Crazy season in the markets

Ah friends, I hate to be the one to break it to you but silly season is upon us. The end of August with the UK Bank Holiday on Monday 29th and then Labor Day the following Monday in the US sees many traders heading off to the country for a few days R&R. Fewer announcements that affect the markets happen around this time, but with junior left in the driving seat the markets can get a little… cray-cray. crazydancing

But let’s not be glum – after all, one man’s trash is another man’s treasure and this week, let’s treasure hunt. Here’s what you should be watching to get the most of the markets.

USD

Last week the dollar index was up 1% after Yellen’s Friday speech at Jackson Hole hinted at a possible September rate rise. Some pundits think it won’t happen until December so it doesn’t affect November’s presidential election but this week’s Non-Farm Payroll on Friday coupled with Tuesday’s CB Consumer Confidence and a few other US figures due out this week could give the Fed a positive reason to hike rates sooner rather than later. Both key announcements follow two months of higher than predicted figures. If this trend continues this week, the US economy will look stronger to the markets. It’s worth noting that not everyone agrees – one major bank was shorting the dollar two days before Jackson Hole.

Oil

Last week, oil declined around 3% after an initial 9% rise so ended approx 6% up on the previous week. The midweek Crude Oil Inventories figures will stimulate movement but the trick is knowing which way to jump. Last week’s surprise 2.5M increase evened out the previous -2.5M decline so things could go either way on Wednesday 31st.

EUR

When you play EUR FX pairs, you watch the Germans. That could be spotting when the towels go down around the pool, or if Greta and Oskar are spending much in the shops. This week the Germans reveal their monthly Retail Sales figures. If they have been splashing out, then all is well, but if not, the EUR could take a hit. This announcement could be as early as Monday but the date’s not yet fixed so keep an ear out for updates.

GBP

Monday is a Bank Holiday and the country is closed. This is no joke. The country is closed…

empty tube

The City of London is empty

Happily Thursday and Friday give us some GBP action with two key events – Thursday 9.30am sees the Manufacturing PMI figures (after 3 months of positive movement July saw a decline) and Friday 9.30am gives us the Construction PMI (after 3 months of negative numbers July saw an increase). This conflict gives our players lots to work with on the FX GBP pairs.

AUSD

Tuesday 2.30am GMT sees the monthly Building Approvals figures. You know and I know they’ve been shocking with two months of pretty steep decline. The markets will be looking for a turnaround in the numbers or they could lose faith, but there are lots of factors at play for the value of AUD this week. Wednesday 2.00am GMT the Assistant Governor of the RBA speaks in Singapore and may drop hints about future policy. Traders love nothing more than reading too much into the nuances of speeches like this. Then Thursday 2.30am brings Private Capital Expenditure  and Retail Sales monthly figures. Both have declined and the recent apparent strength of AUSD could be about to wobble.

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Jackson Hole Symposium

Landscape_of_Jackson_Hole_October_2010

Jackson Hole, Wyoming

From 25-27 August, Kansas City Federal Reserve hosts the biggest US monetary policy event of the calendar in Jackson Hole, Wyoming. Since 1978, the world’s most influential central and commercial bankers, finance ministers and economic academics have packed their suntan lotion and gathered round the BBQ to chew the fat about economic issues, implications, and policy options connected to the biggest economic policy question of the year in the world’s biggest economy.

This year that question is “Designing Resilient Monetary Policy Frameworks for the Future.” What this means to you and me is that they will mull over whether or not the current system and the beliefs that underpin it work and if they don’t, what it could be replaced with. This is the finance world’s version of Olympics with a touch of naval-gazing thrown in – are we the best at what we do? if we are not, how should we change? and, how can we keep on top?

Speculation is rampant among financial pundits. With the next Fed policy statement due on Sept 14th, traders will be agog to see if a rate hike is on the cards or even a complete overhaul of monetary policy. San Fran’s Fed president, John Williams, has called for an increase in inflation targets while other Fed presidents have called for caution. The contradictory statements coming out of the Fed in recent days has left traders bewildered and frustrated. So it’s clear something has to change. A failure to increase rates will be seen as an admission that current policies are failing and could send markets plunging though maybe more like John Smith and less like Chen Aisen.

Improved household spending and last week’s better than forecast employment figures could give Yellen reason to hint at a rate rise on the 14th and a wide range of media pundits support this view though the Federal Funds futures doesn’t agree with only an 18% probability rate rise priced in.

Across the media there is a sense that there are two routes ahead – either a rate hike in response to improved conditions, or a major rethink on monetary policy if that’s not seen as a good enough indicator of improved economic health. The Fed’s own San Fran president John Williams has stated he wants to see a revised inflation target.

With attendees from major financial institutions across the globe, traders will be paying close attention to news updates from the Symposium across all three days. Expect lots of movement on USD FX pairs as well as the USD index and other US-based market indexes across the week. If you’re busy elsewhere then cancel during Yellen’s speech on Friday as well as first thing on Monday 29th as there will probably be a reaction when markets open.

There are certainly plenty of bears around Jackson Hole so let’s see if the markets go the same way when they hear what the world’s finance bigwigs have to say.

jackson hole bears

A Jackson Hole bear

 

 

 

 

 

 

Rallies, bears, bulls and Ryan Lochte – news for 22-26 August 2016

rallying like a sir

Tuesday 5am GMT

The Bank of Japan‘s governor, Kuroda, is going to speak. He’ll try to sound encouraging and calm, but traders will be analysing every syllable and weighing up if the measures he outlines will shore up the currency. Will his dulcet tones appease them? 0% inflation reported last Monday won’t have made them receptive and he’s got a lot to do to win them over. JPY has been on a downhill slope since 21st July and broke the 100 barrier against USD a few times near the end of last week. This is a key point for the Yen and some traders may be looking for a rally to ride but hopes are starting to fade.

Wednesday 2.30am GMT

Follow the yellow brick road as all eyes turn to Oz for some southern hemisphere action. The AUD/USD pairing has been a little unsettled but data is showing the AUD may be a good place to make some gains for currency traders. Traders like round numbers and AUD has been bouncing between 76 and 77c against the dollar. The construction work done quarterly figures will move things but where would you put your money? Recent building figures have been in the red with bigger contractions than forecast for the last three quarters. Current predictions estimate another -1.9%.

Wednesday 3.30pm GMT

pay_attention_to_me

Do pay attention (sigh) this is more important than finding a new species on No Man Sky. Brent oil smashed USD50$ last week. Psychologically this is massive for traders and a far cry from only a few weeks ago when it was hovering around USD40$ – just shows what a fickle thing the market can be so remember a big swing up can also swing back down again just as far but traders will be waiting with baited breath for Wednesday’s crude oil figures from the US. Last week showed a sensible -2.5M fall in barrels being held in inventories against predictions of a 1.1M rise. A smart guy might say it’ll be in the same direction again but oil’s a slippery little fellow at times. We are still waiting for the forecasts so stay focused and listen out for announcements.

Thursday 9am GMT

The EUR has been giving our players lots of fun as it’s been rather volatile as last week’s German economists’ data provoked lots of movement. This week the German IFO Business Climate data will be very interesting: based on a wide spread of manufacturers, wholesalers and retailers as well as builders, it gives a well-founded view of the economy. And the markets will react because the German economy is a major factor in the health of the currency. It’s up to you to decide which way it’s going to go, but recent forecasts have been a little under par with the actual data being more positive. However, some say Brexit is starting to impact and maybe this will be the month there’s a downturn.

All week long… but especially Friday

The S&P500 has really come down off its high and the futures market is as changeable as Ryan Lochte’s story this weekend.

lochte10

Pundits indicate the S&P500 will open near its record close on Friday; and the start of the week will likely see some readjustment as it finds its level. But US announcements from Thursday could send it swooping or soaring once again.

  • Thursday 1.30pm GMT Unemployment Claims
  • Thursday 1.30pm GMT Core Durable Goods Orders
  • Thursday all day Jackson Hole Symposium
  • Friday 1.30pm preliminary GDP quarterly figures
  • Friday (time tbc) Federal Reserve Bank Chair Yellen speaks
  • Friday all day Jackson Hole Symposium

Ears to the ground, eyes on the news, and fun on the horizon.

8 News Items Impacting the US Dollar This Week

Traders will be watching the US Dollar this week after the news released on Friday around jobs data. Total non farm employment rose 252K and the unemployment rate dropped to 5.6% – both of these beating market expectations. These positive numbers were slightly offset by disappointing hourly wage numbers which demonstrate low wage growth.

So, it was a mixed bag for the dollar at the end of last week and there are a number of risk events for the Greenback which are worth being aware of going into the week:

And finally, its worth taking a quick look at the US Dollar index futures chart, we are at an interesting historic level in terms of previous supply on the dollar.

USD Index at an interesting historic level

USD Index at an interesting historic level