A number of "nuclear bombs" hit the market overnight! Don't miss the finale of the show tonight?

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In the past Thursday, investors in the global foreign exchange and commodity markets undoubtedly experienced one of the most turbulent nights of the year. From the announcement of the QE to the Dove, the expansion of QE, the possibility of re-election to Yellen, the passage of the budget decision by the US House of Representatives and the new sanctions against Iran, and even the escalation of the independent stalemate in Catalonia, the fundamentals are called “nuclear explosions”. The "level" incidents came out one after another, making the financial market completely mad.

From the final market trend, the US dollar index climbed 1% overnight, breaking through the 94 mark for the first time since the end of July; non-US currencies fell collectively, with the euro falling the most against the US dollar, falling below the 1.17 mark for the first time since the end of July. The decline was about 1.4% and closed at 1.1650. According to Reuters statistics, this is the worst single-day performance of the euro in 16 months!

In the commodity market, the price of gold crude oil is divided. On Thursday, due to the surge in the US dollar, the Fed chairman's dispute into a two-person showdown, the House passed the budget and other negative factors, the international gold price closed down 0.84% ​​on Thursday, at $1266.45 per ounce, the lowest closing price in more than two months. In contrast, the price of oil was the highest in the past two years, and the price of oil was close to the $60 mark. The US Congress passed the sanctions against Iraq and the Saudi King to extend production. The oil market has heated up.

The five major news "nuclear explosion level" incident shocked the financial market on Thursday

☆ nuclear bomb: European banks wish to reduce QE, multi-doves signal shocked the market!

The European Central Bank (ECB) announced on Thursday (October 26) that it will extend its bond purchase program to purchase bonds on a monthly basis of 30 billion euros between January and September 2018, and increase the scale if necessary. Or extend the time limit. Although the scale of debt purchases was in line with market expectations, the multiple dovish signals revealed in the resolution and Draghi’s speech still shocked the market.

Bloomberg pointed out that the overwhelming majority of members of the ECB's management committee are in favor of maintaining the open end of QE, in case the fledgling economic expansion is frustrated or inflation remains sluggish. The news helped to suppress the euro and push up the stock market. Bloomberg economists expect that if wage growth remains sluggish, the ECB will implement a six-month QE at a rate of 15 billion euros a month after September.

Bloomberg said that in addition to this, we can also find some of the following doctrines from Draghi:

There are no practical restrictions on asset purchases

Although some policymakers believe that according to the current regulations of the European Central Bank, the only eligible securities available for purchase by the European Central Bank are only about 200 billion euros, but Draghi said that the European Central Bank is not restricted. The ECB can still increase the size or duration of the bond purchase and will continue to reinvest in the maturing securities. Draghi said that this may be "huge." Dutch bank strategist Kim Liu estimates that this reinvestment may be equivalent to an actual purchase of between 15 billion and 20 billion euros per month. The European Central Bank is also committed to continuing to provide loans to banks at a fixed rate and in full allocation, until at least 2019, providing more liquidity to the market.

Not agree

Not all 25 members of the Management Committee agreed to the decision on Thursday. Draghi said that there is a broad consensus on some issues, and on other issues, the minority is subject to the majority. He also said that cautious attitudes prompted "the vast majority" of policy makers to end the open end, which means that a few people want to set limits on this. This controversy may break out again in 2018, when they must decide what to do next.

Interest rates will remain at current levels for a longer period of time

Draghi said that interest rates will remain at current levels for a long time, "far beyond the time limit for our net asset purchases." Maintaining this statement means that the ECB may not raise interest rates until 2019. Draghi will expire in October of that year, so he may try to stick to his retirement and may not even raise interest rates during his term of office.

Matters not discussed

The management committee did not consider changing the parameters of the QE plan or the order in which they might exit. They also did not discuss the composition of the object of purchase; once the public debt began to dry up, this debate would be inevitable. Although Draghi barely mentioned the euro (the euro rose by 12% against the dollar this year), the most important topic he emphasized in his big chapter was a vocabulary that was not mentioned at all: underweight.

From the final trend of the foreign exchange market, the euro/dollar fell to 1.1651 as of late Thursday in New York, down 1.4% from late Wednesday. According to Reuters data, this is the biggest one-day drop in the euro/dollar since June 2016. The euro has also hit the 100-day moving average for the first time since April. James Chen, head of research at Gain Capital, said: "Overall, the ECB has focused on withdrawing the process very carefully and slowly, avoiding pushing up the euro, which is clearly more dovish than the market expects."

☆ nuclear bomb: Yellen or has been out? The Fed chairman's candidate is suddenly exploding!

At the same time that the ECB's resolution attracted the attention of the market, the sudden rise of the Fed chairman's candidate overnight also grabbed a lot of headlines in the financial media. According to political betting website Politico on Thursday, US President Trump will select one of Jay Powell and John Taylor to be nominated for the next Fed chairman. This means that current Fed Chair Yellen and two other popular candidates Kevin Warsh and Gary Cohn have been out.

It is worth mentioning that, in a recent interview with Fox TV, Trump once said that Yellen left a deep impression on him, and he would of course consider letting Yellen stay in office. The current Federal Reserve Chairman Yellen will officially step down in February next year. Trump has recently completed an "interview" with the Fed chairman's candidate, and the White House said that Trump will announce the Fed chairman's nominee in the near future.

A top source who had regular meetings with Trump said that the only shortlisted candidates were Powell and Taylor, and the question was who could win the title. This person said that Yellen and Walsh are both out of the game. Cohen, the chief economic adviser to the White House in the United States, was almost excluded a few weeks ago. Politico also cited another unnamed veteran who is very close to the relevant procedures, saying that Trump could not be taken for granted that Powell would nominate Powell or Taylor as the Fed chairman, and Trump’s "ideas changed every day." ”

Currently, bookmakers' odds still tend to Powell. Reuters also reported that Powell is most likely to become the next Fed chairman.

From the market trend, after the news came yesterday, the price of gold fell by 4 dollars in the short-term, and then quickly rebounded from the low level touched by the European Central Bank's resolution. The US dollar index rebounded above the 94 mark. The data shows that COMEX's most active gold futures contract has a volume of 5032 lots in 20 minutes at 20:04 Beijing time, and the total value of the trading contract is nearly 700 million US dollars.

"The most consistent approach for the Fed chairman is Powell's succession to Yellen. Given that we are in a tight cycle, some consistency will be welcomed by financial markets," said Moody's Ryan Sweet. “For the market, regime change may make people more nervous and upset.”

☆ nuclear bomb: tax change! U.S. House of Representatives passed budget resolution

Another big benefit of the dollar long overnight is that the House of Representatives passed a budget resolution. According to US media reports, the US House of Representatives passed the 2018 budget resolution on Thursday to clear the procedural obstacles for the Republican tax reform bill to be unveiled next week. The bill is still being drafted, and the US House of Representatives fundraising committee chairman Brady said that the House tax reform bill will be announced on November 1. President Trump is seeking his first major legislative achievement.

The House Republicans overcame the resistance of the party members at the last minute and approved the 2018 budget, which will make the final tax bill easier to pass in the Senate, although many difficult decisions are still ahead. The passage of the budget heralded the victory of Republican leaders and Trump. Trump promised to revise the tax code in the 2016 campaign. The plan they proposed was opposed by Democrats who thought it was a shift to the rich and the business.

US Senate Democrat leader Schumer said that the reluctance to pass the budget shows that many Republican lawmakers are not satisfied with the plan. The Democratic Party will strive to retain "state tax and local tax relief" (SALT Deduction).

After the US budget was passed by Congress, the US dollar index further rose to a three-month high of 94.44. The euro/dollar once fell below the 1.17 mark, and continued to hit a new low of 1.1687 since October 6, which is close to 150 points higher than the daily high. It will record the biggest one-day drop since December last year.

☆ nuclear bomb: deadlock upgrade! Catalonia President excludes local elections

Under the influence of the above-mentioned nuclear explosion-level incidents, reports on the independent process of Catalonia overnight have received relatively limited attention. However, the development of the state of affairs is still continually slipping into the abyss, and the escalation of the stalemate is likely to lead to a renewed increase in market panic in the future. It is reported that Carles Puigdemont, president of Catalonia, Spain, said on Thursday (October 26) that he would not hold new local elections to break the Spanish government and Catalan separatists. The stalemate, the political crisis has intensified and there may be a direct confrontation.

Puigmont said in Barcelona's autonomous regional government headquarters that the holding of local elections would allow Madrid to abandon direct jurisdiction and the Spanish central government did not provide sufficient guarantees. It was originally expected that Puigmont will announce local elections in the next few days in response to the Spanish government’s action to lift the autonomy of Catalonia. However, Puigmonte said that it is now necessary for the Catalonian parliament to take action and continue to push the region's efforts to break away from Spain after the October 1 independent referendum. The Madrid authorities declared the referendum illegal and tried to stop it.

According to Spain's first major newspaper, El Pais, on the 21st, the Spanish central government will start Article 155 of the Constitution, temporarily withdrawing the autonomy enjoyed by the Catalonia region and depriving the presidents of the regional self-government. Power to dissolve the local cabinet.

The Catalan separatist movement is the most serious challenge facing the country since the Scottish independence referendum in 2014. It is also the most serious situation facing Spain since the end of the Franco military government in 1975. Political crisis. The Spanish stock market has fluctuated overnight and the market is still worried about the future development.

☆ nuclear bomb: oil is infinitely close to 60 US dollars! Passion for the fuel market in the Iraqi sanctions

At the same time that the US dollar has risen sharply in the foreign exchange market, the crude oil bulls in the overnight commodity market seem to be equally unwilling! Brent crude futures closed at a 27-month high on Thursday, and for the first time in two years it is expected to try to challenge the $60 mark. Brent crude oil futures closed up 0.86 US dollars, or 1.5%, to 59.30 US dollars per barrel, the highest closing price since July 3, 2015. US crude oil futures rose 0.46 US dollars, or 0.9%, to 52.64 US dollars per barrel, the highest closing price since April 17.

On Thursday, the US House of Representatives passed the "Iran Ballistic Missile and International Sanctions Enforcement Act" with 423 votes in favor and 2 votes against. The bill expands the scope of sanctions against Iran and imposes sanctions on individuals or entities that help Iran develop conventional weapons such as ballistic missiles.

After the Senate passed and signed by Trump, the above motion will become legislation. The US media pointed out that Trump had previously called on Congress to adopt a more stringent attitude, which may include renegotiating the Iranian nuclear agreement. After the House of Representatives passed the sanctions bill, the international oil price rose strongly. Despite the same strong pressure on the US dollar that day, the gains continued unabated.

In addition to sanctions against Iran, overnight oil prices have also been boosted by a speech. In an interview with the media, Saudi King Salman said that he hopes that the OPEC crude oil production reduction agreement will be extended and the oil producing countries need to continue to maintain market stability. The current production reduction agreement will expire in March next year. Earlier, many Saudi officials expressed their support for the idea of ​​extending the agreement, but they have not given a clear commitment. The Saudi king who holds the energy and economic power gives the above statement or will mean that the OPEC meeting will extend the production at the end of November. The decision of the agreement seems to have been fixed.

US third quarter GDP is released tonight!

Can the dollar be laughed at the end of the week?

At present, this week will only be the last trading day of the day. Although the intensity of the news event may be slightly sparse compared to yesterday, investors obviously still can't have the slightest effect. The financial calendar shows that on Friday night in Beijing time, investors will usher in the US third quarter GDP data, which is likely to start the market's final battle this week. If the data is positive, it is expected to push up the US dollar further; on the contrary, it will bring a respite to the euro gold and other assets that have fallen this week!

According to foreign media reports, although the two hurricanes Harvey and Ima have caused extensive damage to parts of Texas and Florida, economists now believe that the hurricane drag is less than expected.

According to the Bloomberg survey, the median estimate of economists is that the third quarter real GDP growth rate is expected to increase by 2.6% in the third quarter and 3.1% in the previous quarter, which will be the best two quarter performance since the beginning of 2015.

Analysts pointed out that although hurricane-related damage may also hurt consumer spending in the service industry, other purchases and government spending may increase due to disaster relief and reconstruction, which will further contribute to the fourth quarter growth. Tom Simons, senior economist at Jefferies LLC, said: "It is also helpful to have a hurricane in the season, because there is still time to recover some lost soil and the economy is still stable."

The American public is also optimistic about the economic outlook. According to a CNBC survey, the optimism of the American public about the economy earlier this month hit a record high. According to the survey, 43% of respondents believe that the economic situation is very good or good.

Kathy Lien, chief foreign exchange analyst at BK Asset Management, said the dollar will likely benefit from Friday's third-quarter GDP report. Although economists expect economic growth to slow, strong spending and trade activity during July-September support an unexpected rise in GDP data.

It is worth mentioning that after the overnight surge, the current US dollar index has completely surpassed the neckline position of the previous head and shoulders at the technical level, and the further upward movement of the market may have opened. Short-term investors can continue to pay attention to the effectiveness of this breakthrough. If you can hold the fruits of the victory overnight, the next target of the bulls will point to the 95 mark.

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