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Simon Smith

Inflation nowhere to be seen

The last trading day of the month, which does bring risk of choppier than normal trading as institutional investors re-balance portfolios and funds adjust to fit around month end performance statistics. The standout yesterday was the weaker euro, given that the single currency has been holding up relatively well earlier in the week. Falling bond yields were playing a part, together with more negative headlines surrounding Greece from the IMF, although it’s no surprise to see that they remain ...

Simon Smith

Inching towards a Fed tightening

The impression given by the Fed’s post meeting statement last night suggests a central bank inching towards a rate increase, with inching being the operative word here because the changes to the wording were indeed very subtle. But there will be an even greater focus on the jobs numbers going forward, given that the Fed has stated that it will be appropriate to raise rates “when it has seen some further improvement in the labour market and it reasonably confident that inflation will move back ...

Simon Smith

Fed keeping options open

The two-day FOMC meeting concludes today with the focus on the statement released at 18:00 GMT. There is no real anticipation that policy will be changed, but the focus will be on the extent to which the statement indicates a tightening to come and possibly as early as September. Bear in mind that when the Fed dropped the phrase “considerable period” (in relation to how long rates will be kept low) back in January of this year, they were stepping back from offering more structured forward ...

Simon Smith

Strange FX reactions

The two day FOMC meeting starts today, but it seems a long shot to expect the Fed to signal an increase in rates at the subsequent meeting in September. Market pricing for a September move has decreased vs. where we were earlier in the month and the past few sessions have seen more doubt creep into the market, reflected in the weakening of the dollar over the past few sessions. China has played a part in this, with volatility continuing overnight, even though the main Shanghai composite index ...

Simon Smith

Splitting the dollar

We enter the last trading week of the month with a 2 day FOMC meeting to contend with. It’s unlikely that the Fed will strengthen its language so as to signal a September hike, but naturally the markets will scrutinise the statement for any signs that the Fed is shifting in that direction. The dollar performance has been mixed Friday and during the overnight session, weakening against the single currency, yen and Canadian dollar, whilst strengthening against most emerging market currencies. ...

Angus Campbell

Dollar bulls still on side lines

Chinese stocks have been recovering, with the Shanghai composite some 20% off its lows now, meanwhile European and US indices remain just below their record highs having shown reluctance to push on to new unchartered territory. Investors have been tested from all angles in recent months and now they are all too fully aware of the impending rate hikes from the Federal Reserve and Bank of England. Whilst the dollar has recovered some of its lost ground since the highs it marked back in March, the ...

Angus Campbell

Nervy markets

A few days out of the office and not a huge amount has happened in the world of the FX markets, but the action has clearly been more in the commodity and equity space. Investors were spooked by the move in Apple’s stock price which prevented the S&P 500 index from pushing to a new record high on its third attempt in as many months and the Nasdaq has formed a spike that resembles the bursting of a bubble. Since conquering the 7,000 level the FTSE 100 has continually failed to maintain its ground ...

Simon Smith

Dollar giving up gains

FX markets have been something of a sideshow this week compared to what we’ve seen in commodities. That said, there was a notably softer tone to the dollar yesterday afternoon, evident on all of the majors. For the Aussie, this allowed for a push above the 0.7440 level, with some reversal seen overnight on the back of the latest CPI data and comments from RBA Governor Stevens. Inflation data, on the headline measure at least, was softer than expected, rising 1.5% YoY vs. expectations for an ...

Simon Smith

Commodity pressures abounds

It’s commodities that have been taking centre stage at the early part of the week. Yesterday it was gold and the push below the 1,100 level, something which has been repeated again overnight. But other commodities have also been under pressure, including oil, platinum and palladium. For currencies, the declines in commodities has put pressure on both the Canadian dollar and also the Aussie. The standout has been the kiwi, recovering from the 0.65 level on the dollar. A continuation of recent ...

Simon Smith

Worrying less about Greece

For once, we start the week not worrying about Greece, or at least not as much as the previous three weekends. Still, there is the small issue of Greece having to repay EUR 3.5bln to the ECB today to cover maturing bonds owned by the central bank. This was a deadline that was not going to move, because defaulting on this would cause untold problems. The EUR 7bln bridge financing finalised on Friday was put in place to ensure that this did not happen. We’re seeing EURUSD recover from the lows ...

Angus Campbell

More calls for Greek debt relief

The ECB has backed the IMF’s call for Greece debt to be written down and they join a growing number of influential voices calling for the same forgiveness, including the US and hard line German finance minister Wolfgang Schäuble. This puts a growing camp at odds with the Eurogroup who worked so hard to put together the bailout deal. Greek Prime Minister Tsipras must be tearing his hair out thinking that had he stuck to his guns and rejected the latest deal then he probably would have got the ...

Angus Campbell

Greek vote paves way for rate hikes

Both of the most likely central bank candidates for commencing monetary policy normalisation have this week been vocal about the increased chances of them raising interest rates soon. With the bailout agreement on Greece earlier in the week this removed one of the major risks to global financial markets giving the Governor of the Bank and Federal Reserve’s Chairwoman good reason to take a more hawkish approach on rates. Now that the Greek parliament has voted in favour of the terms of the ...

Simon Smith

Greece crumbling again

The raft of data released in China overnight surpassed expectations, with the main GDP number rising 7.0% YoY, steady vs. the first quarter and firmer than then 6.8% anticipated. The data gave a small lift to the Aussie, but otherwise was brushed aside. Interestingly, the statistics office came out to defend the accuracy of the data. Meanwhile, the Shanghai Composite was softer, keeping intact the very weak relationship between stocks and the underlying economy. There is much on the agenda ...

Simon Smith

Another day another deal

As far as the single currency was concerned, the celebrations were all too brief after the Greek deal yesterday. The lifting of the near-term uncertainty allowed stocks indices to gain in Europe by 1-2%, but the impact on bond yields in other peripheral markets (e.g. Italy) was more transitory, with the initial declines having been unwound by midday. You can read more on our take on the deal in our blog, Greece will be back. We start today with a different deal, this time with regards to Iran ...

Simon Smith

A deal of sorts for Greece

The single currency opened around 50 pips lower this morning on the back of yet another Greek deadline not being a deadline after all. Furthermore, EURUSD regained most of that opening gap lower through the course of the Asia session. As we write, there are signs that a deal is has been agreed, but there have been no details as yet with regards to just what this may entail. EURUSD has managed to pull above Friday’s closing levels, but further volatility is likely through the course of the day ...

Angus Campbell

Interests in a Greek deal go beyond Eurozone

As Greece tables its final offer ahead of this weekend’s summit that will end in either a third bailout or the economic catastrophe for the country the markets are optimistic that this time a deal will be done. One of the main hurdles Tsipras now faces is getting his parliament to vote in favour today, before the markets close ahead of the weekend. Risk assets are expected to rally strongly this morning with the FTSE 100 and Dax expected to post triple digit gains. Despite the breakdown in ...