Forex research

US Opening Call from Alpari UK on 21 August 2013

Caution in the markets ahead of FOMC minutes

Today’s US opening call provides an update on:

* Caution in the markets ahead of FOMC minutes;
* If Fed taper in September, amount will be minimal;
* Minutes unlikely to shed new light on taper decision;
* Rising mortgage rates to impact housing data.

US futures are pointing to a lower open on Wednesday, ahead of the release of the FOMC minutes from July’s meeting.

There’s been an element of caution in the markets this week, with traders clearing looking to the minutes as a potential risk to any upside moves. The consensus in the markets has shifted in recent weeks towards tapering in September, rather than December, which makes these minutes even more important.

I’m still of the opinion that the data doesn’t justify tapering in September. If we do see any then I expect it to be minimal, maybe $10-$15 billion, bringing purchases down to $70 billion, which wouldn’t get the reaction in the markets that many would expect when tapering begins. It seems that the markets are pricing in $25-$30 billion of tapering at the moment, so even if we get an announcement in September, we could see further dollar weakness and gains in the US indices.

As for the minutes today, while there’s clearly caution in the markets, I don’t see us learning too much about what we can expect in September. I expect the minutes to show that the voting members are still split on whether to taper in September, which if anything suggests it won’t happen. Meanwhile, the final decision on tapering, along with how much they reduce the purchases by, is going to depend on the data that followed the meeting.

That said, I still expect a surge in volatility in the markets around the release of the minutes, even if we get no fresh hints on tapering. Traders will always read into the minutes in a way that supports their views, as we’ve seen repeatedly in recent weeks whenever we’ve heard from Fed members.

Aside from the release of the minutes, the economic calendar is looking a little thin, with the only other notable release being the existing home sales for the US. The improvement in the housing data has slowed a little recently, with the rise in mortgage rates being blamed. Existing sales are still expected to have improved in July, which suggests that either the rise in mortgage rates is actually having minimal impact on the housing market, or just taking some time to show up in the data.

Ahead of the open we expect to see the S&P down 4 point, the Dow down 28 points and the NASDAQ down 11 points.
 
UK Opening Call from Alpari UK on 22 August 2013

Fed remains split on tapering date

Today's UK opening call provides an update on:

• Fed remains split on tapering, final decision dependent on data;
• Chinese HSBC manufacturing PMI moves back into growth territory;
• Eurozone manufacturing PMIs released this morning;
• Focus on US jobless claims later.

The minutes from the Fed meeting were released last night and it seems that the message we should take away is nothing has changed. Whether the Fed tapers is entirely dependent on the data, as it was before.

This suggests that the Fed remains split on tapering, which means it is unlikely to begin in September. This isn't surprising given that the data has hardly pointed to a sustainable recovery in the US, and the housing market, which has underpinned much of the recovery, is likely to suffer as a result of the rising mortgage rates once tapering begins.

With the minutes now a thing of the past and the markets no clearer on when the Fed will taper, the focus is likely to switch back to the data, as this will now give us the best indication into when the Fed is likely to reduce its asset purchases.

Overnight we had the release of the HSBC flash manufacturing PMI, which showed the sector growing for the first time since April. This is very encouraging, given the continued slowdown in China this year, and is most likely a result of the targeted stimulus measures being implemented by the government in order to ensure the 7% minimum growth level isn't breached.

Whatever the reason, if we can now see a few consecutive readings above the 50 level, that separates growth from contraction, it would suggest that for now, at least, things are likely to improve in China and that minimum 7% growth target may be attainable after all.

This morning, attention will be briefly on the eurozone, with manufacturing and services PMIs being released. These are revised figures, although they can change quite dramatically so any revision could spark a reaction in the markets. Following this we have more key pieces of data being released from the US. As a Goldman Sachs report claimed last week, weekly jobless claims are a key leading indicator on economic performance and should therefore be watched closely.

That said, despite being one of the few areas where the economy has performed well this year, suggesting that companies are less inclined to lay off stay as they see a stable outlook, markets haven't necessarily reacted too much to it as they appear more focused on job creation and unemployment.

Regardless, following the minutes, I expect markets to pay more attention to today's figure, with a negative result potentially acting to support a push higher in the markets. Any sign that tapering will not come until December is likely to be welcomed for now.

Ahead of the open we expect to see the FTSE down 19 points, the CAC down 12 point and the DAX down 30 points.
 
US Opening Call from Alpari UK on 22 August 2013

US jobless claims in focus following Fed minutes

Today’s US opening call provides an update on:

* FOMC minutes shed no new light on tapering;
* HSBC manufacturing PMI back in growth territory;
* Eurozone recovery set to continue in H2;
* US jobless claims in focus.

Encouraging manufacturing and services PMIs out of the eurozone and China have pushed European markets higher on Thursday.

There had been a relatively downbeat mood following the release of the Fed minutes last night, which shed no new light on when the central bank will start tapering its asset purchases. Policy makers appear to agree that tapering should begin later this year, but the fact that the camp is split on whether it should come as early as September suggests it will be December instead.

This has been overshadowed though this morning by the release of some encouraging figures out of China over night and the eurozone this morning. The Chinese HSBC manufacturing PMI got things off to a good start, rising above even the most optimistic forecasts to 50.1, and back into growth territory.

This brings the HSBC survey more into line with the official data, which suggests the targeted stimulus measures being implemented by the government are not just benefiting the larger state owned firms, but the small and medium sized private ones as well. This is necessary if we’re going to see a sustainable recovery.

The manufacturing and services PMIs for the eurozone were also much improved, although we did see a pullback in the French data which is probably due to more to a summer slowdown than anything more permanent. All in all, the data from the euro area was very good and suggests the recovery seen in the second quarter is going to carry through to the second half of the year.

Looking ahead to the US session and data is once again going to be in focus, particularly the weekly jobless claims figure, following the Fed minutes. Claims are expected to remain very low, rising to 329,000 last week from a six year low the week before. It’s worth noting that the figure has beaten expectations on four of the last five weeks, making another beat today quite likely. The flash manufacturing PMI for the US will also be released on Thursday and is expected to rise to 54.1, up from 53.7 in July.

Ahead of the open we expect to see the S&P up 2 points, the Dow up 10 points and the NASDAQ up 7 points.
 
UK Opening Call from Alpari UK on 23 August 2013

Europe to open higher as global recovery gathers pace

Today’s UK opening call provides an update on:

• Second UK and German GDP readings to remain unchanged;
• US home sales probably neither hindered or boosted by rising mortgage rates;
• Eurozone consumers improving but remain very pessimistic;
• Jackson Hole a non-event this year.

European indices are expected to open higher on Friday, after data from the US, Europe and China suggested the recovery is only going to gather pace in the second half of the year.

The economic data from Europe, in particular, has been extremely encouraging recently. Initially we were only seeing vast improvements in the PMI surveys, which can change in a heartbeat and therefore only be taken with a pinch of salt, but now we’re seeing the hard data follow suit. Don’t get me wrong, the recovery is very fragile, especially in Europe, but these are very positive early signs.

The hard data is what we’re going to be focusing on again on Friday, starting with some GDP figures from Germany and the UK. The first readings of both of these figures were great examples of the improvement seen in Europe in the second quarter, with the UK growing at 0.6% and Germany 0.7%. No change to these figures are expected, although it is worth pointing out that we do usually see revisions to these between the first and final reading.

Over in the US, the focus will be on the new home sales, following a report released yesterday that showed mortgage rates have risen to two year highs. Ordinarily, you would expect this to have a detrimental effect on the housing market, however as of yet we’ve seen little evidence of this.

One explanation for this could be that rates still remain low by normal standards and potential buyers therefore view the recent gains as a sign that rates are soon going to return to normality. This is pushing them to buy now and lock in a mortgage rate at these historically low levels. In reality, rising rates are probably acting as both an incentive and a deterrent to potential home buyers which is why we’re seeing little change in the improvement in the data. That said, new home sales are expected to fall slightly to 485,000 in July.

One piece of soft data due out on Friday, which is always worth paying attention to is the consumer confidence figure. While consumer spending doesn’t contribute as much to the economy of the eurozone as it does the US and the UK, it is still extremely important and desperately needs to improve if we’re going to avoid years of stagnation.

Consumer confidence in the eurozone is expected to improve again slightly in August, marking an eighth consecutive improvement in the figure. However, it still remains deep in negative territory which means consumers are still pessimistic about the economic outlook for the euro area.

Finally, the Jackson Hole symposium gets underway today, although this year’s event is unlikely to live up to some of those in recent years. Last year, Fed Chairman, Ben Bernanke, for the second time, used the event to hint heavily that the central bank would begin another round of quantitative easing, which obviously sparked some significant moves in the markets.

Bernanke is not scheduled to attend this year, neither are Bank of England Governor, Mark Carney, or ECB President, Mario Draghi. We will hear from Bank of Japan Governor, Haruhiko Kuroda, which could provide some insight into future BoJ policies, but in terms of the markets, that is probably the highlight. Only one of the two potential successors to Bernanke, Janet Yellen, will be at the symposium, although even she won’t be delivering a speech and is instead due to moderate a panel discussion.

Ahead of the open we expect to see the FTSE up 20 points, the CAC up 19 point and the DAX up 42 points.
 
US Opening Call from Alpari UK on 23 August 2013

US housing market in focus as tapering talk continues

Today’s US opening call provides an update on:

* UK grows faster than expected in Q2;
* German GDP unchanged at 0.7%;
* US housing market in focus ahead of tapering;
* Jackson Hole symposium likely to be uneventful.

Most European indices are trading lower on Friday, although the FTSE is in the green after data showed growth in the second quarter was even better than originally thought.

The recovery in the UK economy has been incredible so far this year, when you consider than less than six months ago everyone was talking about a triple dip recession. Since then, we’ve seen early signs of a recovery in the housing market, thanks largely to the Funding for Lending and Help to Buy schemes, a pickup in the services sector and a return to growth in the industrial production and construction sectors.

To cap all this off, we’ve had a heat wave in the UK and numerous sporting successes which won’t have done these numbers any harm at all, especially in areas such as retail sales which are extremely important to the UK. The revised GDP figure for the UK was 0.7%, up marginally from 0.6% previously.

The German GDP figure for the second quarter was unchanged at 0.7% but this again is another encouraging sign that the largest economy in the eurozone is in recovery mode.

The focus will shift now to the US for the release of the new home sales figure for July. The improving housing market has been really important to the recovery in the US so far this year, which has raised questions about whether the decision by the Fed to taper later this year will damage the housing recovery, and therefore the economy at the same time.

There are two sides to the argument here though and one probably counters the other. If mortgage rates are rising, those potential buyers who were sitting on the fence may now be put off until they can better afford to get on the property ladder. Alternatively, some may see this as a sign that rates are only going to rise from here and want to lock in a rate that is still below historical levels. As it stands, the data suggests these could both be true as we’ve seen very little change in the data, as it continues its gradual uptrend.

Finally, we have the Jackson Hole symposium which starts today. In previous years, the event has attracted a large number of academics and central bankers, however on this occasion there are going to be a few noticeable absentees, including Fed Chairman Ben Bernanke.

Last year, Bernanke dropped a huge hint around QE3, which was then announced less than a month later. This isn’t the first time the Fed Chairman has used this event to drop hints surrounding big policy shifts, which has led the markets to pay increasing attention to the event. That won’t be the case this time though, with Bank of Japan Governor, Haruhiko Kuroda, the only notable central banker making an appearance.

Janet Yellen, potential successor to Ben Bernanke next year, will be at the event, however she will not be giving a speech, meaning very little is expected.

Ahead of the open we expect to see the S&P down 1 point, the Dow down 16 points and the NASDAQ flat.
 
UK Opening Call from Alpari UK on 27 August 2013

Markets expected lower as September tapering talk dominates

Today’s UK opening call provides an update on:

* Jackson hole consensus points to September taper
* Potential US involvement in Syrian crisis pushes oil higher
* German business climate expected to continue European strength
* US CB Consumer Confidence expected to fall for second month

The markets are pointing towards a lower open today, as the uncertainty surrounding talk of Fed tapering continued to dominate investor sentiment. Volatility and market indecision is typically driven by the inability to fully factor a significant market event into prices, which in recent months has dominated on Fed tapering of asset purchases. On this occasion, the market consensus seems to be leaning towards a September taper amid continued mixed messages out of both Fed members and market commentators alike.

Whilst last week’s Jackson Hole symposium failed to bring many notable speakers to the fore from a central banking perspective, it did allow for various experts to speculate as to when exactly the Fed was likely to taper. Overall, most leaned towards a September taper, where the emphasis seemed to indicate that the Fed were desperate to return to more normal monetary policy and shift away from the current runaway train that is quantitative easing.

I do not see the decision as being as clear cut, with an improved unemployment rate being driven in part by a lowered participation rate. The question really centres on the drive of the Fed to take this first step and whenever it occurs, the likeliness is that it would be a relatively small reduction at first given the unknown reaction we are expecting to see from the markets. There is certainly an element of such tapering being factored into the market and I would expect it to be around USD10 billion. The fact that the Fed are aim to halt all asset purchases within 2014 does indicate that it is in their interest to taper sooner rather than later to keep to this timetable.

There are three Fed meetings left this year and as such, should we not see a September taper, October or December would be their remaining options. Given a relative lack of strong data, it could be the case that the Fed delay until the October meeting should the figures show continued weaknesses between now and 17 September.

The continued tensions within the Middle East have been increasingly factored back into the markets recently, with the emphasis shifting away from the Egyptian conflict, towards Syria after the Assad regime were seen to utilise chemical weapons against the Syrian people last week. The escalation of this incident is now pointing towards potential US involvement in the region, which given the ties between Assad, Iran and Russia, will no doubt be seen as in a far more international context. The resulting effect on global markets has predictably been seen within energy prices, where Brent Crude hit a near five month high. The geopolitical influence upon oil prices can be seen in the WTI – Brent differential, which continues to narrow towards $4. This was helped by the fact that several key oil export terminals in Libya are currently closed, reducing supply in the region.

Looking ahead for the day, the eurozone comes back into focus this morning, with the German Ifo business climate figure expected to point towards a continued strengthening within the region. Germany is the mainstay of the single currency, and as such a strong business climate is important in understanding whether the German economy will be able to continue leading the region in the right direction. Market consensus is for a fourth consecutive rise in this measure, with a rise from 106.2 to 107.1 expected within the markets. This would represent the highest level in 16 months and thus provide a substantial boost to the eurozone.

The release of impressive PMI and GDP figures out of the major economies within the region are painting a more rosy picture after a particularly difficult year for the eurozone. However, it is worth noting that despite a clear strengthening of key data, there are still innate weaknesses within the peripheral and southern states, with unemployment and debt/GDP data continuing to highlight struggles within the region.
Finally, we are looking ahead towards the US CB consumer confidence survey which is expected to fall for the second consecutive month from 80.3 to 79.6. The impact of each key release out of the US currently seems to carry more weight given the proximity and uncertainty of Fed tapering. Thus this figure is likely to be crucial for this afternoons trading environment with a significant ability to bring volatility back into the markets.

European markets are expected to open lower, with the FTSE100 -37, CAC -19 and DAX -26 points.
 
US Opening Call from Alpari UK on 27 August 2013

European markets track the US lower on Syria concerns

Today’s US opening call provides an update on:

* European markets track the US lower on Syria concerns;
* Brent crude hits six month highs as tensions rise;
* Fresh battles expected in Congress as government nears debt ceiling;
* Positive German data priced into the markets;
* US consumers in the spotlight on Tuesday.

The growing tensions between the West and Syria is weighing on equity markets this morning. US stocks erased early gains yesterday, following comments from US Secretary of State, John Kerry, who claimed that it was “undeniable” that the Syrian government had used chemical weapons on its own people.

The increasing likelihood of US intervention in Syria is weighing heavily on stocks markets and is likely to continue over the coming days unless Kerry’s comments are played down. I still think we’re not close to any intervention, regardless of how clear cut the evidence appears, given the objections within the UN, particularly from Russia. As such, the weakness in the markets to the comments are only likely to be temporary.

One thing that’s benefitting from the uncertainty in Syria, along with the ongoing turmoil in Egypt, is the price of oil. Brent crude hit fresh six month highs again on Tuesday and looks very likely to hit $113.61 in the coming days. The price looks likely to surpass this with relative ease in the coming weeks, with tensions in Syria mounting and the unrest in Egypt unlikely to subside. The next key level above here will be $115, although I wouldn’t be surprised to see it close in on the 2013 highs just below $120.

Another thing that’s weighing on the markets this morning is fears of another long drawn out battle over the debt ceiling in Congress. Reports suggest the debt ceiling could be hit in October, which could potentially prompt further spending cuts as part of negotiations between Democrats and Republicans. This could further weigh on US growth, which has already been much lower than initially expected this year.

Unsurprisingly, the concerns over Syria have completely overshadowed the positive data out of the eurozone this morning. The economic calendar is looking a little light this week, especially compared to next which contains numerous central bank meetings and the US jobs report.

The only noteworthy release this morning was the German Ifo business climate figure which rose to 107.5 in August, ahead of expectations of 107. The release prompted a sell-off in the euro which suggests these better figures are entirely priced in and only substantially better data will do.

Looking ahead to this afternoon, the focus will be on the consumer confidence figure out of the US. Given how important consumer spending is to the US economy, this is always followed very closely for early signs that the recovery is either gathering pace or slowing. The numbers have been pretty strong over the last couple of months, but with fuel prices and mortgage rates rising, we could see confidence among consumers take a hit along with their disposable income.

Ahead of the open we expect to see the S&P down 8 point, the Dow down 62 points and the NASDAQ down 16 points.

Read the full report at Alpari News Room​
 
UK Opening Call from Alpari UK on 28 August 2013

Investors seek safe haven on fears of military action

Today’s UK opening call provides an update on:

• Investors risk averse on fears of military strikes against Syria;
• Gold back into bull market territory;
• Brent crude hits 6-month high;
• Forward guidance to be questioned when Carney speaks today.

Global equity markets are expected to record significant losses again on Wednesday, as investors pile their cash into safe haven assets on fears that the West will respond to the Syrian governments use of chemical weapons.

Things have escalated quickly over the last couple of days, with numerous officials from the US, UK and France, in particular, condemning the Syrian government for its alleged use of chemical weapons and calling for action to be taken. This has prompted a knee-jerk reaction in the markets on expectations that this action will come in the form of a military strikes against the Syrian government.

The move in Gold back into bull market territory, following a 20% rally since the end of June, clearly highlights the level of risk aversion in the markets at the moment. The yellow metal lost its traditional safe haven status, to an extent, when it became extremely overvalued towards the end of last year. However, the huge correction earlier this year has once again left Gold as investors preferred option during times of risk aversion. As tensions continue to grow over the coming days, further gains in Gold are likely, with $1,450 being the next key level, followed by May’s highs around $1,487.

Oil prices are also on the rise this week. Brent crude yesterday rose above $115 a barrel for the first time in six months on comments from certain officials that suggested some kind of response was imminent. While Syria isn’t a big producer of oil, the potential for the conflict to escalate in the middle east is likely to continue to push prices higher, unless we see attempts from the US to ease concerns about some form of military actions.

Elsewhere today, things are looking a little quieter. The economic calendar is looking very thin today, with US pending home sales the only notable release. The housing market is going to remain a key focus for investors over the coming months, as they wait to see whether rising mortgage rates will derail the recovery that has underpinned what little growth we’ve had in the US economy this year.

Recent housing data has shown signs that the spike in mortgage rates is having a negative impact, although so far it has been minimal. The same is expected today, with pending home sales expected to rise by 0.2% in July.

New Bank of England Governor, Mark Carney, is due to speak in Nottingham today. Carney is thought to be largely responsible for the central bank’s decision to offer forward guidance last month, which the markets did not respond very well to. The long list of caveats attached to the guidance offered little assurances to businesses and households, which essentially defeats the point.

Today will give Carney the opportunity to clarify the bank’s position on forward guidance in order to put people’s mind at ease. That said, my expectations are low as I don’t think the issue was the language used by the MPC, but the fact that the BoE’s hands are tied to an extent by the UK’s high and volatile inflation.

Ahead of the open we expect to see the FTSE down 32 points, the CAC down 28 point and the DAX down 42 points.
 
UK Opening Call from Alpari UK on 29 August 2013

Energy producers rally on rising oil prices

Today’s UK opening call provides an update on:

• Investors risk averse this week as Syria tensions grow;
• Gold can hit $1,550 after return to bull market;
• Oil companies pushing FTSE futures higher;
• German and US data in focus on Thursday.

The prospect of Western military intervention in Syria has really weighed on risk appetite so far this week, with investors pulling their money out of risky positions such as equities, particularly in the emerging markets, and instead opting for safe haven assets, including Gold and US Treasuries.

Gold has re-emerged over the last few weeks as the preferred safe haven asset for investors. Over the last couple of years, it has been viewed more as a hedge against inflation rather than a safe haven asset, which, thanks to the huge amounts of monetary stimulus across the globe, particularly in the US, saw it become extremely overbought.

With the price of Gold now back at more reasonable levels, we’re now seeing it viewed as a safe haven once more, which is why the correction in Gold, since hitting its lows back in June, could go further than people first thought. Initially, $1,400 was seen as the upper limit for Gold, but now there’s no reason why we can’t see it hit $1,550, as long as the situation in Syria continues to escalate.

Equities staged a bit of a recovery in the US over night, with the S&P and Dow both ending more than a quarter of a percentage point higher. While some view this as a sign that investors are still willing to buy the dips, regardless of the goings on in Syria, I think this is just a minor retracement following two very negative sessions. I am in the camp that believes we’re now in correction mode, following the huge rally this year that was backed primarily by the Fed’s bond buying program.

European markets are currently pointing to a relatively mixed open, with the FTSE opening slightly higher and the CAC and DAX marginally lower. Energy producers were the best performing stocks over night in the US and Asia, which explains why the FTSE is expected to open higher, given the number of oil stocks in the index, including Royal Dutch Shell and BP.

While Syria is going to be a key driver in the markets on Thursday, there are a few important economic releases which could shake things up along the way. First up, we have the release of the unemployment data out of Germany, which is expected to remain at 6.8%, despite 5,000 fewer people claiming unemployment benefits. This is followed by the CPI figure for August, which is expected to fall to 1.7%, from 1.9% in July.

Following this, it’s over to the US for the release of the second quarter GDP figure and the weekly jobless claims. Both of these will be followed closely, given the Fed’s focus on the labour market and the health of the US economy. An advanced reading of US GDP, last month, showed the country growing 1.7% in the second quarter. This is expected to be revised higher today, with the preliminary reading showing annualised growth of 2.2%. Jobless claims are expected to be equally strong, falling to 329,000, following the surprise jump to 336,000 last week, which is still a strong figure.

Ahead of the open we expect to see the FTSE up 16 points, the CAC up 3 point and the DAX up 9 points.
 
US Opening Call from Alpari UK on 29 August 2013

US futures higher ahead of GDP and jobless claims

Today’s US opening call provides an update on:

* Indices pare losses as risk aversion subsides;
* Gold pares gains but remains above $1,400;
* US GDP and jobless claims in focus on Thursday.


Risk aversion has subsided in the markets on Thursday, allowing European and US indices to pare recent losses ahead of some key data releases.

We were always likely to see a correction of some kind towards the end of the week, following such an aggressive sell-off in response to the Syria conflict. This has been helped though by reports today that UK Prime Minister, David Cameron, is facing strong opposition to any military action against Syria, unless they get proof that chemical weapons have been used by the Assad regime.

This at the very least is likely to cause a delay in any decision being made, which should provide some relief in the markets. That said, any delay in the decision is only likely to be temporary, and therefore the same is true of the relief rally that we’re seeing today.

We’re also seeing a pull back in Gold this morning, following a five day rally. The yellow metal has benefitted from it safe haven status this week, pushing it through $1,400 to hit three-and-a-half month highs. Until now, the rally in Gold has been seen as a correction following the huge sell off this year, but this changes things. Now there’s no reason why the rally can’t continue towards $1,550, as long as the Syria conflict drags out.

Looking ahead to the rest of the day, the focus is likely to be on the US, with some key pieces of data being released. First up we have the preliminary reading of second quarter US GDP. This is expected to show growth of 2.2% on an annualised basis, up from last month’s advanced reading of 1.7%.

Also being released is the weekly jobless claims figure, which is expected to fall to 329,000 from 336,000 last week. Two strong numbers here could add to expectations in the market that the Fed will begin tapering in September, although the jobs report next week will provide more of a clue.

Ahead of the open we expect to see the S&P up 1 point, the Dow up 18 points and the NASDAQ up 5 points.
 
UK Opening Call from Alpari UK on 30 August 2013

Syrian crisis cools, giving markets a breather

Today’s UK opening call provides an update on:

* Double boost for dollar as strong GDP and jobs data points to potential September taper
* Potential Syria conflict temporarily cools UN inspectors leave on Saturday
* Cameron loses vote on potential force, pushing US towards a possible solo mission
* Indian rupee gains as unorthodox measures appear

Markets are expected to calm somewhat after signs point towards a lowered likeliness of conflict in Syria for the day, along with strong signs out of the US economy yesterday. A strong raft of data released yesterday brought an increasingly bright outlook for the dollar with the likeliness of Fed tapering in September looking increasingly plausible. The first revision of the headline GDP rate saw a spike higher to 2.5% for Q2, confounding positive estimates to provide a timely boost for an economy seeking direction ahead of next week’s crucial jobs data.

The ability of the economy to provide key indications of ongoing strength will be key for FOMC decision-makers when they meet on 17-18 September to address the possible tapering of asset purchases. Markets are mixed with regards to the possibility of tapering in September, with many close to the Fed indicating that it could be tight given a relative lack of data with which to provide a true picture of supposed strength in the economy.

The jobs data has typically been central to the decision-making process behind tapering and thus the release of lowered weekly unemployment claims yesterday provided a further boost to the US dollar given the clear downward trajectory seen within the figure over the past year. The timeline provided by Ben Bernanke describing a mid-2014 end to QE makes a September taper more likely, yet positive indicators such as this allow for an increased likeliness that the Fed will take the risk of trimming back earlier than perhaps some would ideally like.

The conflict in Syria seems like it is set to cool somewhat today, after the announcement that UN investigators will not leave the country until Saturday, thus ruling out any strikes from Western forces. The suggestions of early strikes from the UK and US despite a lack of UN mandate have been quelled somewhat by domestic voices in each country, with a clear unwillingness of many to see a repeat of the Iraq conflict where forces moved against UN wishes, only to find that there were no actual WMD’s in the country. This is not to say that there will be no strikes in the near future, with UK, US and European forces in position should a decision be made to strike key targets.

However, the chance of a coalition strike was dealt a further blow, with the UK Prime Minister David Cameron losing a preliminary vote on the potential use of force within Syria. Whilst this was a non-binding vote, it lowered the possibility that the UK would be willing to strike should the UN findings point to a clear use of chemical weapons by the regime. Subsequently the US have begun to develop plans which are not reliant upon any other party should President Obama give the order to begin operations in the area.

The upshot of any conflict is likely to be dependent upon the involvement of Syrian allies, Russia and Iran. Should we see this escalate into a more widespread conflict, with Western casualties at the hands of Russia or Iran, there is a clear possibility of contagion on a more global scale which will likely hit stocks, while raising the price of global commodities. The Brent crude rise throughout recent weeks has seen prices hit a six month high around $117, with a clear possibility of higher prices should the Syrian conflict escalate.

Meanwhile, in India the government and RBI are taking highly unorthodox measures as a means to regain some of the losses seen within the rupee over recent months, which have brought prices to a 20 year low. The announcement that the government will be providing the foreign exchange requirements for three of the state backed oil companies in a bid to reduce the massive demand for dollars as a means to pay for the oil imports required on a regular basis. The rise in global oil prices has served to heighten worries of a regional crisis after funds flowed out of emerging markets in recent weeks on the back of a ‘risk off’ scenario driven by tapering and Syria fears.

Further rumours have surfaced of an unorthodox measure by the Indian government as they plan to potentially buy gold from their own citizens as a means to reduce gold imports by refining and selling the precious metal. Gold, alongside oil imports are two of the major drivers behind the USD90 billion trade deficit and thus by addressing both imports, the hope is to reduce the requirement to sell rupees and purchase increasingly expensive imported commodities. Luckily the wedding season has passed for India, which drives mass imports of gold, and given the need for people to sell their gold, there is a hope that some of those imported items are likely to be redistributed to reduce demand for external products.

Looking ahead, the dominant market releases come in the form of the Canadian GDP figure, Eurozone unemployment data and UoM consumer sentiment revision.

European markets are expected to open mixed, with the DAX +12, CAC -1 and FTSE100 -4 points.
 
US Opening Call from Alpari UK on 30 August 2013

Investors err on the side of caution ahead of the weekend

Today’s US opening call provides an update on:

* Concerns ease over potential military strike in Syria;
* Investors continue to err on the side of caution;
* Italian unemployment falls to 12%;
* US data in focus on Friday.

European indices are struggling for direction on Friday, with potential military strikes in Syria continue to weigh on risk appetite.

Concerns have eased somewhat over the last 24 hours, after UK Prime Minister, David Cameron, failed to rally much support for military action against Syria during the first vote in Parliament. Unless the US now carries the strikes out alone, which is still a possibility, any action is going to be delayed until sufficient evidence can be found linking the use of chemical weapons to Assad.

That said, I expect investors to err on the side of caution on Friday, as any escalation over the weekend would undoubtedly have a major impact on the markets when they reopen next week. We’re already seeing the more cautious approach in Europe this morning, with indices trading slightly lower, and I expect a similar response later in the US, despite futures currently pointing to a higher open.

Despite European markets trading lower, it has been a bright start to the session on the economic data front. Unemployment in Italy unexpectedly fell to 12% in July, against expectations of a rise to 12.2%. This didn’t have any impact on the overall unemployment figure for the eurozone, but it did remain at 12.1% for a fifth month, which shows the labour market is finally stabilising after two and a half years of constant increases.

We also saw encouraging consumer and business surveys, with improvements being seen across the board in August. Confidence is going to be crucial in the eurozone if it’s going to avoid falling straight back into recession. The early signs are positive, but these figures can be volatile and will quickly fall again at the first sign of trouble in the euro area.

The rest of the day should be relatively quiet, with Syria remaining at the forefront of people’s minds. There are a few pieces of economic data due to be released, including the Chicago PMI and UoM consumer sentiment figure, although the latter is just a revision of the original figure from earlier this month.

The key release will be the core personal consumption expenditures index. This is the Fed’s preferred measure of inflation, over CPI, so should be followed closely. I don’t expect too much reaction to the figure though as it is still well below the threshold at which the Fed would consider hiking interest rates.

Ahead of the open we expect to see the S&P up 4 points, the Dow up 28 points and the NASDAQ up 4 points.
 
Daily Market Update - 30 August 2013 - Alpari UK

0:09 - Investors cautious ahead of the weekend
1:06 - Key economic releases on Friday
5:00 - UN report released Saturday
5:44 - Chinese data released on Sunday

 
UK Opening Call from Alpari UK on 2 September 2013

Today’s UK opening call provides an update on:

• Military strikes in Syria delayed as Obama seeks approval from Congress;
• Gold slides as concerns over military strikes ease;
• Chinese manufacturing PMI aid the rally in European futures;
• European manufacturing PMIs in focus as US closes for Labor Day.

European indices are expected to open higher on Monday, as investors react positively to news that any decision over a military response in Syria won’t take place until next week.

Barack Obama’s decision to offer the vote to Congress when it returns next week reduces the likelihood that we’ll see any military response unless there is hard evidence that the chemical attacks were carried out by the Assad regime. Obama, like his UK counterpart, David Cameron, is likely to face staunch opposition from both inside and outside his party, to military action, with memories of the hugely unpopular war in Iraq still fresh in people’s memories.

Investors are unsurprisingly pleased with this delay, with the risk aversion seen towards the end of last week subsiding and money pouring back into European stocks. Gold, which has regained its safe haven status recently, opened lower this week after no progress was made over the weekend. Obama could still strike without approval from Congress this week, which would prompt further rallies in Gold, although this looks unlikely now that the vote has been offered to Congress. The price of the yellow metal is now likely to be more reactive to the Fed as the week goes on, with the jobs report on Friday being key, less than two weeks before the next FOMC meeting.

European futures also received a boost from the Chinese manufacturing PMIs, both of which were in growth territory in August. The HSBC PMI, released over night, has recently been viewed by the markets as the more reliable indicator as it’s less influenced by government stimulus which is being significantly reduced going forward. The survey covers predominantly small to medium sized private firms that tend to perform better when we’re seeing a more sustainable pickup in manufacturing. Also, the fact that the survey is carried out externally by a private firm means its much less likely to be manipulated to paint a false picture of the industry, a concern that has been raised when it comes to the official PMI.

The HSBC figure rose to 50.1 in August, up from 47.7 the month before, which suggests the targeted stimulus being carried out by the government is filtering through to the smaller private firms and therefore, the real economy. This could help ensure growth in China doesn’t fall below 7%, a minimum threshold set by the government earlier this year.

Despite being the start of what is going to be one of the most hectic weeks of the year in the markets, trading volumes will probably be lower on Monday, with the US markets being closed in observance of Labor Day. There are some manufacturing PMIs being released in Europe this morning, although these are revised figures for August and are therefore unlikely to change too much. Previous revisions have only been minor for most countries, including the eurozone as a whole.

Ahead of the open we expect to see the FTSE up 45 points, the CAC up 16 point and the DAX up 52 points.
 
You must log in or register to reply here.

Similar threads

B
best place to research.
Replies
0
Views
2K
boyes51
B
J
DailyFX.com Releases Top Forex Trading Ideas for 2011
Replies
0
Views
3K
jsales
J
M
research participants?
Replies
7
Views
2K
mikaelsegerberg
M
R
Re: RvdMarkets best trading terms for currency trading
Replies
9
Views
3K
rep.rvd
R
M
Forex Prop Trading Firms and Operational Research
Replies
9
Views
7K
shahkhan
S
Top