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Simon Smith

Tapering and extending

The main challenge for markets today will be steering through the messages that emerge from the ECB meeting and press conference. Whereas the Fed meeting next week is seen as a near certainty in terms of its outcome, this is not the same for the ECB. Under the current asset purchase program, which was started back in 2015, the ECB’s buying of bonds is due to end in March of next year. The indications are that this will be extended beyond this date. The two questions are by how long and how ...

Simon Smith

Calming down

Compared to the volatility seen Monday, yesterday was a much calmer day in markets. That said, there was an underlying bid tone to the dollar, which was most prevalent against the pound, with cable pushing back below the 1.27 level into the European close. The single currency was not that far behind, touching the 1.07 level on EURUSD before recovering modestly thereafter. The ranges have been very tight overnight, reflecting the fact that the main risk events of the year have now passed and ...

Simon Smith

Making Sense

There was a lot of head scratching yesterday as markets digested the Italian referendum result. As with Brexit and the US election, conventional thinking appeared to go out of the window. By the European morning, we had seen EURUSD recover the opening move lower seen at the start of the Asian session. Indeed, having been down 1% early on, the single currency ended the day more than 1% higher vs. Friday’s close. The Italian President asked PM Renzi to stay on to pass the budget early next year, ...

Simon Smith

Crisis Lite

The Italian referendum on constitutional reform saw voters reject the proposals in front of them, in a fairly decisive manner. As such, Italian PM Renzi will tender his resignation today and this became part of the issue, with some voters using this vote as a means to express their dis-satisfaction with the current administration. So whilst the result was expected, the extent of the loss (No around 59%, Yes 41%) was not, hence the fall in the euro during early Asia trading. EURUSD made a new ...

Simon Smith

It’s not the jobs numbers

It’s not bee the economy that has been driving the dollar over the past 3 weeks, of that we can be pretty sure. Rather, it’s been expectations of tax cuts and spending increases, together with incentives for dollar repatriation under the new President. As such, there is a case to say that today’s payrolls numbers in the US will be secondary to this dynamic. There is a certain element of truth to that, not least because a Fed tightening later this month is fully priced in, so we’d have to see a ...

Simon Smith

Booming oil

Markets never have great expectations going into OPEC meetings, but yesterday’s agreement to cut production starting January of next year came as a surprise. Of course, we knew that was the way that the traffic was headed, but there was no guarantee that it was going to arrive there this week. We’ve seen Brent back above the USD 50pb level, whilst the energy related stocks have also risen, by as much as 5% in some cases. The question is whether this is going to put a floor under the oil price ...

Simon Smith

Crunch time for oil

Today is all about oil prices, which were particularly nervous yesterday ahead of the today’s formal meeting of OPEC members in Vienna. The desire to cut production appears to be there, but it’s all about how it is delivered, with some members more flexible than others. The oil price will remain volatile on this last day of the month. Talk is that they want to freeze production around 32.5m to 33m barrels per day. If we see something towards the lower end or below that range, then oil prices ...

Simon Smith

Cruising into month end

Since the US election result, many currencies have been one-way traffic, either up or down, rarely sideways. There are signs that we are taking a breather on some of those trends. This is most notable on the yen, where USDJPY has corrected below the 113.00 level, although we’re seeing a steadier tone in the Asia session so far. Given the extent of the move seen over the past 3 weeks, then the fact that we are reversing into month end should not be that surprising, but also offers a level of ...

Simon Smith

Europe’s turn to shine

So this week it’s Europe’s turn. For the single currency, Sunday’s Italian referendum on constitutional reform is not on the same scale as June’s Brexit vote and this month’s US election. In essence, it’s asking whether Italians want to reform the working of both the main and regional assemblies. But in reality it encompasses much wider issues, including the political future of the Italian Prime Minister Renzi. The ‘no’ side has been ahead for most of the past two months in the polls, but as ...