Forex Research

[Alpari UK]

US Opening Call from Alpari UK on 20 August 2014

Caution seen ahead of FOMC minutes following MPC vote


• MPC votes 7-2 against a rise in interest rates;
• Rate hike still unlikely until next year as inflation falls to 1.6%;
• Two FOMC members may vote in favour of hike.

US futures are edging lower ahead of the release of the Fed minutes, which comes later on in the session. Ahead of the open, the S&P is seen 2 points lower, the Dow 19 points lower and the Nasdaq 4 points lower.

I imagine there’ll be a little more caution as we approach the release given the slightly surprising Bank of England vote on interest rates at the previous meeting. The minutes of that meeting was released this morning and showed two policy makers, Martin Weale and Ian McCafferty, voted in favour of a 25 basis point hike, taking the rate to 0.75%.

I say it was a surprise but both of these policy makers had become notably more hawkish in the last couple of months, making a vote on the hike more likely. I think many expected some dissenting voices at the meeting but not necessarily votes this early on. The response in the market would suggest that this doesn’t change much. Of the remaining members, one or two may be tempted to vote in favour this year based on recent comments but not enough to form a majority. Especially not following yesterday’s CPI number which showed inflation falling to 1.6% in July, which should be enough to convince most policy makers that a hike is not warranted at this time.

With members of the MPC now favouring a rate hike, it will be interesting to see if their US counterparts at the Federal Reserve do the same. We’ve already seen Charles plosser vote against keeping rates the same and he may soon be joined by other hawkish members, with Richard Fisher appearing the most likely to join him, based on recent comments.

While I don’t think that we’ll see a rate hike until the end of the first quarter of next year, at the earliest, given Chairwoman Janet Yellen’s very dovish stance, and the similar stance of most of the committee, two or three votes in favour of raising rates could cause quite a stir in the markets.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 20 August 2014 - Alpari UK

https://www.youtube.com/watch?v=FmR_WnvJj_4

Japanese trade figures normalise following sales tax - 00:17
BoE minutes surprise markets as two vote for a rate hike 01:25
A look ahead to the FOMC meeting minutes 03:20

 

[Alpari UK]

UK Opening Call from Alpari UK on 21 August 2014

Europe set for positive start ahead of latest PMI readings

• FOMC minutes more hawkish but markets end higher anyway;
• Eurozone PMIs expected to weaken further in August;
• Another good month expected for UK retail sales;
• Plenty of US data to come this afternoon.

European indices are set for a slightly positive open on Thursday ahead of the PMI readings from Europe, retail sales for the UK and a whole host of data from the US.

There is a feeling though that despite all this data coming out, the markets only really care about one thing and that’s Janet Yellen’s speech at Jackson Hole tomorrow. It’s a little surprising that European indices are pointing higher this morning, not to mention the fact that their US counterparts ended comfortably in the green yesterday, as the FOMC minutes from the last meeting had more of a hawkish tone than some expected.

We’re certainly seeing more emphasis on the pace of the recovery at these meetings and the minutes from the last meeting showed discussions around how to raise rates when the time comes. Of course, this doesn’t put the Fed on a par with the Bank of England which appears far closer to the first rate hike after two policy makers voted in favour yesterday, but we do appear to have reached the point where the hawks are beginning to speak up a little more. Maybe the markets are willing to overlook this as long as Chairwoman Yellen continues to offset these with some extremely dovish comments of her own.

We’ll hear exactly what she has to say tomorrow morning when she speaks on the labour market at Jackson Hole. There’s been a lot of speculation about Wall Streets absence this year with some suggesting that it may be the Fed’s way of avoiding the discussion of short term measures and instead focusing on the longer term strategy of the central bank. If that is the case then investors who are looking for a Bernanke-esque Jackson Hole performance are going to be very disappointed.

It’s also surprising that European markets aren’t feeling more of the impact from the weakness in the HSBC manufacturing PMI which fell to a three month low of 50.3 in August. Quite often, these Chinese figures can set the tone for the day but it appears that right now, investors are far more concerned with what the Fed is doing than how China is performing. As long as the country is on course for 7.5% growth, which it appears to be, then investors aren’t worried.

There will be a big focus on economic data today, everything from PMI readings and retail sales figures to jobless claims and housing data being released. We kick things off quite early on with the release of the manufacturing and services PMIs for the eurozone, which once again are not expected to be particularly good. Investors are desperate for signs that the region is going to take a turn for the better but it appears they’ll have to wait a little longer with the numbers expected to show a further decline in confidence in August.

The UK economy is looking in far better shape and retail sales numbers for July are expected to give further evidence of this. The numbers are expected to be a little softer on a year on year basis than what we’ve seen this year, but that’s not something we should be concerned about as it’s more reflective of where the economy was 12 months ago than where it is now. You have to remember that 18 months ago we were talking about a triple dip recession in the UK so the numbers were considerably worse. Compared to a month ago, sales are expected to have increased by 0.4%, which is more than good enough to keep investors happy.

Finally it’s over to the US, where we’ll get weekly jobless claims data, the latest manufacturing PMI reading, housing data and the July Philly Fed number, so there’s still plenty more to come on the economic calendar.

Ahead of the open on Thursday, the FTSE is seen 8 points higher, the CAC 5 points higher and the DAX 19 points higher.

Read the full report at Alpari News Room​

 

[Alpari UK]

US Opening Call from Alpari UK on 21 August 2014

Risk appetite not shaken by poor PMI readings

• European indices higher despite disappointing PMI figures;
• Oil prices tumble again on Chinese slowdown;
• Overall UK retail sales slow but the core number is what counts;
• Lots of US data to focus on today.

It’s already been a busy day in the markets for economic data, with Chinese and eurozone PMIs and UK retail sales figures being released, and now it’s over to the US where manufacturing, housing and jobs data will come into focus.

The data seen so far today hasn’t been great but that hasn’t affected investors’ appetite for risk, as European indices have continued their march higher. Even the FTSE which has a high exposure to China due to its heavy weighting in mining stocks is up more than 20 points on the day, while the CAC and DAX are faring even better.

This is despite a mixed bag of manufacturing and PMI readings, with both German numbers exceeding expectations along with the French services number. Although, this doesn’t really paint the whole picture; the German numbers may have been better than expected but they still experienced a decline from last month and the overall eurozone numbers were very disappointing. Maybe what we’re seeing here is another example of disappointing figures getting a positive response on hopes of more monetary stimulus, although as I’ve said previously, I believe this is very premature. I can’t imagine the ECB providing more stimulus until next year at the very earliest. And even then I doubt it would be quantitative easing.

Oil prices are tumbling again today following the HSBC manufacturing PMI from China. The number is just further evidence that China is facing an uphill task to maintain the kind of growth it has become accustomed to. We’ve already seen oil prices falling due to lower demand in China and Europe and clearly this number would suggest that demand is not got to pick up in the coming months.

UK retail sales rose by only 0.1% in July, which fell short of expectations, although the core number slightly exceeded expectations at 0.5%. Given how volatile the overall number can be, traders tend to pay more attention to the core number so won’t be overly concerned with the overall number.

There’s still plenty more data to come from the US today, including initial jobless claims which are expected to remain low at 300,000 in a further sign that the labour market recovery in the US remains strong. Also today we have the preliminary manufacturing PMI for August, which is expected to remain roughly in line with last month’s figure, and the CB leading indicator. This will be followed by existing home sales data which is expected to decline slightly to 5.01 million, the first since March, and finally the Philly Fed manufacturing index.

With so much data being released I expect to see some volatile markets today. The only question now is, how will traders respond to the data? With the Fed appearing slightly more hawkish in the minutes from the last meeting, will we enter into another phase of bad economic news is good for the markets and vice versa? Or have investors moved on from this and instead rewarding a strong economic recovery?

Ahead of the opening bell, the S&P is expected to open 4 points higher, the Dow 32 points higher and the Nasdaq 5 points higher.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 21 August 2014 - Alpari UK

https://www.youtube.com/watch?v=FfKbXLb3RGY

Market Analyst Craig Erlam talks through the key events of the day in the markets including the data released from China, the eurozone, the UK and the US.

 

[Alpari UK]

UK Opening Call from Alpari UK on 22 August 2014

Yellen speech headlines quiet end to the week

• Yellen speech headlines quiet end to the week;
• Bernanke-esque hints should not be expected today;
• Draghi scheduled to speak but expectations of QE hints are low;
• No economic data today as the week comes to a quieter close.

European indices look set to open relatively unchanged on Friday, as investors ignore the lead coming from the US and Asia overnight and instead take the more cautious approach ahead of Janet Yellens speech at Jackson Hole.

The speech from the Fed Chairwoman had been singled out as the one event this week that has the potential to move the markets more than any other, which given that it comes in the same week as the Bank of England and FOMC minutes, is saying something. Responsibility for this lies at the feet of her predecessor, Ben Bernanke, who used this opportunity on a couple of occasions in recent years to drop strong hints that a new round of quantitative easing was around the corner, the announcement of which came shortly after.

With the US economy recovering at a strong pace and the number of new asset purchases likely to fall to zero in two months, many believe the first rate hike is not far away. Markets are currently pricing in the first hike for the middle of next year but many believe that the Fed may be forced to do it sooner as the data just keeps on improving.

Yellen does not appear to be one to give in to the pressure though, as seen in recent months by her determination to retain her very dovish tone regardless of the improvement in the economic data. While many people will be picking apart every word she says today for hints of an earlier rate hike, I don’t expect her to follow in the footsteps of Bernanke, instead once again offering very dovish comments and focusing on slack in the economy.

This will come as music to the ears of Jackson Hole’s first ever protestors who turned up to voice their concerns about what a rate hike would mean for the average American. It seems in Yellen they have someone who is very aware of the imbalances there still are in the recovery and these protests may further drive her to stand by her gut and insist that the Fed must remain accommodative well into next year.

ECB President Mario Draghi is also due to speak at this year’s symposium, although anyone hoping for a Bernanke-esque QE hint is likely to be very disappointed. While it’s not exactly out of character for Draghi to drop strong hints out of the blue – we all remember the “whatever it takes” speech – I just think it’s too soon to expect the ECB to make another bold move. They are going to be of the opinion that the previous package of stimulus measures is still feeding into the economy and therefore won’t be willing to even consider anything else, especially QE.

Aside from Jackson Hole, the markets are likely to have very little else to focus on. We’ve been treated to quite a data heavy week so far, but that has come to an abrupt end, with no economic due from Europe or the US today.

The FTSE is expected to open 3 points higher this morning, while the CAC is expected to open 1 points lower and the DAX unchanged.

Read the full report at Alpari News Room​

 

[Alpari UK]

US Opening Call from Alpari UK on 22 August 2014

Traders cautious ahead of Yellen Jackson Hole speech

It appears that US indices are once again lacking any kind of momentum at the record high levels they find themselves back at. The S&P broke to new highs on Thursday for the first time in almost a month, following a brief correction that many feared was the beginning of the broader sell-off that so many have predicted this year.

The lack of momentum at this level may not necessarily be investors getting a cold feet though. Firstly, it’s natural to see some profit taking at a previous high, especially when it comes at the end of the week following a four day rally. More importantly, these levels have been reached the day before Janet Yellen’s key note speech a Jackson Hole, an event her predecessor Ben Bernanke often liked to drop a bombshell at.

Of course, this doesn’t automatically mean that Yellen will do the same. In fact, I think she will stick to the same dovish rhetoric that we’ve become accustomed to, focusing on slack in the economy rather than rate hikes. I’m sure this will please the group of protestors that have turned up to the event to protest against a rate hike. That said, investors are unlikely to take the risk so I expect to see more fence sitting as the day goes on.

We’ll also hear from Mario Draghi at Jackson Hole which could also shake things up in the markets. Again though, I don’t expect him to drop any bombshells as the ECB has only recently announced a new stimulus package and it will take time for it to feed into the economy. Draghi may give his usual spiel about the ECB being ready to act if necessary but I don’t expect investors to pay much attention to this.

Ahead of the opening bell on Wall Street, the S&P is expected to open 4 points lower, the Dow 35 points lower and the Nasdaq 8 points lower.

Read the full report at Alpari News Room​

 

[Alpari UK]

Webinar - 19 August 2014 - Alpari UK

https://www.youtube.com/watch?v=X7nZ4ZIWKNg

Weekly Market Webinar

Live every Tuesday afternoon our chief market analyst James Hughes, market analyst Craig Erlam and research analyst Joshua Mahony take a look at the major stories moving the markets. They will also look at some of the charts and discuss the big technical levels traders should be looking out for.

Click here to Register for our Webinar

 

[Alpari UK]

Daily Market Update - 22 August 2014 - Alpari UK

https://www.youtube.com/watch?v=rlQR3aLfbY4

 

[Alpari UK]

Weekly market preview from Alpari UK – 25 August 2014

A largely quiet week ahead from an economic standpoint, as is typically the case for the last week of the month. That being said, there is always something moving the market and this week has a handful of events to watch out for. In the US, a GDP reading on Thursday will likely dominate market minds. In the eurozone, the CPI inflation reading has the potential to become the most important event of the week. Whereas, in Asia the lack of Chinese data means that consumer based Japanese readings will take precedent.


US

The US looks to have a handful of economic releases this week, which cannot exactly be said for many of the other regions. However, there are only a few of these which have the potential to actually make a tangible difference to the markets. With that in mind, the main ones I will be looking out for are the consumer confidence figure on Tuesday and GDP release on Thursday.

Tuesday’s consumer confidence figure is the first major release to keep an eye on, with many seeing a strong figure as something which could indicate forthcoming gains in retail sales and GDP figures. However, despite the importance of consumer confidence being undoubted, the markets are not always completely focused upon it as a driver of market volatility. That being said, with the US economy attributing around 70% of GDP to consumer spending it is clear that you can gain a good idea of exactly why this figure has the potential to really impact the Q3 growth figure. Market expectations point towards a fall from 90.9 to 89.1 however with two consecutive beats, this could be setup for yet another better than expected reading.

On Thursday, the second Q2 GDP estimate reading is released following a massive 4% reading last month. In general, we do not spend too much time worrying about revised figures, which is down to two reasons. Firstly, there is the feeling that unless the revision is particularly big, markets will disregard it and focus upon the initial message. Secondly, revisions are perceived to seldom move too far away from the first figure, thus meaning people will generally disregard such a announcement as being unlikely to move markets. However, should you track previous revisions, it becomes increasingly apparent that they have the ability to significantly differ from the initial release. For example, the initial Q1 figure came out at 0.1% growth, followed by a first revision of -1% and finally resting at -2.1%. That is a swing in either direction, with the first and final readings differing by -3.1%! Thus, be careful to watch out for this figure as a potential market mover, with market expectations pointing towards a marginal fall from 4.0% to 3.9%. However, as with Q1 revisions, there is the possibility of a much larger shift which could significantly move the markets.

UK

There are no major releases within the UK this week that have the ability to move the markets.

Eurozone

A somewhat busier week ahead in the eurozone, where the German ifo business climate, GFK consumer climate, CPI and unemployment rate figures look to dominate.

Firstly, the early part of the week looks to focus upon the recently beleaguered German economy, where Monday’s Ifo business climate figure and Wednesday’s GFK consumer climate figure take centre stage. In the past months, the typically strong German economy has been showing substantial weakness, personified perfectly by the fall into negative growth earlier this month. However, with Russian sanctions yet to take hold, I can only see this trend continuing and thus be on the look out for further deterioration of eurozone data points which could lead many to push for more action from Mario Draghi and the ECB.

On Friday, the most important release of the week comes in the form of the CPI inflation reading for August. This measure has been one of the most keenly watched indicators over the past six months, with the threat of deflation forcing Mario Draghi’s hand when he announced the likes of TLTRO’s and negative deposit rates back in June. Given that we have not seen any major effect of those measures, it is likely that Draghi will continue to wait for those policies to kick in. However, with every month that passes, the failure of those measures to raise inflation brings a heightened possibility of asset purchases from the ECB. This is exactly what everyone in the markets is looking towards as a potential driver of volatility and thus should we see yet another fall in inflation this month, it is likely that we would see some strength come into the European indices and weakness in the euro as people factor in a possible QE programme. Market expectations point towards exactly that, with a fall from 0.4% to 0.3% being speculated.

Finally, Friday’s unemployment rate figure is one of the other major data points that reflect upon the strength of the eurozone economy and can impact Mario Draghi’s decision-making. That being said, the jobs market within the single currency region has been somewhat underwhelming for some time now and thus unlike the UK and US, the labour market is not something which is majorly affecting monetary policy right now. With markets expecting the rate to remain at 11.5%, there is unlikely to be too much action with most focusing on the CPI figure.

Asia & Oceania

A quiet week in Asia, sees the focus land upon the Japan release of various consumer based data points on Friday. The most important of these two from a consumer point of view are the household spending and retail sales figures which provides a strong indication of the spending patterns in the country. Following the introduction of the sales tax hike in April, it has been crucial to track exactly what the spending patterns have been in the following months. With the potential of a second tax hike to be discussed around December, any pick up in these figures would surely have an impact upon future actions. Thus with both the retail sales and household spending numbers expected to move closer to 0%, be aware of how this could impact decision making going forward.

Read the full report at Alpari News Room​