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    IronFX Daily Commentary |Paris deadly attacks cause risk-off environment | 16/11/2015

    16.11.2015, 10am

    • Paris deadly attacks cause risk-off environment. In the wake of Paris terror attacks demand for the safe-haven, JPY and to a lesser extend CHF, firmed. Even though it’s been a relatively modest reaction, it could intensify if global risk rise. France already launched airstrikes against Islamic State in Syria, and world leaders promised a forceful response against terrorist attacks at the G20 meeting in Turkey. The tragic events in Paris could put investors in defensive mood as far as risk is considered, with equity markets poised to a weak start. Concern about similar attacks beyond France may have a more prolonged impact on travel and tourism sectors if the consumers’ sentiment deteriorates.

    • Overnight, Japan’s economy fell back into recession in Q3, mainly due to the slowdown in EM economies. The preliminary GDP data showed a contraction of 0.2% qoq, followed by a 0.3% qoq contraction in Q2. The two consecutive quarters of contraction is the definition of a technical recession. This is the fifth time in seven years Japan slides into recession, putting policy makers under pressure to deploy further monetary or fiscal stimulus in the coming months. However, comments by BoJ Governor Kuroda so far showed that the Bank is in no mood to ease policy further any time soon. As a result, the market will closely watch the Bank of Japan meeting on Thursday for clues of a possible change in stance and hints of additional measures. The Nikkei dipped sharply at the opening of trade on Monday in the wake of Paris tragedy and declined even more following the soft data. As such, JPY found buying interest and strengthened against EUR and USD.

    • Today’s highlights: During the European day, we get Eurozone’s final CPI for the October. As usual, Eurozone’s final inflation figure is expected to confirm the preliminary reading. Thus the market reaction is usually limited at the release, unless we have a huge revision. Norway’s trade balance for the same month is also coming out.

    • In the US, the NY manufacturing PMI for November is coming out and from Canada we get manufacturing Sales for September. The NY manufacturing index is forecast to have risen to -5.0 from -11.4, but to remain below zero, while there is no forecast for Canada’s manufacturing sales.

    • We have only one speaker on Monday’s agenda. ECB President Mario Draghi speaks to the annual gathering for the Euro Finance Week in Frankfurt.

    • As for the rest of the week, on Tuesday, the German ZEW survey for November is coming out. The current situation index is expected to see a modest decline, while the expectations index is expected to have risen. Last month, the expectations index plunged as the Volkswagen scandal coupled with the weak growth in EM deteriorated the economic outlook for Germany. Therefore, a rebound in expectations seems normal after such a plunge.

    • In the UK, the spotlight will be on the CPI data for October. In its quarterly inflation Report, the BoE downgraded its medium-term growth and inflation forecasts, while it noted that it sees risks slightly to the downside for inflation to reach their target in two years. As a result, a disappointment in the CPI data is possible, something that could push further back expectations of a rate hike by the BoE, and is likely to put the pound under renewed selling pressure.

    • We get CPI data for October from the US as well. Following the astonishing surge in the NFP for October, even a modest rise in the US inflation rate is likely add to expectations for a Fed lift-off in December, and could strengthen the greenback further.

    • On Wednesday, the US the housing starts and the more forward-looking building permits for October are expected to have accelerated somewhat. These data are likely to confirm the overall strength in the housing sector and could support the dollar.

    • On Thursday, during the Asian day, the Bank of Japan monetary policy meeting will take center stage. At their last meeting, the Bank kept its monetary stimulus program unchanged despite downgrading again its inflation forecast. At the press conference following the meeting, Gov. Kuroda maintained his optimistic view that the tight job market will push up wages and thus consumer spending, and that this would be sufficient to boost inflation. As such, we would expect the policy to remain unchanged again and the focus to shift on Gov. Kuroda press conference afterwards.

    • The ECB releases the minutes of its October policy meeting when President Draghi signaled that the Bank stand ready to undertake further stimulus measures that could even include a cut to the already negative deposit rate. The minutes will give us more insights about the members’ discussion over which tools can be used and in what extent, to support Eurozone’s fragile economy.

    • As for the indicators, we get the UK retail sales for October.

    • Finally on Friday, Canada’s CPI data for October are coming out. Given the renewed slump in oil prices, a disappointment in the CPI figures is likely to put CAD under renewed selling pressure.

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