Forex research

[Alpari]

US Opening Call from Alpari UK on 13 August 2013

US futures higher ahead of retail sales

Today’s US opening call provides an update on:

• Retail sales to provide insight into US consumers;
• Fed member Lockhart to speak on health of US economy;
• More strong eurozone data ahead of GDP figures;
• UK inflation falls in line with expectations.

US futures are pointing to a higher open on Tuesday, ahead of the release of some important retail sales figures for July.

Retail sales figures are viewed by many analysts as a preferential reading of economic health for the US, due to the contribution of consumer spending to the GDP figure. Basically, if consumers don’t feel secure in their jobs or are feeling the pinch financially, they tend to spend less and the economy struggles to grow.

As a result, retail sales can be seen to be a measure of both financial health of consumers, as well as confidence in the economy going forward. Especially at times of high unemployment, low wage growth, poor economic growth, higher taxes and rising fuel costs, like we’re seeing at the moment.

Today we’re expecting an increase of 0.3% in the broader figure, with core retail sales jumping to 0.4%. Traders tend to react more to the latter, due to the volatility in car sales, which isn’t included in it. If we see a poor figure today, it will only make it more difficult for the Fed to justify tapering in September as it would suggest the health of the consumer is not enough to support a sustainable recovery on its own.

On that note, we’ll hear from Federal Reserve Bank of Atlanta President, Dennis Lockhart, later on today when he speaks on the US economy and the strength of the dollar. While Lockhart is not currently on the FOMC, he will have insight into what the other members are thinking and could provide clues as to when the Fed is likely to begin tapering.

It’s been a bright start to the day so far in Europe, with more data suggesting the recovery in the eurozone is finally underway. Of course, any recovery is going to be extremely fragile, but compared to the last couple of years, it’s very encouraging.

The surveys have been improving significantly every month in the second quarter and that looks to be continuing into the third. Today’s ZEW economic sentiment figures for the eurozone and Germany continued the trend, coming out well above expectations at 44 and 42, respectively. Of course, the improvement in the surveys will be pointless if it doesn’t translate into better economic data, which we are expecting it to tomorrow, when the GDP figures are released. Expectations are currently for the eurozone to climb out of a year-long recession in the second quarter.

Over in the UK, the focus has been on the release of the inflation figure, which fell to 2.8% in July. There’s going to be a lot more attention paid to this figures now that new Bank of England Governor, Mark Carney, has set an inflation threshold for forward guidance to remain in place. The threshold actually refers to inflation expectations two years down the line, which is very subjective, however the official figure should give some insight into where the BoE see’s inflation going. Based on today’s figure, it looks like inflation remains well anchored and there’s little threat in the short term of interest rates being reviewed.

Ahead of the open we expect to see the S&P up 6 points, the Dow up 63 points and the NASDAQ up 12 points.

Read the full report at Alpari News Room​

 

[Alpari]

Alpari UK's 3 FX Highlights of the week

Craig Erlam looks at the weeks 3 biggest events hitting the FX market this week.

[video=youtube;IkDouoQopuQ][/video]

 

[Alpari]

Daily Market Update - 13 August 2013 - Alpari UK

James Hughes discusses today's UK CPI reading and looks at how the market has reacted to US retails sales reading.

[video=youtube;xxtHy40ajMc][/video]

 

[Alpari]

UK Opening Call from Alpari UK on 14 August 2013

GDP figures to extend positive run for the eurozone

Today’s UK opening call provides an update on:
• Not enough data to justify tapering in September according to Fed’s Lockhart;
• Eurozone expected to climb out of year-long recession in Q2;
• Forward guidance clarity sought from BoE minutes;
• Fed’s Bullard to provide further tapering insight.

European indices are expected to open slightly higher on Wednesday, after a non-voting member of the FOMC suggested that tapering is unlikely to begin in September.

Investors still remain split on when the Fed will begin scaling back its asset purchases, with the majority sitting in either the September or December camps. Dennis Lockhart, President of the Atlanta Fed, claimed last night that the FOMC is unlikely to have enough data to justify tapering in September, which therefore leaves December as the most likely starting point.

While Lockhart is not a voting member of the FOMC, his views are seen as close to the consensus at the Fed, which is why they carry some weight. If we see more signs in the coming weeks that September is a no go for tapering, it could provide the spark that sends US indices back towards those record highs, following a bit of sell-off since the start of the month.

Asian markets lacked any real direction over night, with most indices trading relatively flat. The same can’t be said for the European session this morning, with Lockhart’s comments providing some early direction, followed by back-to-back GDP figures from the eurozone, Bank of England minutes and UK employment data.

The data out of the eurozone over the recent months has been an unexpected surprise. A few months ago, it seemed unlikely that the euro area would move out of recession this year, let alone in the second quarter, as is expected to be confirmed this morning. The eurozone is expected to have recorded marginal growth of 0.2% in the second quarter, which is enough to bring the region out of recession and begin on the road to recovery. Any decent recovery is very unlikely for probably a few years, with the area probably stagnating somewhat in the meantime.

The release of the Bank of England minutes from earlier this month will be monitored closely by the markets this morning. While Governor, Mark Carney, did not announce the central bank’s new forward guidance at the meeting, it is likely that it will have been agreed upon here. The markets were less than impressed with the BoEs attempt at forward guidance last week, due to the amount of caveats it came with that essentially invalidated it entirely. The minutes may provide further clarity on the matter and may put investors concerns at ease. If not, then Carney has a tough job ahead, convincing businesses and consumers that rates will remain low so that they can borrow and spend without the worry of interest rate hikes in the near future.

The unemployment rate, one of the thresholds for the forward guidance, will also be released this morning. Carney announced last week that interest rates will only be discussed again when unemployment falls from 7.8% to 7%, which he expects to take three years. The unemployment rate is expected to remain at 7.8% today, while the number of people claiming unemployment benefits is expected to fall by 15,000.

The US session later on may be a little quieter, with the economic calendar looking a little light. One thing worth keeping an eye on will be a speech from FOMC voting member, James Bullard, in Kentucky. Following Lockhart’s comments last night, Bullard is likely to receive a number of questions about his expectations ahead of the September meeting. While Bullard is a well known dove, any suggestion that what Lockhart said is correct could prompt further rallies in US equities later, while the dollar would probably come under pressure.

Ahead of the open we expect to see the FTSE up 2 points, the CAC up 9 point and the DAX up 16 points.

Read the full report at Alpari News Room​

 

[Alpari]

US Opening Call from Alpari UK on 14 August 2013

Eurozone out of recession, markets unimpressed

Today’s US opening call provides an update on:

• Strong German and French growth drags eurozone out of recession;
• BoE vote on forward guidance not unanimous;
• UK jobless claims fall for ninth month but unemployment remains at 7.8%;
• Fed’s Bullard to speak in Kentucky.

We’ve seen a very bizarre reaction to the eurozone GDP figures in the markets this morning, with investors selling in response to better than expected figures.

The day got off to a great start, with France climbing out of recession in style. The country recorded 0.5% growth in the second quarter, smashing expectations of 0.1% growth, and well above first quarter growth of -0.2%. Germany kept things going, recording 0.7% growth in the second quarter, ahead of expectations of 0.6%.

Given that these are the two largest economies in the eurozone, it was almost inevitable that the eurozone GDP figure would beat expectations and confirm that the area climbed out of recession in the second quarter. What wasn’t guaranteed was the reaction to the data, with European indices currently a mixed bag and the euro trading lower on the day. There appears to be little reason for the negative reaction to the figures, but it could just be a simple case of strong data being priced in already following a number of positive data releases.

The Bank of England minutes confirmed something that many had previously suggested, that the vote on forward guidance was not unanimous. One MPC member, Martin Weale, wanted a shorter time horizon for inflation than the 18-24 months that the BoE announced last week.

Had the other members agreed to this, the forward guidance would have been even more useless than it already is, given that inflation is currently already well above the 2.5% upper boundary. Understandably, the markets took this as a hawkish sign, prompting a rally in sterling as sending it higher on the day against the dollar.

On a more upbeat note, the number of people claiming unemployment related benefits in the UK fell for the ninth consecutive month in July. The number of people claiming fell by 29,200, while June’s figure was revised lower to 29,400. This was yet another good sign for the UK, although the unemployment rate remained at 7.8%, where it has been since the start of the year, barring February when it temporarily jumped to 7.9%. This just highlights how big the job of getting unemployment down to 7% is going to be. As people find work, more rejoin the labour force, keeping the rate stubbornly high.

The US session is looking a little quieter on Wednesday, with the economic calendar looking pretty thin. The key event will be a speech from James Bullard, President of St Louis Fed and FOMC voting member, in Kentucky.

Following comments yesterday from Dennis Lockhart, President of the Atlanta Fed, that the Fed is unlikely to begin scaling back its asset purchases in September due to a lack of data that shows the economy can support itself, investors will be looking for confirmation from Bullard that this is the case. That said, Bullard is a known dove, so any confirmation of this should be taken with a pinch of salt.

Ahead of the open we expect to see the S&P down 3 points, the Dow down 25 points and the NASDAQ down 3 points.

Read the full report at Alpari News Room​

 

[Alpari]

Daily Market Update - 14 August 2013 - Alpari UK

0:10 Eurozone GDP figures impress
1:56 UK jobs data beats expectations
3:09 Fed's Bullard set to dominate US session

[video=youtube;sp8-A_hRxwY][/video]

 

[Alpari]

UK Opening Call from Alpari UK on 15 August 2013

Retail sales to show UK recovery continuing into Q3

Today’s UK opening call provides an update on:

• US falls as rising Treasury yields stoke tapering fears;
• Not enough data to justify September tapering according to Fed’s Bullard;
• UK recovery expected to continue into Q3 with strong retail sales in July;
• US data in focus this afternoon, in particular jobless claims and philly fed.

European indices are expected to open mostly lower on Tuesday, tracking losses made in the US on Wednesday, which also weighed on Asian stocks over night.

The sell-off in the US came after another rise in US Treasury yields, to around 2.71%, on increasing expectations that the Fed will start tapering its asset purchases in September. While I still believe it won’t come until December, at the earliest, I am certainly in the camp that hopes it will happen in September. All these swings in the markets driven by fear of when the Fed will begin tapering is overshadowing the fundamentals once again and preventing the markets from functioning correctly.

The reactions are not even always rational. For example, in the last two days we’ve heard from two members of the Fed and both have agreed that there is not enough data to justify cutting back the asset purchases in September. This appears to have been completely ignored. Now, while people would be forgiven for ignoring these comments from James Bullard, who is a well known dove, Dennis Lockhart, despite being a non-voter, is generally seen over sharing the views of the majority at the Fed, so these comments should carry some weight.

Instead though, the markets appear to have reacted to comments from Bullard, in which he claimed the Fed should hold press conferences after all its meetings, including October. He believes not having press conferences after certain meetings leaves only a select number of dates when the Fed can make the key decision, which just reaffirmed the markets view that tapering will begin in September or December. However, in calling for a press conference in October, Bullard has essentially suggested that the Fed could be forced to act too early, in September, rather than wait and extra month for more data. This is probably clutching at straws, but that’s what the markets have been reduced to nowadays as everyone attempts to predict when the Fed will act. All comments are over-analysed and the message is different depending on who’s reading it and what they want to believe.

The economic calendar is looking very light this morning, with UK retail sales for July the only release. The recovery looks likely to continue into the third quarter, with retail sales for July seen rising 2.5%, while core retail sales, the measure many in the markets pay more attention to as it strips out the more volatile items including fuel prices, are seen rising 2.7%. Given that consumer spending makes up around two thirds of the economy, this figure is seen as a hugely important measure of economic health.

After this, the focus will switch to the US, with a number of pieces of important economic data due to be released. First up we have the July CPI figure, weekly jobless claims and empire state manufacturing index all being released at 1.30pm UK time. Many people will be closely watching the CPI figure for signs that inflation is closing in on 2.5%, the point at which the Fed will revisit interest rates, however they probably shouldn’t pay too much attention to the figure.

Obviously if we see a significant spike in the figure, we should sit up and take note. However, the personal consumption expenditure figure, released earlier this month showing a rise of only 1.3%, is the preferred measure of inflation for the Fed. Therefore, while the CPI is important, while the PCE figure remains so low, any rise is likely to only have a limited impact.

The figures we should be paying attentions to are the other two, the weekly jobless claims and the philly fed manufacturing index, which will be released at 3pm UK time. That is according to a recent study by Goldman Sachs, who believe they are important growth indicators that don’t necessarily get the recognition that they should, with investors paying more attention to non-farm payrolls and advanced GDP readings. Whether you agree with this or not, it is important to make note of this because if Goldman Sachs believe it to be true, many are likely to agree and the ones that don’t will probably react as if they do, purely out of respect for the size and influence of the bank.

Ahead of the open we expect to see the FTSE down 21 points, the CAC down 5 point and the DAX down 6 points.

Read the full report at Alpari News Room​

 

[Alpari]

US Opening Call from Alpari UK on 15 August 2013

US futures lower ahead of key data releases

Today’s US opening call provides an update on:

• Plenty of US economic data due to be released;
• Goldman Sachs highlights jobless claims and Philly Fed manufacturing index;
• CPI figure important, but Fed prefers PCE as measure of inflation;
• UK retail sales smash expectations pushing sterling through key resistance.

European indices are trading mostly lower on Thursday, and US futures are pointing to a similar open ahead of some big economic releases.

There are a number of pieces of economic data due out of the US today, including the CPI, empire state manufacturing and industrial production figures for July. However, a recent report from Goldman Sachs suggests the releases we should pay most attention to are the weekly jobless claims and Philly Fed manufacturing index.

These figures, Goldman Sachs believes, are important growth indicators that don’t have as big an impact on the markets as they should. Whether or not people agree with this, Goldman Sachs is a big presence in the markets and people should therefore keep an eye on them. It will be interesting to see if we a bigger reaction to these figures now following the release of the report.

Another figure that tends to attract a lot of attention is the CPI figure, which is expected to show inflation rising to 2% in July. With 2.5% inflation being the threshold at which the Fed will consider raising interest rates, this is likely to start having a bigger impact on the markets soon, especially if it comes out above expectations.

That said, the Fed is known to prefer personal consumption expenditure as a measure of inflation, and this is currently at 1.3%, based on data released earlier this month. As a result, even once the CPI figure reaches 2.5%, it’s unlikely to prompt a rate hike, with deflation currently looking a bigger threat.

The European session has actually been largely positive so far, although you wouldn’t think so looking at the markets. While it’s been relatively quiet on the eurozone front, the retail sales data out of the UK smashed expectations, rising 3% in July compared to a year earlier.

The data had minimal impact on the FTSE, but sterling rallied strongly on the data, breaking through a key level against the dollar before running into resistance around 1.56. The UK data just keeps getting better at the moment and is showing no signs of changing. At this rate, a year that started with talk of a triple dip recession could end with far better growth figures than even the most optimistic forecasts.

Ahead of the open we expect to see the S&P down 6 points, the Dow down 48 points and the NASDAQ down 21 points.

Read the full report at Alpari News Room​

 

[Alpari]

Daily Market Update - 15 August 2013 - Alpari UK

0:09 Fed member James Bullard comments on tapering
1:44 UK recovery gathers pace in July
2:48 Three pieces of data to watch today

[video=youtube;cKqr2-wbWGQ][/video]

 

[Alpari]

UK Opening Call from Alpari UK on 16 August 2013

Eurozone inflation and US consumers in focus on Friday

Today's UK opening call provides an update on:

• US stocks fall on better weekly jobless claims
• Markets spooked by pessimistic outlook from Wallmart;
• Eurozone CPI to remain low, although no further stimulus expected;
• US consumer sentiment and housing data may disappoint.

European futures are trading relatively flat on Friday, largely ignoring the sizable losses in the US indices over night on increasing expectations that the Fed will start tapering in September.

US weekly jobless claims fell to a six year low last week, which despite being a positive thing for the economy, was instead viewed as another sign of improving labour market conditions that will probably convince the Fed to begin tapering next month. The figure prompted more selling in US Treasuries which pushed the yield up to 2.8%, from 2.71% earlier in the session.

We're seeing some more unusual activity in the markets at the moment, similar to what we saw a few months ago when investors were viewing anything as a signal to buy into the rally. Now we're seeing the opposite, with investors apparently seeking shorting opportunities ahead of the expected Fed decision in September. Investors are therefore being very selective about what they pay attention to, rather than looking at the bigger picture.

For example, Wallmart became the latest retailer to disappoint on sales yesterday, while offering a gloomier outlook than analysts had expected. A lack of consumer demand was the main reason for the drop in sales, which is a bad sign for an economy the relies on consumer spending to drive around two thirds of its growth.

If consumers aren't spending due to higher mortgage rates, fuel costs and the payroll tax. This should encourage the Fed to maintain its asset purchases for now, however markets ignored this and the losses in Wallmarts shares just contributed to the overall losses in the US indices.

It's looking like a quiet start to the European session on Friday, with a final reading of the eurozone CPI figure the only notable economic release this morning. Eurozone inflation has been a big talking point over the course of this year, with many calling on the ECB to do more to stimulate the economy, either with more aggressive rate cuts or more ambitious forward guidance.

So far we've seen neither, with the central bank instead opting to cut the refi rate by only 25 basis points, leave the deposit rate unchanged at 0% and offer completely useless forward guidance that offered no thresholds whatsoever. Instead it suggested rates would remain low for at least 12 months, which under the circumstances was already assumed.

The final CPI reading for July is expected to remain unchanged from the original figure that was released at the end of last month. The core CPI is expected at 1.1%, which suggests the ECB has plenty of room to manoeuvre when it comes to providing some form of monetary stimulus to the euro area.

Things should pick up a little during the US session later, with a few more key pieces of economic data being released. The obvious release to look out for is the preliminary UoM consumer sentiment figure, given how much consumer spending contributes to US GDP.

As it stands, a figure around 85.5 is expected, although I believe this could be a little high. Consumers are likely to be feeling the pinch at the moment, with higher fuel prices combining with higher mortgage rates to leave consumers watching the pennies. The earnings report from Wallmart yesterday highlights this, so I'll be very surprised if we don't see a disappointing figure here today.

Higher mortgage rates off the back of Fed tapering expectations are not just going to have an impact on spending, but also the housing market.

Previously, those potential buyers who were on the fence about whether it was time to buy or not may have been convinced by the prospect of lower rates, but that is no longer the case. We've already seen it having a negative impact on housing data over the last month and I expect the same today, in the housing starts and building permits figures.

Ahead of the open we expect to see the FTSE down 13 points, the CAC up 3 point and the DAX down 6 points.

Read the full report at Alpari News Room​