Today's data to serve as an indicator of the US economy wellbeing

Market Review

Last week continued a number of slow trading sessions as volatility to the downside was consolidated. The trend in the FX market continued where the dollar was seen to strengthen against most currencies, and the dollar index posted a new 3 year high after 11 consecutive weeks of strength. The winning streak is the largest in history since the currency was ‘free-floated’ back in 1973. Despite decent data last week the e-mini S&P saw a pull-back from the all time high which was posted at 2014.50 (…in the year 2014). The situation in Ukraine partly escalated again, with claims from the Ukrainian side that the rebels had broken the ceasefire in place, and more words were exchanged throughout the week – although the status quo seems to be unchanged at this point in time. Strategies were mixed through the week, although ended the week up by 71 ticks, much thanks to the performance in crude oil.

Today's Fundamental View

As with most Monday’s, the trading session has started off with low volume and movement, despite regional CPI figures from mainland Europe being posted this morning. With Germany being the largest economy and the numbers being posted in line with market consensus, the market has largely discounted most of the data as it will not be noteworthy enough to change the ECB’s stance on monetary policy, looser or tighter. Looking forward to this afternoon Personal Spending and Income numbers as well as core Personal Consumption Expenditure numbers which will serve as an indicator how the wellbeing of the centre of the worlds largest economy is doing; the consumer. Income has been lagging for a long time, and the Federal Reserve has stated it would want to see consumers catching up with the rest of the economy in the shape of wage growth, which should be inevitable should the corporate profits continue to rise. One of the largest threats to the economic recovery in the US is the Conservatives stance on wage increase as the common belief in their wing is that this will diminish and threaten the recovery, with not reserving thoughts as to what drives the US economy, which is made up by about 70% of consumer spending. The other piece of data is Pending Home Sales. Last weeks housing data was much higher than expectations at 504k versus consensus of 432k. The number came after a month of declining numbers across the housing sector, although declining not to be confused with bad numbers. The overall sentiment at Amplify regarding the housing sector remains optimistic. For data reasons we are tempted to go against the general one week trend in the equity sector and implement a long strategy. For bonds as well as USD denominated currency pairs we will be looking at the short side, as well as long in crude

Alternative View

Any geo-political risk should be carefully analysed, with continued focus on Ukraine as well as US data being a key catalyst for movement today. Monetary policy comments from the US will carry weight.