Forex Research

[Alpari UK]

US Opening Call from Alpari UK on 29 September 2014

Markets selloff as we enter key week

• Market selloff continues as markets look towards key week;
• Spanish CPI leads thoughts to tomorrows headline CPI reading;
• US pending home sales figure released later today.

US markets look set to run into further downside today following a disappointing start to the week in Asia and Europe. With the busiest week of the month ahead of us, today marks a rather slow start, where many will begin positioning themselves ahead of the potential volatility due later on in the week. The US markets are expected to open lower, with the S&P500 -6, Nasdaq -14 and DJIA -63 points.

Today’s selloff is widely consistent with the wider trend of selling that has been in place over the past week. Weakness within European indices have uncharacteristically led their US counterparts, with the FTSE100 tumbling over three weeks ago, yet this has only recently been reflected just over a week ago in the likes of the S&P500 and Dow. Much of this is no doubt in relation to the threat of devolution that has hit the European project, with the Scottish independence vote now being followed by the same thing in Catalonia. However, within the US, the feeling is more that we are moving ever closer towards the moment where the Fed finally announce a timeline for interest rate hikes, which is only a matter of time. The increasing noises from the FOMC has been one of inevitability in terms of interest rate hikes and whilst Janet Yellen remains tentative to provide an official change of outlook from the Fed, this appears to be a matter of time. Last month saw the worst non-farm payrolls figure in 7 months, allowing Yellen a little more leeway to keep rate low, however with the US jobs report due on Friday, this could be called back into question before long should we see the 200k+ number expected by the markets.

Today’s European session held little for the markets, as the release of the Spanish CPI figure released some of the pressure upon Mario Draghi, rising to -0.5% to -0.2%. However, this and the German figure due later today, are really the precursor for tomorrows Eurozone CPI figure. Mario Draghi will certainly be hoping that Eurozone CPI will finally start showing some signs of resurgence after a year of incessant downside for prices in the single currency region. However, signs so far have given Draghi little comfort, pushing him into continuously reconsidering how accommodative the ECB should be. Last month’s decision to introduce an ABS scheme is a QE-lite of sorts and thus further action remains unlikely this month, yet the movement of the Eurozone CPI figure is sure to be absolutely key in determining whether markets expect to finally see the fully blown asset purchase scheme introduced.

Today’s US session also looks relatively light on major economic releases, with the main event of note coming in the form of the pending home sales number. Last week saw a real mixed bag from the US housing sector where a weak existing home sales number on Monday made way for a six-year high new home sales number on Wednesday which sparked markets back into life. With that in mind, today’s pending home sales number will give us an idea of where next month’s number could be and thus markets will be watching very closely at today’s figure. Market estimates point towards a fall back into negative territory with a number closer to -0.4%.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 29 September 2014 - Alpari UK

https://www.youtube.com/watch?v=RLXA8cJ0upI&list=UUpnhW5tgmxcQWzcrx_Y6zKg

 

[Alpari UK]

UK Opening call from Alpari UK on 30 September 2014

Today sees the start of the big announcements of the week as a whole host of economic releases are scheduled for this morning. With markets hit overnight in Asia by yet more unrest in Hong Kong and US and European markets failing to post any gains yesterday we could well need some positive numbers out of this morning’s releases to kick start trading and halt the slide we have seen on the major markets over the last few days. Ahead of the open we expect to see the FTSE100 open flat with the German DAX lower by 10 points.

It will be Europe and the UK that dominate first thing this morning with retail sales and unemployment figures out of Germany that kick us off. Numbers from Europe’s biggest economy have been poor of late and a turnaround in fortunes would be greatly appreciated by Mario Draghi, especially in a week were the ECB could potentially add a full program of QE to tackle the mess that is the European economy. Of course unemployment is an important number however retail sales this morning will give us an indication into the behavioural patterns of the electorate in Germany and will tell us exactly what Germans are spending their money on, if anything when they put their hands in their pockets.

At 0930 BST we get another chance to look at Q2 GDP out of the UK. Mark Carney and the BoE have already mentioned a number of times that the growth situation in the UK is not one that is a concern and if today’s numbers are correct we can see why. The revised reading of Q2 GDp is expected to show that growth was actually a little bigger than first expected at 3.2%. This yet again highlights the stance of the government and BoE, and will leave them to focus, like many other central banks on tier obsession with hiking interest rates and as has been previously stated it is the average earnings figure that is causing the biggest concern here.

With the ECB set to announce further measures to tackle the ultra low inflation problem in the Eurozone, it seems fairly apt that we should get both readings in the same week. So at 1000 BST this morning we will get the CPI reading for the Eurozone. Its safe to say that previous efforts by Mario Draghi and the ECB have failed to tackle the problem. Inflation remains incredibly low on a YoY and MoM basis, and today’s reading is like to show that the number has fallen once again on a monthly basis this time to 0.3%. The question all investors are asking is are the new measures been talked about by the ECB going to be the answer. Over the past 12 months we have seen more or less every tool in the central bankers arsenal thrown at this problem but to no avail. Negative interest rates have made no impression while the pick up for TLTRO’s has been poor. It seems the hopes of the Eurozone now rest solely on a full round of government bond buying, a program that the US are set to finish next month. It no uncertain terms the Eurozone is a mess and it could well be that this week highlights just how big that mess actually is, and just how much new money is going to have to be printed to drag it out of the mire.

Read the full report at Alpari News Room​

 

[Alpari UK]

US Opening call from Alpari UK on 30 September 2014

Weak eurozone CPI pushes raghi back into a corner

• Poor CPI readings provide upside to indices, yet weakens the euro further;
• CPI and German unemployment change figures put yet further pressure upon Mario Draghi;
• Consumer confidence figure to dominate US session as volatility is expected to rise this week.

US markets are hoping for a positive start to the day, where weakened Eurozone CPI has put further pressure upon Mario Draghi to introduce yet further Easing at the ECB. The continuation of a worsening Eurozone is the polar opposite from the UK, where GDP pushed yet higher this morning. In a day dominated by the European data releases, a theme of Eurozone weakness and UK strength dominates a provides a bullish theme to the markets. As such, the US markets are expected to open lower, with the S&P500 -7, DJIA -54 and Nasdaq -16 points.


The euro came in for a bashing again this morning, as inflation pushed further to the downside, increasing the validity of calls for the introduction of a fully blown asset purchase scheme by the ECB. Mario Draghi has been fighting against the plummeting rate of CPI, which has been falling since the beginning of 2012 when it peaked out at 3%. Today’s fall to 0.3% was thus far from unexpected, however the continuation of this downward trend in prices makes for worrying reading and proves to the markets that all the measures introduced so far have been completely ineffective at bringing about price stability or higher growth within the region. Perhaps the most worrying thing about today’s release was the unexpected fall in core CPI from 0.9% to 0.7%, which underlined that the weakness in price growth is not solely an issue which can be explained away by factors such as food and energy, which are largely unaffected by monetary policy decisions at the ECB. Representing the lowest level seen since the financial crash of 2007, this core CPI reading is sure to worry Mario Draghi and could push forward the potential of a QE programme in the near future.

Today’s weak Eurozone CPI reading was also accompanied by a disappointing German unemployment change figure, which saw 13k more people in unemployment, representing the second consecutive month of increased unemployment in the German economy. Overall this continued weakness in Germany, accompanied by an incessantly falling inflation rate means that Mario Draghi is being pushed into a corner to find the solution, and fast. However, despite some calls for the introduction of a fully blown asset purchase scheme later this week, it is highly unlikely with Thursday’s meeting likely to focus upon the intricacies of the ABS scheme that was announced last month.

US markets will be looking forward to a somewhat calm day in the markets from an economic standpoint, where the consumer confidence figure represents the only major release of note. With an economy that is 70% driven by domestic consumption, confidence is a leading indicator of where spending is likely to be in the US for September. Today is really the beginning of the week in a way, where we begin to start seeing really major market moving events come on a daily basis. With this in mind, there is likely to be an element of risk aversion take hold given the likely volatility that could become a regular feature of the markets for the remainder of the week.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 30 September 2014 - Alpari UK

https://www.youtube.com/watch?v=PEC-MwFgj9s

 

[Alpari UK]

Daily Market Update - 1 October 2014 - Alpari UK

https://www.youtube.com/watch?v=cy7VPv0d6A8&list=UUpnhW5tgmxcQWzcrx_Y6zKg

 

[Alpari UK]

UK Opening Call from Alpari UK on 2 October 2014

The economic data comes thick and fast for European markets this week as today sees more in the way of headline data. Mario Draghi takes centre stage as the market awaits the next instalment of his plan to turn around the failing Eurozone economy. Fears surrounding the Eurozone and the end of the bond buying program in the US have started to hit already jittery Asian markets. Overnight Asian stocks fell for a 5th consecutive session as pro-democracy demonstrators vowed to escalate their protests as a deadline put in place for Hong Kong Chief Executive Leung Chun-ying to resign quickly approaches.

US markets fell aggressively overnight with the Dow losing 1.4% due to markets finally realising that the QE stimulus package is about to end. This reading was despite a strong ADP payroll number that showed that hiring accelerated in the last month. The problem with the US economy at the moment is that the reading are too good,. Any positive news from the economy is being jumped on by the Hawks and is seen as heaping pressure on Janet Yellen to raise interest rates, or at least contemplate doing so in the near term rather than the drawn out plan already in place. This hysteria around rates will most definitely increase tomorrow as the full jobs report is released in the US. A stronger than expected non-farm payroll number is likely to get officials at the Fed asking the same questions, as it seems this global obsession with raising interest rates shows no sign of dying away.

The major story today is of course the ECB rate decision, and while we expect no movement in rates it is the potential start of a full blown QE program that has got grabbed the markets attention. Firstly I don’t expect to see a QE program announced at today’s meeting. Last time out we saw a QE lite plan that is more than likely going to be fleshed out by Mario Draghi today. However I do expect this to upset the markets , especially after the CPI readings earlier in the week. We have seen rate cuts, LTRO’s and TLTRO’s as well as many more initiatives over the last few months, all of which have made no difference to the ultra-low inflation figure that Mario Draghi and the ECB are desperately trying to drag higher. It is plain to see now that only a full blow round of government bond buying will appease the markets. The Euro has continued its slump against the strong dollar and European equity markets have rallied on anticipation of a plan each month. However this month it seems that equity markets are a little more subdued and cautious ahead of what is likely to be a day where Mario Draghi tries to flesh out a plan that most people see as second fiddle to the major plan waiting patiently in the wings.

Read the full report at Alpari News Room​

 

[Alpari UK]

US Opening Call from Alpari UK on 2 October 2014

ECB set to dominate markets as Draghi takes centre stage

• Hong Kong fears heighten at latest threat
• ECB dominates as ABS takes centre stage
• UK construction strengthens ahead of tomorrow’s services PMI
• US awaits jobs report tomorrow.

US markets are expecting to open in a more positive manner, after losses within Asia yet again extended over to the European session. The mix of fear surrounding the fate of the Hong Kong riots, coupled with alarmingly poor Eurozone data yesterday pushed Europe lower today, yet this seemingly has not been followed through into the US session where futures are pointing towards a positive open ahead of tomorrow’s jobs report. The S&P500 is expected to open +3, DJIA +3 and Nasdaq +11 points.

Overnight, the protests in Hong Kong have persisted, bringing the city to a standstill in their plea for democracy. With both sides unwilling to back down, this issue is likely to become an increasingly hostile battle between the student led protesters and Beijing. The latest threat from the protestors is that they will start to occupy government buildings should the current HK chief executive not stand down by today. However, with the whole of the Chinese one-party system at risk, the Chinese government is unlikely to provide any concessions in response to the very real threat that the same type of uprising would begin on the mainland in response to the new-found democratic freedom seen on Hong Kong. Markets are watching this very closely, with Hong Kong representing one of the main financial centres of the world and Chinese stability at risk.

Today’s session is largely set to be dominated by the monthly Eurozone circus at the ECB, where Mario Draghi is put under yet more pressure to act in the face of non-existent growth, rampant disinflation and perennially high unemployment. Coming off the back of last month’s meeting, where the main refi rate was pushed a mere 0.05% away from zero, it is clear that Draghi is running out of options. With rates at all-time lows, a 10 basis point move in rates is unlikely to spur on economic activity, especially given that previous rate shifts from Draghi have had little to no effect on inflation and output. With that in mind, the imposition of TLTRO’s and ABS purchases are yet another attempt to do what rates haven’t managed. However, after last month’s pitiful uptake in the TLTRO scheme pushes significant pressure upon a positive ABS scheme implementation, which is likely to be the focus of today’s meeting.

I do not expect to see any change in policy this month, with Draghi likely to focus upon the finer details of his ABS scheme rather than implementing further policy changes before this one gets going. Thus there is likely to be significant interest regarding which securities will be purchased under the ABS scheme, with particular focus likely to go upon the riskiness of those assets. For the most part, there is likely to be an initial push towards the safest securities, known as senior tranches, where the riskier assets would have to be approved by Eurozone governments which is likely to be discussed in October when the finance ministers meet.

With this in mind, I am keen to see what Draghi has to say at the Q&A session, where the topic of a fully blown asset purchase scheme will no doubt be raised once more. Given that we have seen inflation fall to a five-year low of 0.3%, there is massive pressure on Draghi to act and while economic data remains poor, there is little willingness within the markets to accept anything other than a QE programme. It seems the time is running out for Draghi, who is backed into a corner with precious little left to throw at the Eurozone before QE gets unleashed.

Today saw the UK construction PMI rise to an 8 month high of 64.2, building on what has been an outstanding year for the sector. The implementation of the UK’s help to buy scheme has no doubt brought about a spark to the housing market, which in turn has led to new building projects in line with new valuations. With the BoE looking to limit the amount of high loan to value mortgages on the market, we are likely to see a cooling in the prices, as seen by the 0.2% drop in prices last month. However, with new buyers comes regeneration of areas and thus I believe we could still see significant activity in the industry long after house prices normalise. Tomorrow brings the services PMI, which is the really number everyone is looking out for. However, with strong data coming out of the UK I would not be surprised to see yet further upside in that release despite predictions otherwise in the markets.

A very quiet US session sees the release of the unemployment claims figure as the only event of note. Given that we have seen the ADP number yesterday and will see the full jobs report tomorrow, today’s number will likely be somewhat of a non-event. Thus it is likely that markets will instead focus upon the ECB meeting and wait for tomorrows all important jobs report.

Read the full report at Alpari News Room​

 

[Alpari UK]

Reaction to ECB Press Conference

The ECB decided to keep rates and policy unchanged this month in a meeting which saw all the focus centre around the application and intricacies of the new ABS programme that will be implemented in Q4. The double whammy introduction of both lower rates and a new asset purchase scheme at last month’s meeting meant that today was always likely to be somewhat of a dampened meeting in comparison, with Draghi highly unlikely to ease further despite reductions in both core and headline CPI.

The usual tones from Draghi led the way at the meeting, with a focus upon structural reforms as a key component of any recovery, along with the monthly reiteration that the ECB stood ready to implement further ‘unconventional’ measures. However, whether we will ever see the introduction of the ultimate measure, QE, will be largely driven by the success of the ABS scheme that was the hot topic at today’s meeting.

The ABS scheme did surprise in its extent, with the ECB being willing to purchase securities on the riskier end of the spectrum. Thus, with the ECB willing to purchase the so called ‘Mezzanine’ tranches along with the ‘senior’ tranche that was expected. This willingness to take on greater risk was personified by the willingness of the ECB to purchase so called ‘junk bonds’, below BBB-, which means that the likes of Greece and Cyprus will be included in this scheme.

Ultimately, the success of this will be established in time and given that the two main policies of ABS (Q4) and TLTROs (2nd tranche in December) come later in the year, it is likely that we could see further deterioration in the meanwhile. The market clearly have a disdain for any policy’s effectiveness apart from a QE programme and thus today’s subsequent sell-off is not surprising. Until there are any signs that these programmes work, markets are unlikely to be overwhelmed by their implementation.

Read the full report at Alpari News Room​

 

[Alpari UK]

Daily Market Update - 2 October 2014 - Alpari UK

https://www.youtube.com/watch?v=i8i0Ipv4cKg

Hong Kong protests raise risk off sentiment - 00:28
UK construction PMI rises to 8 month high - 03:16
ECB keeps rate constant to focus on ABS - 04:16