Dagelijkse Markt Analyse 11 Januari 2019

DAGELIJKSE MARKT ANALYSE 10 DECEMBER 2015

- Bank of England (BoE) Widely Anticipated to Carry Current Monetary Policy Into 2016.
- Will There Be Another 8-1 Split Within the Monetary Policy Committee (MPC)?

Despite expectations for another 8 to 1 split at the Bank of England (BoE) interest rate decision, a greater dissent within the central bank may spur a larger rebound in GBP/USD as it encourages speculation for a U.K. rate-hike in 2016.

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DAGELIJKSE MARKT ANALYSE 11 DECEMBER 2015

- U.S. Advance Retail Sales to Increase for Second-Consecutive Month.
- Household Spending Has Risen Four Out of Last Ten-Months.

Another 0.2% expansion in U.S. Retail Sales may fuel speculation for a December Fed rate-hike and spur a near-term pullback in EUR/USD as central bank officials largely endorse an upbeat outlook for the world’s largest economy.

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DAGELIJKSE MARKT ANALYSE 14 DECEMBER 2015

• Currency Markets Correct Friday’s Price Action on Pre-FOMC Positioning
• US Dollar May Yield Disparate Response vs. Majors on Fed Rates “Liftoff”

Currency markets are in retracement mode to start the trading week. The Swiss Franc, Euro, British Pound and Japanese Yen are trading lower having outperformed on Friday while the Australian and Canadian Dollars are in recovery mode having been the weakest over the same period. Risk sentiment trends have done an about-face as well: S&P 500 futures are trading sharply higher after the benchmark stock index suffered the worst drop in over two months to close last week.

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DAGELIJKSE MARKT ANALYSE 15 DECEMBER 2015

• Market positioning provides backdrop for rally in the weeks ahead...
• Technical events supportive for a bullish bias
• Key fundamental event (FOMC rate decision) to act as catalyst

Market positioning very favorable for rally
Futures markets, through the Commitment of Traders report (COT), show large speculators (hedge funds), in aggregate, holding their smallest long position in over a decade after weeks of quickly abandoning their long bias on rising speculation of a December “lift-off’. Commercial traders (hedgers) covered nearly all their short hedges (smallest in 15 years), indicating they do not believe they require as much protection at this time against further price erosion.

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DAGELIJKSE MARKT ANALYSE 16 DECEMBER 2016

- December rate hike practically a lock since the November NFP release.
- Recent economic data points to a “dovish liftoff’ – a reduced expected future rates path.
- Historical precedence around rate hike cycles beginning is messy at best.

This week is when the rubber meets the road after months – years, even – of qualified remarks, convoluted press conferences, and opaque policy statements: the Federal Reserve will finallyget on with it and raise its benchmark interest for the first time in nearly a decade. Historically, the Fed finds itself raising rates at a time when the labor market/inflation dynamic is just supportive enough to allow for policy tightening. Yet conditions today are relatively weaker than when the Fed raised rates last in June 2006:

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DAGELIJKSE MARKT ANALYSE 17 DECEMBER 2015

• Fed raises rates as expected, dovish tone to policy statement
• 'Risk-on' environment propels FTSE 100 higher
• UK stocks face resistance of varying degrees just ahead

Yesterday, the Fed acted as anticipated by raising rates 25 basis points to 0.5% with a dovish tone to the policy statement. In the absence of any curve balls US stocks responded quite positively after making a couple of sharp, liquidity-driven knee-jerk reactions. US indices closed just off the highs of the day, dragging the FTSE 100 futures up with them. This marked the third consecutive day the FTSE rose since finding its footing around support carved out during the late summer swoon and September retest.

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DAGELIJKSE MARKT ANALYSE 18 DECEMBER 2015

• DAX 30 stops at trend-line resistance
• Euro a strong driving force
• Short-term negative outlook below resistance

Yesterday, the DAX 30 continued to propel higher following the successful hold of key support below the 10,200 mark. It wasn’t until selling pressure in US equities spilled over into European markets did the DAX back off its session highs. The stiff selling pressure seen in the US was only able to take a small bite out of earlier day gains in the DAX. Here is why…

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DAGELIJKSE MARKT ANALYSE 21 DECEMBER 2015

• New Zealand Dollar May Extend Overnight Gains Amid Recovery in Risk Appetite
• Euro Gaps Lower After Spain’s Rajoy Loses Ruling Majority in General Election
• Japanese Yen Pulls Back after Post-BOJ Rally, Canadian Dollar Corrects Higher

The New Zealand Dollar outperformed at the start of the trading week as front-end bond yields tracked higher, pointing to ebbing RBNZ interest rate cut expectations. The Japanese Yen corrected lower having soared after the BOJ monetary policy announcement late last week. Meanwhile, the Canadian Dollar edged upward in a move retracing losses after Friday’s selloff in the wake of soft CPI figures.

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DAGELIJKSE MARKT ANALYSE 22 DECEMBER 2015

• Risk Appetite Unimpressed in Asian Trade as China Hints at More Stimulus
• Australian, NZ Dollars Rise as US Yields Correct Lower After Fed Rate Hike
• US Dollar May Resume Advance if Revised 3Q GDP Data Tops Forecasts

The Australian and New Zealand Dollars outperformed in overnight trade. It is tempting to flag hopes for Chinese stimulus expansion as the catalyst for the advance. China’s official Xinhua News Agency reported that leaders called for more “forceful” fiscal policy and more “flexible” monetary policy to foster appropriate conditions for structural reforms at the government’s Central Economic Work Conference.

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DAGELIJKSE MARKT ANALYSE 23 DECEMBER 015

• US Dollar May Rise if Upbeat Durables, PCE Data Forces Fed Rate PathRe-Pricing
• New Zealand Dollar Gains as Narrowing Trade Gap Cools RBNZ Rate Cut Speculation
• Euro, Swiss Franc Suffer as Risk-On Sentiment Weighs on Funding Currencies in Asia

Another relatively quiet day on the European economic data front will keep investors looking at the US docket for potential directional catalysts. November’s Durable Goods Orders figures as well as the PCE measure of inflation – the Fed’s favored price growth gauge – are due to cross the wires. The former is expected to show a 0.7 contraction, marking a slight pullback, while the latter is seen keeping the core year-on-year growth rate unchanged at 1.3 percent.

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DAGELIJKSE MARKT ANALYSE 24 DECEMBER 2015

• US Dollar Drops Alongside US Treasury Yields Amid Post-FOMC Correction
• Thin Liquidity Conditions Create Knee-Jerk Volatility Risk in Holiday Trade
• Markets Unlikely to Find Direction in US Jobless Claims, Japan CPI Releases

The US Dollar resumed its post-FOMC downward correction in overnight trade after brief respite in yesterday’s session, falling to the lowest level in a week against an average of its top counterparts. The move played out alongside a drop in front-end US Treasury yields, hinting profit-taking on the “Fed tightening” theme into the year-end is the likely catalyst driving price action.

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DAGELIJKSE MARKT ANALYSE 4 JANUARI 2016

• S&P 500 Futures Hint Asia-Hours Risk Aversion Likely to Carry Forward
• British Pound Looks to UK PMI Data to Drive BOE Rate Hike Expectations

The Australian, Canadian and New Zealand Dollars plunged while the safety-linked Japanese Yen outperformed as risk aversion swept the financial markets start of 2016 trade. Indeed, the moves played out alongside sharp declines across Asian stock exchanges. This may reflect the return of liquidity following the holiday lull, with investors establishing 2016 portfolio allocations.

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DAGELIJKSE MARKT ANALYSE 5 JANUARI 2015

• Euro, Pound May Fall if Soft Eurozone CPI Fuels ECB Easing Speculation
• Yen Falls, Australian and Canadian Dollars Rise as Risk Appetite Recovers

Eurozone CPI figures headline the economic calendar in European trade. The core year-on-year inflation rate expected to tick up to 1 percent. Yesterday’s disappointing set of analogous German price growth numbers warns a soft result may be in the cards however. Such an outcome may fuel bets on further expansion of ECB stimulus measures, weighing on the Euro. It may likewise punish the British Pound considering further ECB easing stands to compound imported disinflation pressure in the UK, delaying the onset of BOE rate hikes.

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DAGELIJKSE MARKT ANALYSE 6 JANUARI 2016

• China Fixes Yuan at Five-Year Low, Triggers Broad-Based Risk Aversion
• US Dollar Looks to Dec. FOMC Minutes to Inform 2016 Rate Hike Path Bets

The sentiment-sensitive Australian, Canadian and New Zealand Dollars dropped while the safety-linked Japanese Yen pushed higher as risk aversion gripped markets in Asian trade. The move followed China’s move to set the daily reference rate for the onshore Yuan exchange rate at the lowest in five years.

Newswires suggested the move reflected Beijing’s determination that the economy needs additional stimulus, which implies a deteriorating growth outlook. Curiously, the prospect of additional policy support might have been expected to be supportive for sentiment considering a slowdown in China has been baked into consensus forecasts for some time.

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DAGELIJKSE MARKT ANALYSE 7 JANUARI 2016

• Another weak yuan fix today triggered broad risk-off, led to closing of exchanges in China
• Gold rallied on safe haven buying amid stock and risk rout
• Oil slump was accelerated by statistics of the biggest gasoline build since 1993
• Copper stayed resilient thank to on-going production cuts

Asia set for another heavy selling round of risk assets including commodities, shares, and AUD, after People’s Bank of China fixed the yuan midpoint at a fresh 5-year low. China’s CSI 300 stock index plunged over 7 percent and triggered a halt in all Chinese stock exchanges for the day.

Gold price rallied on a 5th consecutive day to the highest since November 6 as safe haven buying brought it up to 1102.85 following yesterday’s global stock rout and Chinese yuan devaluation. A slightly dovish December minutes from the Fed has not shown much affect though it is supposed to be gold-supportive. Current high level may be today’s top for bullion as it was support level during a September dip.

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DAGELIJKSE MARKT ANALYSE 8 JANUARI 2016

- U.S. Non-Farm Payrolls (NFP) to Expand 200+K for Third Month.
- Average Hourly Earnings to Increase Annualized 2.8%- Fastest Pace of Growth Since Series Began in 2010.

Trading the News: U.S. Non-Farm Payrolls
Another 200K expansion in Non-Farm Payrolls (NFP) paired with a meaningful pickup in U.S. wage growth may trigger a short-term selloff in EUR/USD as it puts increased pressure on the Federal Open Market Committee (FOMC) to further normalize monetary policy in 2016.

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DAGELIJKSE MARKT ANALYSE 11 JANUARI 2016

- Euro Helped by Risk-Off Atmosphere, One-Sided Market Positioning

The Euro had a strong week to start the year, thanks in part to the sharp decline in European equity markets. The German DAX sunk by -8.3% during the year, and it was not alone: the US S&P 500 dropped by -6.0%, its worst start to any year, ever; and the Chinese Shanghai Composite – ground zero for volatility across global markets and asset classes – sank by -10.9%. There is a long-standing relationship between the Euro, as a funding currency, and risk markets, something known as the “portfolio channel-rebalancing effect,” which we’ve covered extensively over the past year.

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DAGELIJKSE MARKT ANALYSE 12 JANUARI 2016

• Hawkish Tone from Fed VC Fischer to Lift US Dollar, Fuel Risk Aversion
• Pound May Rise as Comments BOE Governor Carney Boost Rate Hike Bets

A relatively quiet economic data docket puts central bank commentary in the spotlight in European and US trading hours. Comments from Fed Vice Chair Stanley Fischerought to be particularly interesting because he tends to reflect the middle-ground consensus on the policy-setting FOMC committee. Rhetoric hinting the central bank will look past recent market turmoil to press on with rate hikes may boost the US Dollar and fuel risk aversion.

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DAGELIJKSE MARKT ANALYSE 13 JANUARI 2016

• Upbeat China Trade Data Amplifies Sentiment Rebound in Overnight Trade
• Fed Comments May Fuel US Dollar Gains, Trigger Renewed Risk Aversion

The sentiment-linked Australian and New Zealand Dollars outperformed while funding currencies like the Euro, Franc and Japanese Yen traded lower as risk appetite firmed in Asian trade. The move appeared to reflect carry-over from an upbeat day on Wall Street, where benchmark S&P 500 index posted the largest gain in nine sessions.

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DAGELIJKSE MARKT ANALYSE 14 JANUARI 2016

• British Pound May Rise as BOE Rhetoric Clashes with Dovish Market View
• Fed-Speak May Rekindle Risk Aversion After Early Selloff Fizzles Overnight

A monetary policy announcement from the Bank of England headlines the economic calendar in European trading hours. Governor Mark Carney and company are expected to keep things unchanged for now, putting the spotlight on minutes from the meeting of the rate-setting MPC committee to gauge where officials’outlook going forward. Priced-in BOE rate hike expectations have tumbled over recent weeks, making it relatively difficult to engineer a dovish surprise versus a hawkish one. On balance, this may lay the groundwork for a British Pound recovery.

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