Forex Research

[Alpari UK]

UK Opening Call from Alpari UK on 8 July 2014

Good Morning Folks!

Markets across the globe took a hit during yesterday’s session as the world came back from the long weekend holiday to a raft of negativity after US markets finally broke through all time high levels on Thursday on the back of a strong non-farm payroll figure. However the losses could have been worse, especially in the US where we saw the Dow Jones recover from its lows to finish the session back above the 17,000 level. This may well be seen as a strong signal for traders, but there is a worrying aspect to all of the gains we are seeing across equities. The gains have been relentless but have come at a time of low volume and volatility. This makes me believe that should the markets suffer a shock, the gains are built on such weak foundations that we could well see them unravel very quickly. That shock could come from anywhere and could come as soon as Wednesday in the form of the FOMC meeting minutes. Any hint that there is a more hawkish tone from the Fed would quickly escalate, it must now be a matter of time before a hawkish tone is seen out of the Fed. Continuously good jobs figures coupled with improving inflation readings and strong growth point to the pressure building on Janet Yellen to act.

This morning sees yet more economic data come out of Germany, and after the poor figures we have seen over the last few weeks investors, and especially the ECB will be hoping for a much stronger performance when it comes to this morning’s readings on imports and exports. Yesterday saw the industrial production number fall heavily coming in at -1.8% vs estimates of 0.3%. This follows poor readings on inflation and GDP over the last few weeks. The German economy is a worrying point for Europe. To put it bluntly, without a strong Germany there is no Eurozone. Over the last few weeks Mario Draghi has thrown everything but the kitchen sink at trying to improve the economy, but TLTRO’s and negative deposit rates do nothing if Germany cannot support the bread butter of Eurozone. Today’s numbers will be extremely closely watched and if weaker still there will be some tough questions for Angela Merkel and Mario Draghi come there next meeting, and it could be that the weaker German economy forces the ECB’s hand into the quantitative easing they have so far been trying to avoid.

Elsewhere today we see industrial and manufacturing production numbers out of the UK. There is a growing feeling, much like the US, that continuous positive numbers are likely to push Market Carney and the MPC members at the BOE into a hawkish act, with many even starting believe we could see a rate hike in the UK as early as next month. We may not necessarily get a clear answer on this at this week’s meeting but we will surely be looking for any hints a shift in monetary policy. Personally I remain in the camp that any rate hike before next summer’s general election is hugely unlikely, as this would certainly hit David Cameron’s opinion rating. US markets are set for a quiet day on the economic calendar today, however this week does see the start of earnings season, of course kicked off by Alcoa. It will be an interesting earnings season as investors will want to see that the growth and strength in the major equity indices is backed up by strong sales, revenue and profit numbers out of the companies they are made up of. One thing that would leave investors disappointed would be if we saw strong numbers that remain strong due to cost cutting measures and not organic growth. If we saw this it would be yet another signal that the rally we have seen is built on the most unstable of foundations.

Ahead of the open we expect to see the FTSE 100 higher by 7 points at 6,830 and the German DAX higher by 11 points at 9,917.

Read the full report at Alpari News Room​

 

[Alpari UK]

US Opening Call from Alpari UK on 8 July 2014

US futures lower ahead of Fed speeches

• UK data disappoints but no fears of slowdown yet;
• Slowdown continues in Germany;
• Fed speeches key on Tuesday.

It’s been another tough start to the European session on Tuesday, with data from both the UK and Germany disappointing to weigh further on risk appetite.

It’s not that big a deal for the UK, which has experienced enviable levels of growth over the last year. Manufacturing and industrial production figures released earlier in the European session showed a decline in May of 1.3% and 0.7%, respectively. This is the first decline in both readings since November last year and, at this stage, is probably more a sign of slowing growth rates than a downturn.

The same can’t be said for Germany, which has seen a notable decline in a whole host of indicators recently. Even if we just take the last week, we’ve seen German data fall short of expectations in everything from PMI and IFO surveys to retail sales and unemployment reports. On many of these occasions, these figures have also shown a decline from the previous month. To make matters worse, these are not the first disappointing readings we’ve had from Germany which suggests this slowdown may not be temporary. Given that this is the engine of growth in the eurozone, it doesn’t bode well for the region as a whole if the strongest member is struggling to perform.

US futures are pointing to a similarly difficult start, which isn’t that surprising given the strength of the rally seen last week. In the absence of further positive catalysts, it’s only natural for stocks to pare some of these gains. There isn’t much in the way of major economic releases today that is likely to have a significant impact on the markets, but there are speeches from Fed members Jeffrey Lacker and Narayana Kocherlakota which have the potential to shake things up.

One of the main reasons we’re still seeing record highs being made in US indices right now is the commitment to easy monetary policy from the Fed, with rates currently seen remaining at current levels until at least the middle of next year. If we start to get a more hawkish tone from Fed members, or even direct hints at earlier rate hikes, I imagine these new records may become much more rare. Until then, its onwards and upwards.

Ahead of the opening bell, the S&P is seen 2 points lower, the Dow 18 points lower and the Nasdaq 1 point lower.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 8 July 2014 - Alpari UK

https://www.youtube.com/watch?v=CdwmI54C3jo

 

[Alpari UK]

UK Opening Call from Alpari UK on 9 July 2014

Good Morning all,

European markets are set for fairly quiet day on the economic calendar today as it seems the data takes a break for the majority of the day on Wednesday. However the data that does come out is big, as this evening at 7pm we get the release of the FOMC minutes. Yesterday also saw the start of earnings season in the US and with Alcoa kicking things off in style there is now going to be added pressure on companies to perform and back up the recent equity gains with strong corporate performances.


There is no doubt that the US will dominate proceedings during today’s session but we will have to wait until 7pm for the markets to get into full swing. Pressure is mounting on Janet Yellen and the Fed to act on the positive readings we have seen coming out of the US economy over the last 12 months. Last Thursday saw the first time the non farm payrolls had shown 5 plus 200K consecutive readings since 2001, we also saw the unemployment rate tick to 6.1%. Many believe that despite a low participation rate that a drop below the 6% level is the catalyst the Fed is looking for to act and it could well be as early as next month that we see an increase in tapering or even a potential rate hike. This could well spell danger for those investors who have invested heavily in this equity market rally. This rally is built on severely low volatility and even lower volume leading me to believe that if a change in monetary policy would to happen earlier than people expected, it would cause the gains to unravel at lightning speed.

We have already had some data out of China overnight as CPI fell to 2.3% from 2.5% in the previous month. This will not be seen as a huge issue in China, but is still well below the central banks annual target of 3.5% CPI inflation that was set back in March. Delving a little deeper into the figures it showed that yet again food prices were still the main driver of inflation as fruit prices were up19.8% in June on the previous year. As we have mentioned the economic data does look fairly quiet however the corporate earnings continue to be released as earnings season enters its second day. Today’s sees the beginning of the major bank releases in the US and with many expecting positive things out of a lot of the major financial institutions the pressure is really on today’s releases of Wells Fargo and JP Morgan to do deliver big. However when it comes to the earnings this quarter it will have to be real organic growth that we see from the banks and not numbers adjusted positively due to cost cutting. Inventors will want to see that this equity market rally is built of solid corporate performances and not a house of cards with job cuts at the heart of the good readings. Alcoa has so far started things off on the right foot, but the banks are a different story.

Ahead of the open we expect to see the FTSE 100 open lower by 4 points with the German Dax higher by 22 points.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 9 July 2014 - Alpari UK

https://www.youtube.com/watch?v=6SpIIRhfE_Q

Markets higher as earnings season kicks off - 00:14
Chinese CPI leaves room for further easing - 00:40
FOMC minutes set to dominate US session - 02:07
A look ahead to a busy Thursday - 04:01

 

[Alpari UK]

UK Opening Call from Alpari UK on 10 July 2014

Good Morning Folks!

Asian stocks finally managed to post some gains overnight as markets look set for a more positive session after a week that has seen equity markets retreat from their all-time highs. The positive performance seen was helped by strong import and export numbers out of China and solid unemployment readings out of Australia. Stocks gained in Asia apart from Japan where the Nikkei suffered a moderate fall. Today’s session is still likely to be dominated by the talk of earnings season in the US, however with the busiest day of the week on the economic calendar in front of us there will be no lack of news flow for traders to get their teeth stuck into.

The UK will be a major focus today as we get the BOE interest rate decision. Of course expectations are for no change at today’s meeting, but recent rumours of a rate hike in the second half of 2014 have been gathering pace of late. If we are to get no change in policy today, which is as expected then the vote counts at the meeting minutes will take on added importance. Talks of a rate hike in the next couple of months may have been gathering pace, but currently the voting remains stuck at a solid 0-0-9 in favour of leaving fiscal policy unchanged. For the potential rate hike to be taken seriously we will have to start seeing a change in this voting pattern with at least a couple of MPC members voting for a change. As mentioned already a number of times this week, the equity market gains we have seen are based of very weak foundations, being built during a time of low volatility and even lower volume. So it could well be the case that we don’t need a rate hike to spook the markets and that a couple of committee members changing their vote will be enough to see the markets plummet.

Last night saw the release of the Fed meeting minutes and it was announced that Janet Yellen and the Fed have been contemplating a full exit from the asset purchasing plan that has been in place. The minutes showed that the Fed plan to end the asset purchasing plan in October and have also come up with a plan to manage the increase of interest rates. Interestingly the minutes mentioned that the members were concerned that the recent low volatility in financial markets showed that investors were not factoring in a more hawkish approach from central banks. This clearly shows that the Fed are also worried about the weak foundations the equity market rally is based on and that the gains could unravel at lightning speed if something was to catch them of guard. It seems there is an overall complacency from traders and investors at the moment and that no one will take heed of the warnings until markets finally do show this is a serious matter by posting huge declines.

Overall today the BoE will take centre stage but with a whole host of CPI readings out of the Eurozone both today and tomorrow and earnings from the US it will be a perfect day for an increase in volume and volatility as traders head towards the weekend. Ahead of the open we expect to see the FTSE 100 open higher by 7 points and the German Dax higher by 11 points.

Read the full report at Alpari News Room​

 

[Alpari UK]

US Opening Call from Alpari UK on 10 July 2014

US futures slide ahead of jobless claims data

• US futures tumble following similarly weak European session;
• Dovish Fed ensures stocks will remain high in the coming months;
• Chinese trade balance figures disappoint.
• Weekly jobless claims in focus.

Another negative European session is also weighing on risk appetite in the US ahead of the opening bell on Wednesday, with the S&P seen opening 17 points lower, the Dow 142 points lower and the Nasdaq 36 points lower.

This comes following a fairly positive US session on Wednesday, where investors were boosted by the dovish tone of the Fed minutes. Despite US economic data dramatically improving in the second quarter and the outlook being equally as positive, the Fed maintained its dovish stance claiming rates will remain near zero for a considerable time after the end of its quantitative easing program.

This is exactly what investors wanted to hear and what they had been banking on during the entire period of strong numbers. When investors begin to price in tighter policy, we can see a more negative response in equity and bond markets to strong data but last Thursday’s incredible jobs report prompted none of that. Investors instead cheered the results and stocks soared to record highs. With the Fed maintaining this dovish stance on rates, this may continue in the coming months.

That doesn’t appear to have provided much comfort today though, with investors currently adopting a more risk averse stance. The inability for the Dow to hold above 17,000 on Wednesday or the S&P to break through 2,000 may be seen as a red flag among investors that we’re not yet ready for that next leg higher and as a result, we’re going to see profit taking near these levels for now.

One of the things weighing on sentiment this morning has been the Chinese trade balance figures overnight, which fell short of expectations due to lower exports. The slowdown in the eurozone recovery could be responsible for a portion of this, with figures this morning acting as a further reminder that while things may be better than they have been in the past, there is still a long hard road ahead. Industrial production figures for Italy and France showed a significant decline in May despite expectations for a small rise.

As we near the end of a fairly quiet week on the economic calendar, there is a couple of important economic readings scheduled for release today. In particular, weekly jobless claims which have been a consistent strong point for the US this year. Again, we’re expecting another good reading, 316,000, which further supports the view that the US is well on its way to a strong recovery this year.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 10 July 2014 - Alpari UK

https://www.youtube.com/watch?v=OS6CmqcMLtQ

Fed maintains hawkish stance in June minutes - 00:21
Chinese exports slide in June - 02:26
Portuguese bank fears hit investor sentiment - 03:19
US weekly jobless claims in focus - 04:50

 

[Alpari UK]

Daily Market Update - 11 July 2014 - Alpari UK

https://www.youtube.com/watch?v=2ow4T9Scj-M

 

[Alpari UK]

Weekly market preview from Alpari UK – 14 July 2014

A busy week ahead in the markets following a particularly quiet one just gone. The return of substantial economic events out of the US is particularly encouraging for volatility, where Janet Yellen’s testimony at Tuesday’s monetary policy report is likely to take centre stage. In the UK, the announcement of employment data on Wednesday is likely to contribute to a volatile start to the week. Meanwhile, the eurozone inflation rate will no doubt be absolutely key following the introduction of various easing measures by Mario Draghi.

In Asia, the release of Chinese GDP on Wednesday will provide a substantial degree of interest as the impact of the 2014 slowdown looks set to lower growth expectations for Q2. Meanwhile, the Japanese focus will be dominated by monetary policy statement on Tuesday where expectations of further easing are driven by a slowdown in the economy following the sales tax hike in April.


US

An interesting week ahead for the US economy, where the release of retail sales and consumer sentiment data is joined by two major testimonies from Fed chair Janet Yellen. It is those two speeches from Yellen which I believe could significantly move markets, as she addresses the Senate Banking Committee for the Fed’s semi-annual monetary policy report. The focus within markets has well and truly shifted away from asset purchases and towards interest rates in recent months and this is likely to be key this week. The end of asset purchases in October is now all but certain, yet there remains significant uncertainty surrounding the timeline for interest rate hikes. Yellen has been keen to stress that rates will rise gradually and there will likely be some time between the end of asset purchases and the start of the rate hikes. However, with economic indicators pointing to a booming US economy, there is the potential for this timeline to be pushed forward somewhat and this is what the markets are looking for to drive volatility. Personally I believe that rates will rise in Q1 2015 which is likely to remain as a timeline despite strong macro figures. The Fed has been very careful not to shock the markets in the past and Yellen will not want to spark a major sell-off should she not prepare the markets properly.

On Tuesday, the retail sales figure will be hugely important at a time when the economic picture is really looking positive for H2. The retail sales data is crucial because it is a quantitative representation of consumer behaviour in an economy largely driven by domestic consumption. As such, strong retail sales give a great gauge of where GDP growth is moving in that quarter. This release also has a qualitative element which reflects the fact that people spend money when they are both confident in their own situation and the future conditions of the economy. Thus should we see a strong retail sales release, it leads me to believe that consumers see economic growth continuing for some time and employment conditions also being supportive to major expenditure. This month’s release is expected to move higher towards 0.6% following the 0.3% seen for April. That would reflect a fifth consecutive positive figure which goes some way to explaining the strength we’ve seen in indicators such as GDP recently.

Finally, the consumer sentiment survey released on Friday gives a more qualitative focused release of consumer attitudes. This is the July reading, compared to the retail sales figure which is for May. Subsequently while it is not something which reflects the spending behaviour, the timing of it means that we can gauge how July retail sales data is going to look when it is released in two months. Given that a survey will typically not affect an economy in the way sales data would, I do not expect as much volatility. However, it is key in understanding how the likes of retail sales could move in the coming months. This month the markets are expecting a figure close to 83.2 following a figure of 82.5 last time round.

UK

An interesting week ahead in the UK, where the release the jobs report is preceded by a speech from the BoE governor Mark Carney. On Tuesday, Carney will face yet another treasury select committee hearing with the focus set to be upon financial stability. With that, we are more than likely to revisit the threats of the housing market and whether the steps introduced by the BoE at last months meeting will be adequate to stem the much discussed risks. Ultimately, the question may come down to whether the main tool that should be used is interest rates, thus pushing for a hike sooner rather than later. Given the changing perception of when rates are set to be hiked, we are still in a stage of price discovery as people seek to buy or sell according to any change in expectations of when rates are to rise. For this reason, any hints at sooner or later than expected rate hikes will likely drive market volatility.

On Wednesday, the release of the unemployment rate and claimant count data is going to be crucial in determining if this period of positivity is set to continue for the UK economy. The tumbling rate of unemployment last month really took the headlines as we reached 6.6% for the first time since March 2009. Given this major fall last month I do not expect to see any further drop this month, but it is just important that the figure does not rise yet again. Thus the focus could yet be the claimant count change, which is more of a detailed release. The markets expect to see very little change from last month’s 27.4k and in which case, the scene is set for a possible miss which could bring volatility. Thus I expect to see the unemployment rate remain at 6.6% with the focus possibly centred upon the claimant count figure.

Eurozone

A similar story to the other regions, where the existence of multiple major events means that there is a possibility of volatility within the markets. The first of these is the speech by Mario Draghi at the committee on economic and monetary affairs of the European Parliament. This testimony is predominantly focused upon monetary policy at the ECB which of course is one of the most likely drivers of volatility in the markets. With Draghi having recently implemented a whole raft of measures aimed at minimising the risk of deflation, it will be interesting to get some more details regarding those steps and what impact he expects them to make. However, the market focus will likely centre around the chance of a fully blown asset purchase scheme which ECB members have hinted as being a possibility down the line. Thus be sure to keep a look out for any discussion around this topic for potential volatility in the markets.

Later in the week, the eurozone CPI reading will shed more light on where the ECB’s core economic indicator stands. Of course, the implementation of several measures at the ECB means that even if we did get a further fall in inflation this time around, a kneejerk move from the ECB is highly unlikely. However, any shock fall could spark heightened expectations in the markets that asset purchases could be on their way or at least discussed and this means the markets will be following it very closely. That being said, the markets are looking for another figure of 0.5% to match last months release.

Asia & Oceania

Another week of note in Asia, where Japanese monetary policy and Chinese growth come to the fore. It is the release of Chinese GDP which will certainly grab the attention of the markets overnight on Wednesday. The slowdown throughout H1 within China has been discussed in depth with many worrying that the mix of debt and overcapacity meant we were going to see the powers that be leave the economy to cool off somewhat. However, the signs are pointing towards a recovery and move back to the strong growth we have become accustomed to. The most important indicator for the Chinese has always been GDP growth which is a sense of pride in an international realm, along with a signal to their domestic population that the ruling party is doing what is best for the country. For this reason, Wednesday’s reading is going to be crucial in determining exactly how much the recent slowdown has hurt their country and whether markets are satisfied that this will be temporary. Market expectations are for a flat figure of 7.4%, which is significantly down from the 7.7% seen at the back end of last year. However, should we see any movement either way it will be an opportune moment for the markets to gauge in what direction the economy is moving.

On Tuesday, the BoJ monetary policy stance looks set to come back into focus with their latest monetary policy decision. Recently, market calls for further QE have been largely ignored despite a weakening in many of the fundamentals off the back of April’s sales tax hike. It is worth bearing in mind that the Japanese sales tax of 8% still pales in comparison to some of the other major economies, with the UK VAT currently at 20%. For this reason, I do not see this move as being particularly restrictive for the economy and whilst the negative effect is not ideal, it is likely to be short term. However, it is more likely that the BoJ will be thinking about their currency and inflation levels as a reason to raise asset purchases further. With much of the geo-political conflict we have seen around the world, the Japanese yen has been a safe haven asset despite the ongoing printing of the yen from the BoJ. Thus the deterioration in the price has cooled somewhat despite the call from many within the markets for a rate of 120, compared to the current level of 101. That being said, I do not I do not expect any change from the BoJ at this meeting as they seek further data regarding where the economy is heading off the back of the sales tax hike. As things stands, the 2% inflation target does not seem attainable should the monetary policy remain the same given an end to the yen’s decline along with weakened consumer spending. However, it is most likely that the BoJ will look to move on this sentiment later rather than sooner in my opinion.

Read the full report at Alpari News Room​