UK employers lose confidence

Harry Thompson, PhillipCapitalUK
23/Aug/2017

More warnings over the UK economy as the Recruitment and Employment Confederation have said that companies are losing confidence in the UK economy despite wanting to add jobs. Firms are concerned with the shortage of skilled employees to meet additional demand, as many relied heavily on EU workers, especially in the construction industry.

UK equities shrugged off the plunge in Provident Financial shares after fresh profit warnings which highlight the Bank of England’s recent concerns over the consumer finance boom. Credit card transactions are up by 12.3% YoY.

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Trump wants his wall

Harry Thompson, PhillipCapitalUK
23/Aug/2017

During a campaign rally last night, Donald Trump threatened to bring the U.S. government to a halt if he fails to get funding for his plans to build a wall between the U.S. and Mexico. These comments come after the first round of talks on Sunday failed to bring about any breakthroughs. This initially sent the U.S. dollar lower yesterday evening but it was quickly brushed off by traders.

Donald Trump is concerned that the NAFTA treaty, which has been in place since 1994, is impacting U.S. economic interests. Speaking at a political rally in Arizona, Trump said "Personally, I don't think we can make a deal. I think we’ll probably end up terminating NAFTA at some point.”

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Brexit puzzle

Harry Thompson, PhillipCapitalUK
22/Aug/2017

The UK government put out two papers on its Brexit vision yesterday but the EU still wants to iron out the existing issues on citizens' rights, the divorce bill and the Northern Ireland border before going any further.

The reception to the latest papers was less than warm, with the Irish Prime Minister commenting that he was "confused & puzzled" over future trading plans. Meanwhile, the International Swaps and Derivatives Association (ISDA) has urged policy makers to implement a transitional period if clearing facilities are moved out of the UK post Brexit.

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Where now for European markets?

Nathan Sage, PhillipCapitalUK
22/Aug/2017

European analysts have revised their expectations for the regions equities, predicting a pick up throughout the rest of the year. The pickup is attributed to the euro losing some momentum on the dollar coupled with stronger earnings and an improved economy.

The ECB minutes last week worked to bring the Euro lower after they revealed that the member worried the single currency may strengthen more than justified. Although no major comments are expected from ECB president Mario Draghi traders will what Jackson Hole Wyoming this Friday for any clues on the potential ECB tapering.

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Tags:   Euro ECB Mario Dragh

Eurozone data this week

Harry Thompson, PhillipCapitalUK
22/Aug/2017

Out from the Eurozone this morning will be the German ZEW economic sentiment index which measures the six month economic outlook. The survey has recently scaled two year highs in May; however the index is expected to continue its move away from this peak.

The release of preliminary PMIs for the Eurozone will follow on Wednesday and will show that the recovery in the Eurozone moderated in August; the composite PMI is forecast to drop from 55.7 to 55.5. Finally we will receive the German Ifo Business climate index on Friday which rates the current German business climate which is expected to ease to 115.5 from 116.0.

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Jackson Hole – Yellen and Draghi the highlight of the week

Harry Thompson, PhillipCapitalUK
21/Aug/2017

The week ahead looks relatively light on the data front, so investors will be focusing on keynote speeches from Janet Yellen and Mario Draghi at Jackson Hole, United States.

Fed Chair Janet Yellen and ECB President Mario Draghi are scheduled to speak at the annual Jackson Hole Symposium which begins this Thursday. Both policy makers are scheduled to speak on Friday and this could give markets some excitement heading into the weekend, despite reports showing that neither central banker will disclose any information about new policy. Inevitably, investors will hang on their every word as they eagerly look for any hints on policy ahead of the much awaited September policy meetings. It is expected in September that the Federal Reserve will announce details on their balance sheet reductions, whilst there is the possibility that the ECB will begin to prepare markets for tapering of its bond purchases.

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Politics politics poltics

Nathan Sage, PhillipCapitalUK
21/Aug/2017

US political upheaval continues to grab the headlines with Steve Bannon the latest to head for the White House exit - the comings and goings probably highlight just how surprised Trump was at getting elected, with his front line team hurriedly assembled with not much thought to harmony.

Theresa May’s government has said that it will be stepping up the pressure on the EU on how soon it can turn talks towards a possible trade deal, even though the EU has specifically said they won’t start talking until Brexit is finalised. Our EU counterparts have never responded well to pressure and this view was backed up by the Slovenian Prime Minister Miro Cerar who told the guardian “the process will definitely take more time than we expected.”

Asian equity markets were slightly fragile overnight with the AUS200 and JPN225 falling -0.37% and -0.40% respectively. Trump’s upheaval and whether he’ll be able to fulfil his agenda with his revolving door of political advisors is front and centre for traders. Markets were equally rattled by the US and South Korea starting a joint military exercise this morning and worry that could re-escalate tensions between North Korea, after Pyongyang said last week it had delayed a missile strike on the US Navy base of Guam.

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ECB minutes in focus

Harry Thompson, PhillipCapitalUK
17/Aug/2017

Attention now turns to the release of the ECB minutes today amid signs the euro area economy performed well in the second quarter.

This can be said after yesterday’s release of second quarter GDP for the bloc which posted a reading of 2.2% year on year, above expectations of a 2.1% gain. Before this investors will be focusing on the release of Eurozone CPI which is expected at 1.3% year on year.

Pro Brexit supports have responded to the UK governments open plans for Brexit calling the ‘open’ Irish board a backdoor into the UK. In the plans revealed by Whitehall officials the UK government is seeking certain waivers for goods and people between Ireland and Northern Ireland as around 80% of the trade is for small businesses. Some ministers have said that there would effectively be nothing stopping people flying from mainland Europe to Ireland and simply walking across the border. On the data front today UK retail sales are expected to drop sharply, which will give markets an idea of how the consumer is coping with higher inflation.

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Fed worried about inflation

Harry Thompson, PhillipCapitalUK
17/Aug/2017

The U.S. dollar has come under pressure overnight following the release of the minutes from the last FOMC meeting where policy makers highlighted their concerns over soft inflation.

The minutes show there was a lengthy discussion on the issue with some on the committee proposing interest rate rises were halted until there was evidence to show the current trend was transitory. The minutes stated that members “…saw some likelihood that inflation might remain below 2 percent for longer than they currently expected, and several indicated that the risks to the inflation outlook could be tilted to the downside".

As expected, the minutes showed that there would likely be an announcement in September regarding a start to the reduction of the Fed’s balance sheet. It is obvious the Fed are keen to begin unwinding their $4.5 trillion balance sheet as some members suggested making an announcement at last month’s policy meeting.

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FX commentary 11:07am

Harry Thompson, PhillipCapitalUK
16/Aug/2017

EURUSD

The Dollar continued its advance overnight as geopolitical tensions were left aside as investors focused on the upbeat US economic data. However, on the daily chart, the sell-down for the past 2 days may be a retracement and as a result, as long as prices remain above the 1.1689 low, we could see prices move higher towards 1.1789, which if broken may mean further gains for the pair. 

Technical Analysis 
Resistance:  R1: 1.1788, R2: 1.1843, R3: 1.1948
Support: S1: 1.1682, S2: 1.1632, S3: 1.1526

GBPUSD

Sterling has reversed its losses against the dollar as the UK unemployment rate drops to a 42 year low, whilst wage growth exceeds estimates. The pair has found resistance at the 100 day EMA level meaning the gains may be capped at this level for now. Should the pair fail to move higher from this point, a move below 1.2846 would likely signal further downside for the pair. 

Technical Analysis 
Resistance:  R1: 1.3119, R2: 1.3225, R3: 1.3437
Support: S1: 1.2891, S2: 1.2846, S3: 1.2715

AUDUSD

Despite moving higher overnight and this morning after hitting a key support level, given the fundamentals of a stronger greenback, we may see some downward pressure continue. However, if prices continue to edge higher, breaking above the 0.7876 level, we could see further gains.   

Technical Analysis 
Resistance:  R1: 0.7876, R2: 0.7902, R3: 0.7971
Support: S1: 0.7792, S2: 0.7765, S3:0.7697

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No border proposed

Harry Thompson, PhillipCapitalUK
16/Aug/2017

The UK has confirmed that there should be no border between Ireland and Northern Ireland post Brexit, allowing the 30,000 people who cross the border each day to continue doing so without customs or immigration checks. This is seen as an early attempt to calm tensions on the issue, as thousands of people were killed in the region before a peace agreement was reached in 1998.

The initial rounds of negotiations have failed to lay out any clear cut plans prompting EU officials to warn that the next phase of negotiations could be delayed until the UK come forward with more details on issues such as the border between Ireland and Northern Ireland. On top of this, the UK has confirmed that Britain will not have come to an agreement on a divorce bill by October.

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Gold eases

Harry Thompson, PhillipCapitalUK
15/Aug/2017

Gold prices have dropped away this week as the U.S. Dollar strengthens and tensions ease between the United States and North Korea. Prices are seen testing 200EMA levels as of now. If prices manage to hold above support level S2:1271, we could see some upside continue as the pair broke out of its long-term descending trend line last week. If not, the next support level at 1260 will be the next price level that may come into play.

Technical Analysis 
Resistance:  R1: 1288, R2: 1294, R3: 1306
Support: S1: 1276, S2: 1271, S3: 1260

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FX commentary 10:55am

Harry Thompson, PhillipCapitalUK
15/Aug/2017

EURUSD

The U.S. Dollar has recovered from the previous lows meaning the Euro’s consolidation may continue. The pair has recovered back above 1.1748 this morning which likely bodes well for further upside. Should the pair turn lower again a move through S2 could mean a period of weakness. 

Technical Analysis 
Resistance:  R1: 1.1819, R2: 1.1860, R3: 1.1885
Support: S1: 1. 1748, S2: 1.1689, S3: 1. 1647

GBPUSD

Sterling has slid lower this morning as UK CPI falls short of expectations. The pair has found support around the 1.2920 level. The next level on the downside should this layer of support break is the 1.2891 (100 daily EMA) and then 1.2839 (200 daily EMA).

Technical Analysis 
Resistance:  R1: 1.3119, R2: 1.3225, R3: 1.3437
Support: S1: 1.2891, S2: 1.2839, S3: 1.2715

AUDUSD

The pair edged lower earlier today as tensions over North Korea have eased allowing the U.S. dollar to find its footing. Moving forward, bearishness within the pair may continue until there is any price action to take the pair higher.

Technical Analysis 
Resistance:  R1: 0.7898, R2: 0.7954, R3: 0.8019
Support: S1: 0.7824, S2: 0.7797, S3:0.7723

USDJPY

The Dollar has risen against the Yen as concerns over geo-political tensions between USA and North Korea have eased for now. From a technical perspective, the pair recently broke resistance level R2: 110.23. Therefore looking ahead, prices are set to test next resistance level at R3:110.92

Technical Analysis 
Resistance:  R1: 109.92, R2: 110.23, R3: 110.92
Support: S1: 109.17, S2: 108.73, 107.99

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The day ahead...

Nathan Sage, PhillipCapitalUK
15/Aug/2017

There are a few major events slated for today’s calendar, this morning we get the latest round of UK CPI figures MoM is expected flat at 0.0% and YoY a gain to 2.7%. CPI dropped unexpectedly from 2.9% to 2.6% last month but has sat way above the Bank of England’s 2% target since the end of January this year. Staying with the UK Brexit minister David Davis is expected to lay out his plans for a new customs arrangement, although the EU has reiterated that they will not negotiate any new relationships until Brexit has been decided. The paper sets out the proposals in which the UK would be part of “a temporary customs union” while still being able to “negotiate bold new trade relationships around the world.”

This afternoon we’ll get US retails sales which showed a drop last month but are forecast to rebound from -0.2% to 0.3%; the figure is one of the most important US data points of the week. We’ll see how the US consumer, who has had a choppy year to date, is performing in the second half of the year and how this could support growth above 2%. Alongside retail sales we’ll get the empire manufacturing figure for August which is expected to tick up slightly from 9.8 to 10.0.

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Dollar lifted

Harry Thompson, PhillipCapitalUK
15/Aug/2017

North Korea’s leader Kim Jong Un has reportedly told army officials that he would hold off a missile attack on the U.S. island of Guam as he would like to watch the actions of the United States for a longer while yet. In an easing of geopolitical tensions, the U.S. dollar has found its feet after falling last Friday after weaker than expected CPI had investors reducing their bets on further rate hikes this year from the Federal Reserve.

However, the U.S. dollar was further boosted by comments from New York Fed President William Dudley who breathed some fresh air into interest rate hike expectations. The central banker believes it is possible for the Fed to begin unwinding its balance sheet as soon as September and for the Fed to raise rates once more this year, albeit data dependent.

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RBA remain upbeat

Harry Thompson, PhillipCapitalUK
15/Aug/2017

Overnight the Reserve Bank of Australia has maintained its upbeat outlook on the economy, believing that a pick-up in inflation and jobs was around the corner; however a strong Aussie dollar and high levels of household debt were a concern for the central bank.

A stronger dollar could further depress prices, so the central bank will be happy to see the local currency ease 1.4% in the last few weeks away from its two year peak reached in July.

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Consumer data ahead

Harry Thompson, PhillipCapitalUK
14/Aug/2017

The British consumer continues to come under pressure as real incomes decline, something that does not bode well for a consumer driven economy like the UK. Retail sales out on Thursday are expected to slow to just 1.4% on the year as consumers cut back their spending. July’s retail sales are expected to have eased to 0.2% on the month followings June’s better than expected 0.6% gain.

We are finally expecting to see a U.S. retail sales bounce back on Tuesday following two straight months of declines. Retail sales in the states are expected to rise 0.3% in July. A bounce is also expected in consumer confidence when Friday’s University of Michigan’s preliminary reading of the consumer sentiment is released.

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UK and Australian jobs data eyed

Harry Thompson, PhillipCapitalUK
14/Aug/2017

Amidst growing concerns over Brexit negotiations, data this week could highlight further cracks in the UK economy. A lack of wage pressure in the UK will likely sway the Bank of England from rushing into action anytime soon, and this Wednesday’s unemployment report is expected to confirm that wage growth remains weak. A posting of 1.8% is expected, whilst the unemployment rate is expected to remain steady at 4.5%.

Similarly to the UK, wage growth in Australia remains frail, so Wednesday’s release of the wage price index will be of big significance. Following this, unemployment data on Thursday night will be eyed, especially as much of the Aussie dollars drive this year has been around the strong labour market figures. The unemployment rate is expected to remain steady at 5.6%, with 20,000 jobs expected to have been added in July.

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Japanese GDP strong

Nathan Sage, PhillipCapitalUK
14/Aug/2017

Japanese Gross Domestic Product has recorded its sixth consecutive quarter of growth, the longest unbroken streak in more than a decade and lending a well needed lifeline to a struggling “Abenomics” program. The preliminary figure printed at 4%, up from the upwardly revised figure of 1.5% and beating estimates of 2.5%.

Analysts have said that the underlying figures are supportive of the recent trend and not a one-off fluke in the figures. Despite the upbeat GDP figures, it is not expected that the Bank of Japan will begin to unwind its huge stimulus program as inflation remains well below the central bank’s target.

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Fed bets reduced

Harry Thompson, PhillipCapitalUK
14/Aug/2017

U.S. indices moved higher on Friday as investors reacted to the weaker than expected inflation figures which has led investors to reduce bets of further interest rate hikes from the Federal Reserve this year.

Friday’s data showed that consumer prices rose 0.1% in the month of July, below expectations of a 0.2% gain. This added some pressure to the greenback which dropped to as low as 108.72 against the Japanese Yen. Gold continues to benefit from a weaker dollar and increased geopolitical tensions; however the crisis appears to be showing signs of abating as Asian (ex-Japan) shares have risen overnight. However, any increased aggression will likely see safe haven flows return as investors remain on edge.

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Safe havens bid

Harry Thompson, PhillipCapitalUK
11/Aug/2017

The flight to safe havens continued overnight as a slump in US equities boiled over into Asian hours, pushing them to their first weekly decline in five weeks. Hedge-fund manager Ray Dalio said that Trump is playing a dangerous game of chicken with North Korea’s leader Kim Jong-un, as Trump upped his pressure on the secret state.

Trump has responded to yesterday’s claim by North Korea warning them not to follow through on their threat to attack US outpost Guam and promised a massive response to any strike against America or its allies. The heightened tension is edging the U.S. towards diplomacy with Defence Secretary Mattis commenting that war would be ‘catastrophic’.

The U.S. dollar has come under pressure yesterday as the producer price index released by the Labour department recorded its biggest drop in 11 months. Producer prices dropped 0.1% in July, reversing the 0.1% gain seen in June. Prices were weighed down by lower costs for services and energy products, adding to the belief that the Federal Reserve will delay raising rates later this year. However, investors will await the release of today’s CPI to confirm the extent to which prices are moderating in the States. Speaking yesterday, the Fed’s Dudley thinks it will take some time for CPI to reach its 2% target.

U.S. CPI will be released at 1:30pm and it is expected to show a 0.2% rise on the month from a previous figure of 0.0%, whilst the year on year figure is expected to have risen 1.8%. In a separate report yesterday, the U.S. Labour Department reported that those claiming for unemployment benefits rose 3,000 last week to 244k. Despite the rise, the labour market continues to show signs of strength, as initial jobless claims have remained below the 300,000 level for 127 straight weeks.

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Safe haven flows ease

Harry Thompson, PhillipCapitalUK
10/Aug/2017

Safe haven flows have eased overnight, as investors brushed off the news that Pyongyang plans to fire four medium range ballistic missiles into US territory of Guam 'within days'.

The recent jobs data from the U.S. has lent support to the idea that the Federal Reserve will continue to tighten policy later this year; investors will now eagerly await the release of U.S. PPI today and CPI later on Friday.

This is in contrast to the RBNZ who held interest rates at 1.75% on Thursday, whilst commenting that policy would stay accommodative for a considerable time. The RBNZ Governor Graeme Wheler has commented that he would like to see the Kiwi dollar depreciate and that the central bank could intervene in the currency market if needed; these comments have pushed the Kiwi dollar to a one month low of 0.7258.

UK house prices are beginning to fall outside of London as recent tax changes and uncertainty over Brexit continue to weigh on the market. The Royal Institute of Chartered Surveyors house price balance showed that headline prices dropped from 7% to just 1% when forecasts had been for a rise to 9%. Unsurprisingly the largest drops were in London where 48% of estate agents reported prices had fallen in the three months to July; secondly the southeast dropped 24%. Across the UK prices were still mostly positive but the growth rate was slower in all areas.

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BoE agent report shortly

Harry Thompson, PhillipCapitalUK
09/Aug/2017

The BoE will publish its Agent's report of Business conditions at 0930 which is key as the Bank's MPC uses this as a barometer to key questions in our economy such as firm's ability to cope with Brexit.

There is no significant UK economic data today and no auctions and therfore we look forward to tomorrow's RICS House Price Balance which is expected to show that prices have grown by 9%, up from 7% last month. We will also have Industrial Production and Manufacturing Production figures, which will be watched by the market for further direction in the gilts. We also get guidance from the NIESR which will show GDP, expected to hold steady at 0.3%.

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Morning update - 9th August

Harry Thompson, PhillipCapitalUK
09/Aug/2017

US President Donald Trump has issued a strong warning to North Korea overnight as geo-political tensions raise their head again. A report by US intelligence services said that the secret state has developed nuclear capabilities that are small enough to fit inside a ballistic missile, which in turn could be fired upon major cities in the US. Trump stoked the fire by saying “North Korea best not make any more threats to the United States [or] they will be met with fire and fury like the world has never seen”.

Investors took a risk-off approach to the exchanging of threats between the two countries with US equities taking a dip, the South Korea Won dropped and havens of gold and the Yen were better bid. The news woke markets from an August slumber and the VIX index, which measure implied volatility, has jumped around a point after flat lining around 10 for the majority of this month.

South African President Jacob Zuma has survived the latest no-confidence vote, even after the ballot was held in secret. Opposition parties had hoped to oust the President, who has been in power since 2009, amid repeated calls of corruption. Zuma has been embroiled in scandal since the start of his presidency, including taking taxpayers money to upgrade his private home and being too close to wealthy families. The South African Rand slumped 1.1% against the dollar as the news broke in a clear sign that investors weren’t pleased with the outcome.

Overnight we saw the Australian dollar come under some pressure as Australian new home sales rise less than expected, whilst Chinese CPI for the month of July fell short of expectations. The world’s second largest economy reported that CPI month on month rose 0.1%, below expectations of a 0.2% rise. The Australian dollar is often used as a proxy to the Chinese economy due to the large trade relations between the two countries.

The U.S. dollar traded higher in yesterday’s session after data showed that U.S. jobs openings soared to a record high in June. Used as a measure of U.S. labour demand, job openings rose 461,000 to a seasonally adjusted 6.2 million, supporting the Fed’s view that the U.S. economy is strong enough to continue to tighten monetary policy later this year. Investors will now be focusing on Thursday and Friday’s release of PPI and CPI respectively.

The Bank of International Settlements has posted a study claiming the ageing population will drive higher interest rates, contrary to the Fed’s perceived thought an older economy would create a drag rather than spur cost of capital or 'real rates'.

Meanwhile, OPEC has finally said UAE, Kazakhstan and Iraq have affirmed their commitment to production cuts. Previously these members had been hampering efforts to reduce global stockpiles. Despite this, the price of oil has come under pressure overnight as concerns remain over the ability of OPEC to reign in global supply.

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FX commentary 14:38

Harry Thompson, PhillipCapitalUK
08/Aug/2017

EURUSD

The bullish sentiment surrounding the Eurozone economy has added support to the Euro in recent weeks; however we saw a sharp sell off on Friday following the positive nonfarm payrolls report. This has potentially opened up a period of weakness for the single currency; however a move above the 1.19 level could rule this out.

Technical Analysis

Resistance:  R1: 1.1810, R2: 1.1833, R3: 1.1876
Support: S1: 1.1767, S2: 1.1747, S3: 1.1704

GBPUSD

As weak domestic fundamentals continue to weigh on the Pound, the pair may endure a period of weakness. As with other pairs, we may see a period of retracement before the downward pressure resumes. Should the pair break below the 20 day EMA at 1.3004 we could see it test the 100 day EMA at 1.2878.

Technical Analysis 
Resistance:  R1:1.3047, R2: 1.3075, R3: 1.3120
Support: S1: 1.3002, S2: 1.2985, S3: 1.2940

USDJPY

The Dollar has moved lower against the Japanese Yen today giving up much of its ground it made on Friday. Prices failed to break above the 200 hourly EMA so it is possible we could see some further downside if prices hold below this resistance level.

Technical Analysis 
Resistance:  R1: 110.90, R2: 111.04, R3: 111.32
Support: S1: 110.63, S2: 110.49, 110.22

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UK labour market tightening

Harry Thompson, PhillipCapitalUK
08/Aug/2017

Research carried out by Markit for recruiting firms has shown the UK labour market is tightening with pay rates rising across all sectors. Some EU nationals exiting the UK post Brexit are partly to blame, yet this will is welcome news to the MPC who have found wage inflation sadly lacking as a key barrier to hiking rates.

Barclaycard have reported overnight that consumer spending in the UK has increased by 3.5% y/y, attributed to higher food costs. Their measure of consumer confidence came in at 28% (prev 34% last year). The British Retail Consortium's Like for Like sales were up 0.9% (prev +1.2%) with food up 1.4% and other goods down 0.4%.

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Eye opener

Harry Thompson, PhillipCapitalUK
08/Aug/2017

Something to keep an eye on for the future: Italian opinion polls are currently showing that three anti- Euro parties have got close to 50% support ahead of the next general election due by early 2018.

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Soft U.S. inflation not an issue for Fed

Harry Thompson, PhillipCapitalUK
08/Aug/2017

Speaking yesterday, both Kashkari and Bullard of the Federal Reserve have played down soft inflation in the U.S. being a problem and saw minimal disruption when the Fed begins its balance sheet shrinking program. Although doves, they line up with expectations the FOMC will hold on interest rates next month and announce a gradual trim of its colossal balance sheet it has built up since the financial crisis.

The U.S. dollar has tried to hold onto gains from Friday, however trading is subdued as Donald Trump and U.S. congress enjoy their vacation period. It is likely the movement in the dollar will be limited this week until Friday’s release of consumer prices.

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Afternoon update: dollar holds, US30 pushes higher

Harry Thompson, PhillipCapitalUK
07/Aug/2017

The U.S. dollar has held its ground close to Friday’s highs reached following the positive nonfarm payrolls report which saw 209,000 jobs added in June. In subdued trading, the dollar basket index was little unchanged at 93.31 midway through the morning U.S. session.

The positive payrolls report has added support to the idea that the Federal Reserve will continue their policy normalisation plans, albeit at a more gradual pace. However, the dollar’s rise has been capped as investors now want to see evidence of inflationary pressures building otherwise the rise in the greenback may not be sustainable

The robust labour report has fuelled speculation that inflation will begin to pick up as the economy tightens and wages rise, however investors will likely want to see this reflected in the underlying figures before acting. We will receive U.S. inflation figures this Friday which are expected to show a 1.8% gain on the year.

The US30 closed at another record high on Friday with the index set for another potentially record breaking close once more. Meanwhile, the price of oil has moved lower in today’s trading as investors now await news from the two day policy meeting between OPEC and non-OPEC members that concludes tomorrow.

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The week ahead - 7th August

Harry Thompson, PhillipCapitalUK
07/Aug/2017

The split in the MPC remains but for the time being it appears that the hawks have had their day. McCafferty and Saunders remain resolute to their cause but the departure of Forbes means their ranks have dwindled. The arrival of Tenreyro appears to have swelled the doves, although we are still to hear her own thoughts on how she sees the economy and given the Treasury’s warnings over what Brexit will do to the economy, it is hard to see Ramsden wanting to vote for tighter policy when he joins the committee next month.

Growth forecasts were lowered in the Quarterly Inflation Report, to 1.7% for 2017, which means they are expecting a pick-up in the second half of this year. Inflation is expected to peak around 3% before heading back to the 2% target. They did give some clarity on their view of how the path for interest rates will pan out and the forecasts assumed two rises in Bank Rate over the next three years, with the first coming in Q3 next year, not too dissimilar from our own forecast.

The BRC reports on like-for-like retail sales for July tomorrow, so we get a clue as to whether the consumer is still driving the economy. The CBI reported strength in this sector through its distributive trades survey a couple of weeks ago, so we are watchful for confirmation here. On Thursday we get industrial and manufacturing production figures for June and the forecasts are +0.1% MoM -0.2% YoY and -0.1% MoM +0.6% YoY respectively. Construction output is expected to register +1.1% MoM +1.7% YoY, although in this area it is worth noting that the July PMI slipped very sharply. The NIESR, who last week cut its growth forecasts, reports its estimate of GDP for the three months to the end of July, It too is going for 1.7% this year, so we look to see if that reflects in its current reading, which should, on that basis, start to reflect from the 0.3% they had for Q2.

New Zealand - RBNZ

This week the focus will shift to the Reserve Bank of New Zealand who will announce its latest monetary policy decision. No change is expected this time round, however the bank has expressed in the past that "it is equally likely that the next move in the OCR could be up or down." Despite a bounce in the U.S. dollar on Friday, it will be interesting to see the comments from the central bank regarding its currency appreciation. In the early hours of this morning, we learnt that the 2 year inflation expectation dropped to 2.09% from a previous 2.17% which will likely play into the hands of the doves within the RBNZ.

Unites States

There is various data release this week which will keep investors interested, including June’s consumer credit report, JOLTS job openings, labour costs and productivity numbers. However the main focus will be on Thursday and Friday when PPI and CPI are released. Investors are waiting for confirmation that inflationary pressures are starting to build as this will support the Federal Reserve’s plans to tighten policy throughout 2017 and 2018. The U.S. dollar has been under pressure this year as prices remain weak, so a positive reading could lend support to the greenback. Analysts are expecting a rise of 1.8% on the year, up from June’s 1.6% gain. However, it is worth noting that this CPI reading released on Friday is not the Fed’s preferred measure of inflation. 

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FX commentary - 10:24am

Harry Thompson, PhillipCapitalUK
07/Aug/2017

EURUSD

Last Friday, upbeat NFP data from the US sent prices testing the 200 EMA support level. This support level was not broken, suggesting the dollar bulls do not have the upper hand just yet as the outlook on US rates remains unchanged. Key direction will come from Fed expectations, so, until there is any clarification with regards to future policy in the U.S., it is likely we may see the pair resume its climb higher.

Technical Analysis 
Resistance:  R1: 1.1864, R2: 1.1957, R3: 1.2118
Support: S1: 1.1704, S2: 1.1635, S3: 1.1475

GBPUSD

Weak fundamentals domestically and a strong U.S. dollar have weighed on the pair which has now moved out of its trend line meaning we could be in for further downside. The dovish tone struck by the Bank of England last week will likely continue to weigh on the pair, however any developments of a second Brexit vote will likely add support to Sterling. For now prices look set to test immediate support level at S2: 1.2982.

Technical Analysis 
Resistance:  R1:1.3123, R2: 1.3213, R3: 1.3354
Support: S1:1.3019, S2: 1.2982 S3: 1.2866

AUDUSD

AUDUSD fell modestly on Friday following the release of strong US NFP report as USD bulls came into play.  Moving forward, prices look set to test immediate support at 0.79 which could act as a tough level to break as it is where the 20 day EMA lies. The recent bounce in commodity prices and buoyant equities have supported the carry trade, so in the current environment the downside risk for the Australian dollar is likely to be limited.

Technical Analysis 
Resistance:  R1: 0.7973, R2: 0.8020, R3: 0.8108
Support: S1: 0.7885, S2: 0.7847, S3:0.7756

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Morning update

Harry Thompson, PhillipCapitalUK
07/Aug/2017

UK consumer spending surveys produced by VISA and the National Institute of Economic and Social Research (NIESR) suggest that the squeeze continues, with VISA data falling for the third consecutive month in July; this marks the surveys longest consecutive decline since February 2013.

A major concern for the Bank of England has been the high levels of household debt; however consumers are expected to reign in their debt fuelled spending as risks to job security mount. The NIESR sees the UK savings ratio eventually rising as the UK economy slows.

It has been reported that the UK expects a Brexit bill of €40 billion, a figure much lower than the EU’s proposed €60 billion. No doubt this will be high on the agenda at the next round of talks which are set to begin at the end of this month

Asian shares have moved higher overnight following on from the gains on Wall Street after a positive payrolls report on Friday added 209K in July, whilst June’s employment figure was revised higher. Continued signs of a robust labour market have lent support to the Federal Reserve’s decision to gradually tighten policy.

Fridays report added support to the U.S. dollar, with the dollar basket index adding 0.76%, its biggest one day gain this year. The dollar has held most of these gains; however the rally higher looks to have lost some momentum. It is likely investors will want to see a pickup in inflation before dollar bulls move in. Despite not being the Fed’s preferred measure of inflation, we will get CPI figures this Friday which could lend further support to the dollar should the figures excite the hawks.

Meanwhile, new UN sanctions on North Korea have been put in place, as China looks to reduce tensions on all sides. The UN Security Council voted unanimously to impose an estimated $1 billion of new sanctions on the rogue state.

The price of oil has edged lower night following positive gains on Friday. Officials from a joint OPEC and non-OPEC technical committee are set to meet in Abu Dhabi today and tomorrow discuss plans to boost compliance to their output reduction.

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Positive payrolls report

Harry Thompson, PhillipCapitalUK
04/Aug/2017

The nonfarm payrolls report released today has lent support to the Federal Reserve’s plans to gradually tighten U.S. monetary policy. The Labour Department reported that nonfarm payrolls increased by 209,000 last month, whilst Junes figure was revised up to 231,000 from 222,000.

The unemployment rate dropped to 4.3%, whilst wage growth picked up. The report has helped the dollar to move away from its 15 month lows as the US labour market continues to show signs of strength. Investors reacted positively to the report; however it is worth noting that many of the new jobs were low-paid, while manufacturing continued to shrink as a share of the economy.

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FX commentary 12:41pm

Harry Thompson, PhillipCapitalUK
04/Aug/2017

It seems like the Euro is slowly approaching the 1.20 mark, given the ongoing weakness in the greenback. The bullish momentum looks set to continue with new highs being created throughout the week. Any pullbacks towards the 20/40 hourly EMA support levels could be seen as entry levels before any possible moves higher.

Technical Analysis 
Resistance:  R1: 1.1916, R2: 1.1952, R3: 1.2032
Support: S1: 1.1836, S2: 1.1793, S3: 1.1714

GBPUSD

The UK pound fell shortly after BoE decided to keep interest rates unchanged whilst striking a dovish tone. This pushed the pair to the lower end of its trend line where it has found support. This morning’s bounce could possibly be a short term move as the pair struggles to move beyond the 40 4Hourly EMA at 1.3154.

Technical Analysis 
Resistance:  R1:1.3234, R2: 1.3326, R3: 1.3480
Support: S1: 1.3080, S2: 1.3019, S3: 1.2866

AUDUSD

Yesterday prices broke the 200 Hourly EMA level and look to test immediate resistance at R1: 0.7985. However the pair seems to be moving within the trend-line suggesting a break out from this level may not happen just yet.

Technical Analysis 
Resistance:  R1: 0.7985, R2: 0.8028, R3: 0.8107
Support: S1: 0.7906, S2: 0.7871, S3:0.7792

USDJPY

USDJPY continued its bearish trend on Thursday and made a low of 109.86. US ISM Non-Manufacturing PMI posted was only 53.9, so the greenback struggled to recover. The pair now trades above the 110 level which could be broken later today if nonfarm payrolls fail to kick some life into the U.S. dollar.

Technical Analysis 
Resistance:  R1: 112.11, R2: 113.38, R3: 115.00
Support: S1: 110.00, S2: 109.60, S3: 108.30

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Nonfarm payrolls ahead

Harry Thompson, PhillipCapitalUK
04/Aug/2017

The focus today for many investors will be this afternoon’s release of nonfarm payrolls. The data is looking slightly mixed with the headline payrolls figure expected to have dropped to 180k from 222k last month.

Average earnings are estimated to have risen 0.3% on the month, whilst the unemployment rate is expected lower to 4.3% from 4.4%. If meeting expectations, this will be a positive report to allow the Fed to continue to tighten policy, albeit at an increasingly gradual pace.

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RBA lowers growth forecast, strong currency to blame

Harry Thompson, PhillipCapitalUK
04/Aug/2017

The Reserve Bank of Australia has lowered its growth forecast by 0.5% to 2.5%-3.0% citing a strong currency. Despite this, consumers continue to splurge as Q2 retail sales rise 1.5% against a previous 0.1% rise, and well above estimates of 1.2%.

This is not the case for the UK consumer, as a BDO survey has highlighted that UK retail sales dipped in July, with fashion retailers taking their worst hit for eight years. BDO said its monthly High Street Sales Tracker found overall like-for-like store sales fell 0.6 percent in July, having risen 1.3 percent in June.

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Bank of England on hold, inflation near highs

Harry Thompson, PhillipCapitalUK
04/Aug/2017

The Bank of England assumes two rate rises over the next three years, with the first one coming in Q3 next year. The Bank believes inflation is near its peak, confirmed this morning by Ben Broadbent speaking on BBC radio. He reiterated yesterday’s BoE message that rates are on hold for the time being, inflation is near the top end and growth is weaker as Brexit worries impact investment.

It would appear that despite their recent hawkish wobbles, Carney and Haldane have regained their dovish poise and are happy to sit tight for the time being. Domestic uncertainty will weigh on investment decisions, they say. As a result of the communication the pound fell sharply as the likelihood of a rate hike diminished.

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BoE's MPC ahead

Harry Thompson, PhillipCapitalUK
03/Aug/2017

Sterling has held its ground above the 1.32 level against the dollar ahead of today's Super Thursday announcements. There seems to be a fear that the overall tone of the Bank's message is going to turn hawkish through the MPC minutes and the subsequent Quarterly Inflation Report.

However, some analysts believe that there is sufficient uncertainty over the path of growth to keep a lid on this for the time being. Markets are not expecting any change to the Bank Rate today or the asset purchase programme, from the MPC meeting, the main focus will be the makeup of the vote. It was 5-3 in June, with the inclusion of the now departed Kristin Forbes. She has been replaced by Silvana Tenreyro and her vote is anyone's guess; there are suggestions that she will lean towards the doves but in reality no one actually knows. If the new member on the MPC sides with the doves, we could see a 6-2 vote, which could put some pressure on Sterling; however a hawkish inflation report will limit the downward pressure.

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Fed to tighten gradually

Harry Thompson, PhillipCapitalUK
03/Aug/2017

Speaking yesterday, the Fed’s Mester is confident that inflation will pick up as the cause for the dip is due to one off factors and not a long-lasting trend. The central banker believes the Fed should continue to tighten its policy gradually. This view was echoed by San Francisco Fed president John Williams, who believes the U.S. economy has “fully recovered” from the financial crisis. Williams is in favour of one more rate hike in 2017, and a further three over the course of 2018.

Yesterday we saw ADP employment post a figure of 178,000 for July, slightly below economists’ expectations. This follows on from a positive June figure which was revised up to 191,000 from 158,000. The U.S. dollar remains under pressure as investors focus on the likely policy tightening from other central banks in the near future, whereas the Fed looks to tighten and an increasingly gradual pace.

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Gold commentary 11:05am

Harry Thompson, PhillipCapitalUK
02/Aug/2017

Gold moved down slightly to close at 1267.81 on Tuesday despite the weak US economic data. It seems that the resistance of 1270 level is hard to break, causing the yellow metal to fall back into its range for the week around the 1267 level. We may likely see gold trade between 1260 and 1270 until there is any price action.

Technical Analysis 
Resistance:  R1: 1278.43, R2:1287.80, R3: 1300.00
Support: S1: 1265.48, S2: 1251.82, S3: 1242.26

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FX commentary - 11:03am

Harry Thompson, PhillipCapitalUK
02/Aug/2017

The Eurozone economy continues to report expansion within its region largely due to higher business optimism, strong domestic consumption, and decreasing unemployment. This has helped the euro to push through resistance at R1:1.1633 however it failed to pass R2 at 1.1867. As a result the pair is currently heading lower, however the bullish momentum remains suggesting further upside is possible after this retracement.

Technical Analysis 
Resistance:  R1: 1.1833, R2: 1.1867, R3: 1.1925
Support: S1: 1.1775, S2: 1.1752, S3: 1.1695

GBPUSD

A slight retracement overnight was witnessed as the dollar recovered from previous lows. The retracement was likely due to traders/investor taking profit from a bearish dollar over the week. This morning we have seen buyers return to the market pushing the pair to test R1: 1.3239. A break of this level could open up R3: 1.3345 and then the 6th September high of 1.3444.

Technical Analysis 
Resistance:  R1:1.3239, R2: 1.3276, R3: 1.3345
Support: S1: 1.3171, S2: 1.3139, S3: 1.3070

AUDUSD

Prices have been testing the 200EMA level (hourly), so from a technical perspective, if prices are unable to break this level, a rebound may occur. Moving forward, the 20EMA and 40EMA have started to turn lower, so if we see the 40EMA cross the 200EMA mark, chances are a strong sell-down may occur.

Technical Analysis 
Resistance:  R1: 0.8022, R2: 0.8073, R3: 0.8155
Support: S1: 0.7941, S2: 0.7909, S3:0.7828

USDJPY

The pair has finally stopped dropping as the dollar recovered some lost ground overnight.  Whilst USDJPY is supported above 110.00, it does not indicate a rebound just yet, so we may see prices test the 111.10 for now. The bearish trend still remains intact so further losses to the 109 level are likely not ruled out yet. However we may see prices trade between 110 and 111.10 until there is new price action.

Technical Analysis 
Resistance:  R1: 112.11, R2: 113.38, R3: 115.00
Support: S1: 110.00, S2: 109.60, S3: 108.30

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Morning update - 2nd August

Harry Thompson, PhillipCapitalUK
02/Aug/2017

The day started yesterday with news that will play to the hawks camp on the UK’s Monetary Policy Committee; British Gas announced it will be increasing electricity prices by 12.5%, whilst the UK manufacturing PMI was stronger than expected, supported by strong exports. The increase in electricity prices will likely further fuel inflation in the UK which has already above the Bank of England’s 2% target.

However, shop price inflation, as measured by the BRC, dropped back last month, -0.4% YoY from - 0.3% in June. This gauge had been moving back towards positive territory, so this slip may come as unexpected, playing to the dovish camp. Investors will be focusing on the Bank of England tomorrow as the MPC concludes their two day policy meeting; no change is expected however investors will be keen to understand the voting intentions of the committee.  

Staying with UK monetary policy, the NIESR has changed its call on when a rate hike will happen, reeling in from 2019 to Q1 2018. It has held its growth forecasts for this year and next at 1.7% and 1.9% respectively, which envisages H2 growth this year at more than double that seen in H1. We get the construction version of the PMI today and the forecast is for that to ease back to 54.0 from 54.8 last month.

Meanwhile data in the U.S. pointed to a likely moderate expansion in the third quarter as factory activity dropped as new orders declined, whilst consumer spending, which accounts for two thirds of the U.S. economy, edged up only slightly. The Institute for Supply Management reported that its index for national factory activity dropped to 56.3 from 57.8; the figure still highlights expansion however the sector continues to show signs of slowing. In a separate report construction spending in June tumbled to 1.3%, its lowest level since September 2016.

The soft data from the U.S. added pressure to the dollar which has now recovered from its 15 month lows overnight as U.S. treasuries rose. There was yet more record highs on Wall Street as the US30 punched through its previous peaks, supported by the prospect of lower rates for longer as inflation remains subdued.

The Fed’s preferred measure of inflation, the personal expenditure price index (excluding energy and food), increased 1.5% in June compared to a year ago, the same reading for May, still below the Fed’s 2% target level.

Later today we will hear from two Fed members as Mester and Williams speak, with the latter being the focus as he speaks on monetary policy. Ahead of this we will get U.S. mortgage applications and the all-important ADP employment change for July which is seen as a precursor to nonfarm payrolls on Friday. ADP employment is expected to rise to 190k from 158k in June.  

Quick take

  • Asian technology shares hit a 17 year peak as big earnings from Apple boosted component makers.
  • Oil continues to flirt with $50 a barrel level. WTI went through this mark yesterday but has since came off. British Petroleum is pencilling that level for the next 5 years. 
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Summer rebate offer

PhillipCapital UK, PhillipCapitalUK
01/Aug/2017

Open and fund an account with PhillipCapital UK and receive a full 90 days of cash rebates. Hurry, you've got until 31st August 2017 to sign up!

There's still time left to sign up for the PhillipCapital Summer Rebate. Open and fund a live account before 31st August 2017 and receive a full 90 days of rebates directly into your MT4, starting from the day your account is funded!

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FX commentary 12:06pm

Harry Thompson, PhillipCapitalUK
01/Aug/2017

The Euro has continued its retracement this morning moving towards the 1.18 level following its moves inot overbought territory (based on the daily RSI). We could see further movements lower before the pair looks to test the recent high of 1.1845. The pair will likely find support at 1.1756 which could act as a springboard for further moves higher.

Technical Analysis 
Resistance:  R1: 1.1863, R2: 1.1899, R3: 1.2000
Support: S1: 1.1756, S2: 1.1686, S3: 1.1579

GBPUSD

The Pound was given a further boost this morning following the release of manufacturing PMI figures which posted 55.1 from 54.3. The pair now trades above the 1.32 level; however we could see limited price movement from now as investors await further confirmation on the BoE’s monetary policy. The daily RSI shows a currency pair creeping into the overbought territory so the resistance at 1.3229 may prove strong for now.

Technical Analysis 
Resistance:  R1:1.3229, R2: 1.3265, R3: 1.3367
Support: S1: 1.3127, S2: 1.3061, S3: 1.2959

AUDUSD

The pair has been unable to break pass the strong resistance level at R3:0.8045 as RBA kept its benchmark rate unchanged at 1.5%. In addition, RBA also portrayed a slight dovishness in the policy as an appreciating exchange rate will result in a slower growing economy. This has dampened prospects of a near term hike from the RBA so we could see the pair come under some pressure moving forward, however the weakness in the US dollar may limit the pairs drop for now.

Technical Analysis 
Resistance:  R1: 0.7963, R2: 0.7982, R3: 0.8028
Support: S1: 0.7917, S2: 0.7890, S3:0.7843

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Where now for the U.S. dollar?

Harry Thompson, PhillipCapitalUK
01/Aug/2017

It is the release of the core PCE index today that will be of huge significance as it is the Fed’s preferred measure of inflation. This is expected to have risen 0.1% in June, with the year on year figure remaining at 1.4%.

The reading has been on the decline since the start of the year where it has fallen from close to 1.8%, calling into question the pace at which the Fed plans to tighten policy.

Last week we saw U.S. GDP rebounded in the second quarter to post a figure of 2.6%, confirming the weak first quarter growth was transitory. First quarter growth was revised down to 1.2% with the rebound this time round being attributed to a boost in consumer spending. Consumer spending, which makes up the bulk of the U.S. economy, grew 2.8%, well above the 1.9% posted in the first quarter.

This week will conclude with the release of nonfarm payrolls which are expected to have risen 187k in July following June’s strong ready of 222k. The unemployment rate is expected to have dropped to 4.3% whilst average hourly earnings are expected to have ticked up to 0.3% from 0.2%. The report has the potential to fuel the U.S. dollar should a strong report highlight the strength of the labour market.

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Bank of England ahead

Harry Thompson, PhillipCapitalUK
01/Aug/2017

The Bank of England’s Monetary Policy Committee will meet on Tuesday and Wednesday this week which will follow on from June’s meeting where we saw the blank vote 5-3 in favour of maintaining the Bank rate at 0.25%.

Certain members of the MPC have expressed their concerns over rising inflation that had been brought about by Sterling’s fall since the UK decided to leave the EU last year. However, June’s 12 month CPI reading dropped to 2.6% from May’s 2.7%, easing some concerns. This time round investors will be keen to know if the committee still remains concerned that inflation remains above the Bank’s 2% target level.

It is worth noting that Kristin Forbes, a hawk on the MPC has left the Bank, being replaced by Silvana Tenreyro who is deceived as being on the dovish side of the fence. On top of this, the Bank of England’s MPC will be up to full strength from September when Sir Dave Ramsden joins from the Treasury. He is said to have written a Brexit downturn piece, so is he possibly leaning towards the doves as well?  

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10, 9, 8......Gone

Nathan Sage, PhillipCapitalUK
01/Aug/2017

In a shock revelation last night the White House confirmed that Donald Trump had fired his newly appointed Communications Director Anthony Scaramucci, after just 10 days in the Job. Even within his short period within the administration Scaramucci manged to ruffle a few feathers after publicly feuding with former Chief of Staff Reince Priebus in an expletive strew interview with the New Yorker.

The timing of Scaramucci’s departure coincides with the newly appointed Chief of Staff John Kelly and suggests that either Kelly pushed him or Trump did it for Kelly, although the official communication from the White House said Scaramucci wanted to give Kelly a clean slate to work with and that it was a “mutual agreement”.

The fluidity of Trump administration has been under the microscope in recent weeks and months and the dollar has certainly been on the losing end of that negative scrutiny, the DXYBasket has dropped from 103.78 in early January to around 92.58 this morning.

We could see the dollar come under further pressure later today as the Fed’s preferred measure of inflation, core PCE, is out. This is expected to remain steady month on month at 0.1% in June and 1.4% year on year.

Overnight the Reserve Bank of Australia has held interest rates at 1.5%, marking a year since the central bank cut rates. The RBA still believes that the low interest rate environment is supporting the Australian economy, however weak inflationary pressure brought about by record low wage growth remain a concern for the central bank especially as concerns mount over the appreciation in the Australian dollar. The bank expects a gradual pickup in inflation, however weak wage growth and high levels of household debt will “likely constrain growth in spending”.

In the UK, GfK's weak consumer confidence reading is called into question this morning as a YouGov / CEBR survey shows a modest increase from 107.1 to 107.3 with the publisher suggesting "things have settled down" since the election. Certainly there was no sign of panic in the June consumer credit data yesterday, which, although £300m below May's reading, came in on forecast at £1.5bn.

Nationwide has told us this morning that house prices rose last month by 0.3%, bringing the annual figure down from +3.1% to +2.9%. This is stronger than expected, although the trend does appear to be to a slowing one.

We get UK the manufacturing PMI report this morning and the forecast there is for a small improvement to 54.5 from 54.3. The main event for this series is the services element, due out on Thursday, the same day as the MPC decision and Quarterly Inflation Report. Look out tomorrow for the Bank of England / PRA's response on Brexit transitionary preferences in response to a request from the Treasury Select Committee's chair, Nicky Morgan.

Quick Take

· William Hague reminds world UK is a democracy & will do what it voted for. PRA to set out transitionary Brexit wish list tomorrow.
· Alan Greenspan has said he is content with equity prices but sees a bubble in bonds. He says long-term rates are "much too low" and "unsustainable".

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Morning update

Harry Thompson, PhillipCapitalUK
31/Jul/2017

North Korea test fired a missile on Friday, the second of such kind this month, prompting a conversation between Japanese Prime Minister Shinzo Abe and US president Donald Trump today which concluded with both parties agreeing that more had to be done.

Despite this, Asian shares have edged up as investors focus on the positive environment that has boosted shares in recent weeks. Strong earnings reports and low interest rates have helped shares remain at buoyant levels; however it is likely any moves higher will be kept in check by the North Korea missile launch as it yet again opens up a situation of increased political tensions between the U.S., China and North Korea. 

Overnight Chinese PMI data for the manufacturing and services sector slipped from June’s reading; however the figures were still above the key 50 level which signifies expansion. Meanwhile, Japanese industrial production figures showed a rebound in June from May’s dismal -3.6% figure.  

The UK Chancellor is reported this morning as saying that the UK will not cut taxes to gain a competitive edge of our EU neighbours, which is being seen as a softening of his stance from earlier this year. With the recent infighting in the Conservative party, we could possibly see someone else in the cabinet come out and contradict him.

Lloyds has reported that its UK business barometer is unchanged this month at +30; however confidence is at a six month low as business prospects and hiring intentions drop. We get consumer credit data for June today, a hot topic with the Bank of England at the moment given the rise in this type of lending. The net figure is forecast at £1.5bn, down from the £1.7bn seen in May. Net lending on homes is expected to ease back to £3.4bn from £3.5bn previously.

German retail sales figures this morning have come out stronger than forecast for the month of June. Investors will be keeping a close eye on Eurozone CPI data out at 10am. Core CPI is expected to remain steady at 1.1% for the month of July.  

Quick Take

  • US GDP accelerated in Q2 but there remains a distinct lack of inflationary pressure in the States.
  • An industry survey has shown Australian home sales fell sharply in June.
  • Donald Trump has urged Republican senators to not give up on healthcare.

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FX commentary - 12:25pm

Harry Thompson, PhillipCapitalUK
28/Jul/2017

EURUSD dipped yesterday as the dollar rebounded from its recent lows, however this move was short lived with the dollar now back under pressure. Markets continue to remain bullish on the Euro as investors look to future tightening from the ECB. The recent rally could mean we are in for a retracement with the 200 EMA (daily) at 1.1620 potentially acting as the support level before possible moves higher.

Technical Analysis 
Resistance:  R1: 1.1745, R2: 1.1836, R3: 1.1988
Support: S1:1.1620, S2: 1.1594 S3: 1.1534

GBPUSD

Similarly to the Euro, Sterling edged lower overnight as demand for dollar increased. Movement was largely contributed by investors taking profit and the pair now moves lower from the top of its trend line. A strong reading of US GDP later today could act as a catalyst for the pair to move through the lower end of its trend line around 1.30; however a reading meeting expectations could mean prices use this level as a support.

Technical Analysis 
Resistance:  R1:1.3131, R2: 1.3201, R3: 1.3315
Support: S1: 1.3017, S2: 1.2973, S3: 1.2859

AUDUSD

The moving averages on the hourly chart seem to be converging at the moment, with prices most recently moving through the 100 EMA this morning. The ease that the pair moved through the 100 EMA suggests further weakness is likely for now. The next level of support on the downside could be the 200 EMA at 0.7917.

Technical Analysis 
Resistance:  R1: 0.8043, R2: 0.8127, R3: 0.8274
Support: S1:0.7917 S2:0.7896, S3:0.7834

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Morning update 28th July

Harry Thompson, PhillipCapitalUK
28/Jul/2017

Strong earnings data from the likes of Facebook and Verizon helped push Wall Street stocks to fresh highs yesterday, continuing the record run that has become so familiar with U.S. equities. However the dip in technology and transportation stocks tarnished sentiment moving into the Asian session where markets have sagged overnight. Despite this, the current environment bodes well for stocks, with interest rates low and set to rise at only a gradual pace; whilst many U.S. corporate earnings figures continue to meet or surpass estimates.

Data from the U.S. yesterday showed that initial jobless claims rose by 10,000 to 244,000 for the week ending July 22. Whilst U.S. durable goods orders beat estimates and rose 6.5% last month; however the volatile transportation items are removed, the figure drops to a 0.2% rise, below estimates of a 0.4% gain.

Despite the mixed data, there was some respite for the greenback as it moved off its recent lows. However this appears to have been a short lived move as it has dipped again overnight as investors await the release of second quarter GDP figures today. Analysts are expecting to see that the U.S. economy grew by 2.6% in the second quarter, a remarkable improvement from the first quarter growth of 1.4%. A strong reading will likely add some support to the U.S. dollar; however a miss from estimates could see further pressure as investors decrease their bets of an interest rate hike this year.

This morning we have seen French second quarter GDP beat estimates by rising 1.8% on the year, above estimates of a 1.6% gain, highlighting the robust recovery we are seeing in the Eurozone. Earlier this week we saw the IMF upgrade its GDP forecast for the Eurozone, so the question is, is this feeding into consumers? The answer is likely a yes, as consumer confidence readings remain near elevated levels.  This morning we will receive the final consumer confidence reading for the bloc which is expected to post -1.7 for July.

Meanwhile, GfK has told us overnight that consumer confidence in the UK has fallen to -12 from -10 this month, equalling the lowest level for a year, immediately after the Brexit vote, which in turn is the lowest level since December 2013. The CBI distributive trades survey did not show any signs of a wobble from the consumer however, with its retail sales measure surging to +22 from +12 and against a forecast of +10.

The price of oil remains near its eight week high that it reached earlier in the week following a large drawdown in U.S. stockpiles. Support from OPEC members to reduce the global supply glut has added support. A point worth keeping an eye on is the current political turmoil in Venezuela which could bring about sanctions on the nation that relies so heavily on its oil industry. Any disruption to the country’s oil supply has the potential to support oil prices even further.  Whilst the level of disruption is unclear at the moment, it is something investors are watching.

 Quick take

  • The EU has warned that there could be delays moving forward with Brexit negotiations due to the lack of progress made thus far.
  • The UK will scrap the London Interbank Offered Rate (LIBOR) in 2021, replacing it with a substitute reference rate that is not derived from the judgements of bankers like the current LIBOR. 
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Gold commentary

Harry Thompson, PhillipCapitalUK
27/Jul/2017

Many investors took the comments from the Federal Reserve to be more dovish than expected; gold rebounded to break 1260 resistance levels as a result. Prices for now appear to be taking a breather following its 15 dollar rise overnight. This could possibly be the consolidation period before a move to test the 1278 resistance level. On the downside, prices will likely find a major support level around the 1243 level, where the 200, 40 and 20 day EMA lies.

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