Financial market research and analysis

The ECB’s monetary expansion has been contagious. Sweden’s policymakers announced that it would buy a further SEK 65bn government bonds in anticipation of even broader quantitative easing from the ECB before Christmas. The Riksbank announcement triggered a sizeable price move in the EURSEK pair with the current momentum suggesting that it is only a matter of time before the euro recovers to pushed towards the 9.45/50 band and even above.

The move has painted the European equity markets green. FTSE, DAX and CAC made a good start to the week as cheap liquidity will continue feed the market and the central banks are not ready to turn off the tap any time soon.

This tends to lead to increased speculation that that the rope around the Fed’s wrists is growing tighter.

The anxiety in the market is very much contained as chances given to a Fed rate hike today is practically nil. The Fed is expected to maintain the status quo. And frankly, even a December hike could be considered ill-timed and inappropriate given that all leading central banks, with the exception of the BoE, are stepping back to unorthodox monetary policies in a bid to spur inflation and growth.
Raising the US rates could cause an untimely USD appreciation walking into the election year and the Fed would then be the only one to blame.

EURUSD holds the ground above 1.10, USDJPY traded between 120.25/55 in Tokyo on hope of further stimulus from BoJ on Friday. PM Abe’s aide Shibayama said it wouldn’t be strange for BoJ to boost stimulus. To be honest, nothing sounds strange in this chaotic macro picture.

Japanese stocks outperformed their Chinese peers overnight. Nikkei gained 0.67% while Shanghai’s Composite dropped 1.72%. Copper and iron ore futures looked less enthusiastic and sold-off -0.72% and -1.77% respectively.

In Australia, the inflation softened in 3Q to 0.5% q/q from 0.7%. On yearly basis, Australian inflation is down to 1.5% from 1.7%. This portrait gives the RBA extra margin for loser monetary policy. AUD has been the biggest loser against the US dollar overnight, AUDUSD lost 1% on the session.