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Key events for the day ahead - Rabobank

FXStreet (Guatemala) - Analysts at Rabobank explained the data that has been and gone and what is coming up for the day ahead.

Key Quotes:

"This morning has seen already seen Aussie home loans, up 2.0% m-o-m (flat consensus), but where investment lending dropped 8.5%, which will have had the RBA and APRA saying “Good as gold” to themselves.

The next big release is Chinese CPI/PPI. Headline CPI is seen dropping back to 1.5% y-o-y, while PPI is expected to remain at -5.9% y-o-y. It’s hard to predict if the local equity markets will pay any attention to data when day-traders are so busy pushing equities up from ridiculous to ludicrous valuations again.

Meanwhile, expect little movement in the currency, of course. Until 30 November, when the SDR entry issue is finally settled, China, like Europe, will be on its own self-inflicted little gold standard. (Prices of which are, of course, tumbling at the moment: surely we will break through this year’s low soon, at which point ‘Au’ will be back where it was in early 2010/late 2009.)

We also see US NFIB small business confidence late in the session, whose blunt commentary is always welcome. For example, last month they noted: “The Federal Reserve decided that doing nothing was the best thing for jobs – or for “global concerns” or to make LeGarde and the World Bank happy along with all of the equity traders even though the evidence suggests that the Fed can’t impact employment significantly. Nonetheless, Chairman Yellen put “jobs” at the top of her policy priority list.

Meanwhile, banks can only lend to the best borrowers at the Fed’s low rate structure, believing that the cost of funds will rise and squeeze out profitability before rates can be reset. Savers aren’t interested in lending their money (depositing at banks, etc.) at these low rates.

Trillions of dollars of low yield Treasury securities issued over the past 7 years guarantee sub-par returns to savers and investors for the next decade. Interest income is billions below what “normal” rates would deliver and the Fed continues to hoard trillions of dollars in riskless securities that the market would love to have. Cheap money induces investors to make investments that wouldn’t pass muster in a normal economy. Not a helpful set of outcomes.”

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