Forex Research

[Alpari UK]

US Opening Call from Alpari UK on 5 August 2014

US services and manufacturing data is focus Tuesday

• Eurozone services PMIs rise but downward revisions weigh on sentiment;
• UK services PMI highest since November;
• US services and manufacturing data to come today.

Another positive start in Europe appears to suggest fears of a greater market sell-off are easing, as uncertainties surrounding the Portuguese banking system subside, while news the Israel is withdrawing troops from Gaza is helping to lift sentiment.

One thing that has weighed slightly on risk appetite this morning has been the eurozone services PMI readings for July. While many have improved on the numbers from the month before, the downward revision to the German and eurozone readings from the initial release appears to have served as a quick reminder that the eurozone is likely to continue to crawl its way back to health, with even Germany now suffering as a result of the ongoing conflict in eastern Ukraine.

On the bright side, retail sales in the eurozone were much stronger than expected, compared to a year ago, thanks to revisions of previous releases. A 2.4% increase compared to the same month a year ago is hardly mind blowing by any stretch of the imagination but let’s face it, any sign that consumer spending is improving shouldn’t be brushed off as it’s likely to take a long time until consumer activity reaches pre-2008 levels in many countries.

That said, consumer spending in these countries is not as important as it is in the UK, which is far more dependent on the consumer for growth. We are seeing evidence that business investment is beginning to take some of the load of the back of the consumer but the latter still takes the brunt of it. It’s a good thing, therefore, that confidence in the services sector is on the rise again, with the number having risen to 59.1 in July.

There’s still plenty more economic data to come today and the focus will remain very much on the services sector with both the official and ISM PMI readings being released shortly after the opening bell on Wall Street. The official reading will also be accompanied by the composite number which covers both the services and manufacturing sectors and therefore gives a view on confidence across a large part of the economy.

Also released today is factory orders data for June, which provides good insight into the manufacturing sector including demand both domestically and abroad and provides an indication of future activity. A 0.5% increase is expected to June following a similar decline for May.

Ahead of the open, the S&P is seen 4 points lower, the Dow 27 points lower and the Nasdaq 10 points lower.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 5 August 2014 - Alpari UK

https://www.youtube.com/watch?v=SpYtLGrDzhQ

 

[Alpari UK]

UK Opening Call from Alpari UK on 6 August 2014

Russian threats drive riskoff sentiment back into the markets

• Global markets tumble as Russia brings the geopolitical risk back to the table
• New Zealand jobs report largely positive despite NZD selloff
• Somewhat quiet day ahead with focus open industrial figures in Europe.

Global indices are seeing a knock on effect today, where a poor Asian session overnight led by risk aversion in the US is now filtering through to the European markets. The build-up of troops at the border between Russia and Ukraine has pushed the potential of a war in the region back onto the agenda, whilst mixed New Zealand jobs data represented the only major economic release overnight. European markets are thus expected to follow suit, with futures pointing to a broadly lower open. The FTSE100 is expected to open -44, CAC -32 and DAX -87 points.

The overnight session was predominantly driven by sentiment carried forward from a poor US showing which saw weakness across the board. The return of risk aversion driven by geopolitical factors never seems to be too far away and this time it has been driven by the announcement by Poland that it has noticed a significant build-up of military presence of the border between Russia and Ukraine. Of course this is not something new, with Russia having built up a major border presence throughout the conflict. However this recent build-up marks a return to the aggressive tactics of old, representing the largest military build-up since those same military personnel were told to withdraw in May. Of course this does give us some idea that Putin sees such a move as a valuable tool to exert pressure and it is telling that this comes on the day that Putin has ordered his government to retaliate against European and US sanctions. Thus with Russia poised to ‘pressure or invade’ Ukraine, along with a raft of retaliatory measures being aimed at European and US interests, it is not hard to see why the markets are seeing such weakness in the past 24 hours.

Some more positive news overnight saw the New Zealand unemployment rate fall to the lowest rate in over five years. At a time when New Zealand has been moving aggressively with continued rate hikes, figures such as this drive home the notion that we could see further moves from the RBNZ in the near future despite their call to remain cautious following consecutive hikes. However, unfortunately the jobs report wasn’t all positive, with the employment change figure falling to 0.4% from 0.9%, along with a reduction in the participation rate from 69.2% to 68.9%. Nevertheless, with the participation rate at historically elevated levels anyway, this is not the end of the world and NZD bulls will have been rubbing their hands with glee. However, as is often the case in financial markets, things are often not as simple as that with the value of the NZ dollar falling across the board in response to the news that whole milk powder prices tanked 11.5% to a two-year low.

A somewhat mixed bag in terms of European economic announcements today, with German factory orders and UK manufacturing production figures provide a more industrial beginning to the day. Nevertheless, we also have the notable NIESR GDP estimate for the UK being released in the afternoon along with US trade data. Ultimately I expect the focus of the day to be driven by Russian developments and as such an extension of the risk off sentiment seen throughout both US and Asian markets alike.

Read the full report at Alpari News Room​

 

[Alpari UK]

US Opening Call from Alpari UK on 6 August 2014

Risk aversion seen on Russian threat in Ukraine

• Traders risk averse on Russian plans sanctions and troops gather on Ukrainian border;
• Flight for safety prompts Gold rally, $1,300 level eyed;
• Light data session leaves UK GDP as only notable release.

Ukraine is back in the headlines on Wednesday as the Kremlin prepares retaliatory sanctions against Europe and the US and the Polish Foreign Minister claims Russian troops have gathered on the Ukrainian border.

Geopolitical risk has been one of the major things hanging over the markets in recent months. It hasn’t necessarily prompted a significant amount of selling despite the Russian annexation of Crimea, the Israeli ground offensive in Gaza or ISIS’ actions in Iraq, which makes me think that any response to Russian sanctions or troops gathering on the border will be quite small.

That said, Europe in particular has very carefully selected sanctions that will have minimal impact on its own economy while acting as a deterrent to Russia in its bid to support the Russian separatists. With Russia now looking to impose sanctions of its own, as well as clearly being undeterred by current sanctions if reports of a build-up of troops on the border are true, harsher sanctions from the US and Europe may be necessary that could cause much more harm to their own economies.

Even worse, if Russian troops cross the border, with Putin justifying the actions as an attempt to protect Russian speaking civilians, the situation could escalate quite rapidly and force Europe and the US to take a stand. This is the biggest fear for investors right now and explains why we’re seeing more risk aversion in the markets today, following the late sell-off in the US last night.

As always tends to be the case during periods of risk aversion in the markets, investors are favouring the safe haven assets so far today, with Gold edging higher on the day to trade at $1,288.60. While these gains are only marginal on the day, it’s worth noting that much of the flight to safety occurring yesterday evening. We’re seeing a similar scenario with US indices ahead of the open, with futures currently pointing only a little lower as much of this has already been priced in.

As for the rest of the day, developments in the Ukraine are likely to dominate, especially as there is no major economic data being released. The only notable release actually comes from the UK and even this doesn’t tend to be much of a market mover. The NIESR GDP estimate for the three months ending July should give an idea of how the UK has performed in the first month of the quarter but this figure rarely surprises which may explain why the market impact is so small.

Ahead of the US open, the S&P is expected to open 7 points lower, the Dow 72 points lower and the Nasdaq 15 points lower.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 6 August 2014 - Alpari UK

https://www.youtube.com/watch?v=JPIQ0ODAScs

Markets tumble as Russian scaremongering hits risk sentiment - 00:27
New Zealand employment data mixed - 02:08
German factory orders disappoint - 03:29
UK production figures all come in to the downside - 05:10

 

[Alpari UK]

UK Opening Call from Alpari UK on 7 August 2014

Russian sanctions overshadowed by border troop build-up

• Russian retaliatory sanctions fail to cause much of a stir
• Threat of Russian invasion into Ukraine causes market jitters
• Australian unemployment spikes higher
• ECB monetary policy decision likely to dominate European session.

European markets are largely flat following yet another disappointing Asian session which saw losses across the board in response to an ongoing Russian threat in Ukraine. The imposition of sanctions from Russia yesterday appears to have had little effect to local markets, with traders seemingly focused more so on Mario Draghi and the ECB who are due to speak later today. Subsequently, European markets are expected to open fairly flat, with the FTSE100 +2, CAC -5 and Germany -11 points.


Global sanctions against Russia have been gradually increasing since the annexation of Crimea and later the downing of MH17 via weaponry that has been claimed to have been provided by the Russian military. However, up until now Russia has chosen to remain patient and thus yesterday’s announcement of Russian limits to imports has come later than many expected. Putin’s promise that any actions in response to sanctions would be geared to ensure Russian consumers are not ill-effected could not be any more wide of the mark, with restrictions on imports of US and EU goods likely to limit supply and drive up inflation. The impact upon producers at home will also be felt, given that Moscow is the biggest buyer of European fruit and vegetables by far.

Alongside the war of economic sanctions, there is also the potential for a military war and that is what the markets have been afraid of over the past few days. The 20,000 battle ready Russian military personnel that have amassed at the Ukrainian border is at best a threat but at worst the pretext to a military campaign that many believe will take place under the context of a ‘humanitarian mission’. The past two months have seen Ukrainian government forces taking back swathes of rebel held territory and as such there is clearly a feeling that those rebels that have been fighting using Russian military equipment and intelligence could actually need full boots on the ground to gain back the advantage. Whether this occurs or not is difficult to call and as such there is a certain edginess in the markets rather than a fully blown crisis mode. However, with Russian media having portrayed the ‘plucky rebels’ as Russian comrades in need of humanitarian help, there is likely to be a growing clamour for Putin to send troops in to gain back those areas that have been lost to Ukrainian military in ‘New Russia’. Unfortunately ‘New Russia’ is in fact Southern and Eastern Ukraine and as such any military intervention could mean another land grab and an even greater ratcheting of tensions in what is one of the biggest breakdowns in Russian/Western relations since the Cold War.

Elsewhere in the markets, Australian hopes of a swift and clean transition from an export led economy to one reliant upon domestic consumption have been dashed, with unemployment rising to its highest level since 2002. The rise to 6.4% shocked the markets, with many expecting the previous rate of 6% to remain steady. However, today is unfortunately a continuation of an upward trending unemployment rate that has been rising since mid-2011 when it bottomed out at 4.9%. This is in stark contrast to most of the other major economies which have seen their employment levels rise as we progress out of the 2008 financial crisis. However, it is clearly a stark reminder of the impact weakness in China and major export markets have had upon Australian jobs especially when coupled with depressed commodity prices. The impact to the markets have been notable, sending the Australian dollar lower across the board. However, the impact to monetary policy I believe will be very little in the immediate future. Glenn Stevens insisted that there will be a period of calm where rates are neither raised nor cut and today’s announcement will likely simply lengthen this timeline rather than push them into moving towards any further cuts.

Looking ahead to the European session, the focus is going to be upon central bank policies with both the BoE and ECB announcing their most recent monetary policy. From a policy standpoint, I believe both announcements will somewhat of a non-event. However, it is the ECB meeting that has the potential to really move the market, with many looking to the subsequent Q&A session from Mario Draghi for potential clues to future actions. The ongoing deterioration of Eurozone inflation means that for now we remain in a place where asset purchases cannot be ruled out and for this reason, there is still the possibility that Draghi could drop a bombshell on the markets by hinting as to its potential use. In all likeliness he will seek to let his most recent range of policy measures kick in, yet any inclination or hint that QE could be around the corner is likely to be greeted by substantial volatility in the markets.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 8 August 2014 - Alpari UK

https://www.youtube.com/watch?v=ebPuwJsJkt0

00:14 - Russian fears continue to depress the markets
02:37 - Australian unemployment jumps to 6.4%
04:28 - ECB and BoE fail to provide too much market action
05: 55 - Unemployment claims the second lowest figure since 2008

 

[Alpari UK]

UK Opening Call from Alpari UK on 8 August 2014

Iraq fears drive yet more geopolitical risk-off sentiment

• US airstrikes to take place against the Islamic State
• Chinese trade balance provides strong export growth yet weakening imports
• Trade balance figures the order of the day as UK and Germany both announce their figures.

Global markets are seeking to end the week in the same way it started, with geopolitical risks yet again leading to depression of the indices as traders buy safe haven assets once more. This time the focus has shifted back to Iraq following the US announcement of targeted airstrikes in the region. A busy overnight Asian session has given way to a what is likely to be a somewhat quieter Friday for both European and US markets in terms of economic announcements and thus this risk-off sentiment is likely to continue to dominate. European futures point towards a negative open, with the FTSE100 -48, CAC -44 and DAX -95 points.

Just when we thought that the markets were able to return to an economic focus, another one of the many geopolitical risk regions has flared up, with the announcement that the US is willing to utilise targeted airstrikes against the Islamic State militants that have been moving across the country. Following US involvement in the country, there is no doubt that the US have been following developments closely, with previous estimations that the Islamic State has slowed their advances shown to be misguided. In fact, they have now begun moving into the semiautonomous Kurdish regions, whilst also appropriating the country’s largest dam, in Mosul. The threat to a country such as the US is that many of the Islamic state fighters have originated from Western nations and as such, a greater involvement in this conflict could mean that upon returning to their country you will have a number of battle hardened terrorists seeking to enact revenge against Western countries for their involvement against the ‘Islamic State’. That being said, with the current purge of religious groups such as Christians and the Yazidis, what is occurring is tantamount to genocide against those who do not follow their extreme brand of Islamic religious observation. Thus what will be interesting is seeing exactly how active the US becomes in this crisis and for how long for given that both the Kurdish and Iraqi armies do not seem either adequately equipped or mentally prepared to fight such a brutal and driven enemy. The idea of swathes of the Middle East being controlled by such an entity must of course be the last thing any developed (or underdeveloped nation) would want.

Overnight saw a somewhat mixed picture emerge out of China, where a booming trade balance figure saw exports rise at the highest rate since May 2013 (14.5%), whilst imports posted a negative growth figure for the third time in five months (-1.6%). This meant that the picture has become increasingly difficult for economies such as Australia whereby imports of their raw materials have fallen, yet the promise of greater exports leads one to believe that greater demand must surely be just around the corner. However, for China the picture was much clearer, providing a much needed boost to growth prospects which is sure to quell the need for any further stimulus measures for the time being. The increased demand particularly from Europe and the US is in stark contrast to the poor German factory orders earlier this week, which were attributed to weakening Eurozone demand.

Taking a look ahead at the European session, the focus is likely to remain on the topic of trade balance figures, when the German and UK economies announce their latest figures. Whilst these can be important, it is highly unlikely that they will be as well followed as the Chinese figures given the role China has upon global growth. However, at a time when German economic data is beginning to show some signs of a resurgence following a disappointing Q2, this release will give us yet another insight into exactly how their prized export market is faring at the current time.

Read the full report at Alpari News Room​

 

[Alpari UK]

UK Opening Market Call from Alpari UK on 11 August 2014

Markets set for strong start as markets look to data later in the week

Good morning all!

European markets are set for a stronger open this morning when trading gets underway after a strong performance overnight in Asia saw the major markets jump to the upside. The week ahead is likely to be one that keeps one eye on geo political situations, despite the economic calendar being jam packed full of data for the week. The data in fact started over the weekend as we saw a reading from China on its CPI inflation, and despite these readings coming in bang in line with expectations markets have jumped aggressively. There is yet more data out in Asia as we get going early on this morning with consumer confidence readings and the BOJ monthly economic survey. Asia will be a dominating force throughout the week, with Wednesday the most important day for data with Japanese GDP and BoJ meeting minutes as well as Chinese retail sales and industrial production numbers.

Today’s European trading session could actually be a fairly quiet one in terms of market led data. The economic calendar is looking very light of data and this could quite easily let the geo political situations take centre stage. Over the weekend while a three day cease fire was finally being observed in Gaza, Iraqi Prime Minister when on state television to angrily criticise the President Fuad Masum. The US, who have already launched four airstrikes on IS militants sent a letter backing the President and urging Iraq to form an inclusive government. President Masum has the power to intervene in a row that would see Mr Maliki serve a fourth term as Prime Minister after winning an election in April. However he has not been offered the term and so far President has failed to intervene in the row, heightening tensions in a country that must remain united if it is to put a stop to the growing IS militants.

Although the stories in Iraq, Russia and Ukraine are likely to continue to dominate news agenda’s acorss the globe there is a whole host of economic data due for release this week, with Wednesday the busiest day by far. As stated earlier Asian markets will be begin with data from Japan and China, but then focus quickly shifts to the UK and Eurozone. Most notably we will get more CPI readings from the Eurozone. This of course takes on added importance as Mario Draghi waits to see whether his plan of TLTRO’s has started to work in pulling the figure higher. However his work may all go to waste if Russia continue to ban major foods from western Europe. If farmers have to find new buyers for almost 10% of the products it could well be that this drives the inflation price lower as food price fall on a surplus of goods. Now this may be down the line a little but is a very real danger should the tit for tat sanctions continue to be enforced.

Overall markets will start to a fairly quiet day in terms of data but will most definitely pick up as the week goes on. The real worry for markets will be the uncertainty over the horrendous stories gripping Iraq and Gaza. Any escalation in fighting or major developments will of course give traders and extra unwanted story to keep an eye on when it comes to their trading. Ahead of the open we expect to see the FTSE100 open higher by 42 points with the German DAX higher by 89 points.

Read the full report at Alpari News Room​

 

[Alpari UK]

Weekly market preview from Alpari UK – 11 August 2014

Geopolitical events permitting the coming week will again see the main economic data releases coming out of China and europe. As regards the latter the focus will be on whether the latest economic statistics reveal that Beijing will need to carry out further stimulus measures or not. The latest trade numbers from the country’s customs bureau showed imports unexpectedly falling, hinting at some lingering weakness in the Asian giant’s growth profile.

Meantime, and in the UK, all eyes will be on Wednesday’s Inflation Report. If the most up-to-date market commentary is to be trusted then there might be growing differences amongst the members of the Monetary Policy Committee (MPC) as to the best timing for the first increase in Bank Rate in this interest rate cycle. Precisely in that regard, some observers believe that the MPC may be about to announce a change in its reaction function, subtly moving to place modestly more emphasis on nominal wages as a key determinant of interest rate increases.

The employment report due out on the day before will shed further light on how the degree of slack in the UK economy is progressing. Lastly, and in the Eurozone, figures will be forthcoming throughout the week regarding gross domestic product in France, Germany and for the euro area more broadly, alongside the latest final estimates for consumer price inflation in the month of July.

The headlines through the week will be as follows:

• Russian sanctions on Europe could have devastating affect on ECB plan for stabilising the eurozone economy.
• US air strikes on ISIS militants in order to protect US based personnel and assets in northern Iraqi cities and help those stranded religious minorities stranded and threatened by the fighting violence.
• Asian markets fall into focus as China and Japan both have a busy week on the economic calendar.
Europe looks to ECB’s plans on inflation with CPI reading looking to show weather measures have started to work.
• UK unemployment figures due on Wednesday looking to show further improvement.

Geo political situations aside, the UK could well be the quietest region this week as the economic data looks to focus on other areas of the world. The major talking point will come on Wednesday when the ILO unemployment rate is released. Despite Mark Carney’s forward guidance shifting from its focus on the unemployment many think the current rate still holds sway when discussions are had around rate hikes. The feeling is that a drop below 6% would be a move that would make it very hard for policy makers to ignore. With average earnings numbers also getting better, it would leave the members of the MPC with a decision to make. However, my view is rather more sceptical as I don’t see the any kind of monetary policy change until after the 2015 general election.

The US markets are looking fairly quiet in terms of the economic calendar but it is likely to be growing tensions from between the US and Russia and between the US and the Islamic State. U.S. jet fighters hit Islamic State artillery positions in northern Iraq on Friday, the first of what is expected to be a series of American strikes meant to halt the Sunni extremist advance on the Kurdish capital of Erbil, the Pentagon said. The U.S. F/A-18 jet fighters dropped 500 pound laser-guided bombs on mobile artillery positions outside Erbil.

The strikes were the first since President Barack Obama authorized U.S. military action to target radical Islamic forces in the Kurdish city, where the U.S. has diplomatic and military personnel aiding the Kurds.

Obama said last week that he had authorized targeted airstrikes and emergency-assistance missions in northern Iraq, saying the U.S. must act to protect American personnel and prevent a humanitarian catastrophe. Mr. Obama said the goal of strikes would be to stop militants closing in on the northern city of Erbil, a Kurdish stronghold, or to allow local forces to aid the Yazidis, the religious minority.

The Bank of England is set to update central bank watchers on its view of spare capacity in the labour market at its quarterly Inflation Report this Wednesday. Any sign that the monetary policy committee feels more slack has been absorbed would suggest rises to interest rates sooner rather than later. Since the last report in May, wage growth appears to have been much weaker than the Bank had anticipated, whereas growth and employment data have beaten expectations.

Key labour market figures from the Office for National Statistics are expected to show that unemployment has taken a further fall, and nominal earnings growth is set to go negative. Also on this week’s agenda are the ONS’ second growth estimate for the second quarter of this year and Rics data on housing market strength.

Read the full report at Alpari News Room​