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Morning Comment

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Markets Turn Cautious Ahead of Data

Wed, Aug 5 2009, 10:30 GMT
by Tauane Sousa

Tamley Global Markets

Despite a positive close on Wall Street, global stock markets are reported as becoming increasingly nervous about the sustainability of the current upswing in equities and the possibility of a round of profit taking on the gains of the past three weeks. This anxiety has left the euro, as well as other majors, in a relatively tight range versus the dollar as markets await today’s release of key services PMI/ISM data from the eurozone and the US.

This afternoon also sees the release of the July ADP employment report, which could provide some direction ahead of Friday’s official payrolls report. Nonetheless, despite the air of caution, the euro remains well within sight of its yearly highs seen earlier in the week, and if the day’s data prove supportive of the recovery theory, then a bounce back towards this level could be on the cards. Housing data from the US released overnight were certainly positive, showing pending home sales up 2.6% in June, a fifth straight monthly gain.

Following its spike higher earlier in the week, sterling is treading water around the $1.69 level versus the dollar as markets await today’s UK services PMI data before taking any fresh positions. Meanwhile, versus the euro trading is centred on the Stg0.85p level. Data released overnight should be sterling supportive, with the Halifax house price index showing prices up 1.1% over the month of July, a much better than expected result.

Although housing market conditions remain difficult, due to poor credit conditions and rising unemployment, all of the main sectoral surveys are now showing that the fall in prices looks to have at least bottomed. Meanwhile, speculation continues over the possible extension of the Bank of England’s quantitative easing activities at this weeks’ 2 day policy meeting, which gets underway today.

Published on  Wed, Aug 5 2009, 10:30 GMT

Markets Remain in Optimistic Mood

Fri, Jul 24 2009, 12:11 GMT
by Tauane Sousa

Tamley Global Markets

Markets remain in an optimistic mood going into the weekend with stocks having another strong day on the back of some solid earnings reports. Sentiment was also helped by upbeat comments from the Bank of Canada that its recession is virtually over, as well as remarks from Japan that the worst has passed for its economy. All of this optimism helped lift the euro to weekly highs of $1.4291 yesterday but as $1.43 continues to prove elusive it has since fallen back about a cent, with some talk of profit taking going into the weekend.

Markets could also have turned cautious on the euro ahead of this morning’s release of the flash PMI survey results for July, which are expected to show a continuation of the gradual recovery from the lows seen late last year, though still remaining in recession territory and indicating that the eurozone will lag other majors in terms of the recovery cycle. Other key data to watch today from the eurozone include the German Ifo survey. Meanwhile, in the US, the Michigan survey will provide the latest insight in terms of consumer confidence.

Sterling was lifted versus the dollar and euro by yesterday’s news that high street spending was stronger than anticipated in June. Retail sales were up a solid 1.2% on the month, compared to forecasts for a 0.4% rise. Stronger than expected bank lending data also raised hopes of an economic recovery. This morning sees the release of provisional Q2 GDP data, which should provide fresh direction for the UK currency. The data are expected to indicate a marked slowing in the rate of contraction in the economy. GDP is forecast to fall by 0.3% following a record drop of 2.4% in the first three months of the year.

Published on  Fri, Jul 24 2009, 12:11 GMT

Risk Appetite Returns

Thu, Jul 16 2009, 12:44 GMT
by Tauane Sousa

Tamley Global Markets

• Risk appetite on the agenda again
• UK labor market data shows high unemployment

The risk appetite will be driven today by the US Q2 earning report. Over the last 24 hours the markets have increased the risk appetite as traders are looking at the earnings data with optimism. According to a survey from Merrill Lynch Fund managers were more positive on economic growth in July but less positive on equities as risk appetite was kept on a tight leash. "Economic optimism is raising expectations of corporate profitability in both margins and earnings," the survey said. A net 51% of managers now believe the profit outlook will improve, compared to 49% taking this view on June.

The tempering of risk appetite sees sterling reverse some of yesterday's gains against the dollar. It though retains a generally weaker tone to the euro having lost ground following yesterday's data showing UK unemployment at its highest since January 1997.
There were mixed signals from yesterday's data on the state of UK labour market conditions. The increase in the claimant count, at 23,800 in June, was the smallest since May 2008. This was not much more than half of the expected 40,500 rise. At the same time, the May increase was revised downwards to 30,800 from 39,300 previously.

Published on  Thu, Jul 16 2009, 12:44 GMT

Optimism Ahead of US Earning Results

Tue, Jul 14 2009, 10:30 GMT
by Tauane Sousa

Tamley Global Markets

• Business sentiment rises in Australia
• US Earning Results on focus
• Sterling rises amid strong report figures

The Business Sentiment in Australia has risen in Australia for the first time since 2007. The sentiment index rose 6 points to 4 after been stagnated below zero for 17 months, according to a National Australia Bank Ltd. Survey of more than 400 companies questioned. Much of the improvement in sentiment can “be put down to the prospect that ‘Armageddon’ had been avoided,” said Alan Oster, chief economist at National Australia Bank in Melbourne. “Business conditions appear to have rebounded to a level roughly similar to that reported prior to the collapse of Lehman Brothers Holdings Inc. in September.”

Today the focus will be on the US Earning Results. Strong gains on Wall Street were underpinning demand for riskier currencies such as the euro and the New Zealand and Australian dollars, dealers said. Markets would be paying close attention to companies' earnings forecasts, "which will also have a significant impact on investor sentiment," they added.

Sterling began the day yesterday weighed down by adverse risk sentiment. The optimist ahead of today's US earnings results helped the GBP to recover some grounds. Gains against the dollar have been further aided by news overnight from RICS that its house prices balance, though still negative, was at its highest since September 2007 with price expectations turning positive.

• Tamley - Morning Comment 14/07/2009

Published on  Tue, Jul 14 2009, 10:30 GMT

Sterling is Doomed by Inflation

Mon, Jul 13 2009, 12:16 GMT
by Tauane Sousa

Tamley Global Markets

• FX Market focus on US Q2 reporting season
• United Kingdom economy deteriorates

Forex markets have been stable through the Asian session. Markets have become increasingly cautious as the US Q2 reporting season is approaching. This probably will be a dominant subject in the week ahead, and markets will be also looking into top tier reports, especially from US this week for a direction.
The Sterling has suffered major damages as the UK economy will likely to hit its largest contraction on record. The UK inflation has been relatively high but Tuesday’s data should show an easing in the CPI rate back down below the Bank of England' 2% target level. Meanwhile, figures on Wednesday are expected to show a further deterioration in UK labor market conditions.

• Tamley - Morning Comment 13/07/2009

Published on  Mon, Jul 13 2009, 12:16 GMT

Uncertainty Over Global Recovery

Tue, Jul 7 2009, 10:43 GMT
by Tauane Sousa

Tamley Global Markets

• Bank of Australia left interest rates on hold
• Uncertainty over global economic recovery
• Sterling is victim of increased risk aversion

The Reserve Bank of Australia has left interest rates unchanged at 3%, reassuring the market of its current position in regards to the monetary policy, which involves contributing to sustainable growth and low inflation. Australia outperformed other G10 countries in Q1 as the GDP grew 0.4% q/q. Current trends suggests that the positive tone will continue on Q2.

Markets remain with doubts about a global economic recovery and about whether the optimism in recent months may have been overdone. Caution is expected ahead the G8 summit which will begin on Wednesday and which is maintaining the currency pairs trading on very narrow ranges.

Sterling has suffered with the increased risk aversion and on speculation that the Bank of England will announce on Thursday the extension of its QE programme, beyond the current 125 billion pound target. The focus today will be on May's Industrial Production Data, which is expected to show a further rebound in activity.

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Published on  Tue, Jul 7 2009, 10:43 GMT

Skepticism Ahead of Key Data

Mon, Jun 29 2009, 12:47 GMT
by Tauane Sousa

Tamley Global Markets

• Dollar steady on Asia session
• Japan: Industrial production hit record in May
• Traders take to sidelines ahead of key data

The US Dollar has strengthened against the Euro and Yen in the Asia session, after comments from China Sunday suggested that the country would not change its policy of keeping the US Dollar as its key foreign reserve currency for the time being. The mixed performance from the Asian stocks contributed for a steady US Dollar.

Although the Dollar has started the week stronger against the Yen, investors' sentiment might get a boost from the news that Japanese industrial production jumped 5.9% in May, as the sector outperformed past results.

Traders will continue to focus on signs of recovery in the main economy events and releases this week, which includes key ISM and PMI surveys for the US and Eurozone. With the eurozone surveys expected to confirm that the eurozone is behind other major economies, the data could have adverse impact on the single currency.

Sterling started the week on firm tone versus the Dollar and Euro. The focus this week will be on the housing market data, with Nationwide and the Halifax pricing surveys as well as the Bank of England' May banking data, which is expected to show a growing number of mortgage approvals. Also is due for release this week, the manufacturing and services PMI, which will probably show that the UK is ahead of other countries in the recovery cycle.

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Published on  Mon, Jun 29 2009, 12:47 GMT

Dollar Find Some Reprieve

Thu, Jun 18 2009, 13:39 GMT
by Tauane Sousa

Tamley Global Markets

• German IFO rises again
  
• Dollar recovers from 5 months low
  
• Quiet trading session yesterday as UK and US on holidays

The financial markets had a quiet trading session yesterday on UK and US, due to public holidays, so the FX Markets were generally without a fixed direction. With interest rates unchanged, the only data release to note in Asia is the New Zealand RBNZ Q2, which showed a shy retracement to 2.2% from its previous level of 2.3%

The IFO German Index rose to a six months high of 84.2 in May, showing signs that the consumer confidence in the Eurozone over the economy is setting to ease over the coming months. Despite the rise in the IFO was less than what was expected, the single currency was unable to hold the $1.40 level versus the US Dollar. Altough the $1.40 level is still on target for near term levels, in the early session trade saw a low of $1.3945. Meanwhile the Cable is trading around the $1.59.

Yesterday, traders booked profits on US Dollar moves as we saw it recover from five month lows against many currencies across the board and today it will be likely they will wait for the results of a 2 year US treasury auction. Investors are still keen on buying US papers, despite worries about US credit worthiness.

Today the focus will remain in the eurozone with a whole host of data due to for release, including Germany's Q1 GDP and Consumer Confidence. France will release the consumer spending for April and the eurozone industrial orders for March. The focus will change later today to the US with March Case Shiller House Price Index and Consumer Confidence for May due for release.

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Published on  Thu, Jun 18 2009, 13:39 GMT