a 150 pip fall in USD/CAD.

The pound underperformed ahead of the BOE decision on fear that the central bank could restart asset purchases. At the same time, euro traders are confused heading into Trichets final decision as President. The market has dramatically pared back expectations of easing since last week with current pricing down to a 60% chance of a 25 bps cut.

In the lead-up to the decisions, the fx market is unlikely to experience large swings.

Since the beginning of H2 (2nd half of the year), the best performing currencies against GOLD have been JPY, followed by NZD, EUR, CAD, SEK, AUD and BRL. Todays premium trades (released at 11:40 GMT) have hit all targets in USDCAD, gold and ES (S&P500 futures), with US crude oil. EURGBP and DJA (Dow-30 futures) all nearing the completion of all targets, while the 2nd trade in EURUSD was stopped out by 3 pips. We continue to view this as a temporary countermove ahead of Fridays jobs report, which could alter the game. Until then, more gains seen ahead. Direct access to todays Premium trades is here: http://ashraflaidi.com/products/sub01/access/?a=512 Trial here: http://ashraflaidi.com/products/sub01/

Ashraf

German and Eurozone Services PMI revised lower; Eurozone Retail Sales disappoint; UK Services PMI robust but GDP revised lower. Market turns to ADP and ISM Non-manufacturing. Latest Premium trades are up, including the return of USDCAD.

USD consolidates from yesterday's losses throughout the Asian and London sessions with mild downside bias. Overall sentiment has improved as European equity indices are in the positive territory.

Economic data from the Eurozone continues to disappoint as evidenced by final services PMI that was revised lower to 48.8 from the initial estimate of 49.1. The decline has been substantial considering that in August PMI printed 51.5. German services PMI was also revised lower and in this case it was to 49.7 from 50.3.This print is the lowest since 7/2009.

LATEST PREMIUM TRADES are now ready, with the addition of USDCAD. Yesterdays longs in gold ES (S&P500 futures NOT cash), US crude oil and EURGBP remain in progress. DIRECT ACCESS TO todays edition is here: http://ashraflaidi.com/products/sub01/access/?a=512 NON-subscribers click here: http://ashraflaidi.com/products/sub01/

Eurozone August Retail sales do not provide a reason for optimism either. Monthly figure declined -0.3% and annual retail sales fell -1.0% from previous -0.4%. A decline was expected to a certain degree as German retail sales plunged -2.9% m/m last Friday.

GBPUSD gained half a cent to 1.5480s after September services PMI printed robust 52.9 (50.5 exp.) from previous 51.1. However, better than expected PMI is negated by UK GDP that was revised lower to 0.1% in Q2 from the initial estimate of 0.2%. Annual GDP was revised to 0.6% from 0.7%.

Series of negative UK data was interrupted this week by solid manufacturing PMI and services PMI which increases the chance that in regards to QE, the MPC will choose the "wait and see" approach tomorrow.

The New York session starts at 8:15 am ET with September ADP report that is seen lower at 76K from 91K in August. ADP has been declining gradually over the past seven months.

Later at 10:00 am ET ISM Non-manufacturing is due and is expected at 53 in September from 53.3 in August.

Crude oil inventories are seen lower at 1M barrels from 1.9M barrels last week. WTI has bounced from the 77 level and low print could provide the impetus for additional buying which could also support the CAD.

Patrik Button

Europe remains in focus as Italy finally downgraded by Moodys, UK Services PMI could determine QE tomorrow, UK Q2 growth set to be confirmed at 0.2%, Eurozone retail sales set to slip back, Australian retail sales jump in August, US ADP payrolls due later. German Sep services PMI contracted to 49.7.

Eurozone debt remains front and centre. Last nights reports that European finance ministers are considering a co-ordinated response to the problems in the European banking sector with respect to a recapitalisation plan is a welcome acknowledgement of the problems, if it turns out to be true. Even so the nervousness within the markets was amply demonstrated within minutes of that announcement by ratings agency Moodys who finally swung the axe on Italys credit rating, cutting it to A2 with a negative outlook , citing increased risk in long term funding as well as increased downside risks to economic growth and to fiscal consolidation. This now leaves Fitch as the last ratings agency not to have taken the clippers to Italy's credit rating after S&P got the ball rolling last month.

On the question of ratings downgrades the problems with respect to Dexia and the creation of a bad bank for about 180bn of bad loans could invite renewed scrutiny of Frances triple A rating given that both France and Belgium have pledged to stand behind the beleaguered lender.

German final Sep PMI services at 49.7, lowest since July 2009 from 50.3 flash and 51.1 in Aug.

In the UK the last of the PMI data is due out with services PMI for September expected to show further weakness from August's 51.1, slipping back to 50.6. Given that services makes up the majority of UK GDP a poor number here, below 50, could well prompt increased speculation about the likelihood of further QE at tomorrows Bank of England rate setting meeting. Yesterdays construction PMI data while disappointing still managed to stay in expansion territory at 50.1, but construction only makes up around 6% of total UK PMI, so is not as important. At the same time UK Q2 GDP is expected to be reaffirmed at 0.2% with the annualised rate staying at 0.7%.

Ashraf's latest Premium trades were stopped out for EURUSD and EURJPY, while the rest remain in progress. http://ashraflaidi.com/products/sub01/access/?a=511

Also in Europe today the latest euro zone retail sales data for August is due out with expectations of a decline of 0.3%, though this could well be optimistic given last Fridays appalling German retail sales numbers which plunged 2.9%, well below expectations of -0.4%. European services PMI data for September is also due for release and this is expected to remain in contraction territory at 49.1. European services PMI for September is also expected to be confirmed in contraction territory at 49.1.

In Australia retail sales for August rose 0.6%, well above expectations of 0.2%, household goods and restaurant sales leading the rise, helping the Australian dollar pull back some ground after its recent losses.

Just before the US open the latest ADP employment report for September is due to be released and markets will be hoping for the numbers to at least come in line with expectations.

A report of a plan to recapitalize European banks sparked a sudden reversal in risk appetite in the final hour of US trading. This has offset any downside resulting from the after-hour Moodys downgrade of Italy. Ashraf has added a new set of PREMIUM TRADES. EUR and NZD were the top performers while JPY and GBP lagged. Australian retail sales are a highlight of the Asia-Pacific session.

A 4.2% rally in the S&P 500 in the final hour of trading reversed the risk trade as the index closed up 2.25% to 1124. The gains came after the FT reported that EU leaders have agreed additional measures are needed to recapitalize banks. The details are under discussion but finance ministers are considering coordinated action, the report said.

The snapback is no surprise after crushing negative sentiment gripped markets over the past week. Most currencies gained at least 100 pips against USD and JPY as positions were quickly covered. The reversal still has room to run as several pairs rebound from 500-600 pip declines in the past week.

Latest Premium Trades (2nd Update of the Day) include 3 trades in EURUSD, new trade in US crude, gold and silver. Our earlier trades were stopped out in EURUSD, EURJPY and metals. http://bit.ly/psjvnE

Risks are evident, however, as was displayed by the late-day Italian sovereign downgrade. Moodys lowered Italy by three notches to A2 with a negative outlook, immediately clipping 40 pips from EU.

Aside from the risk reversal, the yen fell on signs the Japanese government is getting more aggressive and creative with efforts to weaken the currency. Nikkei reported that the three largest banks will split $43 billion to fund overseas acquisitions. Japan is also considering buying more EFSF bonds, Nikkei said.

Asia-Pacific Preview

AUD initially fell more than 150 pips following the RBA decision but has completely erased those losses. The central bank was not as dovish as expected and did not hint at a rate cut at the upcoming meeting. Although officials are focused on external conditions, the domestic economy offers some risks, primarily to the upside. At 0030 GMT, the retail sales report for September will be released. The RBA has noted cautious demand from households so a reading below the +0.2% consensus (but above -0.3%) would be taken in stride. On the other hand, an upside surprise should give AUD a solid, 50 pip boost.

UK Construction PMI dropped; Eurozone PPI declined. China is opposed to US Currency Bill; Japanese firms see USDJPY above 80 during the fiscal year 2011. Market will focus on speeches by J. C. Trichet and Ben Bernanke, followed by Factory Orders. LATEST PREMIUM TRADES are up, see link below.

GBPUSD continues to trade heavy after UK Construction PMI declined to 50.1 in September from 52.6 in August. Construction PMI has been declining for five months in a row and today's print is the worst since 12/2010. Today's disappointing result negates yesterday's better than expected manufacturing PMI that could be used as an argument against the possible increase in the Asset Purchase Facility.

August Eurozone PPI printed 5.9% from previous 6.1% on annual basis. Monthly PPI contracted by 0.1% from +0.5% in July. Analysts expected -0.2%.

Despite persisting JPY strength, major Japanese automakers expect the USDJPY rate to average 80.51 during the fiscal year 2011 MNI reported. Major electronics firms project 81.19 and other businesses predict 79.82. However, all three categories have lowered their previous estimate to some degree.

Ashraf's latest PREMIUM INTERMARKET INSIGHTS are now up "Euro DownCycles & Revised F'cast" Click here for direct access: http://ashraflaidi.com/products/sub01/access/?a=510 To subscribe, click here: http://ashraflaidi.com/products/sub01/

China has warned the US that it is "adamantly opposed" to the so called "Currency bill" that the US senate can begin considering after yesterday's 79 to 19 vote. This bill that could limit Chinese imports by imposing tariffs would be a measure against the artificially weak Chinese currency that contributes to widening trade deficit. Chinese officials said that the passage of the bill could lead to a trade war and that Beijing will continue to gradually strengthen the flexibility of the CNY exchange rate.

Market volatility could increase when ECB president J. C. Trichet testifies at 9:00 am ET before the European Parliament's Economic Committee. At the same time,

FED governor and FOMC member Sarah Bloom Raskin delivers a speech in Maryland. Audience questions are expected.

The New York session will also bring August Factory orders at 10:00 am ET that are seen unchanged from +2.4% print in July. Traders are likely to focus on FED chairman Ben Bernanke who at the same time testifies before the Joint Economic Committee in Washington DC.

Greece decision delayed until November, UK construction PMI expected to slip back, RBA holds rates and shifts to a dovish outlook driving down Aussie below 0.95, Euro zone PPI expected to fall, Bernanke to testify to JEC

A decision on the next tranche of aid for Greece has been put back until early November after Greek officials told EU finance ministers they didnt need the money until then. The troika report has also been delayed until after the 13th October and as such the Eurogroup meeting scheduled for that weekend has been cancelled. Eurogroup leader Junckers assured the markets that Greece would continue to be supported by EU leaders and no one had suggested that Greece restructure its debt burden. Junckers did hint, however that the issue of a revision of the current 21% private sector involvement, or debt exchange, could well be under review.

UK growth concerns could remain in focus this morning after yesterdays surprise rebound in September manufacturing PMI from 49.4 to 51.1, back into expansion territory for the first time in 3 months.

Todays release of construction PMI is not expected to be as positive, but it is still expected to remain in positive territory, though sliding back from 52.6 in August to 51.6 in September.

If todays PMI doesnt deteriorate significantly and tomorrows services number is similarly positive, the expectation is such that the Bank of England could well maintain its current wait and see approach at this weeks rate setting meeting, given that it may need to act if the situation in Europe continues to deteriorate. At the same time as this data is released MPC member David Miles is due to speak in Oxford, and given his recent comments that the case for QE has become finely balanced markets will be looking for any clues with respect to a change in tone in light of this weeks economic data.

As expected the Reserve Bank of Australia left interest rates unchanged at 4.75% in the wake of global uncertainty and concerns about the sovereign debt situation in Europe. in a shift from previous meetings the bank admitted that the inflation outlook had shifted and that the bank could well move interest rates lower if the need arose. In other data released earlier Australia's trade surplus increased in August to A$3.1bn from A$1.8bn in July.

Last nights decision by the US senate to push through a bill aimed at imposing tariffs on Chinese goods due to its fixed exchange rate policy, could also affect the Australian dollar if it gets ratified in the coming weeks. China has warned of a response if the bill passes, warning that it could weaken attempts to promote global economic recovery.

All six of Ashrafs trades issued today hit all targets (two remain in progress). In addition, all five of Ashrafs trades on Friday were successful. Direct Access to today's trades here:

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Pricing pressures in Europe have eased somewhat in recent weeks and todays release of Euro zone PPI data for August is no exception with month on month prices expected to fall 0.2%, and pulling the year in year rate down to 5.8%.

Later this afternoon Fed Chairman Ben Bernanke is expected to testify to the Joint Economic Committee.

Even the euro is rallying against the Aussie as markets expect the RBA to make a dovish shift in today's meeting. (see more below). Worries about the crisis in Europe and a slowdown in the BRIC countries intensified Monday, breaking ranges in multiple risk trades. JPY was the best performer while EUR and GBP lagged. The RBA decision is the highlight of the Asia-Pacific session. 7 of Ashraf's Premium trades hit all their targets, gold & silver remain in progress, Wednesday's gold trade was stopped out. Aussie is the biggest loser ahead of RBA.

The only major data point of the US session was the September ISM and it surprised to the upside at 51.6 compared to the 50.6 expected but it didnt matter for the market. A major focus was Franco-Belgian bank Dexia, which has already been bailed out once and may require government intervention again. The board called an emergency meeting Monday amidst intense funding pressure.

Continued delays in releasing the upcoming tranche of aid to Greece are forcing banks and funds to hedge for the worst. Juncker said todays Eurogroup meeting would not yield an answer about funds. We strongly believe the bailout will continue but delays have undermined confidence. We expect a risk rally when the announcement finally comes but, ultimately, this will be a selling opportunity.

Worries about the Chinese property market hit Hong Kong markets hard to open the week and talk about a slowdown spread to the other BRIC nations as well. Ashraf has continually this theme as the chief threat to commodity currencies and risk appetite. Adding further fuel to the worries was a 79-19 vote in the US Senate late Monday to proceed with the bill aimed to punish China for FX interference.

All six of Ashrafs trades issued today hit all targets (two remain in progress). In addition, all five of Ashrafs trades on Friday were successful. Direct Access to today's trades here:

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The S&P 500 closed at the lowest levels of the year, falling 2.9% to 1099. An open or close tomorrow would be further confirmation of a breakout from the recent range and would target a fall to at least 1010. EUR, AUD, CAD and NZD all closed at fresh cycle lows as well.

RBA Preview

The RBA is highly unlikely to lower the 4.75% bank rate at 0330 GMT but will ratchet down growth and inflation expectations, giving it room to lower rates at upcoming meetings. Since the Sept. 6 meeting, Q2 inflation was revised sharply downward (to 0.5% from 0.9%) as the ABS changed how it calculates CPI. This, undeniable signs of external turmoil and declines in commodity prices will force a dovish stance. In the 2008 prior to the first of a cycle of rate cuts, the RBA used plain language to signal the change, saying with demand slowing, the Boards view is that scope to move towards a less restrictive stance of monetary policy in the period ahead is increasing. AUD/USD fell 300 pips over the remainder of that week.

Aussie is ignoring this morning's better data. Australia Aug trade balance rose to AUD 3.1bln from AUD 1.83bln, Australia Aug building permits rose 11.4% from 1.8%

ISM manufacturing did not fall below 50 as we had predicted, but our Premium short in EURUSD (1 out of 2), EURJPY(2/2) and ES hit all their targets. The other EURUSD short was not filled, while USDJPY, gold, silver and Dow-futures trades remain in progress. USDJPY continues to respect the pattern pointed out on Friday. We do not see any intervention from the BoJ but even if there were any, it would prove a selling opportunity as was the case in the August, March and September of last year. GOLD has been unusually range-bound over the past 5 days and is set for fresh technical gains. Direct Access to today's trades is here:

http://ashraflaidi.com/products/sub01/access/?a=509 Get a Free 1-week Trial here: http://ashraflaidi.com/products/sub01/

Ashraf

Fresh Premium Intermarket Insights are up ahead of the upcoming Manufacturing ISM release . New trades in EURUSD, EURJPY, S&P500 futures, Dow-30 futures, gold, silver. Direct Access here:

http://ashraflaidi.com/products/sub01/access/?a=509 Get a Free 1-week Trial here: http://ashraflaidi.com/products/sub01/

Ashraf

Swiss retail sales and PMI disappoint; Eurozone PMI revised higher but still confirm sector contraction; UK PMI better than expected. Market turns to US ISM manufacturing due at 10:00 am. Ashraf's Premium Insights due in 60 mins.

Throughout the London session, USD was consolidating gains it made during Asian trading. As risk aversion lingers, JPY continues to be the only major currency that outperforms the greenback. Gold and silver push higher and have recovered a part of last week's losses. Gold trades around 1660 and silver around 31.

Data from Switzerland disappointed again when annualized Swiss Retail sales dropped -1.9% in August from +2.9% in July and SVME PMI fell to 48.2 from 51.7. Manufacturing sector contracted for the first time in more than two years.

Final Eurozone Manufacturing PMI slipped to 48.5 from 49 in August, the worst since 8/2009 but still better than the initial estimate of 48.4. German final Manufacturing PMI printed 50.3 from 50.9 in August and also came out ahead of the flash estimate. Despite these revisions, m/m readings show declining figures and point to further weakness.

September UK Manufacturing PMI beat expectations at 51.1, from Augusts upwardly revised 49.4. Immediately after the release, GBP lost about 50 points but it recovered them within seconds suggesting a "fat finger" error. Today's above 50 reading, which implies a sector expansion, may indicate that calls for an increase in the Asset Purchase Facility may be unanswered on Thursday. At the same time, New Export Orders sub index fell to 26 months low confirming economic woes.

Today's meeting of Eurozone finance ministers will deal with the issue of leveraging ESFS while the next meeting scheduled at the end of October should determine whether Greece will receive the next part of the aid. News that EFSF will be increased/leveraged substantially may help to improve risk sentiment and temporarily lift the Euro.

The US session will bring ISM Manufacturing for September that is seen slightly lower at 50.5 from previous 50.6 and ISM Prices Paid index that is expected at 54 from 55.5. Construction spending in August should come at -0.2% from -1.3%. All data releases are due at 10:00 am ET.

In his 15-mins CNBC interview, Ashraf reiterated his $1.29 forecast initially made 4 weeks ago, saying he was looking beyond the EFSF vote, focusing on the inadequacy of the facility. He also talks about EU/UX interest rate cycles, which was charted to Premium subscribers back in early August. http://www.youtube.com/watch?v=wSodzBHN7Y4

Ecofin meeting and Greece. German and Euro zone manufacturing PMIs set to show weakness, UK Manufacturing PMI set to slide further, Japanese Tankan survey set to show improvement, US manufacturing ISM. Ashraf will be on AlArabiya at 8:30 GMT (12:30 Dubai Time). Premium Insights due later in the day.

As we head in to the final quarter of 2011, Greece remains the factor that has financial markets most concerned, on reports that the country looks set to miss its 2011 and 2012 budget targets by quite some way. The new targets agreed on July 21st were for a 7.6% deficit to GDP, and this looks likely it will actually be 8.5% of GDP, while 2012 will miss by less.

Todays Ecofin meeting is likely to be a fractious affair given Slovakias resistance to the increase in the EFSF powers, while finance ministers will be hoping that the latest troika report doesnt bring bad news.

The final September manufacturing PMI numbers for Germany and the Euro zone for September are expected to be confirmed today with confirmation that Europes largest economy stagnated with a reading of 50, while the broader euro zone economy is expected to be confirmed at a 48.4 contraction. These figures increase concerns over Germanys ability to be able to even consider increasing its contingent liabilities with respect to the rest of Europe as pressure increases for it to make more money available to help save the euro.

In the UK a key week for the pound kicks off with the latest manufacturing PMI data for September with this particular gauge the only UK PMI measure in contraction territory the previous month. In August the measure came in at 49, and in September number is expected to contract further to 48.5. Another weak number is likely too increase the calls for further asset purchases ahead of this weeks Bank of England rate setting meeting. A number of recent public statements from policymakers have indicated they may be persuaded to back calls for further stimulus.

This mornings latest Japanese Tankan survey for Q3 continues to show a slow pick up in the after effects of Q1s earthquake with the large manufacturers index improving from the previous -9 reading, coming in at 2, as industrial activity and output continues to recover slowly. The manufacturers outlook for Q3 also showed a slight improvement rising from 2 to 4.

Traders dumped risk assets at quarter end despite better-than-expected US data. The euro was the worst performer, followed by CAD. The leaders were USD and GBP. Fridays CFTC report showed the net long USD position to a fresh high since June 2010. EURUSD closed below 1.34, nearing Ashraf's 1.29 target, first warned 6 weeks ago.

Economic data was solid as the Chicago PMI climbed to 60.4 from 56.5, beating the 56.0 expected. Similarly, the final reading on the U of Mich consumer sentiment was revised to 59.4 from 57.8.

The euro fell hard on a rumour that the haircut on Greek bonds will be hiked to 75% from 21%. High European inflation numbers also failed to douse a rumour that the ECB will cut rates by 50 basis points next week.

Hedge funds appeared to want to show minimal risk on their balance sheets as the quarter came to an end as the S&P 500 fell 2.5% to 1131..Continued worries about the eurozone compounded the worries as Germany continued to quash hopes of an expanded EFSF. Minimal rises in US income and spending were also a drag.

Ashraf's Friday PREMIUM INTERMARKET INSIGHTS made 6 out of 9 (2 Gold trades & USDJPY remaining in progress.) The EURUSD prominently failed to break the trendline, long described as the required condition to reverse the downtrend. Direct access to the trades is found here: http://ashraflaidi.com/products/sub01/access/?a=508 To get a free 1-week trial, click here: http://ashraflaidi.com/products/sub01/

Monthly Charts

On the week GBP led while CAD lagged. On the month, USD and JPY were the best performers while CHF and NZD lagged.

A look at the monthly charts makes it quite apparent that the global economy is in a precarious place. After three months of largely range-bound trading, EUR/USD fell 1000 pips in September and close at the lows of the month (similar to many other pairs). A sequence of lower highs and lower lows is also evident. Any bounce in this pair should be sold.

The more than two-year rallies in the commodity currencies are likely over. We may not see continued rapid declines but, at best, they will move sideways.

Given the turmoil elsewhere, its difficult to believe the lows in US stocks wont be taken out shortly. The S&P 500 fell 7.2% on the month and 14% in the quarter.

Commitment of Traders

Fridays CFTC report pushed net USD longs further but the overall changes were relatively mild. The net euro short fell to 82K from 79K, the net sterling short to 64K from 60K and net CAD short to 21K from 5K. Most currencies remain in a net long position against USD but the positions were pared back. The net yen long slipped to 42K from 46K, NZD to 10K from 14K, CHF to 2K from 4K and AUD to 5K from 23K.