The $ bulls remained so this week. We saw them support their positions against a widening trade balance and a so-so Beige Book as they obviously were listening very closely to four Fed Govs state that they were not "comfortable" with the general state of inflation. Then came the strong retail sales report; we saw the EUR touch the 2480 area and GBP hit 8530, before some intermediary profit taking. Overall the strong sales report was initially worth around 70 pips in the EURO and around 80 pips for the GBP. We also saw the same thing happen in the market off the retail report that we saw last week from the NFP, a mis-read by the market followed by a correct reading and subsequent reaction.
The FF calender does not give the entire picture of what happened with the retail sales report. While I appreciate the effort to post an excellent calender with results, a further reading is necessary.
http://bloomberg.com/apps/news?pid=2...6Us&refer=home
"The largest decline ever in gas-station receipts pushed overall retail sales down 0.4 percent in September, the Commerce Department said in Washington. Excluding service stations, purchases climbed 0.6 percent, three times the gain in August. The University of Michigan's consumer sentiment index jumped to 92.3 in October from 85.4 the prior month".
Now next week with the PPI and CPI numbers being released, we have the potential to see some wild reactions, but how is the market likely to react to the numbers? It doesn't take an advanced economic degree to figure out that higher prices at the producer and consumer levels will cause further gains in the $, but what do you think might happen if the PPI and/or CPI come out showing either a slowing in the rate of increase, a flat response or even a decrease in prices? I'm not sure the answer is so obvious.
While the Fed's number one concern is the rate of inflation, there are 2 factors that affect it-price increases and growth increases. Take a look at what lower gas prices have done-produced a big jump in retail sales, an increase in growth. Note that the market has remained $ bullish in the face of DECREASING energy prices, due to the GROWTH in sales at the retail level.
So let's say we see some kind of decrease in the PPI and CPI. Might that not also have implications in the rate of overall growth and might not the market interpet this as $+ also? A slowing in the rate of increase or outright decrease in prices would have the effect of further spurring business and consumer confidence and spending. Consumers certainly are spending more now that energy prices have gone down.
Also important next week are further statements from the Fed, and the TIC data, but I think the most important report of the week might very well be the NAHB housing index, since Bernanke is depending on the continued slowing in the housing market to control the rate of growth in the economy.
Now for a trading tip. If you look at what happened after the NFP and Retail Sales reports, we saw the market react wrong initially then correct itself after further analysis of the numbers. How can we profit in a market like this? Well, the fact of the matter is that if you had been listening to plain old Bloomberg TV or radio, you would have had enough time to hear the numbers and listen to their analysis of what it all meant, with plenty of time to get into the market and make a nice profit. The Euro was still around 2540 2 minutes after the numbers were released before eventually dropping all the way down to 2480 or so. Bloomberg had this thing fully analyzed in less then 1 minute. I'm not saying this is going to work every time, but if you're not using this valuable free resource, you're not trading to your full advantage, especially when multiple reports are being released at the same time.
The FF calender does not give the entire picture of what happened with the retail sales report. While I appreciate the effort to post an excellent calender with results, a further reading is necessary.
http://bloomberg.com/apps/news?pid=2...6Us&refer=home
"The largest decline ever in gas-station receipts pushed overall retail sales down 0.4 percent in September, the Commerce Department said in Washington. Excluding service stations, purchases climbed 0.6 percent, three times the gain in August. The University of Michigan's consumer sentiment index jumped to 92.3 in October from 85.4 the prior month".
Now next week with the PPI and CPI numbers being released, we have the potential to see some wild reactions, but how is the market likely to react to the numbers? It doesn't take an advanced economic degree to figure out that higher prices at the producer and consumer levels will cause further gains in the $, but what do you think might happen if the PPI and/or CPI come out showing either a slowing in the rate of increase, a flat response or even a decrease in prices? I'm not sure the answer is so obvious.
While the Fed's number one concern is the rate of inflation, there are 2 factors that affect it-price increases and growth increases. Take a look at what lower gas prices have done-produced a big jump in retail sales, an increase in growth. Note that the market has remained $ bullish in the face of DECREASING energy prices, due to the GROWTH in sales at the retail level.
So let's say we see some kind of decrease in the PPI and CPI. Might that not also have implications in the rate of overall growth and might not the market interpet this as $+ also? A slowing in the rate of increase or outright decrease in prices would have the effect of further spurring business and consumer confidence and spending. Consumers certainly are spending more now that energy prices have gone down.
Also important next week are further statements from the Fed, and the TIC data, but I think the most important report of the week might very well be the NAHB housing index, since Bernanke is depending on the continued slowing in the housing market to control the rate of growth in the economy.
Now for a trading tip. If you look at what happened after the NFP and Retail Sales reports, we saw the market react wrong initially then correct itself after further analysis of the numbers. How can we profit in a market like this? Well, the fact of the matter is that if you had been listening to plain old Bloomberg TV or radio, you would have had enough time to hear the numbers and listen to their analysis of what it all meant, with plenty of time to get into the market and make a nice profit. The Euro was still around 2540 2 minutes after the numbers were released before eventually dropping all the way down to 2480 or so. Bloomberg had this thing fully analyzed in less then 1 minute. I'm not saying this is going to work every time, but if you're not using this valuable free resource, you're not trading to your full advantage, especially when multiple reports are being released at the same time.