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International financial news

International financial news

[Summary of the main points of the Federal Reserve Chairman Powell House hearing]

In a low interest rate environment, the Fed has a smaller interest rate cut. At present, there is no “prosperity” in the US economy, there is no sign of overheating, and it is in a sustainable state. The "final judgment day" of the US federal government's fiscal deficit is far from coming. The view that "the debt problem is insignificant" is wrong. After a crisis in the repo market, it may be necessary to adjust the rules. US manufacturing declined in 2019.

[EIA report shows that as of the week of November 8, the United States removed strategic reserves of commercial crude oil inventories by 2.219 million barrels to 449 million barrels]
Refining stocks decreased by 2.477 million barrels, gasoline inventories increased by 1.861 million barrels, and crude oil inventories in the Cushing area decreased by 1.229 million barrels. Last week, US domestic crude oil production increased by 200,000 barrels to 12.8 million barrels per day.

[Federal Kaplan (with voting rights in 2020): Low inflation allows the Fed to allow the economy to run hotter without worrying about inflation out of control]
Inflation is unlikely to be out of control, but it still needs to be closely monitored, as it is a huge problem for countries with more than $20 trillion in government debt; that's why we may need to slow down debt growth when the time is good, He added that the US deficit is unsustainable.

[European central bank officials hinted at suspending more stimulus measures to support evaluation of central bank policies]

Two ECB officials have hinted that the European Central Bank is not eager to further expand monetary stimulus. They urged a more in-depth assessment of the central bank's existing strategy. French Central Bank President Francois Villeroy de Galhau said in a speech in Frankfurt on Thursday that the euro zone interest rate is unlikely to fall further sharply, but the possibility of a rate hike is lower unless the German government and other governments increase spending. Dutch central bank governor Klaas Knot believes that the European Central Bank should be more cautious when using non-conventional tools such as quantitative easing.



News and Data



PPI (MoM) (Oct)



Fed Chair Powell Testifies 



Crude Oil Inventories



BoC Gov Poloz Speaks 



CPI (YoY) (Oct)

Summary of investment bank views

Societe Generale: 10-year US Treasury yields suggest that USD/JPY will fall to 104

Societe Generale (SocGen) released a research report on Thursday, pointing out that the 10-year US Treasury yield trend suggests that the yen maintains a structurally bullish momentum, but is more inclined to short the euro against the yen. If you believe that the USD/JPY and the 10-year US bond yields remain highly correlated, this is enough to predict that the pair will fall to the 104 line. Although this is still higher than our end of the year, it is enough to support us to maintain long yen. On the other hand, Japan revised its second-quarter GDP annual rate from 1.3% to 1.8%, partially offsetting the negative impact of the third quarter's quarterly rate slowing to 0.2%.

Mitsubishi UFJ Bank: Weak employment data strengthens the Reserve Bank of Australia's loose expectations

Tokyo Mitsubishi UFJ discussed the outlook for the Australian dollar on Thursday, marking the room for further declines in the Australian dollar as the Reserve Bank of Australia is expected to loosen. Following the weaker-than-expected Australian employment in October, the Asian dollar was underperforming on the trading day. The Australian dollar fell sharply against the US dollar and broke the 0.6800 mark, reversing the previous soothing rebound in trade optimism. The recent labor market report revealed that the Australian economy had a new employment drop of 19,000 in October, brushing the lowest reading since September 2016, and the unemployment rate rose slowly to 5.3% compared to the Reserve Bank of Australia's forecast of 4.5%.

After the exchange rate could not rise above the resistance of the MA moving average of 0.6940 on the 200th, the previous soothing rebound has been exhausted. This trend is in line with our view that the Australian Federal Reserve will continue to move towards non-traditional easing while the Australian dollar maintains downside risks. At present, the RBA has little space in the traditional easing field. The Reserve Bank of Australia has cut interest rates by 75 points to 0.75% so far this year. Since then, the Australian dollar interest rate market has already priced 100% of the 25-point interest rate cut early next year after the weak data is released tonight. .

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