Forex Research

[Alpari UK]

UK Opening Call from Alpari UK on 19 September 2014

Scots vote for independence as focus turns to devolution

• Scotland votes to remain within the United Kingdom
• Europe boosted by idea that it will remain united
• Focus now moves towards the devolution of powers as promised by David Cameron

European markets are waking up to a historic decision by Scotland to reject independence, bringing with it a guarantee of a stable United Kingdom and a reduction in the likeliness that Europe will see a raft of breakaway states form. This boost has returned the certainty to the markets for what is expected to be the strongest growing western economy in 2014, and because of this we are seeing European futures point towards a buoyant open, with FTSE100 expected to open +98, CAC +16 and DAX +77 points.

Scotland has decided to reject independence following a hard fought two year campaign which saw a wide ‘No’ majority shrink to rumours of a potential ‘Yes’ vote in the last week. This vote has shaken the political spectrum within the UK and whilst a decision to remain within the Union has been made, there is no doubt that a drive towards change for regional powers which should shape politics for the foreseeable future. However, the important step ahead is clearly going to involve a discussion between both Yes and No campaigners to appease the inevitable feeling of unhappiness amongst the 1.5 million plus voters that chose to take the step and vote for independence.

The story does not end here, with plans for further devolution to be discussed as early as October, which is going to be followed by a white paper in November and finally, some new laws are expected to pass by January 2015. The issues at hand are wide ranging and dependent upon the degree to which power is devolved, will be likely to appease many within the Yes campaign. This includes the control of factors such as income tax, VAT, benefits, air passenger duty, inheritance tax, capital gains tax and benefits as a whole. The question now is whether this will act as a spark to drive increased calls from the likes of Wales and Northern Ireland to gain the same powers.

That being said, despite the loud campaign for independence gaining significant numbers over the recent weeks, it is clear that a strong majority are unwilling to leave a Union that provides Scotland with more revenue than they put in. The fact of the matter is that the Union is bigger than the sum of its parts and Westminster will be buoyed by the news that their influence will remain strong in the world whilst the Scottish can be happy knowing that they voted for stability and prosperity rather than uncertainty on several absolutely key issues. The news is also going to be welcomed by the Europeans, who have been fighting against the idea of breaking up ever since Mario Draghi’s “whatever it takes” speech. Given the feeling that an independent Scotland would lead to an inevitable fight for similar steps to be taken in breakaway regions such as Catalonia and Bavaria, today’s vote is a major boost for the European project as a whole.

Markets have been responding in a somewhat predictable manner in line with the somewhat smooth election process which at no point looked providing a win for the independence. Despite this, GBPUSD has been moving higher overnight, gaining over 1% today alone, which actually failed to match the gains seen yesterday, showing that markets have strongly backed a ‘No’ vote. In the future markets, the FTSE100 has move 1.6% higher which is being filtered throughout the European markets as a whole.

Read the full report at Alpari News Room​

 

[Alpari UK]

US Opening Call from Alpari UK on 19 September 2014

Markets rally as Scots say no to independence

US futures are pointing to a positive open on Friday, with indices currently seen up around four tenths of one percent. The S&P is currently seen 7 points higher, the Dow 75 points higher and the Nasdaq 17 points higher.

Following weeks of uncertainty in the markets regarding Scotland’s position within the UK, the people have voted and decided to remain a part of the 307 year old union. Despite many polls in recent weeks suggesting the race was neck and neck, with one even claiming that the “yes” campaign was ahead, it was a fairly comfortably win in the end for the better together campaign, with 55% of people voting against independence.

What’s more, at no point during the counting process did the “yes” campaign ever look likely to win, so the volatility that we could have seen in the markets wasn’t really there. As the regions announced the results and it became apparent that Scotland would not get independence, investors did respond but not as strongly as some may have expected.

The pound, which appeared to anticipate the result in the 24 hours before the result was confirmed, rallied as the results were announced but it has reversed all of its gains since and now trades lower on the day. This is about as clear an example of buying the rumour and selling the news as you can hope to see. With the uncertainty of the referendum now behind us, it will be interesting to see whether the pound can make up the lost ground of the last couple of months or if the dollar can continue to run the show and drive the cable pair back towards 1.60.

The FTSE is trading higher on the day, with the result having a particularly positive impact on RBS and Lloyds, both of which have their head offices in Scotland and had threatened to move them to London should the Scots get independence. It’s not just UK companies that had a vested interest in the referendum, those in Spain were also keeping a close eye on the result as independence for Scotland may lead to further calls from Catalonia for the vote. The failure of the Scots to get independence has been judged to have weakened the Catalonians campaign, which has resulted in Spanish yields falling by 7 basis points and the IBEX trading 1% higher.

With the two major risk events of this week now out of the way, the other being the Fed decision, investors have very little to focus on, which is likely to make it a very quiet end to the week. There is no major economic data due out this afternoon and everything in the news is likely to continue to focus on the referendum result.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 19 September 2014 - Alpari UK

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

 

[Alpari UK]

Weekly Market Preview from Alpari UK on 22 September 2014

With two major risk events now behind us – Fed decision and the Scottish referendum - attention is likely to shift back to the economic data and whether we’re seeing a strong enough numbers to justify an earlier rate hike in the US and UK, or weak enough numbers to justify further monetary stimulus in China, the eurozone or Japan.

The coming week may not be the busiest of the month but there’s still plenty of key figures being released that have the potential to create waves in the markets, such as the September PMI readings, not to mention a number of speeches from Fed officials a week after Richard Fisher joined Charles Plosser in calling for a hike and more members brought forward their rate hike forecasts to 2015.

US

It’s not going to be the biggest of data weeks for the US, but there is a steady flow of important releases coming through the week that are certainly worth monitoring. The week gets underway with some housing data on Monday and Wednesday and if last weeks housing numbers are anything to go by, they could be quite disappointing. The housing market is one of those areas that was key to the economic recovery in the US last year but has not really recovered to pre-financial crisis levels. Rising rates later this year may weigh on the housing numbers in the coming months, as we saw last year, although if this recovery is as strong as we hope, maybe people will be in a better position to take it and the numbers won’t be too negatively affected.

The biggest release this week in my view is the durable goods numbers, which can be overlooked by some but actually provide fantastic insight into the state of the economy and confidence in it going forward. People and businesses only tend to invest in goods that last more than three years when things are going well and they are confident that this isn’t going to change. As a result, this can be seen as both backward and forward looking which is quite unusual in a piece of data. The only problem with these is they can be quite volatile, especially the headline figure which is why is can be best to pay more attention to the core reading.

The second quarter GDP reading and UoM consumer sentiment readings on Friday may be something of a non-event given that they are both final revisions, although you can never get complacent when it comes to these figures as big revisions do happen and can move the markets.

The biggest event could well be the Fed speeches since Fisher became the second dissenter at last week’s meeting, while two more members brought forward their forecast for the first rate hike to next year. This may not seem a big deal as people had priced it in for the middle of 2015 anyway, but together they represent an increasingly hawkish Federal Reserve and that is not something the markets want to see.

UK

There are no major events in the UK this week.

Eurozone

This week we have one big day of data, with German, French and eurozone PMIs being released for the manufacturing and services sectors and a couple of German surveys later in the week, so as with everywhere else, it’s looking a little quiet. The PMI readings will be keenly watched for any indication that the eurozone is going to bounce back from the slump it has become entrenched in. We always knew that any recovery in the eurozone was going to be slower than anywhere else and it was going to run into a few problems but the fact that this one has also gripped Germany is a concern.

The PMI readings are expected to show another across the board decline in confidence in both sectors, which would suggest the slump will continue right up until the end of the year. The only bright side is that the expected declines are very small which may be a sign that the numbers are about to bottom out in the coming months. Or maybe I’m just clutching at straws, this is the eurozone after all!

The two German survey’s are Ifo business climate and Gfk consumer climate and both are seen as key readings for the economy, particularly the former given that the economy is less geared towards the consumer than that of the US and UK. We’ve seen four consecutive declines in the business climate number, if we get a fifth this week, we could well be looking at a recession in Germany given that the country contracted by 0.2% in the second quarter.

We’ll also hear from ECB President Mario Draghi on Monday as he testifies before the European Parliament’s Economic and Monetary Committee in Brussels. People are very focused on the ECB at the moment because for the first time, it seems very wiling to provide monetary stimulus for the eurozone economy and not wait until there is absolutely no other option available. Whether we will ever get quantitative easing is another question altogether and I remain very doubtful despite people’s expectations that it could even come this year. Draghi may provide some hints at this event so we should be prepared for some potential volatility.

Asia & Oceania

It’s going to be a very quiet week in Asia, which means we’re unlikely to get too much market direction ahead of the European session. There are a couple of data pieces to watch out for, in particular the HSBC flash manufacturing PMI on Tuesday. The September reading is expected to point to another drop in confidence in the sector, with the number seen falling to 50, the level that separates growth from contraction. I’m not convinced people will be too concerned though given that we learned last week that the People’s Bank of China has injected large sums of cash into its largest banks and cut the short term borrowing rate. This will take time to have an impact so as long as the PMI reading isn’t too woeful, I think investors will accept it.

Finally we’ll get the Tokyo core CPI reading on Friday. As Japan’s largest city, this is seen as one of the more important readings but the market impact doesn’t tend to be too great unless the release is wide of the mark. People are looking very closely at the inflation figures for Japan for signs that we could get more stimulus from the Bank of Japan so this is certainly worth following.

Read the full report at Alpari News Room​

 

[Alpari UK]

UK Opening Call from Alpari UK on 22 September 2014

Focus returns to ECB policy as Draghi takes the stand

• Markets lower after buoyant Friday
• Europe returns to focus upon Eurozone monetary policy
• Mario Draghi set to address the European Parliaments

Global indices are looking to start the week on a somewhat softer tone, with the Asian markets leading the way lower overnight. Following the excitement of Friday’s Scottish referendum and Alibaba IPO, things have come down with a bump, especially in China and Japan where a fall in commodity prices hit valuations. Europe is subsequently looking for a negative open, with the FTSE100 -25, CAC -32 and DAX -67 points.

A somewhat quiet start to a quiet week in stall today, where the European markets have to realign their thought processes following a scare last week where polls started pointing towards the possibility of a move to independence for Scotland. With the existence of further regions (such as Catalonia and Bavaria) who just like Scotland were seeking to form breakaway states, it is believed that Friday’s result should go some way to putting to bed the idea for some of these other regions too. Thus the emphasis within the Eurozone is likely to shift back towards the norm, which is an ongoing picture of low inflation, low growth and ineffective monetary policy. The recent shock announcement that Mario Draghi’s much heralded TLTRO programme had only seen €82.6 billion in takeup from the major banks, despite a possible total allowance for the first two rounds of €400 billion. This has put pressure upon Draghi should we not see an increased interest at the December round.


Over the weekend, US Treasury Secretary Jack Lew called out Europe and Japan as two regions which were holding the world back and called upon them both to do more to spur on growth and help the global recovery. This highlights the importance of success for Mario Draghi and increasingly there appears to be less and less options but to implement a fully blown quantitative easing programme in the near future. The introduction of the ABS scheme at the last ECB meeting is essentially a halfway house to such a step, yet the importance of a QE scheme is as much in its name as anything else given the now commonly known implications for jobs, growth and asset prices. It is evident that until Draghi takes that step, there will always be indecision and mistrust of the direction of the Eurozone and that leads to weak investment and a lack of prospects.

The European focus for the day will be geared towards a speech from Mario Draghi in the afternoon. Draghi’s testimony in front of the European Parliament’s Economic and Monetary Committee should make for an interesting watch, with monetary policy set to take centre stage yet again. There is likely to be an interest in the inability of previous measures to spur on growth in jobs, output and inflation, which is sure to bring the question of what else can be done to do exactly that. Therefore markets will be well aware of the possibility for major volatility in during Draghi’s testimony as everyone awaits those two little letters, ‘QE’.

Read the full report at Alpari News Room​

 

[Alpari UK]

US Opening Call from Alpari UK on 22 September 2014

FOMC’s Dudley hoping to give clarify on Fed outlook

• US markets expected to pull back following recent strength;
• G20 meeting bring questions on European and Japanese growth;
• FOMC back in focus as Dudley speaks in New York.

A weak open to the European markets has followed on from what is a pretty disappointing start to the week with the Japanese Nikkei, Hang Seng and Shanghai composite all posting significant falls to start the week. The US markets are expecting a very similar mood, where futures point towards the S&P500 opening -8 points lower, Nasdaq -21 points and DJIA -30 points.

Friday’s Alibaba driven excitement came off the back of a strong Scottish referendum result which provided a definitive conclusion to an event which provided significant degree of uncertainty within the markets. With new alltime highs recorded in the S&P500 last week, it comes as no surprise that we are seeing an element of profit taking come into the market, which has also been seen in the USDJPY currency pair following the strongest period of upside since January 2013.

This indecision within the markets today was always likely given the relatively quiet day ahead. Over the weekend, the G20 finance ministers meeting hosted in Cairns provided a reminder of where the global recovery currently stands, with the Eurozone and Japan being singled out as particularly dragging upon G20 growth. However, for the most part this has been highlighted as possibly being achieved through fiscal infrastructure investment as opposed to monetary policy per se.

In the US session, the focus will largely be geared towards the release of existing home sales data, due out soon after the markets open. This is accompanied by a speech from FOMC member William Dudley in New York. At a mixed FOMC meeting, the markets saw Janet Yellen somehow bring about both a more bullish and bearish outlook, thus pushing the emphasis of providing more clarity upon the other members of the Fed committee. With a tighter timeline for rate hikes, set against a continued hold-off on providing a start date for the first rate hike, it will be interesting to see if Dudley can provide any clarity on either points.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 22 September 2014 - Alpari UK

https://www.youtube.com/watch?v=2WLMpHucCxo

 

[Alpari UK]

US Opening Call from Alpari UK on 23 September 2014

Weak PMIs and attack on IS leave markets in the red

• Chinese manufacturing PMI fails to boost markets
• Eurozone PMIs continue to disappoint
• Coalition forces attack ‘Islamic State’ positions in Syria for the first time
• FOMC speeches dominate US session.

European and Asian markets are continuing the negative start to the week, posting further losses following a raft of poor eurozone PMI releases this morning. This comes despite a strong Chinese manufacturing PMI figure overnight, which managed to keep only the Shanghai composite above water. Meanwhile, the shelling of ISIS positions saw the first of many coalition military operations against the militant group within Syria. US markets are expected to follow European indices lower, with futures pointing towards the S&P500 -7, Dow – 43 and Nasdaq -17 points on the US open.

Today is clearly dominated by the release of various PMI figures across China, the Eurozone and US. Measuring the outlook of purchase managers within specific industries in relation to business conditions such as employment, demand and prices, the PMI figures typically provide markets with an idea of exactly where production, exports and jobs figures are going to move in the coming weeks and months.

The Chinese HSBC manufacturing PMI release overnight has been absolutely key in determining the degree of weakness within the manufacturing sector during the H1 slowdown this year, given the focus upon SME’s (small to medium sized enterprises). However, despite the clear influence of this figure, today’s strong reading made little impact upon the Asian markets, with the Shanghai representing the only market to post a gain. This inability to respond positively to strong data out of China shows an innate weakness within the markets, and geared us up towards the release eurozone figures which were expected to follow the pattern of weak figures seen in recent months.

True to form, the figures out of the Eurozone came in to the downside yet again, with the only main boost coming in the form of the French manufacturing sector, which managed to rise from 46.9 to 48.8. However, with the French manufacturing and services sectors now both contracting, there is little to shout about across the Atlantic. German manufacturing appears to be following suit, with the current level standing a mere 0.4 away from contraction (50.3). Ultimately, the Eurozone is in a mess, with inflation, growth, jobs and industry all weak. This is music to the ears of Vladimir Putin whose actions have driven the imposition of sanctions from the likes of Germany and France. However, with those measures showing little signs of easing due to ongoing Ukrainian conflict, there is clearly an underlying threat to Eurozone growth and it is something that will have to be addressed sooner rather than later. Mario Draghi has taken various steps, which have failed to make a significant impact as yet, however as seen in his Jackson Hole speech, the feeling is that this could be a problem which has both fiscal and monetary solutions and it will be interesting to see whether the emphasis will shift towards greater spending from the likes of France and Germany.

Overnight, the US was joined by their ‘coalition partners’ in attacking a number of ISIS positions in Syria. This represents both the first attack upon the ‘Islamic State’ within Syria (without the permission of Assad), along with the first attack of Middle Eastern countries upon the terrorist group. Of the coalition partners involved, military jets from Bahrain, Saudi Arabia, Jordan and the UAE were all cited as being involved in today’s attack. This is a major step given the importance of involvement from forces in the region and to some extent will appease the fears of many within the US that this will be another war which will be seen down the line as the US against Islam or the Middle East. The threat of ISIS is clearly as relevant to those within the Middle East as it is to the US and a global effort to avoid the genocide, beheadings and slavery that has been commonplace under the groups expansion is clearly something which is going to be one of the biggest global challenges this decade. That being said, the escalation of the conflict will of course raise questions over the risk appetite of many within the markets, who are no doubt worried about a major war which appears to be unfolding. As such, gold and Oil have seen a round of buying this morning, with global indices selling off. However, the moderate degree to which such moves have occurred shows that there is a degree of inevitability to today’s announcement.

The US session looks somewhat more quiet from an economic data point of view, with markets generally focusing upon speeches from two FOMC members, Powell and Kocherlakota. The FOMC has been in spotlight over the past 24 hours, with yesterday’s announcement that the Philidelphia Fed President William Plosser will retire in March 2015. This is a major shift, with Plosser representing the most hawkish and vocal dissenter of the committee. However, with regards to today’s speeches, the interest will largely be geared towards Jerome Powell, given the fact that Narayana Kocherlakota already spoke overnight and will thus be likely to repeat much of the same comments. Kocherlakota cited low inflation as an ongoing worry and thus there is the chance that monetary policy will remain accommodative for a longer time than desired, simply to help raise the rate of price growth. It will be interesting to see if Powell will tread a similar path and given the typical method of committee members preparing the ground for any changes in policy from the governor through their public views, it is likely we will see an estimate of when rates will rise from a member well ahead of Yellen herself.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 23 September 2014 - Alpari UK

https://www.youtube.com/watch?v=UiMHiS3w71U

 

[Alpari UK]

UK Opening Call from Alpari UK on 24 September 2014

German survey could provide more eurozone negativity

• Long term conflict in Middle East impacts market sentiment
• New Zealand trade balance improves
• German survey could provide yet more bad news for the eurozone

Global markets continue to move lower for a third day today, as the threat of a drawn out campaign against the ‘Islamic State’ becomes ever more likely. Overnight trade data out of New Zealand provided markets with a more buoyant outlook and which could lead to further interest rate hikes. A quiet European session sees a focus upon the German business climate which is expected to see further weakness. All of this means that we are looking for a lower open for European markets, with the FTSE100 -21, CAC -1, and DAX -10 points in the futures markets.

Yesterday saw the beginning of a new era, as the US was joined by a handful of Arabic nations in attacking ISIS positions in Syria. Whilst many have seen this as a positive, given the importance of Middle Eastern involvement, the true impact upon the market is one of risk aversion. An announcement from the Pentagon warned of a sustained campaign that could last years and thus the new norm has been born where habitual attacks upon positions in the Middle East are now expected to be a common recurrence. For now, this is not too major, yet the call for boots on the ground has already been touted by the likes of Tony Blair and Iran, which while currently forming the minority opinion, are likely to be correct should there be any sort of willpower to fully eradicate the ‘Islamic State’ down the line. As this conflict develops, the ability to find members and positions of the group will no doubt become more difficult and as yesterday’s bombings show, the publicity attached to aerial attacks will always focus upon the deaths of civilians and children, as Israel very well knows. It is a PR nightmare and given the success ISIS have had in utilising social media to their advantage, I have no doubt that the civilian death toll in Syria and Iraq will be both public and embellished. However, the involvement of those Arabic nations means that there can be greater confidence that the conflict is not seen as the US vs Islam.

New Zealand saw their trade deficit almost cut in half, as imports sharply fell, whilst export saw a lower than expected drop in August. This came despite the fall in dairy prices, meaning that we could be seeing increased demand from abroad owing to the new reduced price for milk powder and alike. The New Zealand dollar some upside off the back of this result and with the RBNZ currently trying gauge when the next interest rate hike should be, todays numbers will no doubt be a positive which could push the country towards yet another shift in the coming months.

A quiet European session sees markets focus upon the release of the German IFO business climate survey, due out in the morning. Confidence in the German economy has been somewhat hard to come by in recent months, with Russian sanctions hitting business interests, growth falling to -0.2% for Q3, manufacturing nearing contraction and exports suffering. These developments have been reflected in recent months by this survey, which has seen a peak of 111.2 pull back to 106.3 last month. Expectations are for yet another fall, towards 105.7 which would represent the lowest level since December 2012. With European markets already reeling from a raft of PMI figures yesterday which saw French services and manufacturing in contraction, whilst German manufacturing gets ever closer, the release of yet further negative data this morning could compound the weakness seen overnight and lead to a third day of losses in Europe.

Read the full report at Alpari News Room​