Forex Investment and Currency Trading

US stocks fell in the last hour of trading yesterday with the S&P finishing the day down 0.9%. While earnings so far have generally beat to the upside by a healthy margin (16% on average as of last count), the magnitude of revenue beats has been significantly lower and among firms catering to end demand, the median revenue surprise has been zero.

In the UK, yesterday’s MPC minutes revealed a less dovish tone. The MPC stressed that the effect on asset prices from the QE program has been substantial. In addition, the MPC noted that the resilience of employment in the face of a steep decline in output augers well for household spending. This has supported short UK front-ends (both outright and against Euroland).

Norges Bank is widely expected to raise rates by 25bp later this month. Some market analysts think the risks are skewed towards a 50bp hike as well as larger cumulative tightening towards year-end. With growth in Norway on the upswing and oil prices likely to go higher, it is a good time to be long NOK.

Yesterday’s release of the Fed’s Beige Book underscored that the US economy continues to recover at a modest pace. While most districts reported some improvement in the residential real estate sector, commercial real estate continues to deteriorate. Consumer spending was generally seen as remaining flat while manufacturing showed a modest improvement.

Overnight, China released 3Q GDP and September activity and CPI data. On the whole, the data was quite strong, and reaffirmed the view that China’s economy continues to grow at a healthy pace.

In addition, Sweden’s central bank board meets today. Market expects the Board will keep rates at 0.25%. It will be interesting to see whether the Board provides another 12-month fixed rate auction. Also keep an eye on South Africa’s monetary policy meeting (market expects rates to be left on hold at 7%).