Forex research

[Alpari UK]

Weekly market preview from Alpari UK – 12 January 2015

With a big week in the market just gone, trading activity and excitement seems to have built up given the volatility seen as a result of the plummeting oil prices and continued talk of the possible introduction of a QE programme by the ECB later this month. The week ahead looks somewhat more mixed, with real major releases somewhat few and far between. In the US, the release of retail sales provides us with a greater degree of understanding regarding consumer behaviour. Meanwhile in the UK the CPI figure due out on Tuesday is going to be absolutely crucial following the oil induced fall into deflation for the eurozone. On the topic of the eurozone, the European court of justice ruling on Wednesday will bring the validity of the OMT programme back to the fore.

In Asia, the lack of any major releases means that we will be looking towards Australia as the main source of overnight newsflow. The Australian jobs report on Thursday represents the most significant release to watch out for.

US

The US region has by far the most significant events this week, given the somewhat thin week ahead for most countries. That being said, there are few that genuinely provide a significant likeliness of volatility following their release. Of the events to watch out for, the retail sales figure on Wednesday along with Friday’s CPI and consumer sentiment survey releases are the ones I am most keenly following.

The first of these is also possibly the most important, with the retail sales number representing the tangible result of both consumer sentiment and spending behaviour in December. Given that December is such a crucial month for the retail sector, all eyes will be focused on this number, following a strong November reading. The black Friday to cyber Monday trend seen throughout the US means that alot of the Christmas purchases are likely to have been made either in November or at a discounted price. For this reason, there are a number of people who believe we are going to see a weak number this month and the consensus is that there will only be a 0.1% rate of increase compared to the 0.7% figure in November. Given that the US economy is massively driven by consumer spending and behaviour, be aware that spending figures provide a great indication of economic activity in December which will no doubt impact growth figures.

On Friday, the US CPI figure is released, with many now watching closer than ever following the incessant fall in oil prices and the impact that is expected to have upon the inflation rates. In the US, the main measure of price growth is the PCE price index and for this reason, the CPI level is somewhat less crucial than in countries such as the UK and eurozone. However, given that the eurozone saw deflation in December it is going to be crucial to see whether this is going to be a global trend where falling oil prices push all the headline inflation rates lower. Should we see this week’s CPI figure fall lower than the -0.3% seen last month, it could be a cause for concern at the Fed and may indicate softness in the PCE number later this month.

Finally, the release of the University of Michigan consumer sentiment figure brings yet another focus upon the outlook of consumers in the US. Given that so much of the US economic growth can be attributed to domestic spending, a confident consumer base is key to seeing more of the strong GDP figures that have been evident in the US throughout 2014.

UK

A quiet week in the UK, where the biggest release to be watching out for will be Tuesday’s CPI release, following the global impact of falling oil prices. Much like the eurozone, the most important inflation reading in the UK is the CPI figure and in the same way that the ECB is expected to introduce QE as a result of falling inflation levels, the BoE will be watching very closely to see if any further downside in CPI will impact their monetary policy decisions. The likeliness is that should we see that move lower in inflation to any major degree, it will serve to reduce the likeliness of a rate hike in the near future. With that in mind, the yearly figure is expected to pull back from 1% to 0.7% for December. That is likely to be largely driven by oil prices, and given that the eurozone saw a fall from 0.3% to -0.2%, there is reason to believe it could an be even bigger fall. With the target rate of inflation set at 2% for the BoE, any move below 0.7% could bring serious anxiety at the BoE, limiting their ability to tighten monetary policy anytime soon.

Eurozone

Yet another quiet week in prospect in the eurozone, where the only major event of note comes in the form of a hearing at the European court of Justice, where the validity of the OMT programme comes under the spotlight. This follows the decision from the German Federal Constitutional Court to refer a list of questions to the European court regarding whether the consistent with primary EU law. The feeling within Germany is clearly that the ECB has overstepped its mandate and constitutes monetary financing of member states. However, this OMT programme provided a crucial backstop to sovereign debt and thus allowed the eurozone to survive during the height of the crisis. To some extent, the OMT programme is significantly less important than it was when introduced and that takes some of the sensitivity away from the issue. It is also worth bearing in mind that this ruling will largely be seen as advice to the Germans and thus the final decision from the German constitutional court will be more important. Nevertheless, it’s worth watching out for this event despite the fact that I think it will somewhat go under the radar for many.

Asian & Oceania

A distinct lack of market moving events within Asia means that we are looking towards Australia to provide volatility overnight and from that perspective, it is going to be Thursday’s jobs report which is by far the most interesting event of note. Unfortunately the trend for Australian unemployment has been far from impressive, with the 2008 low of 4% leading to a consistent rise towards the 6.3% level seen last month. Expectations point towards the figure remaining steady, but at some point we need to see a turnaround of sorts and that clearly has not been happening. The only beneficial figure which we have been seeing is the employment change figure, which has been positive for the past two readings. On this occasion, the expectation is that this number will pull back somewhat towards around 3.8k from 42.7k.

 

[Alpari UK]

UK Opening Call from Alpari UK - 12 January 2015

Good morning,

The week ahead may not have as much to offer as the one just gone when it comes to hard hitting economic events, but with oil prices already making some significant moves overnight it would take a brave person to bet against these high levels of market volatility continuing.

At times last week investors were starting to feel a little bit more bullish as oil prices began to stabilise around $50 a barrel for Brent crude, giving equities the opportunity to pare some of the losses that have come with the decline in oil prices. However, that was only to last a couple of days with Friday bringing more volatility as oil prices dipped below the psychologically important $50 level and the US released it's widely followed jobs report which was seen as largely positive by the markets.

Brent may have recovered to close back above $50 at the end of the week but with prices opening lower overnight and now trading around $49.30, I think we're going to see plenty more volatility in the coming days as pressure mounts on oil producers to scale back production before prices get dangerously low.

Many people view $40 to be the level at which some producers may start to seriously struggle and be forced into cutting production. While many US shale companies may be hedged against these low prices for now, they're also quite heavily in debt and require prices to be much higher if they're going to be able to maintain the current levels of output. OPEC is effectively banking on this and I don't think we're too far away from that now. Oil may not have bottomed out quite yet but I think some of the bigger players in the markets may start to look at prices being quite cheap and see some good buying opportunities.

While oil is likely to continue to be a major driver in the markets this week, today also marks the unofficial start of US earnings season with Alcoa releasing fourth quarter results this evening. With the likes of JP Morgan, Goldman Sachs and Wells Fargo following this week, any stabilisation in oil prices may shift the focus to company earnings, especially with the week being so quiet on the economic data front.

The FTSE is expected to open 5 points higher, the CAC 11 points higher and the DAX 37 points higher.

 

[Alpari UK]

Daily Market Update - 12 January 2015 - Alpari UK

 

[Alpari UK]

UK Opening Call from Alpari UK on 13 January 2015

Oil continues slide despite record Chinese crude imports

• Oil prices tumble again, weighing heavily on the energy sector;
• More reports of ECB QE supporting European stocks despite plans appearing flawed;
• Record Chinese crude imports fail to provide any support for oil;
• UK inflation in focus in quiet day of economic releases.

Another sharp decline in oil prices overnight weighed heavily on US energy stocks, while in Asia a better than expected trade balance update from China helped support stocks in the region.

As is quite often the case at the moment, oil prices are largely dictating play in the financial markets with energy companies acting as a major drag on the markets despite the fact that people are generally in agreement that lower oil prices are actually a net positive for the global economy. Of course, energy companies and countries heavily reliant on oil revenues will not be pleased to see the decline but overall, it's difficult not to see this as a good thing.

With the upside to lower oil prices being overlooked at the moment, I wonder if there's a strong rally in equity markets just around the corner, once oil prices begin to stabilise. I don't think this stabilisation is too far away with $40 widely seen as being a very significant barrier for prices. This should come around the time that consumers really start to see the benefit of the last 6 months slide in prices, with one place in Birmingham already selling petrol below £1 a litre, something we haven't really seen since around October 2007. Once the savings begin to filter through to the public then I expect to see a big upturn in spending in other areas such as retail.

It was interesting to see how little an impact the Chinese trade balance figures had on oil prices overnight, as they continued to tumble despite the world's second largest economy importing a record amount of crude, above 7 million barrels per day. This clearly shows that while global demand may be weaker that it's been in the past, the collapse of oil prices really is largely driven by the supply glut and the demand side just isn't helping matters. Overall the trade figures were encouraging although domestic demand really does remain quite weak, despite efforts being made to boost it, meaning Chinese exports are still hugely important to the country as it attempts to shift towards a more domestically driven economy.

European stocks were very resilient against the slide in oil prices yesterday and ahead of today's open, it looks like we're going to see more of the same. Yesterday's reports that the European Central Bank is drawing up plans for a quantitative easing program based on the contributions of the country to the central bank gave a significant boost to European stocks. As was the case when the US was buying bonds, we tend to see inflated prices in stocks and bonds and this is exactly what investors are preparing for now.

Aside from the additional liquidity that this will throw into the financial system, I don't really see how this will help the eurozone in any way. Countries like Germany will benefit most from the bond buying program as they make the largest contributions but with yields already below 0.5% on 10 year debt, I don't see how this will make much of a difference. If we do see this announced by the ECB when it meets next week, unless it's accompanied by efforts to improve the movement of cash to the areas where its needed most, as well as initiatives to boost demand, I think it's going to get a lot of criticism. The only positive thing would be that unlikely many of their initiatives in the last 12 months, this should succeed in growing the central banks balance sheet, even if the aid is going to the wrong places.

We have another quiet day in store with regards to economic data, with UK inflation figures the only notable readings this morning. While these are worth keeping a close eye on, expectations for the first Bank of England rate hike have been put back so far now - early 2016 in many people's opinions - due to the central banks admission that inflation is likely to fall further, that there's not much to read into today's numbers. Unless we get a much larger than expected decline, that is, which could suggest that the disinflation problem is much greater than the BoE is anticipating.

The FTSE is expected to open 7 points lower, the CAC 4 points lower and the DAX 5 points higher.

 

[Alpari UK]

US Opening Call from Alpari UK on 13 January 2015

Oil falls further but markets rally on ECB stimulus hopes

Oil prices have continued to slide on Tuesday but stocks appear to be building some reliance to the decline, with European indices and US futures both trading comfortably in positive territory.

This is the second day in which oil prices have continued lower while European indices have headed higher. This is undoubtedly being helped by all the speculation surrounding the European Central Bank and the quantitative easing program is has been preparing in time for the next meeting on 22 January. While many people may be in agreement that the package will not address the real issue in the eurozone – especially if rumours yesterday that bond purchases will be based on each country’s contribution are true – it is clear that it will prove stimulative for the markets as it means liquidity being poured into the financial system.

Oil fell to a near six year low today as UAE oil minister Suhail bin Mohammed al Mazroui claimed OPEC will not change its strategy on production meaning the game of chicken between it and the US shale industry will continue for some time yet. Mazroui stressed that OPEC will not be meeting before the next scheduled event in June which effectively cements their position until at least that date. You get the impression that the only way OPEC would be willing to discuss production cuts at this stage is if similar cuts were agreed by the US shale companies. Given the debt levels of these companies and their costs, I would not be surprised if this happened in the coming months.

Until that happens, oil prices could continue to push lower which means inflation in many countries will also continue to head south. The UK is one of those countries that has seen inflation fall rapidly, largely thanks to the fall in oil prices. Prices rose by only 0.5% in December, down from 1% the month before and well below the 2% target set by the Chancellor or the Exchequer George Osborne. The fall below 1% means that BoE Governor Mark Carney is obliged to write a letter to Osborne explaining when the central bank expects inflation to return to target and what will be done to achieve this.

Food prices also contributed to the decline in prices as the price war continues between Britain’s big four supermarkets in an effort to win back market share after bargain retailers took a significant chunk throughout the great recession. While people will be quick to compare the low inflation in the UK to that of the eurozone, which fell into deflation territory last month, the two situations could not be more different and therefore should not be compared.

While the eurozone is seeing broad based deflation, high unemployment and therefore no wage growth, UK unemployment is very low, wages are already starting to rise – which brings with it inflationary pressures – and the areas in which we’re seeing deflation don’t carry the same threat that others would. People worry about deflation because it encourages people to delay purchases in the expectations that prices will fall, leading to a negative spiral of events. This would never be the case with food and oil so in fact, all that’s happening is people’s compulsory costs are being reduced leaving more money to spend elsewhere. This can’t possibly be a bad thing.

This afternoon we once again have very little data being released in the US. JOLTS job openings for November could be of interest but with the lag being so significant, you have to question whether the markets are even paying attention to these. Corporate earnings season got unofficially underway yesterday, with Alcoa announcing fourth quarter results. We have a few more big names reporting this week, including some major banks but even this is looking a little quiet today.

The S&P is expected to open 12 points higher, the Dow 107 points higher and the Nasdaq 30 points higher.

 

[Alpari UK]

Daily Market Update - 13 January 2015 - Alpari UK

 

[Alpari UK]

UK Opening Call from Alpari UK on 14 January 2015

• Europe seen lower as lower oil prices continue to weigh;
• World Bank revises down growth for 2015 and 2016;
• ECJ to give verdict on OMTs, potentially paving the way for QE this month.

The continued decline in oil prices is seen putting further strain on indices ahead of the European open on Wednesday, even as the ECB draws up plans for its widely anticipated bond buying program which is expected to be announced next week.

Quite often, central bank stimulus will trump most other things in the eyes of investors with more market liquidity meaning stocks must go up and bond yields must come down. Or at least, that has been the lessons from the last six years or so. However, it seems in falling oil prices, quantitative easing has met its match with energy companies weighing heavily on any gains being made on QE expectations.

The lower open expected in Europe has not been helped by the World Bank's new global growth forecasts for this year and next, both of which were revised lower. While the bank warned against relying on the US economy to drive global growth, it did highlight the opportunity that lower oil prices represents for oil-importing nations including China and India. Exporters of oil are expected to suffer quite considerably, especially Russia which is also battling against economic sanctions imposed by the West for its involvement in Ukraine, which is why the country is seen contracting by 2.9% this year.

The World Bank also highlighted some potential banana skins for the coming years, although none of these come as any surprise given they are the same things that have been discussed by analysts and economists everywhere. Higher borrowing costs in developing countries as a result of financial market volatility was top of the list, which also included setbacks in global trade if the eurozone or Japan falls into a prolonged period of stagnation or deflation and Chinese debt levels.

The European Court of Justice will this morning announce its decision on the legality of the Outright Monetary Transactions (OMTs) which was introduced as a backstop by the ECB but has never been tapped. The introduction of this as a backstop was a massive turning point for the eurozone and the fact that it was never used suggests it never will be and therefore, with regards to the OMT itself, today's ruling doesn't really matter. Not to mention the fact that it is non-binding and therefore the ECB could still, if it wants to, utilise the facility if it ever wished. However, if the ECJ deemed it to be outside of the ECBs remit, you can only imagine they would accept its decision.

With that in mind, this morning's ruling is being viewed as the red or green light for the ECB to announce a bond buying program which some have claimed, like the OMT, would be illegal. Given that both involve the purchase of government debt in the secondary market, this ruling effectively rules on whether it constitutes government funding or not and therefore falls within or outside of the central bank's remit. Given how much QE has now been priced in, it will be very interesting to see how the markets react to the ruling. If it's bad news for Mario Draghi, we could see some extreme volatility in the markets.

The FTSE is expected to open 84 points lower, the CAC 72 points lower and the DAX 150 points lower.

 

[Alpari UK]

ECJ ruling gets market approval and Draghi given green light on QE

This morning's European Court of Justice ruling may not have been legally binding but it would have given those in Germany that believe the outright monetary transactions (OMTs) and quantitative easing (QE) do not lie within the ECBs remit a strong case if it comes to either be needed, with the latter potentially being announced next week.

Unfortunately for them, the ECJ appears to have ruled in favour of Mario Draghi and the members of the ECB that support both programs. The ECJ Advocate General this morning confirmed that the OMT may be legal although this was dependent on certain conditions being met. In principal, it was ruled that OMTs are in line with the EU treaty as long as there is no direct involvement in financial assistance programs for the member state. In other words, as long as the ECB is purchasing bonds on the secondary market, bond purchases are neither breaking the rules of the treaty or outside of its mandate. It did state though that the ECB must outline the reasons for adopting the unconventional measures, something I'm sure Draghi will be more than happy to do.

The ruling has dealt a massive blow to those that oppose both policies, none more so than Jens Weidmann who, despite his softening stance on QE, has been openly against such programs on the belief that they constitute government funding.

In reality, this ruling makes little difference to the OMT program, for now at least. No country has utilised the OMT program and all are in a much better position now than when it was announced and therefore no one is likely to. The most important thing the OMT program did was provide an important backstop for the eurozone which in turn brought yields on debt significantly lower. It effectively did the job it was designed to do and I don't think the ECB ever expected it to ever be utilised.

The reason why this ruling was so important was because of the implications it could have had for QE, which the ECB is expected to announce next week. Had the ECJ ruled against OMTs, Draghi would have come up against significant opposition as the two programs are very similar. Both involve purchasing government bonds on the secondary market, which some have argued constitutes government funding. With this hurdle now out of the way, Draghi is free to announce a bond buying program without fearing a backlash from those that previously called it illegal and outside of his remit.

Equity markets rallied following the ruling, as investors cheered the removal of another QE hurdle. The only one that remains now is the Greek election a few days later, which is likely to influence next week's announcement. Whether it will delay it for another month is tough to say but the markets would suggest not. Either way, QE now looks inevitable, if not at this meeting then in March. The only question now is how it will be implemented, with the ECB having a far tougher job that its US, UK and Japanese counterparts.

 

[Alpari UK]

Daily Market Update - 14 January 2015 - Alpari UK

 

[Alpari UK]

UK Opening Call from Alpari UK on 15 January 2015

Europe seen higher as energy stocks lifted by oil rebound

• Rebound in oil prices provide a boost ahead of the European open;
• Technical's point to further gains in oil but fundamentals suggest otherwise;
• US data to provide interest later with no notable data coming from Europe;
• US earnings also in focus, JP Morgan and Wells Fargo disappoint on Wednesday.

Europe looks set for a much more positive open on Thursday, as a rebound in oil prices over the last couple of days provides some reprieve for energy stocks and other sectors continue to be supported by expectations that the ECB will announce its own version of quantitative easing this time next week.

Oil has played such an important role in the markets over the last six months and that is unlikely to change any time soon. The rebound is prices over the last couple of days from the lows hit early on in the session on Tuesday is expected to benefit energy stocks greatly today, as they did overnight in Asia.

The sudden interest in oil has been driven by short covering, with the Brent February contract approaching expiry and the US crude contract expiring. This would suggest that any upside in crude is only temporary despite the technical's suggesting otherwise. Yesterday's failure to make new lows, despite some selling pressure earlier in the session followed by a close above Tuesday's high in WTI and not far from it in Brent - creating a morning star formation in both - is a fairly bullish sign from a technical standpoint.

With the fundamentals remaining weak and contract expiry's being attributed to the buying, I would be reluctant to act on this at the moment though and would instead like to see further confirmation over the next couple of days. This could come from as much as a weekly close above last week's open, if I'm being greedy, but at the very least I'd like to see Thursday and Friday's highs from last week broken. These tend to be providing some resistance in WTI which does not suggest there's more upside to come.

Once again today, the European session is looking a little quiet with any economic data that is due out unlikely to move the markets very much, if at all. We'll have to wait for the US data later on for that and even then, we don't exactly have it in abundance. Weekly jobless claims, the empire state and Philly Fed manufacturing indices may be of interest to the markets, but ultimately I think the biggest moves are likely to continue to be driven by movements in commodities, particularly oil.

That said, we can't ignore corporate earnings, which unofficially got under way on Monday with Alcoa's result. JP Morgan and Wells Fargo got things going for the banks yesterday and neither were well received by investors, particularly JP's after they reported a decline in fourth quarter profit. Today we'll get results from Citigroup, Bank of America, Blackrock and Intel.

The FTSE is expected to open 83 points higher, the CAC 61 points higher and the DAX 140 points higher.

 

[Alpari UK]

Swiss National Bank removes currency floor and cuts interest rates

The Swiss national bank has acted to end the currency floor, while moving the central bank interest rate into negative territory at -0.75%. This morning the move has taken the entire market by surprise and has led to wide spread selling on both EURCHF and USDCHF currency pairs. EURCHF has seen the market move to as low as 0.8500 from a high at the start of the day at 1.20, USDCHF was a similar story falling from an opening on the day of 1.0188 to trade as low as 0.7406. The move will be one of shock to the markets as the SNB has maintained its 1.20 EURCHF currency floor for a number of years. With pressures mounting over the depreciation of the Euro and the strength of the US dollar the national bank has felt under pressure to at least amend the currency floor. However today’s move has not only seen this unpopular currency floor removed but has seen the interest rate cut by 50bp to -0.75%.

The reaction to this is likely to wide reaching and cause a huge issue in terms of not just currency markets but equity markets as well. With many clients struggling to close positions and banks struggling to offer prices due to the high volatility and demand. Many had been expecting the SNB to raise the currency floor but to remove it totally has taken everyone by surprise. There has been a clear attempt to soften the blow on the currency by cutting the interest rate however this seems to have only led to spark yet more volatility and moves on the CHF based currency pairs. Today’s announcement has let investors decide just where the Swiss Franc should be valued without central bank intervention and it very much seems that around 1.05 for EURCHF and 0.90 for USDCHF are the levels that investors now feel is a better representation of the Swiss currency. However of course we cannot rule out yet more surprise and big moves throughout the trading session.

 

[Alpari UK]

Daily Market Update - 15 January 2015 - Alpari UK



It’s been an extremely turbulent day in the financial markets after the Swiss National Bank (SNB) removed the 1.20 floor on the EURCHF pair sending it spiralling lower. Market Analyst Craig Erlam provides an update on the event that rocked the markets on Thursday and why he believes the SNB dramatically changed its stance.

 

[Alpari UK]

Dust settles after SNB announcement

The dust appears to have settled in the markets following the surprise announcement earlier from the SNB that it has decided to remove the EURCHF floor which had stood at 1.20 for three years. The initial market reaction to the removal of the floor was extreme, with the euro falling more than 28% to 0.8636 against the Swiss Franc before recovering to trade just above 1.04 late afternoon. While the removal of the floor only directly impacts EURCHF, the impact was felt everywhere with USDCHF falling to a more than three year low, down more than 27% at its lows. Even none swissy pairs felt the moves, with the euro taking a big hit as the announcement means the SNB will no longer support the currency.

In Europe we saw a lot volatility in stock markets as well, with the initial moves being massive irrational swings in either direction as traders tried to come to grips with what the removal of the floor actually means. Once prices stabilised, we saw a steady rally in Europe as people began to speculate on why the SNB would suddenly remove the floor. One explanation could be that the ECB has warned the SNB of an impending large quantitative easing package – with many expecting the announcement next week when the central bank meets – and they have concluded that they are unable or unwilling to take on the fight. This would explain the interest in eurozone equities this afternoon, not to mention the sudden change of policy from the SNB as well as

Of course, this is just speculation at this stage and if this is the case it has been horrendously handled by all concerned. SNB Chairman Thomas Jordan didn’t help to dispel these rumours when he refused to confirm when asked if there had been contact with other central banks. He also didn’t cover himself in glory when claiming that it was not a panic decision but a well thought out one. Given that only a few days ago it was claimed that the floor was the cornerstone of its monetary policy, this is extremely difficult to believe.

I’m sure this isn’t the last we’ll hear on the subject and the SNB are going to be heavily scrutinised in the coming weeks for what appears to be a horribly irresponsible move on their part. For year’s central banks have tried to avoid days like today by being transparent and making moves like this over time while drip feeding their intentions to the markets. The SNB have shown themselves to be amateurs today and there is many people that will suffer considerably as a result.

 

[Alpari UK]

UK Opening Call from Alpari UK on 16 January 2015

Focus turns to US and eurozone inflation after SNB shock

Good morning,

It's been quite an eventful 24 hours, particularly in the forex markets, after the SNB yesterday decided to announce a massive change in monetary policy without prior warnings or hints, sending the Swiss Franc sky rocketing higher and creating turmoil in the markets.

While central banks are under no obligation to drip feed such massive changes in policy to the markets, there have been big attempts made to do so in recent years so as to avoid the kind of volatility we saw in the currency markets yesterday. It appears the SNB did not get that memo and when the announcement that the 1.20 floor was being removed in EURCHF was made, some fx markets went into meltdown.

The move by the SNB generated a lot of questions regarding what motivated such an irresponsible and abrupt move given that only a few days before the central bank had referred to the 1.20 floor as the "cornerstone" of its monetary policy. SNB Chairman tried to convince us all that the decision was well thought out but I'm sure many would agree that unless under exceptional circumstances, a well thought out decision of this magnitude should take longer than 48 hours.

Which begs the question, what caused the sudden u-turn by the SNB that prevented them from carrying out the move in a more gradual and responsible manner. The only explanation I can come up with is that the move relates to the upcoming ECB press conference in which Mario Draghi is expected to announce a new bond buying program, one that the markets now believe will be much larger than initially thought based on the actions of the SNB.

If the SNB had prior warning of this, and this is just purely speculation, it may have decided that the floor would be extremely difficult to defend given its level of reserves and therefore opted to declare defeat. If this is the case then that again begs the question of why the SNB and ECB didn't think this through and do it in such a way that this could have been avoided. These people are meant to be the experts and yet they have acted in such a way that caused significant harm to the markets, something most people could have predicted would happen.

While the markets have stabilised a little, the damage caused could have a longer term impact on the markets. It will be interesting to see in the coming weeks what this does to liquidity and volumes in the forex markets, with many predicting that this may do significant damage for the foreseeable future.

Moving on from the idiotic actions of the SNB, we do have other things to focus on today, with key inflation figures being released for the eurozone and the US, two countries who's monetary policies could not be headed more in different directions. While the ECB is hoping to launch its first quantitative easing program, a little over six years after the Fed did the same thing, the Fed is looking to raise interest rates in the middle of this year as the economic recovery gathers pace and the country closes in on what the central bank deems full employment.

The final eurozone CPI reading for December is expected to confirm that the region fell into deflation for the first time since October 2009, making it incredibly likely, especially after yesterday's events, that the ECB will announce its QE program next week. In the US, we're also seeing oil prices have a disinflationary impact, although not even close to the same extent with the CPI seen falling to 0.7% from 1.3%, while the core reading is seen remaining at 1.7%. With rising wages seen bringing inflationary pressures, there is very little concern about the inflation outlook in the US and in fact, the Fed expects inflation to return to its 2% target, opening the door to that first rate hike.

The FTSE is expected to open 33 points lower, the CAC 23 points lower and the DAX 47 points lower.