Weekly Outlook Ending on 1st October 2016

Currencies:
U.S dollar shows steady trade remains broadly supported ahead of FED meeting next month.
The dollar pared gains against the other major currencies on Friday, pulling back from a one-and-a-half week high although the release of globally positive U.S. economic reports lent some support. In a revised report, the University of Michigan said its consumer sentiment index hit 91.2 in September, up from a previous estimate of 89.8 and beating expectations for a reading of 90.0.Data also showed that the Chicago purchasing managers’ index rose to 54.2 this month from 51.5 the previous month, exceeding expectations for an uptick to 52.0.The reports came after the U.S. Commerce Department said personal spending was unchanged in August from the prior month, below expectations for a 0.1% rise, and compared to a 0.4% gain in July. Official data on Friday showed that the euro zone’s consumer price inflation rose by a 0.4% this month, in line with forecasts and following a final reading of a 0.2% advance in August. Core CPI, which excludes food, energy, alcohol, and tobacco costs, increased by 0.8% in September, compared to expectations for a 0.9% gain and the previous month’s 0.8% increase. The U.S. Commerce Department said personal spending was unchanged in August from the prior month, below expectations for a 0.1% rise, and compared to a 0.4% gain in July. Investors were still awaiting the release of U.S. consumer sentiment data, as well as report on manufacturing activity in the Chicago area for further indications on the strength of the economy. The FOMC's benchmark Federal Funds Rate has remained at a range between 0.25 and 0.50% in each of their five meetings in 2016.
Euro weak on ongoing uncertainty over banking Giants.
The euro dropped to a two-month low against the safe-haven Swiss franc and lost ground broadly on Friday, as concerns about the health of Deutsche Bank weighed on the single currency and undermined risk appetite across global markets. The Swiss franc was also bolstered by expectations that Middle Eastern investment houses could pull out money from the United States and into alternative safe-haven liquid currencies like the franc. Those expectations were raised after the U.S. Congress voted overwhelmingly on Wednesday to approve legislation that will allow the families of those killed in the Sept. 11, 2001 attacks on the United States to seek damages from the Saudi government. "Risk appetite seems to be backtracking as European banking concerns mount," said Hans Redeker, head of currency strategy at Morgan Stanley, adding that Swiss franc strength was not just a reflection of the European banking problems. "It could also be seen in the context of Middle Eastern accounts possibly starting to pull out of the U.S.," he said. The yen, also seen as a safe-haven currency, has rebounded from Thursday's trough versus the dollar as global share prices slipped on worries about Deutsche Bank, under pressure from a massive fine imposed by the United States over its sales of mortgage-backed securities. The latest lurch came after Bloomberg reported that a number of hedge funds that clear derivatives trades with Deutsche had withdrawn some excess cash held at the lender, which has dropped to fourth in overall rankings as a currency trader.
Pound holds level on positive U.K Data.
The pound edged higher against the U.S. dollar on Friday, after U.K. second quarter growth was revised up more than expected and an upbeat U.K. current account report eased concerns over potential negative effects of Brexit. GBP/USD hit 1.2986 during European morning trade, the session high; the pair subsequently consolidated at 1.2986, up 0.17%.Cable was likely to find support at 1.2912, the low of September 23 and a one-month low and resistance at 1.3125, the high of September 22.The U.K. Office for National Statistics said gross domestic product rose 0.7% in the second quarter, up from a previous estimate of 0.6% and compared to expectations for 0.6%.However, on an annual basis, U.K. GDP increased 2.1% in the second quarter, up from a previous estimate of 1.9% but below expectations for a growth rate of 2.2%.A separate report showed that the U.K. current account deficit widened only to £28.7 billion in the last quarter from £27.0 billion in the first quarter, whose figure was revised from a previous estimate of £32.6 billion. Analysts had expected the current account deficit to widen to £30.5 billion in the second quarter. Meanwhile, investors awaited the release of U.S. personal spending and consumer sentiment data, as well as report on manufacturing activity in the Chicago area for further indications on the strength of the economy. Sentiment on the greenback soured after data on Thursday showed that U.S. pending home sales fell 2.4% last month , missing expectations for an increase of 0.3%.The report came shortly after official data showed that the third estimate of U.S. second quarter GDP showed growth of 1.4%, revised from the previous reading of a 1.1% expansion. Another report showed that U.S. initial jobless claims increased by 3,000 to 254,000 last week, compared to expectations for a 9,000 rise.
Commodities:
Gold down against strong dollar.
Gold fell sharply amid a resurgent dollar, Investors awaited the release of U.S. personal spending and consumer sentiment data, as well as report on manufacturing activity in the Chicago area for further indications on the strength of the economy. Gold prices had strengthened after data on Thursday showed that U.S. pending home sales fell 2.4% last month, missing expectations for an increase of 0.3%.The report came shortly after official data showed that the third estimate of U.S. second quarter gross domestic product showed growth of 1.4%, revised from the previous reading of a 1.1% expansion. Another report showed that U.S. initial jobless claims increased by 3,000 to 254,000 last week, compared to expectations for a 9,000 rise. Since opening the year around $1,075 an ounce, the precious metal has soared approximately 25% over the first seven months of 2016 and is on pace for one of its strongest years in the last three decades. Gold likely gained support at $1,312.80, the low from July 21 and was met with resistance at $1,374.90, the high from July 6. The comments from the Fed chair could shed light on the U.S. central bank's opaque long-term monetary policy forecast, which has been clouded by diverging views from participants over the last few weeks on the timing of its next rate hike.
Crude post strong weekly gain on OPEC oil Output Deal.
Oil prices rose nearly 3 percent extending their rally on optimism over OPEC's first output cut plan in eight years, despite some analysts' doubts that the reduction would be enough to rebalance a heavily over-supplied market. The Organization of the Petroleum Exporting Countries agreed on Wednesday to cut output to 32.5-33.0 million barrels per day (bpd) from around 33.5 million bpd, estimated by Reuters to be the output level in August. OPEC said other details of the plan will be known at its policy meeting in November, leaving unanswered when the agreement will come into effect, what new quotas for member countries will be and for what periods, and how compliance will be verified. The Organization of the Petroleum Exporting Countries said late Wednesday that it had agreed to reduce output to a range of 32.5-33.0 million barrels per day, a reduction of 0.7-2.2% from OPEC estimates of its current output at 33.24 million bpd. It was the first such deal since 2008.However, enthusiasm over the deal slightly began to fade as market players turned their attention to a November meeting, where more details should be hammered out.
Oil prices were also hit by a stronger U.S. dollar on Friday, as investors awaited the release of U.S. personal spending and consumer sentiment data, as well as report on manufacturing activity in the Chicago area for further indications on the strength of the economy.


Stocks
It was Positive week for U.S. equities.
Starting with the U.S. stocks; Dow Jones gains 193 points and 1.06%. Nasdaq Composite added 0.92% and 49 point. S&P 500 gains 18 points and 0.83% for the week.
Coming to European counterparts, UK’s FTSE 100 gains 39 points and 0.57%. German DAX 30 fell 24 points and lost 0.29%. Additionally French CAC 40 added 4 points and 0.09% on the weekly basis.
In commodities Gold lost $20 and 1.52% while Crude Oil added $3.74 and 7.61% over the week.
Euro lost 1.06% over the week while Yen also lost 1.73%. Pound made 0.59% while Ice dollar index gains 1.83% on this week.
Note: Here all the currencies are measured in percentage against the U.S. dollar.