Upward movement in GBP

Market Review

There was initially some downside in equities yesterday, some of which was attributed to the relatively poor reception from investors surrounding the iPhone 6 and the Apple Watch – though if anyone remember the reception of the iPhone 5 it was all the same. People are expecting “innovations”, forgetting that what the product essentially is: a very portable personal computer. It’s a great product, but there is not anything on it that you can not get elsewhere; and for this reason their market share is likely to decline over the next few years and we expect with such a narrow product range that the share price will diminish at an increased rate, and will use Blackberry’s paved path for directions. There was no data or noteworthy news coming to the market yesterday except for this and the market that outperformed in terms of movement was arguably the Nasdaq. Entry was just missed on this market, but obtained on the S&P which went on to hit both targets. Crude oil was stopped after inventories showed components at a very bearish state. 

Today's Fundamental View

This morning there has been upward movement in cable on the back of a poll that shows favourable sentiment for the Scottish to stay in a union with England. A break back above Monday’s high at 1.6233 is significant with a gap fill upside target at 1.6283. At Amplify we made a poll; if you were Scottish would you vote for a break up? Where 50% voted they would. This is increasingly becoming a heated debate. In terms of the yes side gaining some more traction it is likely to have a small effect that the Prime minister and his opponents have started a weeklong campaign to keep the union, though we put more emphasis on Lloyds and the Royal Bank of Scotland both stating they will be moving their headquarters out of Scotland should there be a ‘Yes’ vote. As there is uncertainty around the future of the oil income this is likely to be a large thinking point for the voters. Amplify’s view is that a No vote will transpire and Sterling will rebound. In terms of the Ukrainian situation we are still very on the edge here, and the Foreign Minister Lysenko earlier stated there is a rebel regrouping going on in the East, while Ukraine is deploying heavy weapons to defend Mariupol. Considering Vladimir Putin’s objective we doubt the rebels will not continue and shortly enough will escalate the situation. In terms of data today the Initial Jobless Claims are expected at 306k, and we believe anything in the range between 290k – 320k will be considered decent and continued stable recovery of the labour market. The strategy today will be careful long equities, short bonds and short the EURUSD. Crude is very difficult to call as we believe there will be an escalation, but will now be short amid there is no escalation while the trade is ongoing. Any escalation should lead to an exit of the position. 

Alternative View

Any geo-political risk should be carefully analysed, with continued focus on Ukraine. The price of Apple may serve as a key indicator to index movement today.