• ECB could extend its QE until at least September 2018 with a lowered volume
  • Chinese trade balance shrinks the most since March this year
  • RBA Financial Stability Review offers a slight boost for the Australian dollar

Although, we are still approximately two weeks before the ECB meeting, first rumors have already emerged. According to Reuters European Central Bank policymakers are in broad agreement to prolong asset purchases at a lower volume at their October meeting with views converging on a nine months extension. The sources said that there is a dispute when it comes to how much the QE program should be slashed and a reduction ranges from 25 billion EUR to 40 billion EUR per month. Let us remind that the ECB buys bonds worth 60 billion EUR per month. It’s worth recalling that we outlined such a scenario (a lowering of monthly purchases with a prolongation of the program) a week ago following the release of the ECB minutes. Regardless of these remarks the euro has remained quite unimpressed and it’s trading just a shy of 1.1850 against the US dollar.

link do file download linkChinese trade balance has shrunk the most since March this year as imports have surged. Source: Bloomberg

The second topic being worth mentioning after the Asian session is the trade data from the second largest economy in the world China which could be seen a bit disappointing at least on the surface. Namely, trade balance shrank massively from ca. $42 billion to almost $28.5 billion in September mainly on the back of an increase in imports which moved up as much as 18.7% yoy while exports rose 8.1% yoy – both gauges were higher compared to the prior month though. The softer trade surplus may be welcomed by the United States which has lashed out at the Chinese economy several times accusing it of taking advantage of the artificially weak CNY ex-change rate. Moreover, a jump in imports could also suggest that domestic demand has remained in well condition just ahead of the Communist Party Congress which kicks off next week. Finally, one needs to notice that the PBoC injected as much as 498 billion CNY via 1Y medium-term lending facility or MLF, the move might have had something to do with the Congress but it had been expected though.

Otherwise, the Reserve Bank of Australia revealed its Financial Stability Review for October 2017. The report had a subdued impact on the Australian dollar but it confirmed that the financial system remained strong and resilient. The RBA said that main risks came from rising household debt amid low rates and weak income growth (notice the Australian economy experienced the grim retail sales report).

link do file download linkThe EURUSD has handed back its latest gains and now it’s testing a key support zone. Keep in mind that today it’s all about the US data (CPI and retail sales), hence the US dollar currency pairs could be more volatile. Source: xStation5