Forex research

[Alpari]

US Opening Call from Alpari UK on 21 August 2013

Caution in the markets ahead of FOMC minutes

Today’s US opening call provides an update on:

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

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

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

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

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

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

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

Ahead of the open we expect to see the S&P down 4 point, the Dow down 28 points and the NASDAQ down 11 points.

Read the full report at Alpari News Room​

 

[Alpari]

Daily Market Update - 21 August 2013 - Alpari UK

James Hughes, Chief Market Analyst talks about the latest FOMC meeting minutes and what we can expect to see in regards to QE tapering.

[video=youtube;JQwbpZkO5tc][/video]

 

[Alpari]

UK Opening Call from Alpari UK on 22 August 2013

Fed remains split on tapering date

Today's UK opening call provides an update on:

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

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

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

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

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

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

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

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

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

Ahead of the open we expect to see the FTSE down 19 points, the CAC down 12 point and the DAX down 30 points.

Read the full report at Alpari News Room​

 

[Alpari]

US Opening Call from Alpari UK on 22 August 2013

US jobless claims in focus following Fed minutes

Today’s US opening call provides an update on:

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

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

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

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

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

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

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

Ahead of the open we expect to see the S&P up 2 points, the Dow up 10 points and the NASDAQ up 7 points.

Read the full report at Alpari News Room​

 

[Alpari]

Daily Market Update - 22 August 2013 - Alpari UK

0:09 FOMC minutes shed no light on tapering
1:01 Chinese manufacturing PMI back in growth territory
1:49 Eurozone PMIs point to ongoing recovery in H2
2:30 Weekly jobless claims eyed ahead of September Fed meeting

[video=youtube;Kc8UIE5KUuM][/video]

 

[Alpari]

UK Opening Call from Alpari UK on 23 August 2013

Europe to open higher as global recovery gathers pace

Today’s UK opening call provides an update on:

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

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

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

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

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

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

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

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

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

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

Ahead of the open we expect to see the FTSE up 20 points, the CAC up 19 point and the DAX up 42 points.

Read the full report at Alpari News Room​

 

[Alpari]

US Opening Call from Alpari UK on 23 August 2013

US housing market in focus as tapering talk continues

Today’s US opening call provides an update on:

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

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

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

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

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

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

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

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

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

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

Ahead of the open we expect to see the S&P down 1 point, the Dow down 16 points and the NASDAQ flat.

Read the full report at Alpari News Room​

 

[Alpari]

Daily Market Update - 23 August 2013 - Alpari UK

[video=youtube;vEY6viFJGPg][/video]

 

[Alpari]

UK Opening Call from Alpari UK on 27 August 2013

Markets expected lower as September tapering talk dominates

Today’s UK opening call provides an update on:

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

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

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

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

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

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

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

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

European markets are expected to open lower, with the FTSE100 -37, CAC -19 and DAX -26 points.

Read the full report at Alpari News Room​

 

[Alpari]

Daily Market Update - 27 August 2013 - Alpari UK

James Hughes looks at how the weekends comments surrounding the Syria conflict are affecting the market and looks at today's German IFO reading.

[video=youtube;fMnv8Jb75g0][/video]