Forex research

[Alpari UK]

UK Opening Call from Alpari UK on 9 September 2014

Europe seen lower as the EU announces fresh sanctions

• Europe seen lower as the EU announces fresh sanctions on Russia;
• UK data being released but the focus remains on the Scottish referendum;
• Apple to unveil its new iPhone, new battery could be the gamechanger.

European indices are expected to open lower again on Tuesday after a new package of sanctions was agreed against Russia in relation to its part in the crisis in eastern Ukraine. The implementation of the sanctions will be delayed though in order to give the recently agreed ceasefire a chance to work. In all honesty, given the shelling seen yesterday in two cities in eastern Ukraine, I'm not overly confident that this will last, but as always, I remain hopeful.

Once again today, things are looking fairly quiet from an economic data standpoint. The focus will undoubtedly be on the UK today, with the BRC having already released retail sales data for last month, industrial and manufacturing production figures being released this morning, NIESR releasing its GDP estimate for the three months to August and Bank of England Governor Mark Carney speaking in Liverpool.

Even with all of this, I do question just how much investors are going to respond with many appearing far more concerned with the Scottish referendum vote in nine days. Carney's comments could provide some support for the pound, which has pretty much been in freefall over the last couple of months. Any suggestion that the central bank may be tempted to raise rates this year, for example, would surely reverse some of the declines seen, although how much is difficult to say. A referendum with an uncertain outcome, both in terms of voting results and what a "yes" vote would actually mean, may be seen as a far more important issue than the exact timing of the inevitable first rate hike to investors right now.

While there may be little potential for upside in the pound from today's releases, I wouldn't be surprised if disappointing data was taken as another opportunity to sell the currency. Already this morning we've seen that an unexpectedly strong retail sales report from the BRC had no impact whatsoever so there's no reason to expect anything else from the other data releases today.

The currency markets have come back to life quite a bit recently as central bank easing in the euro area, fears relating to the Scottish referendum and weakness in commodity currencies pave the way for a stronger dollar that in reality has little to do with the greenback itself. Traders have been forecasting a stronger dollar for most of this year, although I think many envisaged that the rally would begin sooner and have more to do with the end of quantitative easing and potential rate hikes than every other currency having a race to the bottom.

Whether from an investor perspective or just that of a fan, all eyes will be on Apple today as it announces the latest release of its smartphone. As always, Apple has let very little slip about the new device ahead of the launch but there has been a huge amount of speculation that the company will introduce the smartphone in two new larger sizes in order to compete with its competitors, along with a new design and, according to a number of sites yesterday, a significantly improved battery. Given consumers repeated complaints about smartphone batteries, the latter is the potential game changer in my opinion. The company may not have been as innovative in recent years but if it can offer a much improved battery, all may be forgiven.

The FTSE is currently seen opening 12 points lower, the CAC 16 points lower and the DAX 32 points lower.

 

[Alpari UK]

US Opening Call from Alpari UK on 9 September 2014

Carney speech, UK GDP and Apple in focus today

It’s going to be another quiet day in terms of economic data from the US on Tuesday, but fortunately there is other things that will certainly keep investors’ attention during the session.

They key talking point today is likely to be the launch of the latest products from Apple, the largest component of the S&P 500. It is widely expected that Apple will unveil the iPhone 6 which will be available in a 4.7” and 5.5” display, both of which are larger than that of the iPhone 5S. This is expected to come alongside the launch of the new iWatch which has apparently been in the works for a long time and Apple has not been the first to the market.

The problem that Apple faces today is that under the leadership of Tim Cook, the company has had a tendency to underwhelm at these launches and in the eyes of many, has gone from an innovative company to a copycat that is more concerned with matching its rivals than leading the way. This may explain some of the weakness in Apple’s share price in recent days which could leave plenty of upside potential, including a new record high in the share price, should Cook deliver.

I don’t think a new phone and iWatch alone will cut it as these are priced in. There’s been rumours about other things that Apple could announce such as a new stronger sapphire screen for the iPhone, which is expected on the iWatch, that would make it more scratch resistant, and a mobile payments functionality. This may appease investors a little but the one that has the potential to be a game changer for Apple would be the new battery that has been rumoured. Users of smartphones have long complained about battery life and if Cook could deliver an iPhone with significantly better capability than its competitors, I think it would be enough to bring a large number back that have strayed in recent years. This would surely excite Apple investors.

Elsewhere we do have more data to come from the UK, with the NIESR GDO estimate for the three months to August being released. This should give us an up to date idea of what growth we can expect to see for the third quarter, with the first month suggesting it’s likely to be a little weaker than we’ve seen over the last year. We’ll also hear from Bank of England Governor Mark Carney who will talk in Liverpool on monetary policy. Carney’s comments are always closely followed by the markets, especially as we near the first rate hike which is expected early next year. With sterling currently suffering as a result of the Scottish referendum, it will need something very hawkish from Carney to significantly lift the pound.

The S&P is currently expected to open unchanged, the Dow 1 point lower and the Nasdaq unchanged.

 

[Alpari UK]

Daily Market Update - 9 September 2014 - Alpari UK



James Hughes looks at the effect the Scottish referendum is having on sterling, he also looks at the economic calendar for the rest of the week.

 

[Alpari UK]

Webinar - 9 September 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

 

[Alpari UK]

UK Opening Call from Alpari UK on 10 September 2014

Carney testimony headlines quiet European session

• Investors once again getting nervous at record highs;
• Rising yields blamed for weakness in equities this week;
• Carney to testify in front of the Treasury Committee.

European futures are expected to open around a quarter of a percentage point lower on Wednesday following a similarly disappointing trading session in the US and Asia overnight.

Once again we're seeing an unwillingness to continue to buy into the rally near the record high levels that US indices currently find themselves around yet at the same time, every time we see a dip in the market, investors are flooding to buy. Maybe that suggests that investors believe the markets are fairly priced at these levels. Many people have said recently that while it may not be a great time to buy at the moment, it's also not a time to sell, which would explain the ongoing buying of the dips to exploit short term weakness in the market.

A lot of the declines overnight are being attributed to the rising bond yields, particularly in the US but also abroad. Rising yields may reflect a slight repricing of the first rate hike with some believing that markets had priced in a later hike than the Fed is suggesting. While that may be true, this should only cause short term weakness in the markets as we haven't seen anything that would suggest the Fed itself has brought forward its rate hike expectations.

Some of the weakness in the markets right now could also be attributed to the lack of economic data being released this week. At a time when news flow is also slow, it's difficult for investors to find any real drivers for markets and instead all we get is choppiness and maybe a little profit taking. We're not even getting any direction from the Federal Reserve as we're currently in the blackout period when policy makers aren't allowed to speak in public.

While today is looking pretty quiet again in terms of economic data, there is one very notable economic event taking place, the Bank of England inflation report hearing. BoE Governor Mark Carney and other members of the MPC are due to testify before the Treasury Committee on inflation and the economic outlook.

Given that this is a major central bank and the Treasury Committee has never been one to go easy on the them, this does have the potential to create some big moves in the markets, particularly at a time when the first rate hike is just around the corner. The only problem we have is that the BoE has been very open about its views on monetary policy and the economy in recent months, with Carney only this week stating that the first rate hike is likely to come during spring next year. Given that clarity, along with the fact that he's confirmed that any hikes thereafter will be gradual, what else could we learn today? Is this going to be another boring few hours of politicians trying to get the central bank Governor to back their policies. Unfortunately, I think this is exactly what's going to happen. That said, you can never be complacent during these events and significant volatility should always be expected.

The FTSE is currently seen opening 12 points lower, the CAC 12 points lower and the DAX 30 points lower.

 

[Alpari UK]

US Opening Call from Alpari UK on 10 September 2014

BoE in focus during quiet US session

Early indications suggest we’re going to see this week’s pullback in US indices grind to a halt as both the S&P and the Dow run into support around the 20 DMA and previous lows, respectively. With little driving markets today in terms of economic data or newsflow, these levels may well hold up, as pre market levels point to a slightly positive start with the S&P seen 3 points higher, the Dow 35 points higher and the Nasdaq 9 points higher.

Prior to this week, we’d seen quite an impressive run in US indices, particularly the S&P and the Dow, helped to a large extent by the Fed’s unwavering commitment to remain accommodative for a considerable amount of time after the end of asset purchases in October. The fact that the Dow barely managed to eke out new highs before pulling back while the S&P just about managed to break 2,000 suggests there isn’t much in this rally at the moment. That said, from a technical standpoint, the two week consolidation seen in both indices could be viewed as bullish given the rally that occurred in the lead up to it.

Apple is likely to continue to be one of the more interesting stocks today, following the release of its two new iPhones and the iWatch. The stock was very volatile following the announcement yesterday before ending the session lower. Now that people have had time to reflect, we should get a better idea of how people viewed yesterday’s launch and whether they were satisfied with what Tim Cook had to offer.

The launch itself offered few surprises but I think overall there was a great disappointment that Apple hasn’t addressed some key issues that has pushed users onto other devices, most notably the battery life. Instead it moved to copy the competition once again, further confirming the company’s new status as a follower rather than an innovator. The iWatch was probably slightly better than people expected but it was not enough to send people away with the kind of buzz that Steve Jobs used to.

As already mentioned, the day is void of notable economic releases. The only important event is the Bank of England inflation report hearing, where Governor Mark Carney and his fellow MPC members will testify before the Treasury Committee on inflation and the economy. This can be a big event for the markets, particularly the pound which has been plummeting recently as uncertainty grows surrounding the Scottish referendum. Any hawkish comments from the MPC may provide temporary reprieve for the pound, although for the next eight days or so, this is likely to play second fiddle as the referendum is seen as a much bigger threat right now.

 

[Alpari UK]

US Opening Call from Alpari UK on 11 September 2014

US futures lower ahead of jobless claims data


• Lower inflation and liquidity withdrawals from the PBOC hit Chinese shares;
• FTSE down on China exposure but sterling rallies on new referendum poll;
• US jobless claims the only major economic release on Thursday.

A mixed morning in Europe is providing little direction for US markets ahead of the open, with futures currently pointing to a slightly softer open.

There wasn’t much more direction from Asia overnight, where Chinese shares ended the session lower on deflationary concerns and the People’s Bank of China’s decision to withdraw some liquidity from the financial system. The latter appears to have been done to stem the recent strength being seen in the Chinese Yuan which may be sparked by speculation.

Withdrawing liquidity at a time when people are concerned about inflation in the country, which fell to 2% in August, is not likely to be well received by the markets. The drop in inflation was largely driven by volatile food prices and the number could therefore rebound in the coming months. On a more positive note, the lower inflation figure does give the PBOC an opportunity to increase its targeted stimulus measures in the coming months which could help the country achieve the 7.5% growth target that some see it falling short of currently.

The FTSE’s exposure to China is what’s weighing on the index this morning, but the pound is performing much better in the currency markets after polls showed that voting on the Scottish referendum had moved back in favour of the better together campaign. The poll showed a six point lead for the “no” vote which is a big change from the YouGov poll over the weekend which showed a two point lead for the “yes” vote.

This change may suggest that some of those undecided voters have not been convinced by the lack of guarantees that the independence campaign offers, with the future currency, central bank, monarchy and membership in Europe up in the air. Without assurances on any of these, I can’t see the majority voting for independence and I expect the vote to gap to widen on the voting before next week. Announcements by RBS and Lloyds that they would move their head offices to London if Scotland votes for independence, as well as yesterday’s plea and offering from the UK government to the Scottish people to remain a part of the union is also likely to have swayed some people.

As has been the case for most of the week, the day is looking a little light on the data front. Initial jobless claims data is the only noteworthy release on Thursday and is expected to show another figure around the 300,000 market.

The S&P is currently expected to open 5 points lower, the Dow 44 points lower and the Nasdaq 9 points lower.

 

[Alpari UK]

Daily Market Update - 11 September 2014 - Alpari UK



Market Analyst Craig Erlam talks about some of the key topics moving the markets on Thursday including Chinese inflation data, the Australian jobs report, US jobless claims data and the Scottish referendum.

 

[Alpari UK]

US Opening Call from Alpari UK on 12 September 2014

US futures flat as the consumer comes under the spotlight

It’s been a very quiet week in the financial markets and European indices are on course to end on a mixed note, while US futures are pointing to a slightly weaker open.

The FTSE and the pound are being well supported again today after the latest YouGov poll showed a u-turn in the voting on Scottish independence with 52% of people saying they would vote no. While this isn’t exactly a huge swing in the voting, with the previous poll showing 49% against independence, the mere fact that its moved in favour of staying a part of the United Kingdom has brought some calm back to the markets.

The worst part of all of this is the fact that no one really knows what will happen if Scotland votes for independence and it’s that uncertainty that is freaking people out. With the UK enjoying a strong recovery at the moment, especially compared to the US and the eurozone, this is the last thing it needs. Once this vote passes and the people of Scotland vote to remain a part of the UK, which I am sure they will, people can once again start to focus on the good news story that is the economic recovery.

The fresh batch of economic sanctions that the EU has imposed on Russia are likely weighing on sentiment today, which is probably largely responsible for the weaker end to the week. We have already seen that these sanctions don’t only harm Russia, there are consequences for the countries imposing them, and while they are necessary, the markets do not respond well to them.

The US session today is likely to be another quiet one although there are a couple of notable economic releases for traders to watch out for. The numbers give an overview of how the consumer has been spending of late and how they are likely to act going forward, so they are likely to be tracked very closely by traders and could have a significant impact on the markets. The consumer is extremely important to the US economy and any drop is spending or confidence will be concerning.

As it stands, we’re expecting a 0.6% increase in retail sales and a rise in consumer sentiment to 83.2 which is very encouraging. The US recovery has been very strong over the last six months and if it continues at this pace, the Fed will have to consider bringing forward its first rate hike. We’ve already seen this week that investors are starting to price this in after rumours surfaced that the Fed will not release such a dovish statement next week, withdrawing its commitment to keep rates low for a considerable amount of time after the end of asset purchases. If this does happen, we may well see further pricing in of an earlier rate hike.

The S&P is currently expected to open unchanged, the Dow down 3 points and the Nasdaq unchanged.

 

[Alpari UK]

Daily Market Update - 12 September 2014 - Alpari UK

 

[Alpari UK]

Weekly market preview from Alpari UK – 15 September 2014

The markets are expected to find significant traction in the week ahead, where the existence of the US FOMC announcement means that monetary policy comes back into the fore yet again. Furthermore, the culmination of the Scottish referendum looks set to draw massive volatility and indecision within the UK markets along with the potential impact this could have upon alternate regions with aspirations of independence. In the eurozone, the final CPI reading is likely to be the major event to watch out for in a somewhat quiet week. Finally, in Asia, the focus lies largely upon Japan, where the BoJ governor Kuroda is set to bring two major speeches for the markets to watch out for.


US

A somewhat mixed week ahead, where a raft of economic indicators does little to disguise the fact that there are very few that will move the markets. However, with the latest FOMC announcement on hand, there is likely to be a major focus upon the Fed for volatility. Apart from that the existence of inflation, housing and manufacturing data provides the padding for the week.

The FOMC monetary policy announcement on Thursday is no doubt the biggest event of note out of the US, with markets largely expecting to see the penultimate taper from Janet Yellen & co. However, with this pathway of asset purchase trimming clearly defined, the emphasis will largely be upon the timeline for interest rate hikes in 2015. Following Mark Carney’s willing offer of a more defined date for the BoE last week, there is going to be further pressure upon Janet Yellen to do the same. With the BoE citing Spring 2015 as a potential start to the process, I am not expecting to see the US move any earlier and thus we could see something from the Fed in Summer 2015. That being said, the US is clearly going to be moving towards more unpredictable times, with a drawn out campaign against the ‘Islamic State’ on the cards which could draw fiscal investment away from the economy and thus encourage a more accommodative stance from the Fed. Thus I do not expect to see anything for the time being to allow for some room going forward. However, with other members within the committee increasingly moving towards a hawkish stance, it is clear that soon enough Yellen will have to adjust her stance accordingly.

This meeting will also see the latest economic projections from the FOMC, with the markets looking out for any revisions to growth and interest rate forecasts from the members. This is an opportunity for the members to show a more bullish or bearish outlook for the forthcoming period and thus many will take their lead on such matters.



UK

A busy week ahead for the UK economy, where the MPC minutes are overshadowed by the massive vote within Scotland over a potential move towards independence on Thursday. The MPC monetary policy minutes are the first of these two major releases to watch out for, coming on Wednesday morning (GMT). Last month’s minutes brought about major volatility as an unexpected shift in votes saw two of the 9 committee members vote for an interest rate hike from the current 0.25% to 0.5%. However, despite Martin Weale and Ian McCafferty taking that first step towards tightening policy, I believe we are still some way from actually seeing such a move given the general alliance of the remaining 7 members who will likely see governor Mark Carney’s outlook for rate rises as the most sensible thing to do. Of course, the MPC doesn’t vote in complete harmony and thus as we move towards the implementation of a new policy, some will believe it to be necessary at a different time from others. However, this staggered approach to the actual rate rise itself provides markets and individuals with a buffer and warning sign that it is coming and thus it is actually useful to have such dissent within the committee. That being said, I do not expect to see any further changes to votes this month and thus it is likely to remain at 7-2 in favour of keeping rates constant. With Mark Carney having provided a timeline of Spring 2015 for a potential first rate hike, I think this could be the case for some time yet.

On Thursday, Scotland goes to the polls to decide whether or not they wish to disassociate themselves from the UK in a historic independence vote. Both sides of the argument have been put forward for over a year now following the agreement to hold the referendum back in June 2013. For those within the UK, this is a source of major economic uncertainty, no more so than within Scotland where membership of groups such as NATO and the EU would no longer be guaranteed. Furthermore, with the future of the Scottish healthcare system, pensions, currency, taxation, television service, defence, budget and alike all pretty much unknown, a ‘Yes’ vote could bring allsorts of questions. Should we see Scotland go it alone, this would no doubt weaken the hand of the UK given it’s diminished size and value, whilst the expected demand for sterling would take a substantial hit with attempts to quantify the possible effect upon the pound looking towards 10-20% losses in such an event. Ultimately, from a markets point of view, this event has brought about major uncertainty and volatility, which is likely to increase as we get closer to the event. Given the importance of the decision, the polls will be watched very closely with markets reacting to developments more so than any general election in recent history. Preliminary polls held by YouGov have shown very mixed swings in the vote, with a recent move towards independence being wiped out in a subsequent survey. Ultimately, any survey will only utilise a sample section of the population and thus we could see continued mixed messages as we get closer to the event. However, with UK interests at hand, I expect to see the likes of the FTSE100 and sterling really see some substantial moves as we approach the event. Finally, be aware that we could see shifts across European interests given the existence of numerous pro-independence regions such as Catalonia who could be buoyed in the event of any Yes vote from the Scottish people.


Eurozone

A quiet week in the eurozone, where the ZEW economic sentiment survey and CPI inflation reading are going to provide some interest on Tuesday and Wednesday. Tuesday’s ZEW economic survey provides an outlook on both German and eurozone economic health from a German standpoint. Given the expected weakness within the export market as a result of the sanctions imposed against Russia, we have seen a massive deterioration in both the eurozone and German figures throughout 2014 so far. However, with recent trade data out of Germany showing that the losses in the exports to Russia had been compensated by strengthening ties amongst the UK, US and eurozone, there is a possibility that this could be reflected on Tuesday. That being said, with Angela Merkel and other European leaders clearly showing that they are willing to push sanctions as far as they need to go, this could lead to yet further deteriorations in investment and thus the market forecasts of further losses may not be far from the truth.

On Wednesday, the release of the final CPI reading for August has the potential to raise some interest in the markets. Of course, the level of inflation has been a major driver of monetary policy throughout the last year and with the current rate at 0.3% year-on-year, this could become a massive issue should we see a negative rate down the line. However, with the majority of revisions coming in at the same level as the preliminary figure, I do not expect to see any change this time. That being said, any move higher could bring strength back into the euro, whilst a fall may weaken it further as some call for a full asset purchase policy to be implemented. That being said, with interest rates having just been lowered and the introduction of an ABS purchase plan, I think that in the event that there was a move lower, then sentiment could be stemmed by the knowledge that these figures haven’t been influenced by recent steps from the ECB.



Asia & Oceania

The Asian region is somewhat quiet this week, with Japan the only region to be seeing any major events of note. The most important of these are likely to be the two speeches from BoJ governor Kuroda, which are due to take place on Tuesday and Thursday. That being said, I do not foresee any changes to monetary policy in the near term, with mixed messages coming out of Japan regarding growth and inflation. The feeling is that the Japanese are happy enough with the level of the Yen and thus it is really the inflation rate which will dominate going forward. This has been increasing due to the sales tax hike, yet there is a feeling that the BoJ are waiting to see if we can see an underlying price rise for now. There is a possibility of another sales tax hike early in 2015 and thus there could be some sort of grounds for a rise in asset purchases down the line. Yet for now, markets will simply be looking out for any change in rhetoric to what is a pretty stable central bank policy currently.

 

[Alpari UK]

UK Opening Call from Alpari UK on 15 September 2014

Weak Chinese data pushes the markets lower

• Poor Chinese data leads to weak start to the week
• John Kerry continues to gain support for a coalition to take on ISIS
• The Scottish vote looms and uncertainties mean volatility should ensue

Global markets are facing up to a somewhat disappointing start to the week as growing uncertainties over geo-political factors provide the backdrop to some key economic releases. Worrying data out of China on Saturday has driven the Asian markets to a poor overnight session and this is likely to follow on into the European open.

Much talk of a Chinese slowdown has been allayed in recent months, with the likes of manufacturing and services PMI figures recovering from a notable downturn in H1. However, this weekend provided a stark reminder that the worst is not necessarily over as retail sales, industrial production and fixed asset investment all moved significantly lower. PMI data is obviously a strong indicator of future performance for the output and demand within the economy. However, they are no substitute for the final outcome and that is why these figures are absolutely key. The fixed asset investment figure is certainly one of the most worrying indicators, which at 16.5%, is far lower than at any point in the last decade. However, the industrial production figure also reminds us as the underperformance seen throughout 2014, where the growth rate currently stands at the lowest level since the immediate downturn that followed the start of this crisis back in 2009. Ultimately, China’s old model relies upon investment and production on a massive scale to maintain the 7.5% growth target that has been in place for some time now. However, with the new switch in emphasis towards a consumer based economy, the retail sales figure is absolutely key to determine that there is enough domestic consumption to drive demand. With retail sales at the lowest level since April, things are not exactly going to plan in China and that is why we are seeing markets open in such a negative fashion today.

A particularly light session from an economic point of view sees the focus remain well and truly upon the whole raft of geo-political events which continue to shape risk sentiment within the markets. The death of David Haines, a British aid worker was no doubt aimed at engaging David Cameron and co, which appears to have done exactly that. As John Kerry moves around the world trying to gather support for a coalition of forces, the UK rhetoric has moved to align with that of the US in what seems to be the pretext before an extended assault against the Islamic State. The US is certainly learning it’s lessons over the choice to essentially go it alone in Iraq without international approval and thus the development of a wide ranging group of countries who are all willing to fight the same cause means that the US and UK are emboldened with their military actions. However, there must be a concerted effort made to ensure that Sunni moderates are not marginalised where Western forces are seen to simply be supporting the Shiite and Kurdish in this battle. The war will be upon ISIS and not Sunni Muslims per se, but with previous examples of a strong social media and marketing strategy in place by ISIS, it is clear that they would likely try to change the context of the war to suit their recruiting needs. Should the war move into a stage where it is perceived as simply an attack upon Sunni’s, there would be no future in Iraq which returns to the coexistence of Kurds, Sunni and Shiite alike. This of course would mean that all Sunni moderates would end up fighting for ISIS given their persecution and treatment due to their creed.

The Scottish referendum is fast approaching and with polls too close to call, many within the markets are beginning to wake up to the distinct possibility that the pound and UK markets could see some significant volatility as the week goes on. For the most part, the markets appear to have factored in a vote for ‘No’, which appears to be the most likely event. However, the feeling is that as we approach the vote, the ‘Yes’ camp is making gains and bringing the tie closer together. Ultimately, the decision is Scotland’s to make and for the most part it appears to be that the ‘No’ vote is driven by the head, whilst a ‘Yes’ vote is driven by the heart. No doubt, a few reruns of Braveheart would push more towards the vote for independence. However, the worry remains as to the whole raft of unknowns associated with this move, where Alex Salmond has offered virtually no guarantees regarding some of the most crucial tenets of British life. Everything from the currency, to taxation and EU membership remain on a trust basis and with the ‘No’ camp unwilling to discuss such negotiations until the vote has been cast, it really is a shot in the dark for the Scottish people. For the markets this means that there is not only uncertainty in the vote, but also in the eventual outcome in the event of the vote going in favour of independence. The most central of these is no doubt the use of the Pound sterling, which despite being claimed as being ‘as much Scottish as English’, would be a massive bone of contention should Scotland not share the same central bank. Initial signs point towards Scotland dropping out of the use of the Pound which would massively devalue the currency due to weakened demand for the good and services of the UK. However, much like many other parts of this vote, this is a massive unknown and thus it is certainly a difficult decision for the Scots who must choose between the known and the unknown. Most risk averse would likely choose the known, yet increasingly there is a growing number willing to chance it in search of a greater degree of self-determination.

 

[Alpari UK]

US Opening Call from Alpari UK on 15 September 2014

Risk appetite low ahead of uncertain week


• Uncertainties surrounding Scottish referendum, Fed and BoE weigh on risk appetite;
• Lack of key guarantees could lead to comfortable win for better together campaign;
• Fed rumoured to remove key dovish language from this month’s statement;
• BoE minutes may reveal more hawkish tone.


With the week ahead offering so much uncertainty for the markets, it’s no surprise to see US futures pointing to a slightly lower open on Monday. As it stands, the S&P is seen opening 4 points lower, the Dow 22 points lower and the Nasdaq 6 points lower.

The biggest concern for the markets this week is going to be the Scottish referendum and not just because it could bring an end to the 307-year union it has had with the UK. This, of course, is a great concern simply because no one seems to know exactly what impact Scotland’s independence would have on the UK economy. What could be a greater concern though is whether even a close vote could set a precedence for regions in other countries to request a similar vote on independence. We’ve already seen support for the Scottish vote in Catalonia which has long sought independence from Spain and this would be a bigger problem due to how much tax the region generates which is then transferred to other regions.

Regardless of the fact that certain polls that have shown the vote being neck and neck, I don’t expect the final vote to be too close. There is still a huge amount of undecided voters and if Alex Salmond and the pro-independence campaign hasn’t managed to convince them to vote “yes” yet, I don’t think they will. Of course, some will vote in favour but I expect the majority to be put off by the lack of guarantees on key issues including currency, central bank and EU membership. These are huge issues and without guarantees, the risk is not worth taking.

Another concern must be Wednesday’s FOMC decision, with speculation growing that the Fed is going to drop a key sentence from its statement that, until now, has given the markets comfort that the Fed will remain dovish. The commitment to keep rates low for a considerable amount of time after the end of asset purchases is rumoured to be taken out of the statement which may bring forward people’s rate hike expectations.

The release of the Bank of England minutes, also on Wednesday doesn’t help matters, after two policy makers surprisingly voted in favour of a rate hike at the previous meeting. While the MPC did not raise rates at the meeting a couple of weeks ago, any additional votes in favour of a hike could spook the markets and lead some to start pricing in a hike this year.

With so little on the economic calendar today, these events are likely to make investors a little more risk averse. The only notable releases today are the Empire State manufacturing index and industrial production figures and even the reaction to these are likely to be a little muted. The former is seen rising to 16 in September while the latter is expected to show a 0.3% increase as the US continues its strong recovery in the second half of the year.

 

[Alpari UK]

Daily Market Update - 15 September 2014 - Alpari UK

 

[Alpari UK]

UK Opening Call from Alpari UK - 16 September 2014

There are a whole host of key risk events as we know dominating the agenda for the markets this week, with the Scottish independence vote as well as the FOMC. We may well be looking at a calm before the storm before the storm in terms of markets before we get to the big risk events but before that we do have a huge amount of numbers. Todays session will be dominated by data out of the US and UK as the markets wait for the key events on Wednesday Thursday and Friday this week.

However let’s begin with the Scottish vote and the recent developments. The leaders of the three main political parties have pledged to devolve more powers to Scotland if they vote to remain in the Union and reject independence. Part of this pledge states that Scotland will be given the final say on all funding discussions around the NHS, as well as telling Scots that a vote for NO was not a vote for less control. It is very clear that whichever way the vote goes on Thursday we are likely to see Scotland win in both eventualities. With the vote coming ever closer and the polls still too close to call it is becoming increasingly hard to call. Sterling is where this uncertainty is being felt the most and it is in fact the uncertainty of a potential YES vote which is doing the damage to GBPUSD. With so many unanswered questions over currency and membership to EU and NATO, promises previously given to the Scottish people by Alex Salmond, we are seeing increasing volatility and unrest in sterling based currency pairs. The old adage reads that the one thing the market hates more than anything is uncertainty, and uncertainty we currently have bucket loads of.

To today’s session and it looks like the CPI out of the UK will be the key piece of data early on. Expectations are for a the benchmark number to remain the same holding steady at 1.8%. This will be seen as a positive step. While we had seen CPI inflation at the 2% Bank of England target over the last couple of months, the decline in the previous months had shown a worrying decline. Fears of inflation starting a steady slide to the downside will however hopefully be alleviated should this figure hold steady. They take on more importance as tomorrows sessions sees the un employment readings as well as the BoE meeting minutes. Both of these will be key to Mark Carney and the MPC, the interesting point will come in the voting. Last month a 7-2 split occurred for the first time in a number of months, any signs of this split becoming closer in terms of numbers will be a big deal for an already under pressure pound. Mark Carney has told us that average earnings numbers must be moving in the right direction in order to a rate hike in the UK to be sustainable. Tomorrows numbers could well show average earnings increase and those calling for a hike in rates at the BOE get a bigger voice, pilling on the pressure for a rate hike in the new year if not beforehand.

Ahead of the open we expect to see the FTSE 100 open higher by 7 points with the German DAX higher by 9.

 

[Alpari UK]

US Opening Call from Alpari UK - 16 September 2014

Further risk aversion seen ahead of Fed and Scottish vote

• Scottish referendum polls remain neck and neck, uncertainty hits risk appetite;
• Tomorrow’s FOMC decision adds further uncertainty into the markets;
• UK inflation falls again in August, but it doesn’t appear to be worrying the BoE.

With so many risk events to come this week, investors are understandably risk averse again today, with European stocks tumbling and US futures pointing to a similar open.

As was the case yesterday, uncertainty surrounding the Scottish referendum and the Fed decision is really weighing on investor sentiment. While most people you ask will say that they believe the Scots will ultimately vote against independence, even if by a fine margin, people do not want to put their money where their mouth is.

The fact of the matter is that while there is still a lot of undecided voters – many of whom in my opinion are more likely to vote for the status quo – the polls are neck and neck and this cannot be ignored. As long as this is the case, there is still a realistic chance that the Scots could vote in favour of independence which as far as the markets are concerned would be a total disaster.

The other big risk event this week is the Fed meeting. It’s very difficult for people to argue that the Fed’s ultra-loose monetary policy stance has not been largely responsible for stocks rallying to their highest ever levels. Now that this is coming to an end, with asset purchases falling to zero next month and the first interest rate hike around the corner, people are getting nervous.

As long as rates remain at record lows, there is reason for US indices to be at these highs. That’s why people are concerned about the Fed’s stance on Wednesday, after rumours surfaced that the Fed is preparing to drop its commitment to keep rates low for a considerable amount of time after the end of asset purchases. If that happens, it may mark the end of record highs being made in indices for a while.

As for today, it’s going to be another light data session, with no major economic releases coming from the US. This morning we’ve had some inflation data from the UK which may change things as far as the first rate hike is concerned, given that the headline figure fell to 1.5% in August. We’ll get the minutes from the latest meeting on Wednesday which will show how the latest voting went. Should we see additional voting in favour of a hike, it may suggest that the MPC is prioritising other things over inflation, such as risks in the financial system that many people have raised concerns about in recent years. The fact that core inflation rose to 1.9% may ease fears of a falling headline number.

The S&P is currently seen opening 1 point lower, the Dow 24 points lower and the Nasdaq 3 points lower.

 

[Alpari UK]

Webinar - 16 September 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

 

[Alpari UK]

US Opening Call from Alpari UK - 17 September 2014

US indices edge higher ahead of FOMC decision

• FOMC statement and press conference key today;
• BoE rate hike vote fails to gather more support leaving only two in favour;
• UK jobs report shows further improvements in labour market as unemployment falls to 6.2%.

All week we’ve been talking about the big risk events for the markets and why they’re weighing on investor sentiment and now one of them has arrived.

The FOMC will announce its latest policy decision later on today and investors are desperate to know whether rumours that a commitment to keep rates low will be removed from the statement are true. In previous statements, the Fed has stated that rates will not rise for a “considerable amount of time” after the end of quantitative easing, which many took to mean the middle of next year or even later.

If the FOMC decides to remove this from its statement, people will be forced to revise their forecasts for the first rate hike which I expect would weigh heavily on equities and bonds, while we could see another bout of strength in the dollar, which has been the standout performer in the currency space recently.

This will set us up nicely for the press conference which follows 30 minutes later, in which Chairwoman Janet Yellen would be forced to justify the removal of the text from the statement and provide further clarity on when we can expect the first hike to come. Even if the text isn’t removed from the statement, Yellen is likely to be questioned on the rumours which could mean we get surges in market volatility during the press conference, which is not abnormal by any stretch of the imagination.

The Fed’s stance on interest rates are likely to be influences by the inflation readings for August that will be released earlier on in the day. While the CPI readings are not the Fed’s preferred measure of inflation, they do give a good idea of the kind of environment we find ourselves in. Inflation rising above 2% may force the Fed to reconsider its ultra-dovish stance while a falling inflation rate would give them more leeway when it comes to that first hike. Expectations are for a small drop to 1.9%, from 2% in July, while the core reading, which strips out volatile components such as food and energy prices, is seen remaining at 1.9%. This is just in line with the Fed’s target, which allows them to remain accommodative for now but as soon as these rise, the FOMC may have a big decision to make. Which part of their dual mandate do they prioritise, price stability or the labour market?

One of the smaller potential risk events this week was the release of the minutes from the Bank of England meeting this morning. The decision by Martin Weale and Ian McCafferty to vote for a rate hike at the meeting a month earlier has made things much more interesting as we now only need three more members to vote in favour before we get the first rate hike in more than seven years. As it turns out, the voting was unchanged, which suggests those two hawkish members are struggling to convince other members that the time has come to raise rates. With that in mind, I still believe that we’ll have to wait until the end of the first quarter of next year for the first rate hike, which could come just too late to have any impact on the elections.

The UK jobs report once again pointed to an improving economy in July, with the unemployment rate falling more than expected to 6.2%, while earnings rose slightly by 0.7%. While this appears to have lifted the pound, the gains are minimal with the Scottish referendum vote continuing to be the biggest driver of the currency. With the vote now only 24 hours away, I imagine the pound will remain heavy as traders wait for an indication of how the voting is going. The result isn’t expected until early Friday morning but by that time, I imagine most people will have a fairly good idea of what the result is.

The S&P is currently seen opening 1 point higher, the Dow 15 points higher and the Nasdaq unchanged.

 

[Alpari UK]

UK Opening Call from Alpari UK on 18 September 2014

Scots go to the poll as markets brace for volatility

• FOMC stays steady, yet timelines show sharp rate path
• Scottish referendum too close to call

The European markets seem somewhat undecided today, with US and Asian gains pushing minor gains in UK and Eurozone indices. Yesterday’s FOMC meeting provided and element for both bulls and bears to grab hold of and as such, the initial gains that saw the Dow reach a record high, soon gave way to a round of selling. That indecision along with the historic Scottish referendum hanging over the UK and Europe means that markets will no doubt be waiting for the result to gauge market direction. Futures point to a moderately positive open, with the FTSE100 +8, CAC +10 and DAX +16 points.

The FOMC chose to remain somewhat steady yesterday and in turn disappointed investors who had been looking out for a change in tone from Janet Yellen. The big question on the lips of the market was whether the Fed would remove the ‘considerable amount of time’ language from their statement and instead provide some sort of timeline for interest rate hikes, much like the BoE has recently. However, Janet Yellen was clearly in no such frame of mind to provide such clarity, instead choosing to remain consistent with previous meetings in stressing the importance of labour market improvements given that there still remains a degree of labour market slack that needs to be used up. This decision to retain a more dovish stance played into the bulls hands, leading many to believe that we will be waiting longer for rates to be affected despite the decision to end asset purchases in October as expected. However, the release of economic projections from the committee provided a somewhat shortened timeline for when we would see rate normalise, pointing towards near enough a 25 basis point rise in the Feds funds rate at each of the FOMC meetings between 2015 and 2017. Thus whilst the bulls cling on to the idea that rates will remain at 0.25% for a longer time, the bears will be highly conscious of the fact that once rates do start to rise, it will be a steep and notable climb to what will become the new normal rate.

The Scottish referendum will finally come to a close tonight, potentially bringing with it and end to the 307 year Union between Scotland and the rest of the UK. A clear tightening of votes between the two camps has clearly caught those within the ‘No’ camp off-guard whose complacency could yet provide one of the biggest shakeups in the history of these Islands. This is personified perfectly by the last ditch attempt at Westminster to devolve powers on spending and taxation up to Scotland in the event of a ‘No’ vote. In essence this is a sweetener which David Cameron has been forced to use to help avert the breakout of the UK. Yet it’s timing, coming within a week of the final vote despite a campaign lasting over two years, could not be more telling. The markets and bookmakers may tell us that it is going to be a convincing win for the No camp, yet the regional polls over this last week have portrayed a race that is neck and neck.

The implications of such a breakup would no doubt be detrimental to the economic and political power of both sides in this matter. The reduction in size and value of the UK economy would of course be reflected in the hand Westminster has to play on the global stage and thus from a purely political standpoint, this devolution will favour neither side in terms of global firepower on the biggest stage. However, such a breakup also has wider reaching implications for Europe who has further regions with aspirations of independence to deal with, in the form of Catalonia, who like Scotland are demanding a referendum of their own. Unfortunately, the decision for Scotland to leave the UK could also mark the beginning of the EU breakup, with Scotland joining the back of the queue for new entrants where Spain and other will be far from keen to allow easy entry for fear of promoting the ease of such a move towards independence. However, would also raise the likeliness of the UK leaving the EU, given the pro-European mindset within a largely Labour dominated Scotland. The future political landscape of the UK would be overwhelmingly conservative and thus without the influence of Scotland, the chance of a Yes vote of our own come the referendum promised by David Cameron would be massively raised.

From the Scottish outlook, this is no doubt a big opportunity to shake things up. It would be a move towards forming all the elements of a fully fledged country themselves rather than relying on London for the provision of core factors such as central banking. However, it would be an absolute shot in the dark for an economy whose biggest export has been predicted to near enough run out in 15 years. An economy built upon dwindling oil and gas reserves strikes me as a dangerous course of action at a time when the difficulty of growing in both jobs and output is perfectly highlighted across the water in Europe which has seen much larger countries struggle despite strong, diversified economies. In a world where there is always someone willing to do something cheaper, Scotland would need to diversify, and quick. The demand for whisky has seen a great rise in recent years and that provides some sort of security, yet to see a Yes campaign driven by pledges on healthcare, spending and taxation without any substance, it doesn’t take a genius to realise that an economy which requires the massive investment to set-up new institutions, coupled with a gradually decreasing resource base, is not necessarily compatible with lower tax and higher spending. The decision is Scotland’s to make and there is no doubt some merit in the idea of independence. However, at a time like this, with a campaign based on foundationless promises, the question remains over whether the Scottish people value stability and growth or self-governance with the possibility of both prosperity or poverty.

 

[Alpari UK]

US Opening Call from Alpari UK on 18 September 2014

Scotland heads to the polls while PBOC provides boost

US futures are pointing to a stronger open on Thursday as investors shrug off concerns over the Scottish referendum and instead turn their attention to the second dose of monetary stimulus this week from the People’s Bank of China.

As the day progresses and we near the referendum result, I’m sure we’ll see some profit taking creep into the markets, especially if we get reports suggest the voting is neck and neck as the polls suggest. The result itself isn’t due out until the early hours of tomorrow morning which should make the last hour of trading today very interesting.

As it stands, despite what the polls say, people seem very confident that the Scots will vote no when push comes to shove. The odds strongly favour a no vote and that probably says a lot more than any surveys would. While a lot of Scots may like the idea of independence, which is completely understandable, I think a lot won’t be able to get past the fact that Alex Salmond and the “yes” campaign were not able to give any guarantees on key issues such as currency, central bank and EU membership. The lack of a plan B has seriously damaged the chances of Scotland getting independence and the country may now have to wait a long time to get another chance.

The decision by the PBOC overnight to announce a cut to the short term borrowing rate has provided another boost to the markets this week. This week we’ve already had reports that the PBOC has injected large sums of cash into the country’s five largest banks, which in itself gave the markets a big boost. Today’s announcement is a massive statement of intent from the PBOC. Despite its desire to tighten credit conditions and reign in some of the reckless lending that has happened in recent years, it will not do so at the expense of the country’s growth.

Investors have been concerned about China again recently, with some of the numbers being far from great. But stimulus has worked in the past so there’s no reason to doubt that it will again. Well, that’s what the markets are betting on anyway.

We have plenty of US data being released today, although it may be somewhat overshadowed by the referendum. The housing data is likely to show a small decline in both building permits and housing starts which is a little concerning given that rates will rise in the next 12 months which could weigh further on the numbers. We’ll also get jobless claims figures for the last week as well as another speech from Fed Chair Janet Yellen so there’s plenty to focus on from a US perspective as well.

The S&P is currently seen opening 7 point higher, the Dow 54 points higher and the Nasdaq 15 points higher.