January 2016

Daily analysis of USDX for February 01, 2016

The US dollar index is forming a higher high pattern below the resistance level of 99.73 after a huge rebound made at lows of January 28 . However, we should note that a strong inflection area is located around that resistance zone because the index wa... [...]

Daily analysis of GBP/USD for February 01, 2016

We should note that during the last Friday session a double top pattern was formed and after it we saw a huge decline towards the support level of 1.4198. That move told us that the bearish bias has been resumed in a short-term basis. A breakout below... [...]

US stocks post weekly gains, but close with monthly losses

FXStreet (Córdoba) - US stocks rallied on Friday and closed the week with gains, but despite the recent recovery, the main indexes ended the month with heavy losses following steep declines during the first weeks of the year.

US stocks soared on Friday after the Bank of Japan unexpectedly cut rates into negative, to -0.1%, also helped by a modest recovery in oil prices.

The Dow Jones Industrial Average gained 394.45 points, or 2.47%, to 16,466.09 and posted a 2.3% weekly gain. The S&P 500 rose 46.65 points, or 2.48%, to 1,940.02 and closed the week 1.7% higher but lost 5% over the month. The Nasdaq Composite climbed 107.28 points, or 2.38%, to 4,613.95 and finished the week virtually unchanged.

US stocks rallied on Friday and closed the week with gains, but despite the recent recovery, the main indexes ended the month with heavy losses following steep declines during the first weeks of the year.

(Market News Provided by FXstreet) [...]

BoE first move on rates seen only towards the end of the year – Commerzbank

FXStreet (Córdoba) - There will be no change to the MPC’s monetary stance at next week’s “Super Thursday” meeting but there will be some interest surrounding the voting stance of Ian McCafferty, the Committee’s only dissenter, who has been voting for a 25 bps increase since August, according to Peter Dixon, analyst at Commerzbank.

Key Quotes


“The message from Mark Carney is that wage costs are not picking up sufficiently to justify policy action in the near term, undermining Mr McCafferty’s position which has been based on fears of rising labour costs.”

“The BoE continues to express concern that productivity growth remains weak, with MPC member Kristin Forbes indicating that the Q4 figures could be ‘abysmal’.”

“However, weak price inflation will take some of the heat out of wage growth and prevent wage and productivity figures from moving too far out of line in the near-term. Accordingly, the majority view of no change will prevail for some months to come, and we continue to look for the first move on rates only towards the end of the year”.

“The other item on the agenda next week will be the release of the Inflation Report which will give the BoE the opportunity to update its economic forecast. It is possible that the 2016 GDP growth and inflation forecasts will be shaded down modestly although this is unlikely to materially affect the bank’s thinking.”

There will be no change to the MPC’s monetary stance at next week’s “Super Thursday” meeting but there will be some interest surrounding the voting stance of Ian McCafferty, the Committee’s only dissenter, who has been voting for a 25 bps increase since August, according to Peter Dixon, analyst at Commerzbank.

(Market News Provided by FXstreet) [...]

US real GDP: No case for a Fed rate hike in March – Wells Fargo

FXStreet (Córdoba) - Analysts from Wells Fargo affirmed that after 4Q real GDP, there is no case for a Federal Reserve rate hike in March; but they noted some positive signs from the report.

Key Quotes:

“Real GDP rose at a 0.7 percent annual pace in the fourth quarter following a 2.0 percent rate in the third quarter. It is worth noting that since the 1980s, real GDP has trended lower—a signal of a changing framework for the economy.”

There is some positive news in the report. Real final sales to domestic purchasers, which excludes inventories and trade, rose at a 1.6 percent pace following a 2.9 percent increase in the second quarter.”

“Consumer spending remains a positive force with the support of improving labor market conditions and stronger purchasing power due to the decline in retail gasoline prices.”

“In the fourth quarter, overall inflation came in at 0.8 percent with sharp declines in export and import prices. The Fed’s benchmark PCE deflator came in at just 0.1 percent with both durable and nondurable prices registering a decline, but services up at a 2.0 percent pace.”

Given the modest real GDP gain and continued low inflation, we see no case for a Fed rate hike in March. For the year we still have overall PCE inflation remaining below 2 percent.”

Analysts from Wells Fargo affirmed that after 4Q real GDP, there is no case for a Federal Reserve rate hike in March; but they noted some positive signs from the report.

(Market News Provided by FXstreet) [...]

Fed: Better safe than sorry – Commerzbank

FXStreet (Córdoba) - In its statement on Wednesday, the Fed kept the door open to an interest rate rise in March, according to Esther Reichelt, analyst at Commerzbank, the USD is therefore becoming increasingly sensitive to the economic data. “A good labour market report next Friday should support the USD for now.”

Key Quotes


“At its January meeting, the Fed did not rule out an interest rate rise in March. The US dollar has not profited from this yet; US data and the situation on equity markets this year have so far given the market more reason to expect a rate pause in March. And the market remains cautious. Besides lasting calm on global financial markets, solid US economic data are a necessary prerequisite for the market to see any chance at all of a rate step in March.”

“However, the more bullish the upcoming data publications are, the more likely a move on rates should become and the stronger the US dollar should become. Against this backdrop, the data heavyweights due for publication in the week ahead should be able to offer the US dollar support initially.While the ISM index for manufacturing is expected to remain weak in next Monday’s release, it should have improved a little on December.”

“Ultimately however, all eyes will be on the labour market report on Friday, as the Fed gave the labour market a prominent place in its communiqué last Wednesday. Catch-up effects in wage growth in particular could lend impetus to the US dollar as the Fed needs urgent signs that inflation pressure is rising. However, this will probably not be enough to break out of the EUR/USD trading range of 1.0750-1.10 that has formed since the beginning of the year. The FX market is too cautious for that given the still moderate outlook.”

In its statement on Wednesday, the Fed kept the door open to an interest rate rise in March, according to Esther Reichelt, analyst at Commerzbank, the USD is therefore becoming increasingly sensitive to the economic data. “A good labour market report next Friday should support the USD for now.”

(Market News Provided by FXstreet) [...]

GBP/USD: Limited recovery, remains near multi-year lows

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GBP/USD: Limited recovery, remains near multi-year lows

FITITOL--> FXStreet (Córdoba) - A week ago the pound started an important rally against he US dollar, recovering from the lowest level since 2009 but it was limited and after a sharp reversal, cable is about to end the week modestly lower.

From 2-week highs to 1.42

During the Asian session, the decision of the Bank of Japan boosted risk appetite and GBP/USD climbed to 1.4412, hitting a 2-week high. The pair appeared to be ready to extend the rally but it turned to the downside falling more than 200 pips in a few hours.

The rally was capped again by the 20-day moving average that stands around 1.4390. The pair traded above but it failed to consolidate and ended making a reversal. During the last hours of trading, it trimmed losses and climbed back above 1.4200. It was about to end the week around 1.4220/40, slightly below last week close.

Another busy week

After days with key economic data from the UK and the FOMC decision, next week is also going to be busy. The most important event will be the release of the Bank of England decision (and the Inflation Report) and the Non-Farm Payroll report in the US.

No change is expected in the BoE, attention will lie on the minutes of the meeting and on the inflation report. “Despite the upward impacts of a 4% weakening in trade-weighted sterling since the November report, further downgrades to projections for GDP growth and inflation over 2016 and 2017 are expected”, said analysts at Lloyds Bank.

In the US, markets consensus point toward an increase of 200K in NFP. Analysts from TD Securities expect the pace of employment growth to slow to 177K and the unemployment rate to remain unchanged at 5.0% “In the coming months, we expect the positive momentum in the labor market to be sustained, though the pace of growth should remain in the 175K to 200K range.” A NFP number considerably below expectations would reduce expectations of another rate hike by the Fed during the first half of 2016.

A week ago the pound started an important rally against he US dollar, recovering from the lowest level since 2009 but it was limited and after a sharp reversal, cable is about to end the week modestly lower.

(Market News Provided by FXstreet) [...]

Mixed Norwegian data keeps EUR/NOK elevated – UBS

FXStreet (Córdoba) - Friday's multiple data releases from Norway failed to strengthen the NOK, which is still relying on market risk sentiment and oil prices for now. According to UBS analyst team, the data indicates that the Norwegian recovery story may take a bit longer than previously assumed. “We still see markets pricing EUR/NOK too high compared to fundamentals, but are also monitoring risks of a further delay of Norway's economic recovery.”

Key Quotes


“The main disappointment has been a 1.3% month-over-month drop in Norwegian retail sales. This brings them back to the September level and makes 2015 a year of flat sales in real terms. Registered unemployment continued rising slowly in January, mainly due to more job losses in oil regions. However, vacancies seem to have turned over recent months, shooting up in January and possibly indicating the end of rising unemployment rates.”

“While Norway's economic data may currently lack vigor, very easy monetary conditions should still prevent a bigger impact from the oil downturn on the rest of the economy. Hence, EURNOK remains too high compared with economic fundamentals and interest rates, as markets still have a very pessimistic view on the Norges Bank rate outlook. The European Central Bank and the Bank of Japan have clearly indicated their readiness to deliver more monetary easing. Sweden may be forced to follow in their footsteps. This stands in stark contrast to the already high Norwegian inflation rate and the Mainland economy's ability so far to withstand the oil downturn.”

“We thus still see considerable room for EUR/NOK to drift lower to 9.00 as markets re-price over the next three months.”

Friday's multiple data releases from Norway failed to strengthen the NOK, which is still relying on market risk sentiment and oil prices for now. According to UBS analyst team, the data indicates that the Norwegian recovery story may take a bit longer than previously assumed. “We still see markets pricing EUR/NOK too high compared to fundamentals, but are also monitoring risks of a further delay of Norway's economic recovery.”

(Market News Provided by FXstreet) [...]

Gold posts 5% monthly gain

FXStreet (Córdoba) - Gold prices ended Friday higher despite a stronger dollar, with the yellow metal posting a monthly gain in January helped by its safe-haven condition.

A strong risk-averse environment during the first weeks of the year, amid turmoil in Chinese markets, increased the appeal for safety and underpinned the metal off multi-year lows scored in December.

Gold closed Friday just above $1,116,0.18% higher on the day, posting a 1.64% weekly advance and a gain of over 5% for the month.

Gold prices ended Friday higher despite a stronger dollar, with the yellow metal posting a monthly gain in January helped by its safe-haven condition.

(Market News Provided by FXstreet) [...]