If anyone is interested, I have been following Mark's picks. The results are very impressive thus far I have to say. Well done Mark.

The results are below in tab delimited format. Simply copy them and paste into Excel to see more clearly...

Date Currency Pair Close ND High ND Low Direction Pip Potential Strength Type In At For To S/L Time In (GMT) Date/Time (T/P or S/L) Exit Method Profit/Loss Balance
24/10/2007 gbp/usd 2.0525 2.0539 2.0399 up 14 medium Sell 2.0496 30 2.0466 2.0589 00:00:00 24/10/200 8:00:00 TP 30 30
25/10/2007 usd/jpy 114.2100 114.6900 113.5900 down 62 medium-strong Sell 114.0300 30 113.7300 115.1900 00:00:00 Manual Exit ME -8 22
25/10/2007 nzd/usd 0.7550 0.7597 0.7472 up 47 medium Buy 0.7539 30 0.7569 0.7422 00:00:00 25/10/2007 12:00 TP 30 52
26/10/2007 eur/usd 1.4321 1.4378 1.4274 up 57 strong strong 1.4324 30 1.4354 1.4224 00:00:00 26/10/2007 08:00 TP 30 82
26/10/2007 usd/chf 1.1658 1.1716 1.1595 down 63 strong Sell 1.1657 30 1.1627 1.1766 00:00:00 26/10/2007 16:00 TP 30 112
29/10/2007 eur/usd 1.4393 1.4443 1.4352 up 50 strong Buy 1.4408 30 1.4438 1.4302 01:07:00 31/10/2007 05:00 TP 30 142
29/10/2007 usd/chf 1.1639 1.1691 1.1556 down 83 strong Sell 1.1627 30 1.1597 1.1741 01:07:00 30/10/2007 21:00 TP 30 172
30/10/2007 usd/can 0.9532 0.9612 0.9508 down 24 strong Sell 0.9537 30 0.9507 0.9662 00:45:00 Carried Fwd N/A 0 172
30/10/2007 nzd/usd 0.7688 0.7755 0.7660 up 67 strong Buy 0.7700 40 0.7740 0.7610 00:45:00 1/11/2007 TBA SL -90 82
31/10/2007 usd/can 0.9525 0.9588 0.9493 down 32 strong Sell 0.9537 20 0.9507 0.9662 Carried Fwd 31/10/2007 15:00 TP 20 102
31/10/2007 gbp/jpy 237.1600 238.0800 236.0600 up 92 strong Buy 237.4100 75 238.1600 235.5600 04:13:00 31/10/2007 10:00 TP 75 177
1/11/2007 gbp/usd 2.0799 2.0824 2.0727 up 25 strong Sell 2.0800 50 2.0750 2.0874 00:45:00 TBA N/A 0 177
2/11/2007 usd/can 0.9516 0.9559 0.9457 down 59 medium Sell 0.9495 30 0.9465 0.9609 01:26:00 N/A 0 177
2/11/2007 gbp/jpy 238.2100 240.0300 237.9400 up 182 medium strong Buy 238.4200 100 239.4200 237.4400 01:29:00 N/A 0 177

A lot of the data is informational only. In reality, the most relevant info. is the balance (pips) column which reads +177 from 24 Oct - 31 Oct.

I am comparing these results against my own. It is a little offset because I am only going for one trade per day. If a trade is still open from previous day, I do not take another trade until that one has cashed out or hit S/L (Psychological).

FYI: my results are +124 Pips From 15 Oct to 1 Nov.

OK, my results are not as impressive as Mark's. But on the other hand, I do not have as many trades open. I also do not trade the more volatile pairs as I have a lesser appetite to risk!

If anyone is interested in comparisons, please post and I will paste my results seperately...

To summarise, I'm stoked - Thank you Mark

Rabbits! (brings money if it is the first thing you say in a month with r)

So last night I take th gbp/usd short at 2.0799 for 50 pips....The low for the day was 2.0749....The ***&&^% spread kept me in the trade...I should learn by now...That is twice in a week that has happened. But it is the price you pay when you decide to walk away from the screen and let the Forecast do the watching. I saw my trade down as much as 31 pips which really burns me, however that is the nature of the beast and maybe I was a little aggressive.

So why did I take the trade in the first place. I believe in psychology of the markets. We really have little control on what movers are doing behind the scene that can possibly jack us for our money. Just when you think you have it all figured out some Russian oil interest decides to dive bomb a currency. I have said it before, the more you think you know the less you really do.

But there is Human nature which is a very visible driving force in the markets. It pops up after major news events that we saw yesterday, and will more than likely pop up again on Friday with the NFP's.
I took the short gbp/usd trade in anticipation of the "hangover" after the wild party. Remember we are day trading the Forecasts. I did not take a short position because I thought there was weakness present in the pound. I took it because I have seen so many times a significant retracement after a run up.

My trade was confirmed and I feel right in my decision. I was protected by the Forecast which gave me a spread to work with. If I had of stayed to my plan of 30 pips a day I might be writing a different blog comment

I am planning on getting out of this trade prior to the NFP's on Friday.

For those of you interested in trading this volatile piece of news, this is a technique that I use which is pretty much 90% bang on.:
Use a 5 minute chart on your favoured pair. (Use candle sticks). The direction the candle is going after the first 5 minutes (this would be the 2nd candle) will be the direction the pair will go for the rest of the day. Not always , but most times.

Good luck and be careful out there.

The Fed is meeting now and will be coming out with an announcement tomorrow. I want to be out of any day trade I am in prior to the announcement. This is a classic example of "buy the rumour, sell the news". There are those that believe the expected rate cut is priced into the charts right now, and the statement is as important as any action. So who knows where the spikes will go.

As I sit here writing my comments my swissy recommendation from Sunday night has hit profit, and my euro recommendation is flirting between 20 and 25 pips profit (goal 30).

Times like these determine what trader mentality you enjoy...Those 2 trades bounced between -30 and plus 10 (each) for the last 2 days. At one point today I was almost ready to cash in for a total combined profit of 30 pips. That would not have been bad, and kept me on track for my monthly goals.

But when I entered these trades I had a goal in mind. I am only 8 measly pips away and will now just wait to see what the Forecast says.

But why am I holding on to this trade instead of just cashing in? I believe in the ripple effect. Sort of like a law of energy. A currency in motion stays in motion from one world market to the next unless it is acted upon by a force greater than its momentum.

The force is either news, world events, trader events etc. or some unknown. This morning EST there was bad news out of Europe relating to the sub prime credit crunch. The swissy went up and the euro went down. I thought, O.K. here we go. Then this morning US news came out bad. Complete rebound in those pairs. Very small gains but inching all day towards my profit goals. So very simply, even though I am close to my target, I want to see if I might go a little deeper into profit as we enter into the Asian open. Asia may decide to wait and see what happens with the Fed, or see how their equity markets react to the down day on the Dow.

I have used this technique many times with great success, and am now hedging my Euro trade with the profits from my swissy. If i see the euro dropping, I will punt while I can, in profit and walk away. But there is the opportunity now to see if the Euro can track upwards for me for an extra 15-25 pips (Above my target).

That is the power of the Forecasts. If they come out and say the Euro is going down, I will get out when I can, make a little profit on it plus my whole profit on the swissy. If the Forecast comes out positive, then I will put a trailing stop on the trade and see where it goes.

I had a question last night on how many pips the Forecast generates. That is really an unknown as we all trade differently with the information that is presented to us. I never say if the gbp/usd hits "x" buy and exit at "y". I say I want to make 30 or so pips on the strength of this currency pair based on the next day projected high and lows.

That is why the Forecasts are not a signal system. Once you understand how the Forecasts can be traded, you can develop a great strategy based on the info in front of you. If you want to trust signals, you might as well have a managed Forex account and have someone else trade for you. I prefer the control and satisfaction derived out of making my own trades. As I am an entrepreneur it satisfies my entrepreneurial desires, and as such I treat the Forex as a business. And no one cares about your business the way you do.

The Forecasts work the same for me as they do for you. The only difference is I compile the data and spit out the results. I do not interpret, look in a crystal ball or throw a dart when I send you the info. I just paint a pretty decent picture based on the facts.

For those who may still be unsure, that is why I have decided to post what I believe are the best trades for any evening based on the minimum risk the Forex affords. This is not a signal to you. This is an opportunity to learn how I use the system and perhaps gain some confidence in the Forecasts. Trade if you wish with the confidence in knowing that I am going for the same position.

Since the launch of the blog in August I think you can see we have a pretty good record going. We profited when the markets were tanking, and continue to profit as they decide which way they really want to fly.

Enjoy the ride and make some money. That is why we are here!

Those of you who have followed the blog know how much I hate trading the swissy. I find it to be the most stubborn pair to trade. I like trading the gbp/usd, gbp/jpy, usd/jpy, usd/can, nzd/usd, euro/jpy pretty much in that order. I do however like the gbp/jpy for BIG moving trades. You need deep pockets and guts to trade this pair, and is not for the timid. But for the sake of placing "safer trades" for you , I want to stay with the majors on most nights.

So if you saw my picks last night, how did they turn out? Both came close to my profit target and never hit, so I am still holding them and will wait to see what the Forecasts say to see if I have to make any adjustments. I like to take 2 opposing pairs (gp/usd,usd/jpy, or euro/usd, usd/chf) when the Forecasts have them going in opposite directions (which is normally in correlation). Last night the swissy and euro were strong signals in opposite direction. (good sign). Also, I verified that I had a good movement happening in each pair on my Daily Charts (good sign). The Markets are pricing in a rate cut by the FOMC (Good Sign). The USD is taking a beating on all the pairs (good sign).

Now, as a Monday morning quarterback, the Euro is very high and will take a push to go higher. Not one to take a trade like that normally. But as the stars lined up according to my checklist I was trying to double down with the Euro following the market wishes to go higher, and the swissy going down with it.

Market Directions Sunday, October 28, 2007

• • The Euro’s cautious approach to history

There was essentially no new information produced on either side of the Atlantic this week. The few statistics released in the US and the EMU did nothing to dampen the Euro’s rise. If traders could not quite bring themselves to vault the Euro into the unknown on their own they did nothing to disguise their desire to do so.

Forex is a conservative market. Amid nearly universal expectation for a 0.25% cut in the Fed Funds rate next Thursday, the Euro broke new ground against the Dollar just twice this week, Monday and Friday. There were no breakouts, no stop loss induced buying and, except for the more than 200 point fall on Monday at the London open, no breathtaking volatility.

It was only last Friday, the 19th, that interest rate futures traders became certain that the Fed would drop the Funds target rate to 4.5% at the FOMC meeting on October 31st. Their conviction was supplied by the large fall in the American equities that day. The day before, on Thursday, the futures had priced the chance of a 25 basis point cut at less than 50%.

Last Friday, as the US equities sank the high in the Euro was 1.4317; the top on Monday was 1.4347, and the final peak at the end of the week was 1.4392. For a market embarked on a new relationship between the Euro and the Dollar it was an oddly muted beginning. Violent moves in forex are usually the result of stop loss orders placed to close existing positions. It much less common for large stops to have gathered for initiating new positions; completely new trading levels are very rare indeed.

Despite the apparent reluctance to test for buy stops in the Euro above 1.4400, the New York Friday close at 1.4391 insures that if they exist, Sidney and Auckland will find them on Monday morning. It will be a nervous weekend for Asian bank traders.

The Week in Review October 22 – October 26

United States

Very little substantive information was released about the US economy during the week and what was available was uniformly bad; though only the weak Durable Goods numbers could have been considered at all unexpected. At -1.7% against the forecast for a gain of 1.8% and accompanied by a -0.4% revision to the August result, they added to the Dollar’s woes despite their well known month to month volatility. New Home Sales shrank marginally from August, as the price discounting by home builders may be nearing market clearing levels. But Existing Homes Sales continued their prolonged slide into September dropping another 8.0% over the month. Neither statistic provided any new insight to the state of the US housing market.

The 134.78 point addition to the Dow average on Friday, closing at 13,806.70, was more indicative of market confidence that the Fed will be forced to act on rates, than a judgment that the US economy is headed towards stronger growth and low inflation into 2008.

Eurozone

ECB governing board members remained publicly unsympathetic to the political and economic difficulties attendant on the Euro’s record gains against the Dollar. Nicholas Garganas, head of the Greek Central Bank, and not one of the most hawkish of the govenors said, “ I would characterize FX movements as normal so far”. A comment which makes sense if one checks volatility but not levels. Alex Weber, one of the ECB’s long time anti-inflation stalwarts and head of the Bundesbank, commented that, “We interrupted the tightening cycle only because of the financial market turbulence”. His view was pointedly to the past; he did not offer any speculation of future ECB policy. But Mr. Weber has rarely given countenance to economic concerns, his remark did not provoke any reaction from Euro traders.

Industrial Orders improved considerably less than expected in August, rising only 0.3% and 5.1% for the year, against expectations of +0.9% and +6.2%. But as July’s results were revised higher by 1.4% to -2.6%, and both June and May were shifted down, the net trading effect was zero. Flash Manufacturing PMI at 51.5, 1.5points below the median forecast, was offset by the services number which was almost the same amount above expectations. Both numbers will be revised twice more.

Joseph Trevisani
FX Solutions
Chief Market Analyst

You have probably noticed that I have started to post my preferred picks every night. After looking at the accounts that I use to demonstrate trading the Forecasts I felt that perhaps you, the subscriber could benefit from getting inside my head.

I took a $10,000 account in September to $13,000, and a $10,000 in October (with a few days left) to over $15,000.

Click here to see my accounts:

October Results:

September Results:

Here is my dilemma with making recommendations:

1) I feel a huge responsibility in steering you the right way and this adds a huge amount of pressure to my trading.

2) Everyone has a different level of risk tolerance, and I fear you might take my advice without doing your homework. (Checking out the Forecasts and your Daily Chart set-up I provided.)

3) I have set up the Forecasts and blog to be a quasi mentoring system to allow you to develop a winning strategy and fear my influence might prevent this growth.

So this is what I would suggest. Use a separate account to track my picks, while developing your own strategies and not allow my picks to influence those strategies.

Some are fortunate to have confidence in their system. I work 7 days a week to ensure that my system works for me. And I think if you could look over my shoulder every night you can really benefit.

I am a real believer in setting monthly trading goals. I used to have a monthly plan that I called "$15k in 30 days". It was based on a $10,000 trading account and making $500 a day for 30 days. That would require making at least 50 pips say per day on a gbp/usd trade for instance. (100,000 lots pays $10 pip). And it worked for me. But, I was on the screen around the clock and it was killing me and making me take stupid risks.

But what if I said, you could catch 900 pips next month? Got your attention? Well, if you followed the picks I have been posting, I am going for trades every night with a pip profit of 30. The last I looked, 30 x 30 was 900. A few nights I am going for a couple of trades. I am also trying to drive deeper into profit and prepared to hold on to a trade if it has not hit my mental stop. Of course I have losses, but with proper money management you will always be able to stay in the game. Coupled with the Forecasts, we limit our losses and bail from dead trades.

So feel free to go along with my monthly plan of trying to make 900 pips in 30 days. If you look at my October results all I did was chip away everyday, took my 30 when I could and bailed when I had to, and dove deeper into profit when I could. But I insist that you develop your own goals and strategies. Decide what you want every month and break it down to manageable daily bites that you track religiously.

Last night I said I liked the usd/jpy short, and the nzd/usd long and go for 30 pips. Both hit. But it was a bit of a struggle for me. The usd/jpy came within the spread of my target which I neglected to account for at the time I made my trade. So when I woke up I was in the hole. The kiwi soon cashed out, so I just waited to see what would happen with the yen.

When I made the trade I went by the forecast and the weakness in the usd. Even though on the first crack, I made my target by a hair I found myself in a bit of a fight. However, as I followed the principles that I preach so often in the blog, I was never out of my comfort zone or near my psychological stop.

When I was new, I would have panicked and cashed out. There is a lesson to be learned here. Even when I was back at get even the temptation was to get out and be happy with winning one and breaking even on the other. I don't believe in break even. There is a spread involved that the broker charges, and right off the bat you are in the hole. And why enter a trade if not to profit? You will find more times than not, on a day trade in particular, that if a trade goes against you and finds it way back to break even, there is a probability that it will continue into profit. And this happens all the time when you bail too early.

Don't fool yourself. This is a game of wits sometime, and not for the timid. Bail out of a trade when you have to, not when you are afraid.

It is important to remember why you made a trade in the first place. Are you just throwing darts? Taking my advice? I don't mind if you trust me, just try and understand how I think and make my picks based on the forecasts. This way you can quickly see the opportunity that presents itself every night.

30 pips plus per trade is not that hard to achieve using the Forecasts. You don't have to trade every night, but when you do, be creative and understand why it is you make the trade.

Have a great weekend.

Last night I said I liked the gbp/usd short out of all the picks. If you had of taken that trade you could have made upwards of 70 pips.

A strategy that I use when trading the forecasts is to see how close we are to a high or low forecast position. The pound had bounced off a selloff from the day before and was nearing all time high levels again. The short position I felt was safe, even if you had to hold it for a day or 2. And even though it was strong to go high, the Forecasts afford us the opportunity to go in both directions sometimes.

This is why it is very important to log the forecasts of the pair you trade. Be familiar with pricing and use these opportunities to make profits why we wait for the long runs.

In my comment on my last 2 Forecasts I stated that:

• I did not like what I saw in the currencies.
• After a sell-off as we saw on Monday you use the day after as confirmation for how to trade. I also said that a nice rebound had occurred by end of day

Wow, I must have had a crystal ball!

So lets explore why (or maybe how) I made these statements.

I am very open through the blog with how I trade and how I make my decisions. In the past I immersed myself 24/7 in reading every bit of news, listening to talking heads, following my trades through the night, looking for different strategies, mixing up my account with many different philosophies, and in a nutshell just being overwhelmed.

I soon discovered that this would lead me to an early grave. So things had to change.

Fast forward to now. In the Forecasts you receive every night, and with my simple Daily Chart set-up, you are given everything that I use to make good trades. I look at the numbers, check my event risks, check my chart, decide on a trade and move on.

But my mind is working, looking, observing while I am doing this. Many of the currencies (euro, pound, can) etc are at all time highs or close to it. While the US dollar is struggling, equity markets are also chugging to all time highs. You don't have to do any great analysis to say to yourself we are due a correction or a retracement. Also risk tolerance, (which wavers back and forth and can almost be gauged by the equity markets) has a huge impact on the markets.

If I read the newspaper during the day I may read the business section. I might read some articles on my site etc. I try and absorb what is going on the way I might follow a pro sport. I have a good news feed that I will read for market re-caps. I am "aware" of my "surroundings" when I trade, but only to the extent of giving me a back drop for the forecasts. I have enough knowledge of currency moving world events to bore any dinner party.

With all this I know the following:

1) Nothing goes on forever without stepping back up or down.
2) Once a quarter (my theory) a big event will happen to start a nice long run. You can either get killed or benefit. I trade tight with the forecasts until this event happens, then when it does, use the forecast to push deeper into profit.

So 2 things happened for me which formed the basis for my statements. Currencies were high, and the Forecasts were going back and forth every night instead of up, up, up, up or down, down, down. "High prices plus "see-sawing" Forecasts = big drop" for me. Then when the drop came, you wait a day to trade, or make smaller, tighter trades. You see if is this a BIG drop, or just an adjustment. If you used a conservative stop, you would have been wiped out only to see a rebound. (Please read blogs on stops)

I know many of my subscribers still blindly trade, and because of this will get frustrated and blame the Forecasts. So this is what you need to do.

1) do not over trade the Forecasts
2) do not be underfunded
3) the riskier the pair, the more money you should pad your account with. (Exotic Yen pairs riskiest, followed by usd/jpy, gbp/usd then kiwi, loonie, then euro, then swissy)
4) Understand how to use stops.(read my blogs) Stops will wipe you out quicker than anything else.
5) Print out all forecasts and note which pairs hit target (50 -75% of predicted pip profit is a hit)
6) Visualize with the daily chart.
7) Make note of how many days in a row something hits
8) Be aware of your surroundings
Establishing these habits will serve you well.

If the Forecasts and my blogs are just something else to confuse you, move on until you can trade with them with a clear mind. I know the Forecasts work. But they only work if you are not doing 20 other strategies at the same time and are prepared to be passionate about your trading. The flip side of get rich quick is get poor quicker. The Forecasts are not a get rich quick scheme. They require a learning curve which can be mastered through the use of demos and observation.

Market Directions Sunday, October 21, 2007

• The equity sky suddenly grows stormy
• The G7 meets and ...
• ECB rate policy, made in Washington?

There is still a week and a half before the next FOMC decision on October 31st. Fed Chairman Ben Bernanke has said repeatedly that the decision will be determined by the state of the economy as reflected in the statistics. But the Fed now has a new worry, the equity market. If Thursday's poor jobless claims number had tilted the speculative see-saw toward a 0.25% cut then the Friday collapse in stocks will keep the lever pinned to the ground. Can the Fed not cut rates again?

Even though several important statistics will be released before the Fed decision, the futures market had, by late afternoon on Friday, fully priced in a 4.5% Fed Funds rate. The day before the same futures pricing had predicted only a 48% chance for a rate cut. None of the pending statistics, Durable Goods Orders, Consumer Sentiment, the Chicago Purchases Index, 3rd quarter GDP and three housing figures will allay the Fed's economic fears. When the Fed meets it will also be able to consider the pre release ISM, PCE inflation and Non Farm Payroll numbers for October. Even the best results for these numbers are now unlikely to prevent additional Fed rate cuts and none will provide support for the Usd.

No one statistic of the past several weeks has been strongly Dollar negative. Most have shown continuing moderate growth in GDP and consumer spending but the Dollar has continued to fall. The problem for traders is that the market sentiment is overwhelmingly against the USD. That sentiment cannot be altered by rationed good news or a moderately expanding economy. The governing market assumption, one might call it the 0.5% thesis, is that the strains on the US economy will keep the Fed on the defensive and the economy from trend growth for the next two quarters. Bad sentiment cannot be driven out by mediocre news; the Dollar cannot recover while the Fed is the only central bank reducing rates.

The logic for this FOMC meeting is the same as it was for the September 18th assembly  last month. The danger posed to continued moderate economic growth outweighs the potential exacerbation of inflation. If the Fed had this one good reason to cut rates last month does it now have any good reasons not to cut? What could the Fed view as more important than economic growth? Moral hazard in the financial markets? The six month horizon for inflation? The falling Dollar? None of these possibilities can overcome the economic damage from a recession. In fact all of these concerns, while real, will be made measurably worse if the economy slips into recession. Inflation is tame. Growth worries can only have been made worse by Friday's equity slide and the credit market problems have not vanished. The question can be asked again. What good reason does the Fed have for not cutting rates? It is difficult to formulate an answer. In addition, it would be rare in modern Fed history for the bank to cut rates only once in a cycle. If the Fed cuts on the 31st logic predicts further cuts as well. If the Fed rate reduction horizon has just lengthened then the decline of the Dollar has also.

In the something for everyone department the G7 communiqué is one of the best. The foreign exchange paragraph of this communiqué is worth quoting in its entirety. “We reaffirm that exchange rates should reflect economic fundamentals. Excess volatility and disorderly movements in exchange rates are undesirable for economic growth. We continue to monitor exchange markets closely, and cooperate as appropriate. We welcome China's decision to increase the flexibility of its currency, but in view of its rising current account surplus and domestic inflation, we stress its need to allow an accelerated appreciation of its effective exchange rate”. Issued by the assembled finance ministers after Friday’s meeting in Washington its virtue is to please all without offending any. Anyone that is, as long as one is not from Beijing. “Excessive volatility” satisfies those Europeans who dislike a high Euro and Euro/Yen; China’s mention satisfies all manner of trade warriors; “monitor” and “cooperate” keeps the internationalists happy. Every finance minister and politician can find in the text the appropriate phrase for reference during their news conferences back home, whatever the inclinations of the national audience.

Central Bank Rate Actions

Bank of Canada left the main overnight rate unchanged at 4.5%.

The Week in Review October 15 - October 19

United States

The descent of the US housing market accelerated this week, postponing any serious hope for recovery well into 2008. All three major housing market indicators recorded worse than expected results, but the news had little direct effect on the Dollar. There has been so much bad news from this sector that almost anything short of a complete cessation of all sales is already factored into the market. The dollar took its biggest single hit on Thursday from Weekly Jobless Claims a volatile and relatively minor statistic. The reaction to this number evidenced the extreme fragility of the Dollar to anything that indicates weakness in the US economy particularly in job creation.

Projections for 3rd quarter corporate profits for American heavy equipment manufacturer Caterpillar, among others on Friday slammed the major US equities averages and returned what had been a mildly recovering Dollar to the defensive. The equities have been one of bright spots in a wary economic picture.

The sub prime and credit crunch which began two months ago took its toll of foreign investment in August with the net long term capital flows registering their first decline since 1995. This is the second month in a row that capital funding has been less than the amount needed to offset the US trade deficit.

The Fed Beige Book prepared for the Oct 30-31 meeting of the FOMC showed continued expansion in all districts, but it cited decelerating growth since August. Consumer spending rose but reports varied from district to district. Real estate continued to weaken. All in all this book reflects the trend we have been seeing in this anecdotal survey for many months, with slowly accumulating pressure on economic growth and heightened uncertainty among responders about the economic outlook. GDP in the 4th quarter appears that it will be considerably weaker than in the third.

Eurozone

Economic growth in the EMU is slowing but for an ECB very uneasy about inflation it is not enough to make them break inflation cover and reduce interest rates. If the economic picture continued unchanged then logic and their own statements would put them on hold until the end of the year. If however, the Fed cuts American rates at the end of the month and the Euro then reaches 1.4500 and higher, the game changes. It will be hard for the European central bank governors to deflect the outcry from politicians and the media. And, more importantly, their own economic projections will point to the same dangers currently so evident from Washington. The ECB governors may not quite realize it but their next rate decision will probably be determined on Halloween in Washington.

United Kingdom

Retails sales for September were six times the expected rate and will certainly give the Monetary Policy Committee (MPC) pause when it contemplates its next rate decision on November 8th. But recent inflation numbers may lean the MPC in the opposite direction. Headline CPI was 1.8% in September, better than expected. And, most impressively, core CPI was only +1.5% year on year, much lower than the +1.8% prediction and a large improvement from the +1.8% rate in August and the +2.0% in June. MPC had voted 8-1 for unchanged rates at beginning of the month. The majority on the committee is shy of cutting for two reasons: lower rates could ward off the economic slowdown predicted in their August report and that the MPC expects to keep a lid on inflation; secondly, they did not want to appear to be overly supportive of the financial markets in its recent troubles. Preliminary GDP for the third quarter, +0.8% and +3.3% annualized was the highest quarterly figure in three years and is perhaps another militating factor against a rate cut. If the main argument for reducing rates is the potential for economic slowdown from housing and lingering financial markets effects then the accuracy of that view is undermined by the recent retail sales that were the driving force behind 3rd quarter growth. Given the distribution of votes on the Monetary Policy Committee, the recent economic results and the relative calm in the credit markets rate cuts might not be granted for some time. Much will depend on the world reaction to the US equity fall on Friday.

China:

With the end of the 17th Communist Party Congress market expectations are for further Peoples Bank of China rate increases. Food inflation is a serious concern for the Beijing Government. The average Chinese family spends almost 40% of its budget on food and the potential for political unrest in the poorer provinces is never far from the government's mind. The end of the twice a decade Beijing political chautauqua frees policy makers from distraction and they will return their focus to the rampant growth and speculation that are their main concerns.

At the Party Congress President Hu Jintao said that the Chinese economy continues to strengthen and pledged to make economic growth more balanced instead of relying on investment and exports. For investment read Foreign Direct Investment, for exports read replace exports with domestic consumption. China's biggest development problem is the income disparity between the booming wealthy coastal cities and the rest of the country. The party's biggest problem is that poverty, corruption and economic envy in the hinterland is a potentially explosive political situation. If the government is to encourage domestic consumption and investment then it must find a way to spread growth and wealth to the interior of the country.

Economic Releases October 15- October 19

United States

Tuesday: Industrial Production gained 0.1% in September as predicted, but Augusts' number lost 0.2% on revision to flat. Auto manufacturing output fell 3.3% in the month largely due to the two day General Motors strike. Non auto manufacturing added 0.3%, a reasonable recovery after the flat result in August and the financial market upsets.

Capacity Utilization was 82.1% in September as expected, virtually unchanged from 82.2% in August.

The Treasury International Capital system (TICS) in August registered the first decline in net long term capital flow since 1995 at -$69.3 billion. About half of the deficit was due to foreigners selling US assets and half to the overseas investments of US residents. Foreign investors sold $34.9 billion of US Securities, $24.2 billion by official institutions and $10.6 billion by private investors. US residents bought $34.5 billion in foreign securities. It was the first net sale of securities by foreigners since 1998. Private investors and hedge funds sold US equities and central banks sold US Treasuries. Overseas investors had been forecast to purchase $60 billion of US debt instruments. Coming after July's far below average inflow of just $19.2 billion the exodus aroused concerns about the funding of the US trade deficit which requires about $60 billion a month of net purchases. The credit crisis in August forced many owners of US debt to sell all or part of their holdings. Net sales by private investors were predominantly in equities and corporate paper exactly what one might expect in a credit panic. But the demand of these same private investors for US Treasuries and government agency debt, the least risky class of securities, rose. The TICS number has always exhibited a great deal of month to month volatility. Two months do not make a trend and with US equities staging a strong recovery in September and October, a return to the US market for foreign capital can be expected.

The National Association of Home Builders (NAH Housing Market Index for October at 18, 2 down from September, was the lowest score for this series since inception in 1985.

Wednesday: consumer inflation in September rose 0.3% a 2.8% yearly rate; the core rate gained 0.2% or 2.1% yearly. Though both numbers were largely as predicted, the core rate has ceased falling in August and September. Prior months had dropped steadily from February's 2.7% rate.

Housing Starts fell 10.3% in September to 1.191 million units the smallest number since March 1993 and well off the 1.3 million expected. Building Permits shed 7.3% to 1.226 million also the lowest since 1993.

Thursday: weekly jobless claims for the week ending October 13th rose 28,000 to 337,000 against the expectation of 312,000. A labor Department official said that a 'portion' of the rise was due to 'seasonal adjustment volatility'. Weekly numbers by nature vary widely but these results did nothing to alleviate the gloom gathered about the Dollar. The Euro reached 1.4311,  in the aftermath.

NAHB Housing Market Index fell to 18 in October, down two from September and a new low record for the series which began in 1985.

Eurozone

Tuesday: final September HICP was unrevised at +0.4% and +2.1%, the highest yearly reading since +2.3% in August 2006. It was the first time in 13 months that the harmonized index has been at or above the 2.0% ECB target. The rate in August was 1.7%.

Thursday: Construction Output improved +0.4% in August, a +2.8% yearly rate; for July the rates were revised down to -0.1% monthly and +1.4% yearly from 0.0% and 1.7%, June results were also dropped to +0.3% from +0.6%. A surge in German output was the largest component in the EMU statistic.

Germany

Tuesday: final HICP for September came in as expected +0.2% but the +2.7% yearly figure was the highest in six years. The last time this standardized EMU statistic was above 2.0% in Germany was July 2006. Final CPI for September rose 0.1% to 2.4%. Though this was slightly better than the forecasts of +0.2% and 2.5%, the annual rate was the highest in two years. It was last at 2.5% in September of 2005.

The ZEW Survey for October showed business attitudes largely unchanged from the prior month: 'expectations were -18.1 the same as in September and 'current condition' fell slightly to +70.2 from +74.4. Both numbers were as forecast.

Friday: PPI accelerated in September to +0.2% and +1.5%, double the monthly rate in August and half again the yearly rate. Though PPI was less than the forecasts of +0.4% and +1.8%, and was led by volatile energy prices, with oil touching $90 a barrel this week there is no comfort in these numbers for the ECB.

United Kingdom

Monday: Rightmove house prices from the online property site jumped 2.7% in October erasing the 2.6% decline in September. The yearly rate moved up to 10.4% from Septembers' +9.6%. The DCLG House Price Index dropped one percent in August to +11.4% from the July result of +12.4%. This statistic records an actual transaction price, an simply the asking prices. The apparent contradiction between the two widely used house price surveys is due to a new government reporting requirement. Known as the Home Information Pack this puts a reporting burden on sellers who may have been rushing to complete sales before the September 10th deadline.

Tuesday: CPI in September at +0.1% and +1.8% for the year was lower than the forecast of +0.2% and 1.9% and cleanly below the BOE 2.0% target measure. Core CPI was flat and up 1.5% annually, well under the 1.8% expected yearly rate. Sterling dipped 45 points on the release.

Wednesday: ILO unemployment rate stayed constant in August at 5.4% as expected. Average Earnings rose at a 3.7% three month moving average yearly rate. In July it gained 3.5%.

Thursday: Retail Sales volume surged 0.6% in September to 6.3% for the elapsed year. It was the highest annual rate in three years, and well ahead of the median forecasts, +0.1%, +5.6%.

Friday: preliminary GDP gained 0.8% in the third quarter and 3.3% yearly, slightly better than the +0.7% and +3.2% forecast .

China

Monday: The People's Bank of China raised the reserve requirement effective October 25th for the eighth time. The 50 bps point hike brought the reserve to 13.0% the highest ever and brings the increase this year to 400bps. The PBOC has already raised rate five times this year and the reserve requirements seven times.

The Week Ahead October 22 - October 26

United States

Tuesday: Richmond Federal Reserve District Manufacturing Index at for October at 10:00 ET; September 14.

Wednesday: Mortgage Bankers Association (MBA) Mortgage Application Index for the week ending October 19th at 7:00 ET; prior week +0.7% to 656.3. Existing Home Sales for September at 10:00 ET; August 5.50 million.

Thursday: Jobless Claims for the week ending October 20th at 8:30 ET; prior week +28,000 to 337,000. Durable Goods Orders for September at 8:30 ET; August -4.9%, ex defense -5.4%, ex transport -1.8%. New Home Sales for September at 10:00 ET; August 795,000.

Friday: Final University of Michigan Consumer Sentiment for October at 10:00 ET; preliminary 82.0.

Eurozone

Tuesday: Industrial New Orders for August at 9:00 GMT; July -4.0% m/m, +10.9% y/y.

Wednesday: Current Account for August at 8:00 GMT; July seasonally adjusted +E36.6 billion, not seasonally adjusted +E3.3 billion. Flash (1st issue) Manufacturing PMI for October at 9:00 GMT; September 53.2. Flash (1st issue) Services PMI for October at 9:00 GMT; September 54.2.

Friday: Money Supply (M3) for September at 8:00 GMT; August +11.6% y/y, 3 month moving average +11.4% y/y. Loans to private sector for September at 8:00 GMT; August +11.2% y/y.

Germany

Thursday: IFO Survey for October at 8:00 GMT; September 'business sentiment' 104.2, 'current assessment' 109.9, 'business expectations' 98.7.

Friday: GfK Consumer Confidence for November at 6:00 GMT; October 6.8.

United Kingdom

Monday: CBI Industrial Trends Survey for October at 11:00 GMT; September 'monthly orders balance' 6. CBI Quarterly Industrial Trends Survey for Q4 at 11:00 GMT; Q3 'business optimism balance' -2. .

Tuesday: Nationwide House Prices for October at 7:00 GMT; September +0.7% m/m, +9.0 y/y.

Thursday: Chancellor of the Exchequer Alistair Darling testimony to the Treasury Committee at 11:00 ET.

Friday: Land Registry House Prices for September at 11:00 GMT; August +0.2% m/m, +9.4% y/y.

Japan

Friday: National Core CPI for September at 23:30 GMT (October 25); August -0.1%. Central Tokyo CPI for October at 23:30 GMT (October 25); September -0.1%.

China

Monday: Q3 GDP (release time undetermined); Q2 +11.5% y/y. CPI for September (release time undetermined); August +6.5% ytd, +3.5% y/y. Fixed Asset Investment for September (release time undetermined); August +26.7% y/y.

Joseph Trevisani
FX Solutions
Chief Market Analyst