Forex Research

[Alpari UK]

Daily Market Update - 3 July 2014 Preview - Alpari UK

https://www.youtube.com/watch?v=3dwM9cAJtmk

European markets higher despite mixed services PMI readings - 00:40
ECB rate decision and press conference preview - 02:09
US jobs report preview - 04:16
Other economic data to watch out for today - 06:00

 

[Alpari UK]

US Opening Call from Alpari UK on 3 July 2014

Traders optimistic ahead of jobs report and ECB

• ADP raises expectations ahead of NFP release;
• Strong jobs report may be bad for equities and Treasuries but good for the dollar;
• ECB unlikely to announce more stimulus measures but Draghi may talk down the euro more;
• Plenty of US economic data also being released today.

A mixed start to the session from an economic data stand point has not taken the shine off risk appetite on Thursday. In Europe, indices are trading as much as six tenths of a percentage point higher, while in the US indices are expected to open around a tenth of a percentage point higher. Ahead of the opening bell, the S&P is expected to open 1 point higher, the Dow 21 points higher and the Nasdaq 4 points higher.

A lot of this may be attributed to yesterday’s ADP figure, which smashed expectations with a 281,000 increase in June. Of course, this is only viewed as an estimate of the official job creation figure, and a pretty poor one at that, but a beat of that magnitude will always raise expectations ahead of the non-farm payrolls release.

As a result, today’s strong start is not necessarily an ongoing reaction to the ADP figure but higher expectations ahead of the jobs report. With that in mind, a reading in line with analysts’ forecasts of around 212,000 is no longer likely to be good enough for traders. We need to see something around 250,000 or more in order to fall in line with what is now being priced in.

The next question is how the markets will react to the data. Of course, a strong jobs report is good for the economy but that is not necessarily good for risk appetite. When the rally in equity markets is being supported by lower interest rates, the threat of an earlier rate hike as a result of an economy that’s recovering at a faster rate is not going to be conducive with a continuation of that rally. With that in mind, a figure in line with yesterday’s ADP number is likely to weigh on equity markets today, while US Treasury yields could rise and the US Dollar strengthen.

Other aspects of the jobs report are also likely to be of interest, such as the unemployment rate, the participation rate and the average hours worked, due to the Fed’s commitment to base monetary policy decisions on a basket of indicators. However, based on what we’ve seen in the past, the non-farm payrolls figure, along with revisions to previous releases, still carries the most weight.

Another major event today is the ECB rate decision and press conference. This is not because we’re expecting any further stimulus from the ECB because we’re not. ECB President Mario Draghi has a tendency to create major swings in the market and always delivers plenty of volatility.

We may see a more dovish Draghi at the press conference today as I imagine the ECB will not be pleased with the strength still being seen in the euro despite all of the stimulus measures announced last month. It’s no secret that a strong euro is not ideal for the eurozone and Draghi has used to tactic of talking down the currency in the past. With it still trading above 1.36 against the dollar, we may see this tactic used again in an attempt to force it through 1.35.

Aside from these two events , there’s also plenty of big economic releases coming from the US today including weekly jobless claims, services PMI, non-manufacturing PMI and trade balance. Each of these has the potential to move the markets and as a result I expect to see a huge boost in volatility today.

Read the full report at Alpari News Room​

 

[Alpari UK]

Reaction to US jobs report

The US labour market gave a boost to growth prospects for H2 as payrolls and the unemployment rate both portrayed a picture of a fast improving economy. Coming off the back of various positive alternate indicators such as ADP payrolls and the Philly fed index this should not come as a surprise. Furthermore, the CB consumer confidence figure last week alluded to the perception of an optimistic outlook for the jobs market.

Today’s announcement saw the headline unemployment rate fall to 6.1%; representing the lowest level since October 2008. Meanwhile the payrolls figure smashed expectations, rising to 288k which represents the same figure announced for April; seen by many as an outlier. In fact, it seems that we have seen a shift in what the new norm is, with figures closer to 300k than 200k expected to increase in frequency. Add to this a positive revision to last month’s figure by 7,000 people and there is no doubt that the economy is reaching a critical stage where employers feel comfortable enough with the strength of the recovery to be able to take on more workers on a regular basis.

One thorn in the foot of this release came with the announcement that average earnings on a year-on-year basis fell to 2% from the 2.1% seen last month. Meanwhile the participation rate remained steady at 62.8. It is these figures along with elements such as part time employment which is viewed as ‘slack’ within the economy and Janet Yellen will be watching closely. That being said, Yellen will be well aware of the linkages between employment and economic growth, where newly empowered employees are able to consume far, pay more taxes and reduce the amount of support they need from the government. Which can only be a good thing.

Read the full report at Alpari News Room​

 

[Alpari UK]

Reaction to ECB decision and press conference

No change from ECB but Draghi talks down euro

This may not be the most dovish press conference than Mario Draghi has given but it certainly had dovish undertones, with the ECB President stressing again that rates will remain low for an extended period of time, while warning that they are monitoring a number of things, including the euro exchange rate. This is clearly a reference to the high exchange rate that we’re still seeing despite the package of stimulus measures announced by the ECB last month. The euro not be trading at the level it was a couple of months ago but above 1.36 against the dollar is still considered to be near the upper range that the ECB and most eurozone member states would like to see.

Unfortunately for Draghi, the press conference was almost entirely overshadowed by the US jobs report which was responsible for many of big moves in the markets. That said, Draghi’s dovish message was loud and clear and the euro didn’t just slide against the dollar, which benefited greatly from the jobs report, we also saw weakness against the pound and the yen, the latter coming following an initial spike.

Probably the most interesting point from the press conference was the announcement that the ECB meetings will change to a six week cycle as of January 2014 and will start to release minutes. The latter will provide the additional insight into the decisions that have been craved for years, but the ECB has until now refused to give. Transparency has been increasingly sought after throughout the financial crisis and the ECB has been very slow to do something that both the Fed and the Bank of England have done for years.

The most interesting thing that could come from the minutes in the short term is the policy makers view on quantitative easing and how close they actually are to trying it. Until now, we’ve had to put up with Draghi making reference to the use of it without ever providing real insight into the likelihood that it will actually be used. The minutes will hopefully not keep this information from us. That is, of course, assuming that the ECB doesn’t try quantitative easing before the end of the year, which I highly doubt.

Read the full report at Alpari News Room​

 

[Alpari UK]

UK Opening Call from Alpari UK on 4 July 2014

US bank holiday brings lively week to a quieter close

It’s been an extremely lively week so far in the financial markets, capped off yesterday with a fantastic jobs report from the US that completely overshadowed Mario Draghi’s ECB press conference. Unfortunately, the busy schedule this week is unlikely to extend to today, as a bank holiday in the US combined with a lack of economic data or events elsewhere is going to result in lower trading volumes and a lack of catalysts for the markets.

One of the most interesting things yesterday was the response to the jobs report. It goes without saying that this was pretty great all round, from job creation and previous revisions to unemployment and participation. Not to mention that this is the first time in more than a decade that we’ve seen five consecutive months of job creation above 200,000.

But it was the fact that traders responded so positively to the number, despite the fact that it surely acts as evidence that the US recovery is much stronger than previously thought which may tempt the Fed into an earlier rate hike. Maybe investors are just not ready to accept that yet and until Janet Yellen herself acknowledges it, we’ll continue to see equities rally on good news and US Treasury yields barely change. Given the recent data though, Yellen may not be far away from ruining the party at which point the hangover may finally start to kick in.

That positivity does not appear to be carrying over into today’s European session, with indices currently seen opening a little flat. As mentioned earlier, there is a real lack of catalysts today, with the only notable economic release being the German factory orders before the open. These numbers can be a little volatile and we’re expecting this to continue today with a 0.8% decline seen for May, following an impressive 3.1% rise in April.

Ahead of the open, the FSTE is seen higher by 1 point, the CAC lower by 7 points and the DAX lower by 2 points.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 4 July 2014 - Alpari UK

https://www.youtube.com/watch?v=0dRx7Zy2Bxw

Market Analyst Craig Erlam talks about why markets are looking a little quiet on Friday and highlights a few key events next week.

 

[Alpari UK]

Weekly market preview from Alpari UK – 7 July 2014

A comedown from the first week of the month ahead, where the frequency of major economic announcements becomes a little thin on the ground. Nevertheless, the hope is that there should be enough to keep the markets bubbling along nicely. The major event of note from the US region is certainly going to be the release of the Fed’s minutes from the June FOMC meeting. Meanwhile, the BoE monetary policy announcement on Thursday is set to dominate proceedings in the UK. Also on Thursday, the ECB releases it’s monthly bulletin which will most likely form the only major event to watch out for in the Eurozone region.

In Asia, the one figure I will be paying particularly close attention to will be the Chinese trade balance figure to note how export and import growth is advancing as the economy moves out of the recent slowdown. And finally, the outlook for Australian employment comes back into focus on Thursday when the jobs report is released.


US

A quiet week ahead in the US, where the release of the minutes from June’s FOMC meeting marks the real event of note to watch out for. Given the evident improvements within the US economy in recent months, there is a growing emphasis upon whether we will see the likes of asset purchases or ultra low interest rates brought to a halt earlier than expected. The meeting back in June poured cold water on this somewhat with the announcement that under a broader assessment of indicators, the Fed believes an underutilisation in the labour market is still prominent. Given the less impressive jobs report released in June compared to the one released this month, it is unlikely that the Fed will get too carried away. Ultimately the issue on everyones mind is going to be the interest rate decision, with the asset purchase pathway seemingly set to come to an end later this year. Thus look out for any indications of a shift in emphasis with regards to the interest rate hike. However, with a slowdown in the May payrolls along with continued sub 2% inflation, I believe we are less likely to see it happen on this occasion.

UK

A similarly thin week ahead for the UK, where Tuesday’s release of the manufacturing production figure and the BoE monetary policy announcement represent two of very few events. On Tuesday, the manufacturing production figure is hoping to follow the lead of the recent manufacturing PMI figure, which saw a surge in demand leading the indicator to a 7 month high. The production figure is the end product of surveys such as the PMI and ultimately allow us to know whether the goods are actually being produced. The strength seen in the manufacturing sector has been portrayed well through this figure, where monthly swings between growth and contraction has now given way for 5 consistent months of growth. This trend is expected to continue yet again this week. Forecasts point towards a moderate rise from 0.4% to 0.5% which would reverse the slowdown in the rate of growth seen in the past two months. Thus anything above 0.4% would be very positive and could point to yet another boost in the sector.

On Thursday, the latest monetary policy decision from the BoE is expected to bring few surprises despite our previous experience of this being one of the biggest events of the month for the UK economy. As things stand, we do not expect to see rates rise anytime soon, despite rumours of the timeline being brought forward to within 2014. Mark Carney is very unlikely to use this forthcoming meeting to change the interest rates or asset purchase facility which means it will most likely be somewhat of a non-event. Realistically we are awaiting further hints that the interest rate hike could come earlier than expected, yet typically that would happen either with the release of the minutes or discussions from the Carney himself. Thus whilst this event is always worth looking out for, I do not expect any fireworks.

Eurozone

Yet again, not too much to move the markets in the Eurozone, where the ECB monthly bulletin is the major event of note. Due out on Thursday, this release typically addresses issues such as the threat of deflation and how the monetary policy stance of the ECB is likely to impact their targets going forward. Given the plethora of policies implemented by the ECB last month, it is likely that we will see a more upbeat bulletin with expectations of a gradual increase in CPI over the remainder of the year.

Asia & Oceania

China is the focus for the Asian region, where the release of trade balance data on Thursday is going to be the mainstay of attention for the markets. Given the reliance of the Chinese economy upon exports for growth, the ability to import raw materials and export finished products is the basis for a prosperous economy. With the PMI figures picking up, the signs are there for more positive trade figures going forward. The official manufacturing PMI index saw new orders at the joint highest level in more than two years. This gives me confidence that we will start to see those figures reflected within the exports and imports in the near future, paving the way for a pickup in growth prospects.

In Australia, the jobs report brings insight into how their economy is faring in a period which saw a drastically lowered trade balance and retail sales figures. The Australian economy on the whole has actually fared better than many expected given the weaknesses evident within China over the past 6 months. This has been reflected in the Australian dollar which has been rising accordingly. However, with some questioning whether the poor trade balance will signal a break lower in employment. This is unlikely to be the case, where this figure has been skewed massively by the falling price of iron ore. This has come despite increasing volumes which to me means the likeliness of higher employment yet potentially lower wage growth. In line with this, the expectations point towards a rise in employment by 12.3k from the -4.8k last month. However, this is offset by a forecasted rise in the unemployment rate to 5.9%. In the past when we have seen such contrary moves, it reflects a possible rise in the participation rate which in itself is a good thing. However, it is yet to be seen and typically when the market moves significantly from such a release, it will be driven by both measures moving positively or negatively. In this case I expect to see the unemployment rate remain steady whilst the change post an above zero figure.

Read the full report at Alpari News Room​

 

[Alpari UK]

UK Opening Call from Alpari UK on 7 July 2014

European markets look set to start the day in negative territory for Monday’s session as traders brace themselves for the a return of the US markets after Friday’s Independence Day holidays. It will likely be the whole host of important data that was released on Thursday that takes centre stage as we are try to digest the non farm payroll and ECB press conference that was released. In truth the payrolls are the bigger story as this week we will get the FOMC minutes. After a positive number on Friday and the overall unemployment rate falling to 6.1% there is yet more pressure on Janet Yellen and the Fed to take a more hawkish approach over monetary policy. It is widely thought that a drop below 6% unemployment will be a trigger for the Fed to not only act on the rate of tapering but also take steps to raise interest rates. Wednesday should give us a closer look at exactly what the Fed are thinking as we get the meeting minutes, with any slight shift in the voting likely to cause big moves in currency and equity markets.


Overnight Asian stocks fell back somewhat as profit takers jumped in after equity markets hit 6 year highs last week. With the US returning today the question will be asked yet again as to when this bubble in equity markets is going to end. Major indices around the world have been relentlessly pushing higher, however the moves have been on the back of hardly any volume and even less volatility. This is always a worrying sign as it shows the gains are bit on very week foundations, and that any slight pull back could well be greatly exaggerated. It won’t take much to spook investors and forced those riding big profits to start closing out. With geo political tensions in Iraq and Ukraine and a number central banks looking to pull stimulus, being prepared for the inevitable pull back is something a lot of traders should be ready for.

As this week moves on the economic calendar remains fairly quiet with the FOMC meeting minutes and BoE rate decision the key announcements to look out for. However don’t take this as us having a quiet week. With traders returning from the long weekend across the pond and the FOMC lining up their minutes we could well see volume and volatility pick up. However there is no doubt that Wednesday’s meeting minutes are the major focus, and with many of us looking at just what will be the catalyst for this sharp correction on the horizon, taking an eye off Janet Yellen and the Fed would be a very foolish thing to do as stranger things have happened than a sudden increase in tapering or even stronger hints of a rate hike.

Ahead of the open we expect to see the FTSE lower by 4 points with the German DAX higher by 2 points.

Read the full report at Alpari News Room​

 

[Alpari UK]

US Opening Call from Alpari UK on 7 July 2014

Markets primed for correction following strong week

• Markets primed for correction following strong week;
• FOMC minutes may hint at earlier rate hike;
• German industrial production numbers disappoint again;
• Quiet US session expected following chaotic week.

The week has got off to a slightly negative start following the long weekend in the US. In truth, the weakness being seen this morning is probably more a case of profit taking than anything else, despite the numbers from Germany this morning being far from encouraging.

We saw plenty to be optimistic about from the US last week, particularly from the jobs report on Thursday which showed 288,000 jobs being added and the unemployment rate falling to 6.1% in June. This was the first time since 2001 that we’ve had five consecutive months of more than 200,000 jobs being added and the lowest the unemployment rate has been since October 2008.

That is unlikely to be enough to convince the Fed to hike interest rates any earlier than the middle of next year, or that appears to be what the markets believe given that these numbers were not met with a response typically associated with hike fears. The Fed minutes, which will be released on Wednesday, could shed more light on the current stance on rates, although it is worth noting that this meeting took place almost two weeks before Thursday’s jobs report. That said, should more members highlight the improvement in the data recently and even hint at an earlier rate hike, it could weigh quite heavily on sentiment.

Following such a manic week in the markets, this week is expected to start a little slower, with the number of economic data releases being significantly reduced. The only notable release this morning has been the German industrial production number, which showed a 1.8% decline in May, while the April figure was revised lower to -0.3%, marking a third consecutive decline. While this is concerning, especially as the decline this month was driven by falling orders both domestically and externally, I do expect things to pick up in the coming months and clearly so do other investors as the DAX is still trading near all-time highs.

The US session is looking very quiet from an economic data perspective, with no numbers scheduled for release. This isn’t necessarily a bad thing, given the amount of data we saw last week. We saw a good reaction to much of the data last week and this period of calm may allow for a necessary correction.

Ahead of the opening bell, the S&P is seen 3 points lower, the Dow 28 points lower and the Nasdaq 3 points lower.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 7 July 2014 - Alpari UK

https://www.youtube.com/watch?v=hUpdQYJmQ2g&list=PL9AE6BFC876359986

German industrial production adds to worrying period for the largest Eurozone economy - 00:23
Why earnings season is going to be crucial - 02:23
A look ahead to this week in the markets - 03:40