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Market Analyst Craig Erlam was on Bloomberg earlier talking about Ted Baker earnings, Lloyds, Tesco and market volatility.
Market Analyst Craig Erlam was on Bloomberg earlier talking about Ted Baker earnings, Lloyds, Tesco and market volatility.
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US Opening Call from Alpari UK on 11 June 2014
US futures lower after more record highs on Tuesday
US indices are expected to open lower on Wednesday, with the S&P seen down 5 points, the Dow down 42 points and the Nasdaq down 8 points.
It’s been an impressive run for US indices as of late, with the S&P and Dow both hitting new record highs on an almost daily basis. That run had to come to an end at some point and early indications would suggest that may be today. That said, as we’ve seen already during this rally, a negative open can quickly be reversed so I wouldn’t write off the chances of further record highs being made today.
That said, we are looking at a very quiet day for the US in terms of economic events, with no notable data due out and no other major events scheduled. With that in mind, the lack of a positive catalyst may offer the opportunity for traders to lock in some profits and wait for a lower entry. I don’t expect a significant correction at this stage but a shallow correction or, at least, a consolidation of some kind may be on the cards.
The European session hasn’t been much more lively today. The only notable event this morning was the release of the UK jobs data, which despite carrying some negatives, has been well received by the markets. Despite the Bank of England claiming that they are looking at a wide range of data in order to determine the correct time to raise rates, the unemployment rate is clearly still carrying a significant amount of weight among traders.
The unemployment rate fell more than expected in April, dropping from 6.8% to 6.6%, in a further sign that the economy is on the mend. However, average earnings growth tumbled in the same month to 0.7%, including bonuses, and 0.9%, excluding bonuses. Clearly this is being overlooked at this stage which I think is dangerous because in an economy that relies so heavily on the consumer, wage growth needs to surpass inflation if any recovery is going to be sustainable. The numbers for March were much better and the earnings including bonuses figure was revised higher to 1.9%, which may be why traders are willing to let this one slide.
Markets were mixed in Asia over night, with indices of those developing economies appearing to fare the worst after the world bank downgraded growth in the developing world from 5.3% to 4.8%. This didn’t weigh too heavily on sentiment as I imagine a downgrade was probably expected, given the start to the year in China and other external factors, such as the poor first quarter in the US and the Ukraine crisis.
US futures lower after more record highs on Tuesday
US indices are expected to open lower on Wednesday, with the S&P seen down 5 points, the Dow down 42 points and the Nasdaq down 8 points.
It’s been an impressive run for US indices as of late, with the S&P and Dow both hitting new record highs on an almost daily basis. That run had to come to an end at some point and early indications would suggest that may be today. That said, as we’ve seen already during this rally, a negative open can quickly be reversed so I wouldn’t write off the chances of further record highs being made today.
That said, we are looking at a very quiet day for the US in terms of economic events, with no notable data due out and no other major events scheduled. With that in mind, the lack of a positive catalyst may offer the opportunity for traders to lock in some profits and wait for a lower entry. I don’t expect a significant correction at this stage but a shallow correction or, at least, a consolidation of some kind may be on the cards.
The European session hasn’t been much more lively today. The only notable event this morning was the release of the UK jobs data, which despite carrying some negatives, has been well received by the markets. Despite the Bank of England claiming that they are looking at a wide range of data in order to determine the correct time to raise rates, the unemployment rate is clearly still carrying a significant amount of weight among traders.
The unemployment rate fell more than expected in April, dropping from 6.8% to 6.6%, in a further sign that the economy is on the mend. However, average earnings growth tumbled in the same month to 0.7%, including bonuses, and 0.9%, excluding bonuses. Clearly this is being overlooked at this stage which I think is dangerous because in an economy that relies so heavily on the consumer, wage growth needs to surpass inflation if any recovery is going to be sustainable. The numbers for March were much better and the earnings including bonuses figure was revised higher to 1.9%, which may be why traders are willing to let this one slide.
Markets were mixed in Asia over night, with indices of those developing economies appearing to fare the worst after the world bank downgraded growth in the developing world from 5.3% to 4.8%. This didn’t weigh too heavily on sentiment as I imagine a downgrade was probably expected, given the start to the year in China and other external factors, such as the poor first quarter in the US and the Ukraine crisis.
Alpari UK
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Webinar - 10 June 2014 - Alpari UK
Weekly Market Webinar
Live every Tuesday afternoon our chief market analyst James Hughes, market analyst Craig Erlam and research analyst Joshua Mahony take a look at the major stories moving the markets. They will also look at some of the charts and discuss the big technical levels traders should be looking out for.
Click here to Register for our Webinar
Weekly Market Webinar
Live every Tuesday afternoon our chief market analyst James Hughes, market analyst Craig Erlam and research analyst Joshua Mahony take a look at the major stories moving the markets. They will also look at some of the charts and discuss the big technical levels traders should be looking out for.
Click here to Register for our Webinar
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UK Opening Call from Alpari UK on 12 June 2014
Attention turns to euro data after RBNZ hikes rates again
• Nikkei slides on stronger yen, while NZD rallies following third rate hike from RBNZ.
• Plenty of low tier economic data scheduled for release this morning;
• Eurozone industrial production headlines data heavy morning;
• US jobless claims and retail sales key ahead of the US open.
European indices are expected to open pretty flat on Thursday following fairly negative sessions in both the US and Asia over night. The FTSE is expected to open up 8 points at 6,846, while the CAC and DAX are seen unchanged at 4,555 and 9,949, respectively.
Many of the Asian indices simply tracked the US indices lower after traders took a little profit following a decent few weeks for the indices. Many Japanese stocks, particularly those sensitive to currency fluctuations, suffered as a result of the yen rally yesterday. The dollar slipped below 102 against the yen in a sign that this period of range trading is far from over. The pair had been looking quite bullish up until that point and was showing signs of breaking above its recent range which could have prompted quite an aggressive move higher.
The Reserve Bank of New Zealand raised rates again over night, a few months after becoming the first major central bank to do so. This is actually the third consecutive month that the central bank has raised rates which sends a clear message about its intentions to pre-empt any significant rise in inflation, which is likely to come with the country growing at around 4% so far this year. Not only did the RBNZ raise rates, which was expected, it also hinted at further rate hikes in the coming months which explains the rally in the New Zealand dollar over night despite the fact that today’s hike was largely priced in.
While there’s plenty of economic data scheduled for release today, the majority of them are historically low impact figures so I see no reason to assume the same won’t be true today. This includes items such as French, Irish and Portuguese inflation figures and Greek unemployment, all of which may sound like noteworthy events but when you look at them a little closely are either old news or simply not seen as having any impact on the eurozone as a whole.
The inflation numbers, for example, could provide us with important insight into the overall eurozone reading for May, which sounds useful. However, the preliminary May inflation reading for the eurozone was released last week, making these releases effectively useless for those trading the euro, for example. The Greek unemployment rate is another that will most likely be ignored simply because the dire jobs market in Greece is old news. There is no longer a realistic chance of Greece exiting the euro and therefore these numbers, while depressing, are not going to move markets. Greece is a small country after all and once the threat to the currency union goes away, so does the impact of data releases such as these.
The one noteworthy release today is the April industrial production figure. Even this is likely to have only a small market impact but compared to the other pieces of data being released today, it certainly stands out. The monthly numbers here can be quite volatile so it tends to be best to focus on the year on year number, which provides more useful insight into the situation in the euro area right now. This is expected to show that last month’s small negative reading was just a blip in an otherwise positive trend. The number for April is expected to show a jump of 0.9% compared to last year which is far from spectacular but still, a vital improvement.
The US session later should be more interesting with weekly jobless claims and retail sales due an hour before the open. Jobless claims are expected to continue the recent trend of numbers close to 300,000, which is a very encouraging sign for the labour market. Meanwhile, the release of the retail sales report is viewed by many as one of the more reliable indicators of economic health as it shows exactly what the consumer thinks of the situation at the moment. The logic is simply, if they are optimistic about the economy, they’ll put their hands in their pocket, if not they won’t. Recent reports have shown pretty steady growth and today’s number is expected to be no different, with the main reading seen showing 0.6% growth in May and the core number 0.4%.
Attention turns to euro data after RBNZ hikes rates again
• Nikkei slides on stronger yen, while NZD rallies following third rate hike from RBNZ.
• Plenty of low tier economic data scheduled for release this morning;
• Eurozone industrial production headlines data heavy morning;
• US jobless claims and retail sales key ahead of the US open.
European indices are expected to open pretty flat on Thursday following fairly negative sessions in both the US and Asia over night. The FTSE is expected to open up 8 points at 6,846, while the CAC and DAX are seen unchanged at 4,555 and 9,949, respectively.
Many of the Asian indices simply tracked the US indices lower after traders took a little profit following a decent few weeks for the indices. Many Japanese stocks, particularly those sensitive to currency fluctuations, suffered as a result of the yen rally yesterday. The dollar slipped below 102 against the yen in a sign that this period of range trading is far from over. The pair had been looking quite bullish up until that point and was showing signs of breaking above its recent range which could have prompted quite an aggressive move higher.
The Reserve Bank of New Zealand raised rates again over night, a few months after becoming the first major central bank to do so. This is actually the third consecutive month that the central bank has raised rates which sends a clear message about its intentions to pre-empt any significant rise in inflation, which is likely to come with the country growing at around 4% so far this year. Not only did the RBNZ raise rates, which was expected, it also hinted at further rate hikes in the coming months which explains the rally in the New Zealand dollar over night despite the fact that today’s hike was largely priced in.
While there’s plenty of economic data scheduled for release today, the majority of them are historically low impact figures so I see no reason to assume the same won’t be true today. This includes items such as French, Irish and Portuguese inflation figures and Greek unemployment, all of which may sound like noteworthy events but when you look at them a little closely are either old news or simply not seen as having any impact on the eurozone as a whole.
The inflation numbers, for example, could provide us with important insight into the overall eurozone reading for May, which sounds useful. However, the preliminary May inflation reading for the eurozone was released last week, making these releases effectively useless for those trading the euro, for example. The Greek unemployment rate is another that will most likely be ignored simply because the dire jobs market in Greece is old news. There is no longer a realistic chance of Greece exiting the euro and therefore these numbers, while depressing, are not going to move markets. Greece is a small country after all and once the threat to the currency union goes away, so does the impact of data releases such as these.
The one noteworthy release today is the April industrial production figure. Even this is likely to have only a small market impact but compared to the other pieces of data being released today, it certainly stands out. The monthly numbers here can be quite volatile so it tends to be best to focus on the year on year number, which provides more useful insight into the situation in the euro area right now. This is expected to show that last month’s small negative reading was just a blip in an otherwise positive trend. The number for April is expected to show a jump of 0.9% compared to last year which is far from spectacular but still, a vital improvement.
The US session later should be more interesting with weekly jobless claims and retail sales due an hour before the open. Jobless claims are expected to continue the recent trend of numbers close to 300,000, which is a very encouraging sign for the labour market. Meanwhile, the release of the retail sales report is viewed by many as one of the more reliable indicators of economic health as it shows exactly what the consumer thinks of the situation at the moment. The logic is simply, if they are optimistic about the economy, they’ll put their hands in their pocket, if not they won’t. Recent reports have shown pretty steady growth and today’s number is expected to be no different, with the main reading seen showing 0.6% growth in May and the core number 0.4%.
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US Opening Call from Alpari UK on 12 June 2014
US futures higher ahead of retail sales and jobless claims
A day after the Dow’s winning streak came to a halt, we’re expecting US indices to open marginally higher as traders look for the next catalyst that can spark another rally.
Fortunately, there is a couple of potential catalysts today that could provide that spark in the form of the retail sales report for May and the weekly jobless claims number. The retail sales figure, in particular, has the potential to create a big move in the markets given that it is widely viewed as one of the most reliable indicators of economic health and its sustainability.
The consumer is hugely important to the US economy, contributing a significant amount to total output. Any sign that consumer sentiment is waning would not be well received by the markets, especially after such a poor first quarter. Thankfully, it does not look like that will happen, with expectations currently being for 0.6% growth in the headline figure and 0.4% for the core number. That should be enough to ease growth fears for now.
Weekly jobless claims have become a reliable source of good news for the US recently, having consistently hovered around the 300,000 level. This suggests that aside from seeing fewer job cuts, we’re also seeing job creation pick up to the point that people are able to move from one job to another without having to sign on. This is an encouraging sign that the labour market is getting back to good health, although clearly, it’s not quite there yet.
The European session has been fairly quiet so far, despite there being plenty of economic data being released. Unfortunately, the majority of these are viewed as low-tier releases and therefore tend to be completely overlooked by the markets. This is hardly surprising when you consider that the inflation readings for Ireland, Portugal and France come a week after the eurozone CPI figure. Greek unemployment, while being a concern, is no threat to the eurozone economy any more as the country has effectively secured its place in the currency union.
Ahead of the opening bell on Wall Street, the S&P is expected to open 1 points higher, the Dow 19 points higher and the Nasdaq 3 points higher.
US futures higher ahead of retail sales and jobless claims
A day after the Dow’s winning streak came to a halt, we’re expecting US indices to open marginally higher as traders look for the next catalyst that can spark another rally.
Fortunately, there is a couple of potential catalysts today that could provide that spark in the form of the retail sales report for May and the weekly jobless claims number. The retail sales figure, in particular, has the potential to create a big move in the markets given that it is widely viewed as one of the most reliable indicators of economic health and its sustainability.
The consumer is hugely important to the US economy, contributing a significant amount to total output. Any sign that consumer sentiment is waning would not be well received by the markets, especially after such a poor first quarter. Thankfully, it does not look like that will happen, with expectations currently being for 0.6% growth in the headline figure and 0.4% for the core number. That should be enough to ease growth fears for now.
Weekly jobless claims have become a reliable source of good news for the US recently, having consistently hovered around the 300,000 level. This suggests that aside from seeing fewer job cuts, we’re also seeing job creation pick up to the point that people are able to move from one job to another without having to sign on. This is an encouraging sign that the labour market is getting back to good health, although clearly, it’s not quite there yet.
The European session has been fairly quiet so far, despite there being plenty of economic data being released. Unfortunately, the majority of these are viewed as low-tier releases and therefore tend to be completely overlooked by the markets. This is hardly surprising when you consider that the inflation readings for Ireland, Portugal and France come a week after the eurozone CPI figure. Greek unemployment, while being a concern, is no threat to the eurozone economy any more as the country has effectively secured its place in the currency union.
Ahead of the opening bell on Wall Street, the S&P is expected to open 1 points higher, the Dow 19 points higher and the Nasdaq 3 points higher.
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Daily Market Update - 12 June 2014 - Alpari UK
RBNZ raises rates and hints at future hikes - 00:22
Drop in Australian employment not all bad news - 01:34
Slow morning despite large amount of economic data - 03:03
US retail sales and jobless claims up next - 04:30
RBNZ raises rates and hints at future hikes - 00:22
Drop in Australian employment not all bad news - 01:34
Slow morning despite large amount of economic data - 03:03
US retail sales and jobless claims up next - 04:30
Alpari UK
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UK Opening Call from Alpari UK on 13 June 2014
Europe to open lower following oil price spike on Thursday
For a while now we’ve been waiting for that next major catalyst that can either provide a boost for the next leg higher in indices or bring about a long overdue correction and it looks like the latter may have won the race. Overnight, US indices suffered further losses, with the S&P ending the day in the red for a third consecutive day, while the Dow recorded a second day of losses for the first time in almost a month.
The move was prompted by a spike in oil prices that came as a result of increasing unrest in Iraq. Overnight, Brent crude prices soared to $113.38, while WTI hit $107.07 for the first time since 19 September. This has the potential to seriously disrupt the supply of oil from, what is, a major oil producing country, and therefore it is hardly surprising that we’ve seen such a significant reaction in the markets.
The only question now is whether the situation in Iraq will deteriorate further and, if it does, how high oil prices will go before the expected fall in oil exports is offset with increased production elsewhere. In the past, the Saudi’s have been more than happy to make up the shortfall but clearly, financial markets are not willing to bet on this just yet. A sustained spike in oil prices could have a very negative impact on the global economy, just at a time when many countries are just finding their feet again.
It’s important to remember that it’s not just consumers that suffer at the pump as a result of rising oil prices, companies also suffer quite significantly as well. Any company that relies on transporting goods, say throughout the UK for example, will see costs rise quite significantly as a result of the rising prices, while airlines will also suffer, for obvious reasons. Add to this the fact that if consumers are spending more at the pump, disposable income is significantly reduced which leaves less available to spend elsewhere. A reduction in consumer spending is not good for business and could therefore be disastrous for the economy.
Bank of England Governor Mark Carney also stole a few headlines last night after announcing during his annual Mansion House speech that interest rates could rise earlier than financial markets currently expect. Unsurprisingly we saw a significant spike in the pound in response to these comments, with traders now pricing in a rate hike as early as later this year, rather than early 2015. Sterling rallied more than one cent against the dollar, while the euro also suffered quite significantly at the hands of the sterling rally.
The Chinese data, released this morning, has given the markets a bit of a boost ahead of the European open. Retail sales and urban investment became the latest figures to exceed expectations, which is hopefully a good sign that the economy is turning around and can have a much better second half of the year. There’s been plenty of concern that the country is slowing at a faster rate than intended and could face a hard landing. The latest data would suggest otherwise.
Today there’s a lot of economic data being released, but as with a couple of other days this week, the majority of it is low impact data and therefore we could actually see quite a mild end to the week. The eurozone trade balance figure stands out as the notable economic release this morning, while the week will be wrapped up with the University of Michigan consumer sentiment reading for June. This is a preliminary reading so has the potential to have quite an impact on the markets.
Ahead of the open, the FTSE is expected to open down 21 points, the CAC down 6 points and the DAX down 8 points.
Europe to open lower following oil price spike on Thursday
For a while now we’ve been waiting for that next major catalyst that can either provide a boost for the next leg higher in indices or bring about a long overdue correction and it looks like the latter may have won the race. Overnight, US indices suffered further losses, with the S&P ending the day in the red for a third consecutive day, while the Dow recorded a second day of losses for the first time in almost a month.
The move was prompted by a spike in oil prices that came as a result of increasing unrest in Iraq. Overnight, Brent crude prices soared to $113.38, while WTI hit $107.07 for the first time since 19 September. This has the potential to seriously disrupt the supply of oil from, what is, a major oil producing country, and therefore it is hardly surprising that we’ve seen such a significant reaction in the markets.
The only question now is whether the situation in Iraq will deteriorate further and, if it does, how high oil prices will go before the expected fall in oil exports is offset with increased production elsewhere. In the past, the Saudi’s have been more than happy to make up the shortfall but clearly, financial markets are not willing to bet on this just yet. A sustained spike in oil prices could have a very negative impact on the global economy, just at a time when many countries are just finding their feet again.
It’s important to remember that it’s not just consumers that suffer at the pump as a result of rising oil prices, companies also suffer quite significantly as well. Any company that relies on transporting goods, say throughout the UK for example, will see costs rise quite significantly as a result of the rising prices, while airlines will also suffer, for obvious reasons. Add to this the fact that if consumers are spending more at the pump, disposable income is significantly reduced which leaves less available to spend elsewhere. A reduction in consumer spending is not good for business and could therefore be disastrous for the economy.
Bank of England Governor Mark Carney also stole a few headlines last night after announcing during his annual Mansion House speech that interest rates could rise earlier than financial markets currently expect. Unsurprisingly we saw a significant spike in the pound in response to these comments, with traders now pricing in a rate hike as early as later this year, rather than early 2015. Sterling rallied more than one cent against the dollar, while the euro also suffered quite significantly at the hands of the sterling rally.
The Chinese data, released this morning, has given the markets a bit of a boost ahead of the European open. Retail sales and urban investment became the latest figures to exceed expectations, which is hopefully a good sign that the economy is turning around and can have a much better second half of the year. There’s been plenty of concern that the country is slowing at a faster rate than intended and could face a hard landing. The latest data would suggest otherwise.
Today there’s a lot of economic data being released, but as with a couple of other days this week, the majority of it is low impact data and therefore we could actually see quite a mild end to the week. The eurozone trade balance figure stands out as the notable economic release this morning, while the week will be wrapped up with the University of Michigan consumer sentiment reading for June. This is a preliminary reading so has the potential to have quite an impact on the markets.
Ahead of the open, the FTSE is expected to open down 21 points, the CAC down 6 points and the DAX down 8 points.
Alpari UK
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US Opening Call from Alpari UK on 13 June 2014
US futures shrug off oil prices and Carney comments
* US futures shrug off oil prices and hawkish Carney comments;
* Sterling rallies as Carney warns that first rate hike may come earlier than expected;
* Preliminary UoM consumer sentiment reading key today.
Yesterday’s spike in oil prices along with Mark Carney’s surprising hawkish comments at the annual Mansion House event appear to have condemned European indices to end the week on a negative note. Meanwhile, US indices are expected to shrug this off much easier, with the S&P seen opening unchanged, the Dow down 4 points and the Nasdaq up 2 points.
The bulk of the downside resulting from the oil spike was probably largely priced into US stocks yesterday, which would explain why they appear to be showing such resilience ahead of the open. That said, it’s unlikely that oil prices have peaked quite yet, in fact there could be a significant amount of upside to come if previous episodes of disrupted supplies are anything to go by, so I expect there’ll be more suffering to come for stocks.
Given what we’re just recovering from, it would be outrageous to say this has come at the worst possible time, but it is certainly extremely inconvenient. The recoveries in the UK and US are still fragile, while the eurozone is only stagnating at best. We could have really done without another oil price shock that could derail what recoveries we are seeing and extend what has already been one hell of a financial crisis.
With US President Barack Obama not ruling anything out, we have to assume that the situation in Iraq is going to get worse before it gets better. This will be disruptive to say the least, not just to the consumer who will see disposable income take yet another hit as they are forced to pay higher prices at the pump, but also to companies that rely on oil and gas. Hence why these stocks could suffer a lot more in the coming weeks and months.
This could potentially make the comments made by Bank of England Governor Carney a little irrelevant as I can’t imagine that the MPC would look to tighten monetary policy at a time when the economic recovery is under threat. Clearly the markets don’t see it that way, which is understandable as it’s a little early to start pricing in such assumptions.
Carney’s warning that interest rates could rise earlier than financial markets are currently expecting came as a total surprise to traders, most of whom were not expecting the first hike until the first quarter of 2014 at the earliest. Sterling rallied aggressively following the comments, just falling short of 1.70 against the dollar for the second time in a little over a month. Unlike last time though, traders now have a reason to buy at these levels and force the pair through this major resistance. I expect this will happen in the coming days, potentially following a brief correction given the scale of the rally since yesterday. A break through 1.7042 would see the pair trading at levels not seen since October 2008, the period when sterling went from trading at more than $2 to the pound to $1.35 in the space of five months.
The end of the week is looking pretty quiet with the only notable economic release being the preliminary UoM consumer sentiment reading for June. This is an important piece of data as it gives us key insight into consumer attitudes in the coming months. The consumer is so important to the US economy that this cannot be ignored.
US futures shrug off oil prices and Carney comments
* US futures shrug off oil prices and hawkish Carney comments;
* Sterling rallies as Carney warns that first rate hike may come earlier than expected;
* Preliminary UoM consumer sentiment reading key today.
Yesterday’s spike in oil prices along with Mark Carney’s surprising hawkish comments at the annual Mansion House event appear to have condemned European indices to end the week on a negative note. Meanwhile, US indices are expected to shrug this off much easier, with the S&P seen opening unchanged, the Dow down 4 points and the Nasdaq up 2 points.
The bulk of the downside resulting from the oil spike was probably largely priced into US stocks yesterday, which would explain why they appear to be showing such resilience ahead of the open. That said, it’s unlikely that oil prices have peaked quite yet, in fact there could be a significant amount of upside to come if previous episodes of disrupted supplies are anything to go by, so I expect there’ll be more suffering to come for stocks.
Given what we’re just recovering from, it would be outrageous to say this has come at the worst possible time, but it is certainly extremely inconvenient. The recoveries in the UK and US are still fragile, while the eurozone is only stagnating at best. We could have really done without another oil price shock that could derail what recoveries we are seeing and extend what has already been one hell of a financial crisis.
With US President Barack Obama not ruling anything out, we have to assume that the situation in Iraq is going to get worse before it gets better. This will be disruptive to say the least, not just to the consumer who will see disposable income take yet another hit as they are forced to pay higher prices at the pump, but also to companies that rely on oil and gas. Hence why these stocks could suffer a lot more in the coming weeks and months.
This could potentially make the comments made by Bank of England Governor Carney a little irrelevant as I can’t imagine that the MPC would look to tighten monetary policy at a time when the economic recovery is under threat. Clearly the markets don’t see it that way, which is understandable as it’s a little early to start pricing in such assumptions.
Carney’s warning that interest rates could rise earlier than financial markets are currently expecting came as a total surprise to traders, most of whom were not expecting the first hike until the first quarter of 2014 at the earliest. Sterling rallied aggressively following the comments, just falling short of 1.70 against the dollar for the second time in a little over a month. Unlike last time though, traders now have a reason to buy at these levels and force the pair through this major resistance. I expect this will happen in the coming days, potentially following a brief correction given the scale of the rally since yesterday. A break through 1.7042 would see the pair trading at levels not seen since October 2008, the period when sterling went from trading at more than $2 to the pound to $1.35 in the space of five months.
The end of the week is looking pretty quiet with the only notable economic release being the preliminary UoM consumer sentiment reading for June. This is an important piece of data as it gives us key insight into consumer attitudes in the coming months. The consumer is so important to the US economy that this cannot be ignored.
Alpari UK
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Weekly market preview from Alpari UK – 16 June 2014
A key week in the markets where the Fed comes back into focus with the Federal Reserve bringing about the most notable event in the form of the latest monetary policy decision on Wednesday. Elsewhere, the UK CPI figure will bring an update to the real income story. Meanwhile in the eurozone, the CPI figure is going to be a major driver of interest within the markets. On the Asian front, the focus will largely be upon the Japanese economy, where the release of the latest monetary policy meeting is going to be the focus of Wednesday.
US
A largely quiet week on the whole in the US, where the major economic data releases amount to the latest CPI and Philly Fed manufacturing index. That is with the exception of the FOMC announcement, which will make up the most notable event of the week when it occurs on Wednesday.
The FOMC announcement marks the conclusions of the two day meeting where we will see the latest Fed forecasts, along with the monetary policy decision from Yellen & co. Unfortunately this event has become somewhat predictable recently, which brings down the propensity for volatility. That being said, given the size of the announcement, we are always likely to see some notable price action. My opinion earlier this month is that should we see a non-farm payrolls figure above 200k, then we would most likely see another $10bn taper this week. Thus with the payrolls number of 217k, I expect to see much of the same from the Fed. As such, be aware that the press conference and quarterly economic projections are just as likely to provide significant volatility as the core announcement.
Earlier in the week, the US CPI measure of inflation is due out, with estimates pointing towards a steady level of 0.2% quarter on quarter. On a yearly front, this amounts to 1.7% compared to the May 2013 figure. Unlike the eurozone, the Fed is not too worried about this figure as it currently stands given it’s proximity to the 2% level. However, should we see a major move to the downside, this could be enough to bring about discussions within the Fed regarding whether tapering is too sharp.
Finally, the Philly Fed manufacturing index figure is due on Thursday, where we are expecting to see a second consecutive pull-back from the high in March towards 14.8. Bear in mind that this survey is typically something which generally only has a significant effect if it falls markedly short or higher than market expectations. This is in contrast to some of the more notable releases which seemingly bring volatility irrespective of the announcement. Given the major move to the upside two months ago, a pull-back would not be a shock. However, a move to the upside could be the thing needed to drive the markets forward yet again.
UK
A mixed week ahead, where the CPI, BoE minutes and retail sales figure represents a few interesting items to keep a look out for. On Tuesday, the CPI measure of inflation is likely to dominate where expectations point towards a fall back to 1.7%. For the most part, the inflation level has become alot less of a threat to monetary policy in the UK in recent months following the fall back below 2%. In all likeliness, the main worry for the BoE would be a move into a deflationary environment, similar to that in the eurozone. Thus should we see a significant fall in this figure, it could bring a change in expectations of future monetary policy.
On Wednesday, the release of the monetary policy minutes is expected to revitalise the discussion regarding when we will see interest rates rise in the UK. The meeting earlier in the month saw Carney note that we had edged closer to the point where we would see interest rates rise. This has been followed up more recently by Carney speculating that rates would increase earlier than many expect. Thus the minutes are going to be watched closely for any sign of when the MPC expect to see the start of interest rates hikes.
Finally, on Thursday, the retail sales figure is widely expected to move back into negative territory for the first time in four months. The role of the consumer in driving the UK economy forward is absolutely key, as highlighted by the fact that Mark Carney saw consumption as one of the major areas to watch out for in relation to his forward guidance policy. The retail sales growth shows the confidence of consumers to make investment decisions and thus reflect both current and future confidence.
Eurozone
A rather front weighted week for the eurozone, where the release of the CPI inflation rate, along with the ZEW economic sentiment numbers represent the only two major events on my agenda. Monday’s CPI release is by far the most important of these, given the disinflation seen in the last year. The inability of the actions from the ECB to actually bring about any decent level of inflation was what drove him to implement a whole range of measures seeking to raise this figure. On this occasions, we do not expect to see any major moves in relation to monetary policy given that the steps have been taken and thus Draghi will be waiting to see what the effects of his policies are in the coming months. However, a further move to the downside means that the pressure will be on the ECB to avoid deflation or else QE could be on the cards down the line.
On Tuesday, the ZEW economic sentiment figures for Germany and the eurozone are expected to provide a valuable insight into the outlook of German institutional investors and analysts as to the direction and health of both the country and eurozone as a whole. In general, the German figure is typically the most important given that this is a German centric measure. On this occasion, there is the expectation that we will see a reversal in the German figure, following five months off downside. Should this occur, it would point towards a possible bottoming out, where German investors believe that the economic situation is getting progressively better.
Asia & Oceania
A quiet week in Asia and Australia, where the only real major event comes on Tuesday, when the BoJ release their latest monetary policy minutes. The ability of the economy to withstand the sales tax hike in April has been the hot topic in Q2. Thus as time goes on, we will be watching more and more closely for any sport of reaction from the BoJ should the weaknesses continue. I do not expect to see any major hints in this month’s minutes, yet it cannot be ruled out and thus it is worth keeping a look out for this release.
A key week in the markets where the Fed comes back into focus with the Federal Reserve bringing about the most notable event in the form of the latest monetary policy decision on Wednesday. Elsewhere, the UK CPI figure will bring an update to the real income story. Meanwhile in the eurozone, the CPI figure is going to be a major driver of interest within the markets. On the Asian front, the focus will largely be upon the Japanese economy, where the release of the latest monetary policy meeting is going to be the focus of Wednesday.
US
A largely quiet week on the whole in the US, where the major economic data releases amount to the latest CPI and Philly Fed manufacturing index. That is with the exception of the FOMC announcement, which will make up the most notable event of the week when it occurs on Wednesday.
The FOMC announcement marks the conclusions of the two day meeting where we will see the latest Fed forecasts, along with the monetary policy decision from Yellen & co. Unfortunately this event has become somewhat predictable recently, which brings down the propensity for volatility. That being said, given the size of the announcement, we are always likely to see some notable price action. My opinion earlier this month is that should we see a non-farm payrolls figure above 200k, then we would most likely see another $10bn taper this week. Thus with the payrolls number of 217k, I expect to see much of the same from the Fed. As such, be aware that the press conference and quarterly economic projections are just as likely to provide significant volatility as the core announcement.
Earlier in the week, the US CPI measure of inflation is due out, with estimates pointing towards a steady level of 0.2% quarter on quarter. On a yearly front, this amounts to 1.7% compared to the May 2013 figure. Unlike the eurozone, the Fed is not too worried about this figure as it currently stands given it’s proximity to the 2% level. However, should we see a major move to the downside, this could be enough to bring about discussions within the Fed regarding whether tapering is too sharp.
Finally, the Philly Fed manufacturing index figure is due on Thursday, where we are expecting to see a second consecutive pull-back from the high in March towards 14.8. Bear in mind that this survey is typically something which generally only has a significant effect if it falls markedly short or higher than market expectations. This is in contrast to some of the more notable releases which seemingly bring volatility irrespective of the announcement. Given the major move to the upside two months ago, a pull-back would not be a shock. However, a move to the upside could be the thing needed to drive the markets forward yet again.
UK
A mixed week ahead, where the CPI, BoE minutes and retail sales figure represents a few interesting items to keep a look out for. On Tuesday, the CPI measure of inflation is likely to dominate where expectations point towards a fall back to 1.7%. For the most part, the inflation level has become alot less of a threat to monetary policy in the UK in recent months following the fall back below 2%. In all likeliness, the main worry for the BoE would be a move into a deflationary environment, similar to that in the eurozone. Thus should we see a significant fall in this figure, it could bring a change in expectations of future monetary policy.
On Wednesday, the release of the monetary policy minutes is expected to revitalise the discussion regarding when we will see interest rates rise in the UK. The meeting earlier in the month saw Carney note that we had edged closer to the point where we would see interest rates rise. This has been followed up more recently by Carney speculating that rates would increase earlier than many expect. Thus the minutes are going to be watched closely for any sign of when the MPC expect to see the start of interest rates hikes.
Finally, on Thursday, the retail sales figure is widely expected to move back into negative territory for the first time in four months. The role of the consumer in driving the UK economy forward is absolutely key, as highlighted by the fact that Mark Carney saw consumption as one of the major areas to watch out for in relation to his forward guidance policy. The retail sales growth shows the confidence of consumers to make investment decisions and thus reflect both current and future confidence.
Eurozone
A rather front weighted week for the eurozone, where the release of the CPI inflation rate, along with the ZEW economic sentiment numbers represent the only two major events on my agenda. Monday’s CPI release is by far the most important of these, given the disinflation seen in the last year. The inability of the actions from the ECB to actually bring about any decent level of inflation was what drove him to implement a whole range of measures seeking to raise this figure. On this occasions, we do not expect to see any major moves in relation to monetary policy given that the steps have been taken and thus Draghi will be waiting to see what the effects of his policies are in the coming months. However, a further move to the downside means that the pressure will be on the ECB to avoid deflation or else QE could be on the cards down the line.
On Tuesday, the ZEW economic sentiment figures for Germany and the eurozone are expected to provide a valuable insight into the outlook of German institutional investors and analysts as to the direction and health of both the country and eurozone as a whole. In general, the German figure is typically the most important given that this is a German centric measure. On this occasion, there is the expectation that we will see a reversal in the German figure, following five months off downside. Should this occur, it would point towards a possible bottoming out, where German investors believe that the economic situation is getting progressively better.
Asia & Oceania
A quiet week in Asia and Australia, where the only real major event comes on Tuesday, when the BoJ release their latest monetary policy minutes. The ability of the economy to withstand the sales tax hike in April has been the hot topic in Q2. Thus as time goes on, we will be watching more and more closely for any sport of reaction from the BoJ should the weaknesses continue. I do not expect to see any major hints in this month’s minutes, yet it cannot be ruled out and thus it is worth keeping a look out for this release.
Alpari UK
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UK Opening Call from Alpari UK on 16 June 2014
Geo-political fears drive markets lower
• European markets expected lower following geo-political fears
• Iraq insurgency continues to gather pace as US considers military action
• Ukraine crisis also gathers steam following the downing of a military plane
• FOMC likely to discuss possible response to Iraq and Ukraine crises
• ECB inflation could give a hint to future ECB action
European markets are expected to open in the red following a notably pessimistic Asian session which saw the Nikkei fall over 1%. The escalating tensions within Ukraine and Iraq have provided a more pessimistic geo-political backdrop, with Iraq in particular providing the possibility of yet another armed intervention from the US. European markets are expected to follow their Asian counterparts, with futures pointing towards the FTSE100 opening down 24 points, CAC down 26 points and DAX 48 points.
The escalation of conflict within Iraq has been driving up the price of oil and energy, along with precious metals. However, this is beginning to feed into the equities markets, where the possibility of US involvement is driving increased flow from equities to bonds and safe haven assets. The emergence of photographic evidence that the radical ISIS group massacred hundreds of Shiite soldiers has added a renewed degree of urgency in the US response, following an expansionist policy that has seen Tal Afar taken under their control most recently. The announcement that the US will possibly work alongside Iran in providing military support is the most worrying part of this, with investors hoping that this is not the beginning of yet another armed conflict which runs for years. Following it's involvement in the Syrian and Ukrainian crises, this represents yet another reason for the markets to fear the use of military force from a western nation.
The Ukrainian conflict rattles on yet again, with the news that the pro-Russian separatists managed to shoot down a Ukrainian military transport plane on Saturday, killing all 40 service members and nine crew on board. This represents the biggest cost to life in the conflict so far and is calling for a greater role from Russia to find some sort of resolution to this problem. The increasingly untenable situation within East Ukraine has led to a call to arms from pro-Ukrainians which saw the Russian embassy attacked in recent days. Unfortunately there is no easy way out of this situation and thus a civil war looks increasingly likely; something the EU and US will be keen to avoid involvement in.
With the FOMC meeting ahead later this week, an escalation of geo-political concerns have the potential to bring about a more cautious tone from the committee as fiscal and monetary policy have often worked hand in hand to help support the economy when significant resources are being allocated for military purposes. Thus a slow down in tapering could actually be seen as a tool to halt any slide in the markets should a more protracted sell-off occur in response to the Iraqi and Ukrainian crises.
Today marks the return of the all important eurozone CPI release, which follows the decision from Mario Draghi to implement a whole range of measures aimed at raising inflation and devaluing the euro. The somewhat mixed fortunes of the euro show a somewhat mixed response to these measures, with many believing a fully blown QE policy would be the one most potent tool in providing price growth. Given the relatively new announcement of those measures, it is unlikely that any further downside could spark yet more action from Draghi right now. However, should we see a rise, this could feed into a positive euro given that this would reduce the likeliness of any further ECB action down the line. Expectations are for the rate to remain at 0.5.
Geo-political fears drive markets lower
• European markets expected lower following geo-political fears
• Iraq insurgency continues to gather pace as US considers military action
• Ukraine crisis also gathers steam following the downing of a military plane
• FOMC likely to discuss possible response to Iraq and Ukraine crises
• ECB inflation could give a hint to future ECB action
European markets are expected to open in the red following a notably pessimistic Asian session which saw the Nikkei fall over 1%. The escalating tensions within Ukraine and Iraq have provided a more pessimistic geo-political backdrop, with Iraq in particular providing the possibility of yet another armed intervention from the US. European markets are expected to follow their Asian counterparts, with futures pointing towards the FTSE100 opening down 24 points, CAC down 26 points and DAX 48 points.
The escalation of conflict within Iraq has been driving up the price of oil and energy, along with precious metals. However, this is beginning to feed into the equities markets, where the possibility of US involvement is driving increased flow from equities to bonds and safe haven assets. The emergence of photographic evidence that the radical ISIS group massacred hundreds of Shiite soldiers has added a renewed degree of urgency in the US response, following an expansionist policy that has seen Tal Afar taken under their control most recently. The announcement that the US will possibly work alongside Iran in providing military support is the most worrying part of this, with investors hoping that this is not the beginning of yet another armed conflict which runs for years. Following it's involvement in the Syrian and Ukrainian crises, this represents yet another reason for the markets to fear the use of military force from a western nation.
The Ukrainian conflict rattles on yet again, with the news that the pro-Russian separatists managed to shoot down a Ukrainian military transport plane on Saturday, killing all 40 service members and nine crew on board. This represents the biggest cost to life in the conflict so far and is calling for a greater role from Russia to find some sort of resolution to this problem. The increasingly untenable situation within East Ukraine has led to a call to arms from pro-Ukrainians which saw the Russian embassy attacked in recent days. Unfortunately there is no easy way out of this situation and thus a civil war looks increasingly likely; something the EU and US will be keen to avoid involvement in.
With the FOMC meeting ahead later this week, an escalation of geo-political concerns have the potential to bring about a more cautious tone from the committee as fiscal and monetary policy have often worked hand in hand to help support the economy when significant resources are being allocated for military purposes. Thus a slow down in tapering could actually be seen as a tool to halt any slide in the markets should a more protracted sell-off occur in response to the Iraqi and Ukrainian crises.
Today marks the return of the all important eurozone CPI release, which follows the decision from Mario Draghi to implement a whole range of measures aimed at raising inflation and devaluing the euro. The somewhat mixed fortunes of the euro show a somewhat mixed response to these measures, with many believing a fully blown QE policy would be the one most potent tool in providing price growth. Given the relatively new announcement of those measures, it is unlikely that any further downside could spark yet more action from Draghi right now. However, should we see a rise, this could feed into a positive euro given that this would reduce the likeliness of any further ECB action down the line. Expectations are for the rate to remain at 0.5.
Alpari UK
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UK Opening Call from Alpari UK on 17 June 2014
Despite the continued violence in Iraq and Russia turning off gas supplies to Ukraine, stocks on Wall Street pushed higher at the close yesterday leading many to look towards a stronger open for Europe this morning. However a negative session in Asia has poured cold water on that with the markets now instead focussing on the geo political uncertainty as well as what could be a pretty busy day of economic data. Markets are also digesting a cut by the IMF to the US growth forecast, as Christine Lagarde urges the Fed to keep interest rates low and raise the minimum wage in order to kick start the economy.
Today’s session will be one where we focus on UK data initially, especially ahead of tomorrow’s BOE announcement. Of course we expect nothing out of this announcement tomorrow but poor numbers today out of CPI and RPI could well give Mark Carney something to think about. Expectations are for the CPI inflation reading to drop a little lower to 1.7% on the YoY figure. The fall is not likely to be big enough to get the BoE worrying about deflation, but with deflation such an issue in the Eurozone and becoming an issue in the US it will definitely be closely watched. The theme of CPI inflation will continue into the afternoon as the US version will also be released a little later with this fear of deflation expected to ease a little with the YoY figures expected to rise to a much safer 1.9%. We cannot forget about the Eurozone today as the release of the Zew survey will undoubtedly be a talking point. Over the last few months Germany has seen this number struggle as threats of retaliatory sanctions from Russia on Europe got a little closer. With Russia now switching off the gas supplies to Ukraine we could well see this number struggle again as Germans and Europeans see the rising threat again.
Overall we are looking a fairly busy session today with a fair amount of data for traders to get excited about, and if that stuff is not enough there is even some UK corporate data to get excited about. If that doesn’t work either then go home and put the Brazil game on.
Ahead of the open we expect the FTSE to open higher by 12 points and the DAX to open higher by 27 points.
Despite the continued violence in Iraq and Russia turning off gas supplies to Ukraine, stocks on Wall Street pushed higher at the close yesterday leading many to look towards a stronger open for Europe this morning. However a negative session in Asia has poured cold water on that with the markets now instead focussing on the geo political uncertainty as well as what could be a pretty busy day of economic data. Markets are also digesting a cut by the IMF to the US growth forecast, as Christine Lagarde urges the Fed to keep interest rates low and raise the minimum wage in order to kick start the economy.
Today’s session will be one where we focus on UK data initially, especially ahead of tomorrow’s BOE announcement. Of course we expect nothing out of this announcement tomorrow but poor numbers today out of CPI and RPI could well give Mark Carney something to think about. Expectations are for the CPI inflation reading to drop a little lower to 1.7% on the YoY figure. The fall is not likely to be big enough to get the BoE worrying about deflation, but with deflation such an issue in the Eurozone and becoming an issue in the US it will definitely be closely watched. The theme of CPI inflation will continue into the afternoon as the US version will also be released a little later with this fear of deflation expected to ease a little with the YoY figures expected to rise to a much safer 1.9%. We cannot forget about the Eurozone today as the release of the Zew survey will undoubtedly be a talking point. Over the last few months Germany has seen this number struggle as threats of retaliatory sanctions from Russia on Europe got a little closer. With Russia now switching off the gas supplies to Ukraine we could well see this number struggle again as Germans and Europeans see the rising threat again.
Overall we are looking a fairly busy session today with a fair amount of data for traders to get excited about, and if that stuff is not enough there is even some UK corporate data to get excited about. If that doesn’t work either then go home and put the Brazil game on.
Ahead of the open we expect the FTSE to open higher by 12 points and the DAX to open higher by 27 points.
Alpari UK
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Daily Market Update - 17 June 2014 - Alpari UK
Iraq fears persist as situation remains liquid - 00:14
RBA minutes point to much of the same - 01:14
UK CPI falls, pushing rate hike expectations lower - 02:14
ZEW expectations fall - 03:18
A look ahead to tomorrows FOMC announcement - 04:22
Iraq fears persist as situation remains liquid - 00:14
RBA minutes point to much of the same - 01:14
UK CPI falls, pushing rate hike expectations lower - 02:14
ZEW expectations fall - 03:18
A look ahead to tomorrows FOMC announcement - 04:22
Alpari UK
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US Opening Call from Alpari UK on 17 June 2014
US futures higher ahead of inflation and housing data
• US futures higher as stocks continue to pare losses;
• Gold slips on short term rally in risk assets;
• US Inflation stands out as key release today;
• May housing data also scheduled for release ahead of the open.
US futures are pointing to a positive start to the session on Tuesday, as indices look for a third day of gains and attempt to erase more of the losses suffered as a result of the crisis in Iraq.
The gains seen over the last couple of sessions have been fairly small in comparison to those on Wednesday and Thursday last week when the crisis escalated quite rapidly. This appears to be a sign that the strength seen over the last couple of days is temporary and simply a case of stocks paring those initial losses. From a technical standpoint, the Dow is still looking quite bullish having found support at the end of last week around the previous highs of 16,735, but I don’t expect this to hold much longer.
The recent recovery in stocks has coincided with a pullback in Gold, which is generally regarded as the risk averse trade. The recent turmoil in Iraq has therefore generated a lot of interest in the precious metal, as well as many other commodities including, of course, oil which has rallied on fears of potential supply disruptions from a major oil exporting country. As with the recovery in stocks in recent days, I don’t expect this pullback in commodities to last, with the situation in Iraq likely to deteriorate before it improves.
There’s plenty of economic data being released from the US today, which may provide a small distraction to events in the middle east. That said, in my experience, traders tend to overlook these data releases more when such a significant geopolitical risk emerges, particularly in the early stages of it. The CPI inflation reading stands out as the key release today, with the core reading seen closing in on the Fed’s 2% inflation target. That said, this is not the Fed’s preferred measure of inflation, although it may provide some insight into the direction of inflation in the coming months.
There’s also two pieces of housing data being released today for May, with housing starts and building permits both scheduled to be released alongside the inflation numbers ahead of the opening bell. Both numbers are expected to fall slightly following the spike in April, with housing starts expected at 1.05 million and building permits at 1.055 million.
Ahead of the opening bell on Wall Street, the S&P is seen unchanged, the Dow 6 points higher and the Nasdaq 3 points higher.
US futures higher ahead of inflation and housing data
• US futures higher as stocks continue to pare losses;
• Gold slips on short term rally in risk assets;
• US Inflation stands out as key release today;
• May housing data also scheduled for release ahead of the open.
US futures are pointing to a positive start to the session on Tuesday, as indices look for a third day of gains and attempt to erase more of the losses suffered as a result of the crisis in Iraq.
The gains seen over the last couple of sessions have been fairly small in comparison to those on Wednesday and Thursday last week when the crisis escalated quite rapidly. This appears to be a sign that the strength seen over the last couple of days is temporary and simply a case of stocks paring those initial losses. From a technical standpoint, the Dow is still looking quite bullish having found support at the end of last week around the previous highs of 16,735, but I don’t expect this to hold much longer.
The recent recovery in stocks has coincided with a pullback in Gold, which is generally regarded as the risk averse trade. The recent turmoil in Iraq has therefore generated a lot of interest in the precious metal, as well as many other commodities including, of course, oil which has rallied on fears of potential supply disruptions from a major oil exporting country. As with the recovery in stocks in recent days, I don’t expect this pullback in commodities to last, with the situation in Iraq likely to deteriorate before it improves.
There’s plenty of economic data being released from the US today, which may provide a small distraction to events in the middle east. That said, in my experience, traders tend to overlook these data releases more when such a significant geopolitical risk emerges, particularly in the early stages of it. The CPI inflation reading stands out as the key release today, with the core reading seen closing in on the Fed’s 2% inflation target. That said, this is not the Fed’s preferred measure of inflation, although it may provide some insight into the direction of inflation in the coming months.
There’s also two pieces of housing data being released today for May, with housing starts and building permits both scheduled to be released alongside the inflation numbers ahead of the opening bell. Both numbers are expected to fall slightly following the spike in April, with housing starts expected at 1.05 million and building permits at 1.055 million.
Ahead of the opening bell on Wall Street, the S&P is seen unchanged, the Dow 6 points higher and the Nasdaq 3 points higher.
Alpari UK
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US Opening Call from Alpari UK on 18 June 2014
Will the Fed follow BoE and hint at earlier rate hike?
• Traders cautious ahead of FOMC decision and press conference;
• Another $10 billion taper expected;
• Fed may follow BoE and hit at earlier rate hike following new projections;
• BoE minutes show officials calling for rate hike later this year.
We’re potentially seeing a little bit of caution from traders ahead of the opening bell on Wednesday, given the FOMC decision and press conference later which always has the potential to create big moves in the markets. As it stands, the S&P is expected to open unchanged, the Dow down 4 points and the Nasdaq up 3 points.
It’s not necessarily the decision itself that has the potential to shake things up, with the Fed being quite clear in the past that it intends to continue to taper by $10 billion per month unless circumstances drastically change. While this may be a little predictable, the same can never be said of the press conference, especially one that includes a new set of economic projections that could alter when the Fed expects to bring an end to its quantitative easing program and, more importantly, begins to raise interest rates.
Currently, the markets are pricing in the first rate hike around the middle of next year, with rates potentially hitting 1% by the end of the same year. The strength of the recovery in the US in the second quarter, combined with yesterday’s jump in CPI inflation to above 2% in May, could prompt some of the more hawkish Fed officials to call for the first hike to come earlier than we’re expecting. We’ve already seen similar comments from Mark Carney, Governor of the Bank of England, so it wouldn’t be too much of a surprise if the Fed was on the same page. Aside from this, the rest of the day is looking pretty quiet, which is only likely to feed into the more cautious approach being seen already.
Unsurprisingly this morning, the BoE minutes pointed to a potential rate hike before the end of the year. This would have been quite a shock for the markets had it not been for Carney intentionally dropping a big hint last week during his speech at the annual Mansion House event. Clearly, he was just trying to avoid any excessive market volatility following the release of the minutes this morning. Sterling rallied strongly against the dollar immediately following the minutes, before running into resistance again around $1.70. The pair is now trading back around the level it was at before the minutes were released, around 1.6940, so clearly Carney’s warning worked perfectly.
Will the Fed follow BoE and hint at earlier rate hike?
• Traders cautious ahead of FOMC decision and press conference;
• Another $10 billion taper expected;
• Fed may follow BoE and hit at earlier rate hike following new projections;
• BoE minutes show officials calling for rate hike later this year.
We’re potentially seeing a little bit of caution from traders ahead of the opening bell on Wednesday, given the FOMC decision and press conference later which always has the potential to create big moves in the markets. As it stands, the S&P is expected to open unchanged, the Dow down 4 points and the Nasdaq up 3 points.
It’s not necessarily the decision itself that has the potential to shake things up, with the Fed being quite clear in the past that it intends to continue to taper by $10 billion per month unless circumstances drastically change. While this may be a little predictable, the same can never be said of the press conference, especially one that includes a new set of economic projections that could alter when the Fed expects to bring an end to its quantitative easing program and, more importantly, begins to raise interest rates.
Currently, the markets are pricing in the first rate hike around the middle of next year, with rates potentially hitting 1% by the end of the same year. The strength of the recovery in the US in the second quarter, combined with yesterday’s jump in CPI inflation to above 2% in May, could prompt some of the more hawkish Fed officials to call for the first hike to come earlier than we’re expecting. We’ve already seen similar comments from Mark Carney, Governor of the Bank of England, so it wouldn’t be too much of a surprise if the Fed was on the same page. Aside from this, the rest of the day is looking pretty quiet, which is only likely to feed into the more cautious approach being seen already.
Unsurprisingly this morning, the BoE minutes pointed to a potential rate hike before the end of the year. This would have been quite a shock for the markets had it not been for Carney intentionally dropping a big hint last week during his speech at the annual Mansion House event. Clearly, he was just trying to avoid any excessive market volatility following the release of the minutes this morning. Sterling rallied strongly against the dollar immediately following the minutes, before running into resistance again around $1.70. The pair is now trading back around the level it was at before the minutes were released, around 1.6940, so clearly Carney’s warning worked perfectly.
Alpari UK
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US Opening Call from Alpari UK on 20 June 2014
Dovish Fed continues to boost appetite for risk
Wednesday’s dovish comments from Fed Chairwoman Janet Yellen remain the key driver of sentiment in the markets today, as traders continue to favour risk assets in the absence of anything else to convince them to do otherwise. The gains being made aren’t exactly massive, but they have been enough to send the S&P to another record close on Thursday and get Europe off to a good start today.
Of course, there is still plenty of downside risk for the markets right now, most notably Iraq where the crisis is likely to get worse before it gets better. This may explain why we’re only seeing limited gains in certain assets, such as stocks, right now. Traders are clearly concerned that the situation in Iraq could escalate very quickly and the impact this would have on oil would be very bad for stocks.
One thing that’s benefitting from both Yellen’s dovish stance and the uncertainty in Iraq is Gold, which is seen as both an inflation hedge and a safe haven asset. The precious metal broke through $1,300 yesterday to hit two month highs and despite trading slightly lower today, still looks very bullish. We may see some further pressure on Gold today but as long as it closes above $1,300, I expect it to reach its next target, $1,331, in the next week or so.
There’s unlikely to be much in the way of catalysts for the markets today, with the economic calendar offering very little that would usually have any impact. The Canadian inflation and retail sales numbers may have some impact on Canadian pairs in the currency markets but this shouldn’t have any impact elsewhere. The eurozone consumer confidence reading may also be of interest, but again this doesn’t tend to carry much weight in the markets.
Ahead of the opening bell on Wall Street, the S&P is expected to open unchanged at 1,959, the Dow up 11 points at 16,932 and the Nasdaq up 2 points at 3,802.
Dovish Fed continues to boost appetite for risk
Wednesday’s dovish comments from Fed Chairwoman Janet Yellen remain the key driver of sentiment in the markets today, as traders continue to favour risk assets in the absence of anything else to convince them to do otherwise. The gains being made aren’t exactly massive, but they have been enough to send the S&P to another record close on Thursday and get Europe off to a good start today.
Of course, there is still plenty of downside risk for the markets right now, most notably Iraq where the crisis is likely to get worse before it gets better. This may explain why we’re only seeing limited gains in certain assets, such as stocks, right now. Traders are clearly concerned that the situation in Iraq could escalate very quickly and the impact this would have on oil would be very bad for stocks.
One thing that’s benefitting from both Yellen’s dovish stance and the uncertainty in Iraq is Gold, which is seen as both an inflation hedge and a safe haven asset. The precious metal broke through $1,300 yesterday to hit two month highs and despite trading slightly lower today, still looks very bullish. We may see some further pressure on Gold today but as long as it closes above $1,300, I expect it to reach its next target, $1,331, in the next week or so.
There’s unlikely to be much in the way of catalysts for the markets today, with the economic calendar offering very little that would usually have any impact. The Canadian inflation and retail sales numbers may have some impact on Canadian pairs in the currency markets but this shouldn’t have any impact elsewhere. The eurozone consumer confidence reading may also be of interest, but again this doesn’t tend to carry much weight in the markets.
Ahead of the opening bell on Wall Street, the S&P is expected to open unchanged at 1,959, the Dow up 11 points at 16,932 and the Nasdaq up 2 points at 3,802.