Dagelijkse Markt Analyse 11 Januari 2019

DAGELIJKSE MARKT ANALYSE 24 OKTOBER 2014

• Dollar’s Fundamental Limitations Come into View After Third Advance
• British Pound Could Close Out Week with a Bang on UK GDP
• Euro Calendar Packed Next Week – Volatility or Indecision?

Dollar’s Fundamental Limitations Come into View After Third Advance
Despite another spurt of optimism amongst the risk-sensitive financial market benchmarks and modest setback in rate measures, the Dollar enjoyed its third consecutive advance this past session. This climb is just enduring enough to draw the market’s attention and trip short-term technical barriers (EURUSD below 1.2700 and USDJPY above 107.50) but not intense enough to build confidence that a push to four-year highs was imminent for the Dow Jones FXCM Dollar Index (ticker = USDollar). Despite the proximity to the multi-year high set at the beginning of this month, the fundamental current carrying us higher lacks the quality to ensure reinforce impulsive capital inflow. To hit that stride, we would need to reinvigorate recently-drained US rate expectations or generate extreme risk aversion.

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DAGELIJKSE MARKT ANALYSE 27 OKTOBER 2014

• ECB Stress Tests Pass with Little Fanfare, Bond Purchase Data Next on Tap
• US Dollar Pressured as Markets Look Ahead Toward FOMC Announcement

The release of ECB bank stress test results over the weekend had a feeble impact on the Euro as markets came online in Asia. The exercise showed that 25 of the 130 major Eurozone banks failed the tests as of December 2013 but have since mostly remedied the situation, with only €10 billion in cumulative shortfall left outstanding. The offending lenders will now have a hefty nine months to get up to snuff.

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DAGELIJKSE MARKT ANALYSE 28 OKTOBER 2014

• Dollar Slips Alongside Volatility as FOMC Decision Approaches
• Euro Finds Little Conviction in ECB’s Stimulus, Stress Test Reports
• Emerging Markets: Russian Ruble, Brazilian Real Disturb Otherwise Quiet Market

Dollar Slips Alongside Volatility as FOMC Decision Approaches
Like US equity indexes, the US Dollar was little changed in the opening trading session of the week. Though there was scheduled event risk crossing the wires, it would lack the gravity necessary to distract from the preoccupation with Wednesday’s FOMC rate decision. The market is brimming with anxiety as we march towards the central bank decision. This policy meet carries obvious, high-profile risk for the Dollar with a timely shift towards tightening or a retreat to accommodation can change the currency’s standings in the relative monetary policy scales. However, this event’s influence runs deeper than just a trend ignition for the Greenback. Stimulus is a critical girder to the market’s buoyant sentiment over the past half a decade. As the market grows more cognizant of its exposure and fundamental environment, anxiety continues to build. In fact, the market may even ensure disruptive volatility as it under-prices the risk moving forward.

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DAGLIJKSE MARKT ANALYSE 29 OKTOBER 2014

• FX Markets to Look Past European News-Flow, Focus on FOMC Outcome
• US Dollar to Rise if Static Fed Statement Clashes with Dovish Market Views

A quiet economic calendar in European trading hours is likely to see traders looking ahead to what is arguably the week’s most significant bit of scheduled event risk: the Federal Reserve monetary policy announcement.The rate-setting FOMC committee is expected to deliver a final $15 billion “taper” of asset purchases, ending the QE3 stimulus program. The probability of a surprise extension seems overwhelmingly unlikely. That means the announcement’s market-moving potential will be found in guidance for the timing of the first subsequent rate hike inferred from the accompanying policy statement.

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DAGELIJKSE MARKT ANALYSE 30 OKTOBER 2014

• Euro Unlikely to Find Lasting Cues in German Unemployment, CPI Reports
• US 3Q GDP Slowdown May Not Amount to Major Setback for the US Dollar

German Unemployment and CPI reports headline the economic calendar in European hours. Jobless ranks are expected to shrink by 4,000 in October, keeping the unemployment rate unchanged at 6.7 percent. Separately, the benchmark inflation rate is expected to edge higher to 0.9 percent after lingering at a four-year low of 0.8 percent through the third quarter.

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DAGELIJKSE MARKT ANALYSE 31 OKTOBER 2014

• Euro May Look Past October’s Flash EZ CPI on Limited ECB Implications
• NZ Dollar Down as Building Permits Slump Undercuts RBNZ Rate Hike Bets

October’s preliminary Eurozone CPI reading headlines the economic calendar in European trading hours. Expectations call for a print at 0.4 percent on the benchmark year-on-year inflation rate, marking a slight improvement after the five-year low of 0.3 percent recorded in August and maintained in September. The outcome may not yield a meaningful response from the Euro absent a wild deviation from consensus forecasts considering its limited implications for the near-term trajectory of ECB monetary policy.

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DAGELIJKSE MARKT ANALYSE 3 NOVEMBER 2014

• Australian Dollar Sinks Following Soft Chinese Manufacturing PMI Report
• US Dollar May Look Past Soft ISM Print After Jumping to Four-Year High
• Pound at Risk if Slowing Factory Sector Trims BOE Rate Hike Speculation

The Australian Dollar underperformed to start the trading week, sliding as much as 0.7 percent on average against its leading counterparts. The drop followed a disappointing Chinese Manufacturing PMI reading released over the weekend. The report showed factory-sector activity growth unexpectedly slowed to the weakest in five months.

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DAGELIJKSE MARKT ANALYSE 4 NOVEMBER 2014

• Australian Dollar Gains as RBA Signals Interest Rate Cut Unlikely Ahead
• Yen Corrects Upward After Sliding to a 6-Year Low vs. Top Counterparts
• Pound at Risk of Outsized Losses if Construction PMI Figure Disappoints

The Australian Dollar advanced in overnight trade, rising as much as 0.4 percent on average against its leading counterparts. The move followed the RBA monetary policy announcement where policymakers struck a neutral tone once again after keeping the benchmark lending rate unchanged at 2.5 percent. Governor Glenn Stevens said “inflation is expected to be consistent with the 2–3 percent target over the next two years,” seemingly putting policy on standstill in the interim. That seemed to amount to a supportive catalyst for the Aussie considering the build in priced-in rate cut probability since October’s sit-down.

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DAGELIJKSE MARKT ANALYSE 5 NOVEMBER 2014


• British Pound May Broadly Overlook October’s Final Batch of PMI Figures
• US Dollar Could Find Strength if ADP Figures Set a Positive Tone for NFP

Another quiet day on the European economic data front will see October’s UK Services PMIreading in the spotlight, withsector growth is expected to slow for a second consecutive month. The economy-wide Composite PMI will distill the range of sector-specific readings published over recent days to show that the overall pace activity expansion slowed to the weakest since June 2013 last month. The outcome’s implications for the British Pound may prove limited however considering the release’s limited ability to drive BOE policy expectations.

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DAGELIJKSE MARKT ANALYSE 6 NOVEMBER 2014

• BOE Policy Announcement Likely to be a Non-Event for the British Pound
• Euro May Fall if ECB President Draghi Hints at Readiness to Launch QE

Monetary policy announcements from the Bank of England and the European Central Bank headline the economic calendar in European hours. The former is likely to be another non-event. An MPC committee split between a status-quo majority and a hawkish minority meeting against a backdrop of deteriorating UK economic news-flow all but assures standstill. That is likely to translate into a muted response from the British Pound.

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DAGELIJKSE MARKT ANALYSE 7 NOVEMBER 2014

• Dollar Rallies to More than Five Year High as Payrolls Approach
• Euro Drops after Draghi Reiterates Stimulus Commitment
• British Pound Most Fundamentally At-Risk Currency Next Week

While many of the top financial headlines are cheering the fresh record highs for US equities, a comparatively impressive move has developed for the FX market’s leader: the US Dollar. The Greenback climbed against all of its major counterparts this past session despite an unflattering economic docket and a move seeking higher return (historically the bane of this traditional safe haven). If this is the currency’s performance through a tepid docket and weakened fundamental backdrop, what happens if a high-profile release like today’s NFPs offers a clear signal and motivation?

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DAGELIJKSE MARKT ANALYSE 10 NOVEMBER 2014

• US Dollar Drops to Start the Week as Asia Reacts to Disappointing Payrolls
• Euro Looks to ECB Covered Bond Purchase Results for Direction Guidance
• BOE Governor Carney May Stoke Japanese Yen and British Pound Volatility

The US Dollar underperformed to start the week, tracking Treasury bond yields as Asian markets took their turn to react to last week’s disappointing Employment figures. The report showed a 214,000 payrolls increase in October, disappointing expectations calling for a 235,000 gain and hinting the Federal Reserve may move slower to issue its first post-QE3 interest rate hike.


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DAGELIJKSE MARKT ANALYSE 11 NOVEMBER 2014

• Dollar Rises Versus Majors as Correlation to S&P 500 Builds
• Euro Steady Despite Painful Investor Sentiment, Slowing Stimulus
• British Pound Counting Down the Hours to Volatility

Dollar Rises Versus Majors as Correlation to S&P 500 Builds
The Dow Jones FXCM Dollar Index (ticker = USDollar) posted a modest advance to start the week. Yet, where its drive was measured, its breadth was impressive. The greenback managed gains against all of its major counterparts. With FX Volatility still elevated and the market’s rate forecasts still recovering, there is a steady bullish track beneath the benchmark currency. What makes the currency’s current performance truly remarkable though is its relationship to the S&P 500 – a benchmark for sentiment. Though the two can (and have) risen and fallen in tandem in the past, the short-term two-week (10-day relationship between safe haven currency and ‘risk’ benchmark has hit an incredible 0.95. That is the strongest positive relationship between the two since March of 2003. With any meaningful shift in speculative positioning – whether bullish or bearish – this relationship will flip once again; but status quo is clearly feeding two very established trends.

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DAGELIJKSE MARKT ANALYSE 12 NOVEMBER 2014

• Dollar Drops as FX Volatility, Rate Forecasts Offset
• British Pound Traders Brace for Volatility from BoE Report
• Yen Crosses Rally as Market Speculates on Election, Tax Hike Delay

Dollar Drops as FX Volatility, Rate Forecasts Offset
The US Dollar took a modest spill versus most of its major counterparts this past session as moderation in rate speculation offset a jump in FX volatility. Two important themes have traded influence over the Greenback: investor sentiment and the yield advantage held over major counterparts. On the risk front, the standard-bearer S&P 500 tagged a fresh record high but did so on increasingly slower progress while volume showed the lowest turnover in 10 weeks. While this restraint was likely partly attributable to the Veteran’s holiday that closed fixed income exchanges, this projects a trend of moderation that we have seen develop shortly after the rebound began. Meanwhile, on the FX side, the currency market’s short-term (1-week) volatility reading jumped nearly 10 percent, and has made a similarly sized jump this morning. At 9.4 now, a move back towards 11 – the 12-month peaks set in September and opening week of November – could reinvigorate the Dollar.

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DAGELIJKSE MARKT ANALYSE 13 NOVEMBER 2014

• Dollar Traders Await Policy, Growth Comments from Fed’s Yellen
• British Pound Drops after BoE Report Pushes Back Market’s View of First Hike
• Euro: The International Protest for More European Stimulus Grows

Dollar Traders Await Policy, Growth Comments from Fed’s Yellen
With the BoE taking a more dovish tack while the BoJ and ECB vow to pursue their unconventional policies, the US Dollar stands to be benefit even if its fundamental backdrop remains ‘status quo’. A modest gain by the Dow Jones FXCM Dollar Index (ticker = USDollar) Wednesday was no doubt inspired by just such an indirect appeal. Locally, the event risk was less than motivating. Data improved modestly but it carried less reach. Meanwhile, the calls from Philly Fed President Plosser to raise rates in the near future and Minneapolis Fed President Kocherlakota’s comments that low inflation demands an extended zero interest rate policy don’t stray from their respective scripts, so there is little to reprice. Perhaps Fed Chairwoman Janet Yellen will offer a more significant shift in views in her opening remarks at the Fed-ECB Global Markets meet.

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DAGELIJKSE MARKT ANALYSE 14 NOVEMBER 2014

• Dollar Traders Watch S&P 500 Deceleration, EURUSD Volatility, G-20
• Euro Faces Breakout with Euro-area GDP Figures on Tap
• British Pound Continues to Lose Ground on Rate Forecasts

Dollar Traders Watch S&P 500 Deceleration, EURUSD Volatility, G-20
There wasn’t much to charge Dollar traders this past session, but the fundamental theater looks significantly more treacherous directly ahead. On its current course, the Dow Jones FXCM Dollar Index (ticker = USDollar) is on pace to set a new five-and-a-half year high to end the week; but that is very much dependent on what motivates its next steps. Thursday, the currency was more or less taking the cues from its more active counterparts. From its own newswires, updates weren’t making it to the deeper fundamental waters. For data, the initial jobless claims rising more than expected, an October budget deficit that was slightly smaller than forecast and inline Bloomberg economy survey come up short for traders seeking out fodder for interest rate speculation and signs of liquidity gaps. The most prominent item on the calendar was Fed Chairwoman Janet Yellen’s opening remarks to the joint Fed-ECB meeting on global trends. Yet she would not stray into the speculative.

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DAGELIJKSE MARKT ANALYSE 17 NOVEMBER 2014

• US Dollar Falls as Treasury Bond Yields Sink After Japan Enters Recession
• Yen Spikes Down as Tax Hike Chances Fade, Rebounds on Political Turmoil
• Euro Looking to ECB Bond Purchase Tally, Draghi Testimony for Direction

The US Dollar underperformed in overnight trade, sliding as much as 0.4 percent on average against its leading counterparts. The decline tracked a slide in benchmark 10-year Treasury bond yields, pointing to eroding rates appeal as the catalyst behind the selloff. For their part, yields moved lower as an unexpectedly soft Japanese GDP figure triggered risk aversion, fueling haven-linked demand for Treasuries and pushing bond prices upward.

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DAGELIJKSE MARKT ANALYSE 18 NOVEMBER 2014

• Dollar Gains Increasingly Relative
• British Pound Faces Top Event Risk on Inflation Data
• Yen Crosses Shaken But Not Broken on Recession Announcement

Dollar Gains Increasingly Relative
The traditional means for Dollar strength weren’t catering to the currency’s advance Monday, but that didn’t prevent the greenback from closing at a fresh multi-year high through the session’s close. As has been the case for a good portion of the past four-month’s rally for the currency, gains were instead found on the basis of weakening counterparts. Warnings of softer monetary policy stances by Euro-area and UK central bank heads as well as an unexpected recession for Japan (which also inspires speculation of more easing) draw a greater contrast to the United States modest but as-yet persistent move towards normalization. Amongst the potential avenues of fundamental influence, this is proving the most capable driver with plenty of motivation and unencumbered by the complacency inspired in other themes.

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DAGELIJKSE MARKT ANALYSE 19 NOVEMBER 2014

• Dollar Traders Whether FOMC Minutes Will Keep the March Towards Hikes
• British Pound Fails to Regain Traction after CPI Uptick
• Yen Crosses Steady after Snap Election Call, Will the BoJ Help Soothe Uncertainty?

Dollar Traders Whether FOMC Minutes Will Keep the March Towards Hikes
The Dollar put in for a mixed session Tuesday despite a stir in risk trends. Perhaps the upcoming FOMC minutes can tap into the currency’s more active fundamental drive: monetary policy. From this past session, EURUSD was the biggest mover amongst the majors (with a 0.7 percent rally). This was certainly not inspired by the S&P 500’s nudge higher – a genuine risk upgrade would have likely leveraged a bigger USDJPY move. Once again, this illustrates how influential a more active counterpart can be in the FX market. For the Euro, better-than-expected investor sentiment survey (more on that below) caught the market off guard. Yet, with that EURUSD charge – the biggest since October 15 – we still wouldn’t turn the benchmark’s pair dominant bear trend. Resilience is still the name of the game for the Dow Jones FXCM Dollar Index (ticker = USDollar) as it remains in a tight holding pattern at five-year highs.

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DAGELIJKSE MARKT ANALYSE 20 NOVEMBER 2014

• Euro Gains on Pickup in PMI Readings Unlikely to Yield Follow-Through
• US Dollar Vulnerable if Soft CPI Print Undercuts Fed Rate Hike Outlook
• Yen Drops Alongside Japanese Yields, Aussie Down on Weak China PMI

The preliminary set of November’s Eurozone PMI figures headlines the economic calendar in European trading hours. The region-wide composite gauge is forecast to show manufacturing- and service-sector activity growth narrowly accelerated for a second consecutive month. An upbeat result may offer a short-lived boost to the Euro but follow-through seems unlikely considering the inability of such outcomes to meaningfully alter the ECB’s decidedly dovish posture.

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