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Market Drivers

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LACK OF WAGE GROWTH FRUSTRATES POUND RALLY

 

 

Market Drivers for July 16 2014

China GDP at 7.5% vs. 7.4% eyed

UK labor data mixed as jobs increase but wage growth lags

Nikkei 0.10% Europe 1.32%

Oil $100/bbl

Gold $1298/oz.

Europe and Asia:

CNY GDP 7.5% vs. 7.4%

GBP UK Labor -36.3K vs. -27.1K

GBP UK Wage growth 0.3% vs. 05%

EUR Trade Balance 15.3B vs. 16.3B

North America:

USD PPI 8:30

USD IP 9:15

CAD BOC statement 10:00

USD Yellen testifies 10:00

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Market Drivers for July 21 2014

Risk off flows resume as geopolitical risks and data weigh on thin markets

German PPI 0.0%

Nikkei closed Europe -0.57%

Oil $102/bbl

Gold $1315/oz.

 

In Europe meanwhile the economic news continues to point to a slowdown as Italian Industrial Production printed much worse than expected at -2.1% versus 3.6% eyed. The news bodes badly for the EZ flash PMI readings due later this week, suggesting that the rebound in the periphery may have been short lived.

 

The recent geopolitical tensions could also play a major part in the dampening of demand as the diplomatic chill with Russia will no doubt have economic ramifications for Germany – the region’s largest economy. So far the euro has held above the key 1.3500 support, but the pair remains vulnerable to further downside action if the PMIs show significant deterioration.

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It is a busy week for data releases with the Fed FOMC notes and the NFP the featured attractions. Additionally in the US, we have the initial Q2 US GDP report, and the weekly unemployment claims report as well as the monthly unemployment report. From Europe we get more potential market moving reports, the unemployment rate, anticipated CPI's, and some estimates of consumer spending. Since Forex trading involves pairs of currencies, almost all currencies get caught in the money shuffle.

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Market Drivers for August 6 2014

NZD sells off further as employment data disappoints

UK MP/IP 0.3% vs. 0.6%

Nikkei -1.05% Europe -0.57%

Oil $97/bbl

Gold $1292/oz.

Europe and Asia:

NZD Employment 0.4% vs. 0.7%

NZD Unemployment Rate 5.6& vs. 5.8%

EUR German Factory Orders -3.2% vs. 0.5%

EUR Retail PMI 47.6 vs. 50.0

GBP UK IP

North America:

USD Trade Balance 08:30

CAD Trade Balance 08:30

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Geopolitical Risks Make US Assets Attractive

 

EUR Lifted by De-escalation of Russia/Ukraine Tensions

 

GBP: Big Week Ahead for Sterling

 

USD/CAD Snaps Back on Weak Canadian Employment

 

AUD: Weak Home Loans and Investment Lending

 

NZD: Chinese Trade Balance Hits Record Highs in July

 

USD/JPY Hit by Losses in Nikkei and Drop in Treasury Yields

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Market Drivers for August 13 2014

UK Average earnings decline -0.2% -slowest pace on record

Chinese data proves mixed

Nikkei 0.35% Europe 0.85%

Oil $97/bbl

Gold $1309/oz.

Europe and Asia:

AUD Wage Price 0.5% vs. 0.8%

CNY IP 13.5% vs. 14.5%

CNY Retail Sales 12.2% vs. 12.5%

GBP UK Average Wage Earnings -0.2% vs. -0.1%

GBP Claimant Count -33K vs. -28K

North America:

USD Retail Sales 08:30

USD Business Inventories 10:00

 

 

Cable tumbled in morning London trade today breaking below the 1,6750 mark after BoE Governor Mark Carney noted that both wage and productivity gains were “disappointing” suggesting that the UK central bank will maintain its accommodative monetary policy longer than the market expects.

The UK central bank lowered its estimates for wage growth to 1.25% in 2014 from 2.5% previously forecast with Mr. Carney noting that there was heightened uncertainty about the slack in the UK economy. He went further by stating that even if spare capacity was eliminated overnight the right level of bank rate would be the current rate.

Mr. Carney’s emphasis on wage growth clearly indicates that the BoE is not yet ready to consider rate hikes as it sees inflationary pressures non-existent and is far more concerned about sustaining growth going forward.

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Market Drivers for August 19 2014

 

UK CPI Much cooler Cable tumbles through 1.6650

 

RBA Minutes suggest further easing unlikely

 

Nikkei 0.83% Europe 0.44%

 

Oil $96/bbl

 

Gold $1300/oz.

 

Europe and Asia:

 

NZD PPI -1.0% vs. 0.7%

 

EUR CA 13.1B vs. 19.2B

 

GBP UK CPI 1.6% vs. 1.8%

 

North America:

 

USD CPI 08:30

 

USD Building Permits 8:30

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The US economic news, though not outstanding, remains positive. Yesterday the US building permits number and the housing starts both beat estimates. The nay Sayers pointed out many of the new permits were for rental units, but the market didn't care. The US CPI was up a mere 0.1% for the month and now sits a respectable 1.9% for the year. This number gives the Fed no reason to fear inflation.

 

This afternoon the Fed released their most recent monthly musings. The Bloomberg headline. "Fed Officials Said Job Gains May Bring Faster Interest-Rate Rise," gives you their quick analysis. Some of the members rightly complain the labor market recovery remains slow, but they are optimistic going forward, it will continue to improve. There is nothing in the report that suggest the tapering off of the QE is going to slow. A word of caution, however, the Fed Chairlady is going to speak at the Jackson Hole gathering. Will she offer any new thoughts that might surprise the market?

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a glance at the Global Dairy Trade website says there’s another auction today and these have recently been undermining NZD, as indeed it appears to have done today already in addition to the general USD buying.

So a heads up just in case we get some volatilty in a couple of hours or so (underway now but it takes a while), judging by recent auctions here and here

NZDUSD currently 0.8328 just off session lows of 0.8323.

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As traders know when the size of your account grows, an increase in trading volume soon follows. Unless, of course, you are one of those rare disciplined traders who takes money out of the account and time away from the market after a serious of successful trades.

 

Speculators were correct with their large bearish bets in the euro and the yen. Now, with the increased equity, the trading volume has forged ahead. Yesterday at the CME forex futures markets, there were 1,659, 838 contracts traded, At day's end the total open interest in all futures contracts was 1,687, 451 contracts. This shows the turn over was almost the entire OI of CME currencies in a day.

 

The most actively traded currency is the euro, which finished the day with total OI of 484K. This represents an increase in the OI of 41,117 contracts in a day, which tells us the specs are continuing to sell the euro. How do we know? The most recent COT report with data from September 2nd, showed specs were short 211,006 contracts of futures and delta adjusted adjusted options. Since the OI has gone up significantly for the past two days this means there are new shorts entering the market.

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A poll last week end showed the Scottish Yes votes for independence taking a narrow lead. This crushed the pound, causing it to gap lower when the trade resumed Sunday evening. The pound-selling, combined with the frantic USD buying, took the pound to the lowest level since November 2013. The sell off from the July high of 1.7180 to the yearly low of 1.6052 was quick. The GBPUSD has since bounced from this low but a small portion of the gap remains.

 

Shedding the yoke of London has appeal for those craving independence. The Scots, however, are known for their parsimonious tendencies and the start up costs for a new government will not be cheap. Further, the new Scotland seems destined to be a country without a currency.

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September 17th, 2014

 

Market Drivers for September 17 2014

 

UK employment BOE minutes

 

AU LEI at -0.1% vs. -0.1%

 

Nikkei -0.14% Europe 0.34%

 

Oil $94/bbl

 

Gold $1237/oz.

 

Europe and Asia:

 

AUD LEI -0.1% vs. -0.1%

 

GBP UK Employment -37K vs. -29K

 

GBP UK Boe Minutes 7-2

 

EUR EZ Final CPI 0.4% vs. 0.3%

 

North America

:

USD CPI 8:30 AM

 

USD FOMC 14:00 AM

 

Cable sold off session highs after the release of the BoE minutes revealed that the MPC was generally circumspect about the state of the UK economy and saw some risks to growth from both the Scottish referendum and the weakening of demand from the Eurozone.

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USD Existing Home Sales 10:00

 

It’s been a quiet night of trade on the first trading session of the week with most of the majors tracing our relatively narrow ranges in the absences of any economic news, but both the Aussie and the kiwi saw some serious volatility throughout Asian and early European dealing.

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Market Drivers for September 24 2014

 

IFO hits a 17 month low

 

New Zealand Trade Balance improves

 

Nikkei -0.24% Europe -0.02%

 

Oil $91/bbl

 

Gold $1223/oz.

 

Europe and Asia:

 

NZD Trade Balance -472M vs. -1125M

 

EUR IFO 104.7 vs. 105.9

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On Thursday we get the results of the ECB's deliberations on interest rates, which will be followed with the Draghi press conference. With interest rates already at zero and a negative charge for money parked in the central bank, how many more monetary tricks does Draghi have left in his magic bag? At the Jackson Hole festivities last month, he pleaded for coordinated fiscal stimulants, but this proposal is alien to the austerity advocates in the EU.

 

Weakness this week in the EURUSD accelerated as the pair traded under the 1.27 handle. The EU economy seems to be slipping back into another recession, partially caused by its own policies, exacerbated by sanctions against Russia. There also seems to be an increasing awareness the single currency is dysfunctional, as the political opposition is growing.

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In North America today is the last quiet calendar day of the week before the market gets hit with a deluge of US data including the NFPs on Friday. Today the docket contains Chicago PMI readings and Consumer confidence numbers. Neither report promises to be market moving, but traders will nevertheless keep a sharp eye on USD/JPY 110.00 level. The pair has climbed within 25 points of that key barrier over the past few days and if it can push through that handle it could trigger massive stops given the fact that it has not been at 110.00 since 2008.

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October 7, 2014

 

1. RBA Rate Decision (11:30PM ET) No Trade - Not expected to be a huge market mover for AUD but I do not trade rate decisions

 

 

2. BoJ Rate Decision (12AM ET) No Trade - Not expected to be a huge market mover for JPY .

 

 

3. German Industrial Production (2AM ET) Bearish EUR - Potential downside surprise given drop in factory orders

 

 

4. UK Industrial Production (4:30AM ET) Bearish GBP - Potential downside surprise given manufacturing PMI index hits 17 month low. New and export orders growth also slows significantly

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The large spec long in the USD remains. In the most recent three weeks, speculators have held long positions in the USD versus every other currency. The biggest short position is in the euro, about 210K contracts of futures and delta adjusted options. Each contract is 125,000 euros, or at 1.27, around $159,000. This position is far from chump change, and it is strange there has been no evidence of a short squeeze. Considering the DI is heavily weighted in the euro, and the CHF is pegged to the euro, the short position is even larger.

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Durable Goods 08:30

 

USD Consumer Confidence 10:00

 

It’s been a very subdued session of trade in the currency market with very little newsflow to drive dealing as euro and cable drifted lower while Aussie showed some relative strength.

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The bear market in crude oil continued today. WTI traded under $75 per barrel today, the lowest in four years, while brent December crude approached $78 per barrel. The catalyst for today's bear raid seemed to be fear the November OPEC meeting will not result in an agreement to reduced production. Abundant North American supplies have altered the supply demand balance and are finally favoring the consumer.

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WTI at $75.82 Crude at $77.74

Oil is traded in U.S. Dollars,

 

Demand has dropped off a bit but high production continues.

Countries that export a lot of Oil, like Canada, can expect to see their currencies weaken.

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