Fundamental/News Thread

and actually..this is the first time I'd read across several sites to get some info on whats going around ahead this week before looking for some trade setup. Thanks to this thread.

The thing is the one and done - is already priced into the market. Carney said that about a month ago if I recall

Traders are always looking ahead.
What matters is what Carney will say about the UK economy going forwards- he had said in August that growth will drop (shortly after the IMF)
nttfx have a read of the inflation and MPC statements above. - this is important
Read what Carney says.
Then see how the economy has performed since then (CPI, GDP etc...).
If Carney says that we are not going to hike again - that's it- I would not be going long- may even sell the news

I don't rely on bank forecasts to trade cash rate meetings. They obviously affect sentiment.
I remember the first time that the BOC hiked (this year) - I was the only one bullish on it.
10 banks were bearish or neutral

Noted Fader.
I've go thru the report. Stuck my head on inflation target. Will try again. Thanks

The one thing I would say - is that we have the British Chamber of Commerce pleading with Carney not to raise rates.
There was another body that questioned this as well last week.
The housing market is not doing that great at the moment.

They may take this into account- but lets see what the forecasts are and what the position is of the BOE after the annoucment

this is what I've got from the meeting summary..I think I need some rest..

Hi Fader, many thanks for the explanation and clarification, my question is around CB (central Bank) biases, I will like to ask you and other experienced fundies, what key leading economic indicators the CBs look at, I know they look at CPI, unemployment, and housing. Please do you know any other leading economic indicators we can add to the list so that we can monitor this indicators and better contribute to this discuss and also learn?

Thanks

You are getting there.
Also pay close attention to any speeches that have been made by Central bankers
They are giving clues as to their voting intentions

The general rule is that they will tell you what they are looking at in their cash rate statements and speeches made by central bankers themselves

Quite often they might say we are not looking at CPI now but how it will be in 2 years time. But they do.

The main stuff is GDP, employment.
Ideally you want to look at trends rather than just figures in isolation to guage the health if an economy

Many thanks Fader for the insight. Gotya on the trends rather than figures thingy, I appreciate.

Now the effect is coming on USD? I've catched some pips..thanks.

It does change what they look at.
Poloz was saying that he could not care less about inflation at the moment only about how well the economy was doing.

Lowe main concern to cut interest rates would be unemployment.

You need to start to read cash rate statements and speeches.

Well done.

Come across the ANZ Business Confidence just now. I did make some trade to strengthen my understanding based on fundie (data news) result. Well, I felt like my trading emotion became better now. I got to scalp on M1 timeframe for a small pips in the morning. Really, thanks Fader.

I know that the BOE's rate decision is at the top of the market's mind, but I also think that today's FED decision can be market moving if the FED sends a strong signal about hiking OR not hiking in December. Even if it isn't, I want to make sure that I have done my homework, and am always ready to respond when a central bank makes a move.

For me, it also helps with my psychology. When I miss an "easy" trade because I am unprepared or working, I sometimes take a gambling trade to try to catch up.

Anyway, here is my take on the state of the US economy. GDP is great. The last two numbers have been outstanding: 2.6 and 3.0. The employment numbers have been great. Yes, the hurricanes contributed to a loss of 33k jobs, but here are the gains for the three prior months: 156k, 209k, and 222k. The expectations for the next release is 300k jobs.

Inflation is where it gets tricky. Personal Consumption Expenditures (PCE) is the FED's preferred inflation measure. It is at 1.3, well below the 2.0 target.
How the FOMC sees inflation will be key to how hawkish the November statement is.

Here are the key comments from the September FOMC statement:

"On a 12-month basis, overall inflation and the measure excluding food and energy prices have declined this year and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance."

"The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data."

I found the Minutes for the September meeting helpful. There was a prolonged debate about the prospects of a pickup in inflation and slowing the path of future interest rate rises if it did not. Here are some highlights:

"If so, the appropriate policy path should take into account the need to bolster inflation expectations in order to ensure that inflation returned to 2 percent and to prevent erosion in the credibility of the
Committee’s objective. It was also noted that the persistence of low inflation might result in the federal funds rate staying uncomfortably close to its effective lower bound. However, a few others pointed out the need to consider the lags in the response of inflation to tightening resource utilization and, thus, increasing upside risks to inflation as the labor market tightened further."

"Several of them noted that interpreting the next few inflation reports would likely be complicated by the temporary run-up in energy costs and in the prices of other items affected by storm-related disruptions and rebuilding."

"Consistent with the expectation that a gradual rise in the federal funds rate would be appropriate, many participants thought that another increase in the target range later this year was likely to be warranted if the medium- term outlook remained broadly unchanged. Several others noted that, in light of the uncertainty around their outlook for inflation, their decision on whether to take such a policy action would depend importantly on whether the economic data in coming months increased their confidence that inflation was moving up toward the Committee’s objective. A few participants thought that additional increases in the federal funds rate should be deferred until incoming information confirmed that the low readings on inflation this year were not likely to persist and that inflation was clearly on a path toward the Committee’s symmetric 2 percent objective over the medium term."

The focus of investors has shifted from the headline number of jobs to inflation indicators, such as wages.
Here is the good news: the employment cost index (0.8% increase in wages in Q3, 2.5% year-over-year) has begun accelerating.

Because 80% of folks believe that a rate hike will happen in December, a dovish statement, could lead to a sharp fall.

I think the wage uptick will lead to a hawkish statement, but I am going to read the statement before I do anything.

No one voted against the September statement. Will look to see if anyone votes against the statement November. If there are "no" votes. Then I will see if they are hawkish or dovish. If hawkish members vote no, that might be a signal to a hike in December. I use this site to see where the members are on the dove/hawk scale: http://fingfx.thomsonreuters.com/gfx...4EG/index.html

We haven't heard much from Yellen recently.

Thoughs/critiques are welcomed...

Nice writeup Cheetah, I think the statement will be dovish, I checked out the link you sent from reuters and observed that alot of the members are more dovish than hawkish and economic data is reaching historic highs warranting caution from the FED imo. Also, I think BOE might not cut rate due to lingering Brexit talks. My thoughts

I should have just said sell the news
Nothing really has changed since October
And now a dove installed as Chair of the Fed

Fitch: UK Rate Rise Has Little Growth Impact, Shows Global Shift

Fitch Ratings-London-02 November 2017: The Bank of England's (BoE) decision to increase UK interest rates by 25 bp partly unwinds the monetary stimulus it provided last summer, and is unlikely to have a large economic impact, Fitch Ratings says. The BoE looks set to tighten policy slowly, but the first UK rate hike in over decade highlights how shrinking output gaps and tighter labour markets are pushing central banks towards interest rate normalisation.
The BoE said Thursday that its Monetary Policy Committee (MPC) voted by 7:2 to increase the Bank Rate to 0.5%, reversing the cut it made last August in the aftermath of the Brexit referendum. It left the stock of bonds purchased under its quantitative easing (QE) scheme unchanged. Prior to last August, the Bank Rate had been unchanged for over seven years. The BoE's last rate hike was in July 2007.
Fitch has for some time been expecting the post-referendum interest rate cut to be reversed, although in our most recent Global Economic Outlook (September 2017), we expected this to happen in early 2018. The MPC summary said that all members agreed that future increases "would be expected to be at a gradual pace and to a limited extent," and that monetary policy "continues to provide significant support to jobs and activity."
We think another increase is unlikely in the next 12 months, given the impact of Brexit uncertainty on the outlook for investment. Today's decision does not alter our UK growth forecasts , which see a net trade boost partially offsetting slower domestic demand this year, enabling real GDP to rise by 1.5%, before slowing to 1.3% next year. But it remains to be seen how firms and households adjust to a shift in the monetary policy stance after such a long period without a rate rise.
While the BoE has no intention of slowing the economy down, its decision highlights how tighter labour market conditions (UK unemployment is at a 42-year low) and concerns about adverse supply-side impacts from Brexit have reduced tolerance for above-target inflation. Inflation rose to 3% in September partly in response to the weakening of sterling. We forecast inflation to slow next year, averaging 2.5%, but this would still be above the BoE's 2% target.
As output gaps close, central banks around the world are generally refocusing on policy normalisation. The BoE said it was "ready to respond to changes in the economic outlook as they unfold" to ensure a sustainable return to target, while supporting the UK economy through its Brexit adjustment. Meanwhile the ECB has announced smaller monthly QE purchases from January, while this week's Fed statement emphasised solid growth and did little to suggest that it felt that recent low US inflation readings were becoming more persistent.

Federal Reserve issues FOMC statement

Information received since the Federal Open Market Committee met in September indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate despite hurricane-related disruptions. Although the hurricanes caused a drop in payroll employment in September, the unemployment rate declined further. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. Gasoline prices rose in the aftermath of the hurricanes, boosting overall inflation in September; however, inflation for items other than food and energy remained soft. On a 12-month basis, both inflation measures have declined this year and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Hurricane-related disruptions and rebuilding will continue to affect economic activity, employment, and inflation in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term. Consequently, the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.
In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.
In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.
The balance sheet normalization program initiated in October 2017 is proceeding.
Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Jerome H. Powell; and Randal K. Quarles.

Hi Fader123

Reading through the FOMC statement, I was able to highlight some economic indicators the FED is looking at for the US economy namely;

1. Unemployment rate
2. Household spending
3. Business fixed investment
4. Gasoline prices
5. Inflation

My first question is, what is Market-based measures of inflation compensation ? survey-based measures of longer-term inflation expectations?

Also, the said; "In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments."

My second question is, What economic indicators relates to labour market conditions apart from NFP,unemployment rate, Jobless claim and wages?
What economic indicators relates to indicators of inflation pressures and inflation expectations apart from CPI?

I will appreciate your response on the above. Thank you

I actually sold the news and placed a buy stop on EURGBP above previous day close, which closed in profit. What key lessons did you learn from this experience?