Saturday 26 August 2017

Week to Aug 25th

LAST WEEK (all times GMT)

On Monday, when not watching the eclipse, the market digested the departure of Steve Bannon from the White House. US indices were broadly flat, as was NKY, which tracked the yen during the cash hours. NKY volatility has been very low for three weeks now. DAX was down on a stronger Euro, however FTSE held its own against stronger GBP. The picture was much clearer in currencies, USD was down against all currencies and gold, and 10-year bond yields were down. Oil gave up nearly all the sharp ramp it enjoyed last Friday, as the final day of the September contract was traded.

Sometimes Tuesday is the reverse of Monday and so it was for USD which was up against all currencies except CAD which fell after the Canadian Retail Sales miss at 1230, mainly because there was no negative news and Oil rallied. Gold was similarly down, and yields were up. The picture was similar with indices, which were all up sharply, and the VIX was back below 12. However for all indices except FTSE, these were the highs of the week.

The sentiment see-saw took a downturn again on Wednesday, partly when Trump said he would build the wall even “if we have to close down our government”. PMIs during the European session were mixed, and then there was a big miss (-9.4% vs +0.3%) in the change in US New Home Sales at 1400. SPX and DAX gave up around half of Tuesday’s gains, NKY gave them all up on stronger JPY. Only FTSE kept its head above water on two days of weakening GBP. Currencies were mixed but, in line with indices, was generally negative for USD. EUR recovered all of Tuesday’s losses, as did JPY. The rise in AUD and CAD was more muted, helped by the rise in Oil despite a very slight EIA miss (-3.33M vs 3.45M) at 1430. This is one of the most accurate EIA prints versus estimate we have seen for a long time. In line with everything else, Gold was up and yields were well down, giving up two days’ gains.

Thursday was yet another see-saw day. We separate our chart of the week into days at 0000GMT each day, partly because it is the global time reference, but mainly because it cuts a neat division between the Asian, European and US markets in that order and is close to the ‘twilight hour’ (2100-2200 GMT) when no markets are open. The USDJPY chart this week is quite amazing, precise reversal after the end of the US session on the first four days of this week. Many instruments (Gold, NKY, JPY, FTSE, US10Y) performed a re-run of Tuesday and Oil which did a re-run of Monday.

News releases were light, and there were no black swans. SPX, DAX and FTSE rallied slightly, but the former pair finished flat and FTSE was only slightly up as UK GDP came in (1.7%) as expected at 0830. Currencies were mixed, CAD and GBP were up, EUR and AUD were flat. This is not to say that USD was weak, as JPY and Gold were down and yields were up. Oil gave up 1.6% which is quite mild by this most volatile of instruments’ standards.

Friday was the big day, with speeches by Janet Yellen at 1400 and Mario Draghi at 1900, and fifth day of sentiment reversal! Even though neither speech contained any direct references to currencies, as we have said before it was what they didn’t say. Yellen didn’t say anything hawkish, and USD promptly fell 60 pips against JPY, 80 pips against EUR, and 70 pips against GBP, which doesn’t normally benefit from these dollar flights. Five hours later, Draghi didn’t say anything dovish and EUR put on a further 60 pips, to break through $1.19, its highest level since January 2015. It was an across the board rout for USD, Gold was also up (after a strong but momentary spike down) and yields were down. Indices were less volatile that earlier in the week, and generally ended flat.

In summary, a most unusual week where we saw USD sentiment reverse every single day. The weekly movement figures below belie the actual volatility seen in the week.


These are the prices movements for the week on the instruments we cover. The best forex trade of the week would have been long EURNZD up 2.41%. The strongest index movement was FTSE, up 1.12%

AUDNZD 1.0956 (+1.05%)
AUDUSD 0.7932 (+0.06%)
EURGBP 0.9259 (+1.37%)
EURUSD 1.1922 (+1.38%)
GBPUSD 1.2879 (+0.04%)
USDCAD 1.2841 (-0.83%) 
USDJPY 109.34 (+0.12%) 
DAX     12171 (+0.14%)
FTSE     7397 (+1.12%)
NIFTY    9892 (+0.62%)
NKY     19459 (+0.01%)
SPX    2443.4 (+0.71%)
GOLD  1291.03 (+0.51%)
OIL     47.86 (-1.79%)

NEXT WEEK (all times are GMT)

The final week of August ends the summer holiday season, and once again it is NFP week as Sep 1 falls on a Friday. There are several forwarding looking indicators released this week.

Monday is a public holiday in the UK only, which has implications for forex flow, as London is the world’s main forex centre. FTSE futures will be traded as normal, as will the ADRs of the majors (BT, HBSC, Barclays) in New York. There is little scheduled news, but in politics Reichskanzlser Merkel meets her the Spanish, Italian and French leaders in Paris.

Tuesday has some forward looking indicators, Consumer Confidence in Germany and the US, and Home Prices in the latter. (All housing statistics are taken as forward looking). President Trump meets his counterpart from Finland.

Wednesday may see a major speech on tax reform, says White House Economic Advisor Gary Cohn (who is still there!). UK PM May flies to Japan. Topics may include Brexit and North Korea. The major news item of the day is US GDP, although the ADP jobs print is always interesting as a preview to NFP. The estimate is the same as last month’s actual at 178k. Note the normal low volatility German inflation figure which may provide a clue to the next day’s more important Eurozone figure.

On Thursday, Europe is in the forefront with German Retail Sales and Unemployment, and Eurozone Unemployment and CPI. The euro is an extreme high again. Poor figures could trigger a pullback.

Friday is NFP day. The estimate, at 185K is slightly higher than ADP, but well within historical norms. If the print is close to the estimate, traders will be looking at the ancillary reports: Unemployment, Average Weekly Hours. Average Hourly Earnings, and Labor Force Participation Rate in that order. Also important is the ISM Manufacturing PMI, which comes after several countries Markit reports in the same area. An exceptional item is the US Bank Stress Test Info, released 30 minutes before the market closes.

CALENDAR (all times are GMT). High volatility items are in bold

Mon Aug 28
1400 USD Dallas Fed Manuf Business Index
2330 JPY Unemployment and Jobs/Applicants Ratio

Tue Aug 29
0600 EUR Germany Gfk Consumer Confidence
1300 USD S&P/Case-Shiller Home Prices Indices
1400 USD Conference Board Consumer Confidence
2245 NZD Building Permits
2130 WTI API Oil Stock
2350 JPY Retail Sales

Wed Aug 30
0830 GBP UK Consumer Credit/Mortgage Approvals
0900 EUR Economic Sentiment/Business Climate
1200 EUR Germany Inflation (CPI)
1215 USD ADP Employment
1230 CAD Current Account Q2
1230 USD US PCE (Prices)
1430 WTI EIA Oil Stock
2350 JPY Japanese FDI

Thu Aug 31
0000 GBP UK Gfk Consumer Confidence
0100 CNY PMIs
0100 AUD HIA New Home Sales
0600 EUR Germany Retail Sales
0800 EUR Germany Unemployment
0900 EUR Eurozone Unemployment
0900 EUR Eurozone Inflation (CPI)
1230 USD US PCE (Price Index)
1230 USD Personal Income & Spending
1230 CAD Canada GDP
1230 USD Initial/Continuing Jobless Claims
1345 USD Chicago PMI
1400 USD Pending Home Sales
2330 AUD AIG Performance of Manuf Index

Fri Sep 01
0755 EUR Germany Markit PMIs
0800 EUR Eurozone Markit PMIs
0830 GBP UK Markit Manuf PMI
1230 USD US NFP/AHE/Unemployment
1345 USD US Markit Manuf PMI
1400 USD US ISM Manuf PMI/Prices paid
1400 USD US Construction Spending
1700 WTI US Baker Hughes Rig Count
2030 USD US Bank Stress Test Info

Saturday 19 August 2017

Week to Aug 18th

LAST WEEK (all times GMT)

On Monday, North Korea fears faded, and despite misses on Chinese Retail Sales and Industrial Production (0200) and Eurozone Industrial Production (0900), all indices rose, with SPX putting in its best day in three months. Similarly, USD was up against all currencies and gold and 10-year US bond yields were also up. Only oil bucked the trend, it was down $1.50 on the Chinese data.

Tuesday saw mixed data in the European session, with German GDP miss, working day adjusted beat at 0600, mixed UK Producer Price Index at 0830, together with an UK inflation miss. Once again GBP sold off in advance of the print. The US releases were all beats. Retail Sales at 1230, Import/Export prices at 1330, and the NAHB Housing Market index at 1400. It was strange therefore that DAX, FTSE and NKY were up, but SPX was slightly down. The position was clearer on USD, which like the previous day was up against other currencies and Gold, in particular GBP, due to the inflation miss. Bond yields were also up, and Oil recovered a little of the previous day’s losses.

Wednesday saw the disbanding of Trump’s Business Council, after many leaders resigned following the President’s refusal to condemn white supremacists. Also the FOMC Minutes were dovish, suggesting that give the inflation outlook, the bank could afford to be patient in balance sheet normalisation. This probably accounts for why SPX was flat, whereas the other indices rose, FTSE following the UK unemployment beat, a 42-year low, DAX following the Eurozone GDP beat. NKY was slightly down, despite a more pronounced JPY strength. The effect of the negative US news was felt more strongly in currencies: USD was well down against all majors and Gold, and bond yields were down. Oil was down against, despite the WTI EIA crude stocks beat, probably because of the miss on gasoline stocks.

Wednesday’s news took effect on equities on Thursday, further depressed by the terrorist incident in Barcelona, and the (in the end, false) rumour that National Economic Council Chair Gary Cohn was resigning. All indices were sharply down, SPX giving up 1.5%. Currencies were mixed. The equity mood was reflected as classic risk-off, as gold held the previous day’s gains and JPY was up again, and bond yields faded further. However, USD recovered some of its losses against the other currencies, for different reasons. EUR faded as the ECB voiced concerns in the MPC Accounts (1130) about Euro strength, CAD was a delayed reaction to the previous day’s oil price. AUD had risen the most on Wednesday, putting on 1.33%, rising another 0.39% on the Australian jobs print at 0130. At 27.9k (vs 20k) this is equivalent to a 373k NFP figure as the US has 13.4 times the population of Australia. However it then gave up all these gains to finish slightly down on the day. Oil recovered a little to close around $47. 

Friday started quietly until news started to flow that Trump’s Chief Strategist Steve Bannon had been fired. The equities market was very mixed. SPX ended up down slightly, or more to the point, it did not recover from the Thursday drop. If Cohn wasn’t leaving, then Bannon was, the market seemed to say, and this is despite some in the market thinking the exit of Bannon is a good thing. In any event, the long standing SPX 2450 support had been broken. FTSE was also down, but DAX rose, reacting to the ECB Euro comments (and its subsequent decline). NKY was flat on the day after a dip down. Notably DAX, FTSE and NIFTY all had an inside week for the first time in months.

Currencies were similarly mixed. USD was down again AUD, CAD and EUR, in each reversing Thursday. It was however flat against JPY, GBP and Gold, the latter after a spike up to touch the psychological $1,300, from which it quickly retreated. Yields were flat after a dip down. There was huge spike in Oil which rose 3.26% in 50 minutes, starting at the European close at 1530. This has been variously put down to an unconfirmed report of a unit shutdown at a Texas refinery, the reduction (of 3) in the rig count (actually not published until 1700), but what is more likely is the exiting of weekly short contracts, and September contracts which expire next Tuesday. Contango into the October contract (“10-Oil”) is now 17 cents.


These are the prices movements for the week on the instruments we cover. The best forex trade of the week would have been short GBPCAD, down 1.63%. The strongest index movement was DAX, up 1.26%

AUDNZD 1.0842 (+0.55%)
AUDUSD 0.7927 (+0.43%)
EURGBP 0.9134 (+0.52%)
EURUSD 1.1760 (-0.52%)
GBPUSD 1.2874 (-1.04%)
USDCAD 1.2585 (-0.75%) 
USDJPY 109.21 (+0.01%) 
DAX     12154 (+1.26%)
FTSE     7315 (+0.19%)
NIFTY    9831 (+1.25%)
NKY     19457 (+0.15%)
SPX    2426.2 (-0.65%)
GOLD  1284.49 (-0.36%)
OIL     48.73 (-0.12%)

NEXT WEEK (all times are GMT)

The most important scheduled news this week is the Jackson Hole Symposium. This event, hosted by the Kansas Fed in Wyoming every year brings together the world’s central bankers. Of particular interest is Mario Draghi’s attendance. Of course at any time in the week we could get a surprise from the White House, following the surprise departure of Steve Bannon on Friday.

We always say that in the absence of news, technicals come to the fore, and although mixed, the bias does seem to moving to the downside in equities.

On Monday, as continental Americans enjoy the first total solar eclipse for 21 years, joint military exercises between the US and South Korea commence, which could resurrect North Korean tensions, which were drowned out by US political events last week. An obvious reaction by Kim could be another missile test. We will be watching GBP in advance of UK PSBR at 0830.

Tuesday sees a speech by ECB Vice President Vitor Constancio at 1200. Minor news includes German ZEW Sentiment (forward looking) and Canadian Retail Sales.

Wednesday’s news is PMIs, but Mario Draghi is speaking in Lindau, Germany, at 0700, presumably before he flies off to Wyoming, and Fed Kaplan (centrist) speaks at 1305. Otherwise another light news day, with PMIs and the EIA stock print.

Jackson Hole starts on Thursday, although the main speeches are on the following day. Another chance to test the UK ONS leak theory as UK GDP is released at 0830.

On Friday, Janet Yellen speaks before the US bell, and Mario Draghi speaks five hours later. Yellen’s topic is financial stability. Commentators are expecting more hawkishness than the last FOMC minutes, i.e. that balance sheet normalisation pace should continue, in line with recent comments by the normally dovish-leaning Fed Dudley  We don’t yet know what Draghi will say, although given market sensitivity about ECB forward guidance, and concerns about EUR volatility, it may be that his speech is relatively anodyne, and in any event, there will only be two hours of the market week left when it is released.

CALENDAR (all times are GMT)

Mon Aug 21
0430 JPY All Industry Activity Index
1230 USD Chicago Fed National Activity Index

Tue Aug 22
0900 EUR German ZEW Sentiment
1230 CAD Canada Retail Sales
1300 USD US Housing Price Index
2030 WTI API Stock

Wed Aug 23
0730 EUR German Markit PMIs
0800 EUR €Z Markit PMIs
1345 USD US Markit PMIs
1400 USD US New Home Sales
1430 WTI EIA Stock (prev -8.95M)
2245 NZD Trade Balance
2350 JPY Japanese FDI

Thu Aug 24
0000 USD Fed Jackson Hole Symposium Day 1
0500 JPY Japan Leading Economic Index
1230 USD Initial/Continuing Jobless Claims
2330 JPY Japanese inflation (CPI)

Fri Aug 25
0000 USD Fed Jackson Hole Symposium Day 2
0600 EUR Germany GDP
0800 EUR Germany IFO Expectations
1230 USD Durable Goods
1400 USD Fed Chair Yellen speaks (at Jackson Hole)
1900 EUR ECB President Draghi speaks (at Jackson Hole)

Saturday 12 August 2017

Week to Aug 11th


Monday saw the DJIA make its ninth successive ATH, although other indices, SPX, DAX, FTSE and NKY were flat. In currencies, USD continued to fade, although less aggressively than last week. DXY was down 0.1%. EUR and JPY were slightly up, but AUD CAD and GBP were down, as was the 10-year bond yield. Gold was also slightly up, whereas oil was slightly down as the OPEC conference continued.

On Tuesday, President Trump reacted to North Korea’s latest provocation with language not dissimilar to that used by the Kim regime, promising ‘fire and fury’ if NK continued its path. Nevertheless, after the normally unimportant JOLTS Job Openings beat at 1400, the SPX and DJIA briefly made another ATH of 2490 and 22178 respectively, before pulling back quickly to end the day down. The beat was substantial, (6.16M vs 5.77M) which validates what we always say about minor releases. Finally, the VIX reacted, and was up 11% on the day at 11.03. The pattern was repeated to a certain extent in DAX, FTSE and NKY, after the German Trade Balance beat at 0600. The JOLTS print also helped USD, which was looking for an excuse to rally, and in any event, still buoyed by last week’s NFP beat. The dollar was up strongly against EUR, GBP and AUD, but flat against CAD, and actually gave up ground to JPY. (GBPJPY faded 100 pips on the day). Gold fell on the JOLTS report, but finished the day up. Yields did the exact reverse (i.e. bond prices correlated with Gold). As JPY was the only currency gainer, we can safely assume the Trump remarks caused traders to take risk off. Oil was down on the day as the OPEC meeting failed to deliver a definitive answer on cuts. The API stock beat at 2030 (-7.84M, prev +1.78M) of course came after the open outcry market closes.

Wednesday saw further negative sentiment as the war of words between Kim and Trump continued. However, the reaction from US stocks was relatively muted, with SPX DJIA and NDX only slightly down. The reaction was stronger elsewhere. DAX futures had fallen after Tuesday’s cash close, so although trading was fairly flat, the gap down was not recovered and the index closed 1.1% down, partly because EUR clawed back some of Tuesday’s losses. NKY was well down on NK tension, and of course Tuesday’s yen strength. FTSE was also down as GBP recovered. In currencies, JPY continued to hold up and gold rose as risk-off sentiment continued. Otherwise USD was down against EUR AUD and GBP. Surprisingly, CAD was down despite the EIA Oil stock release at 1430 (-6.45M vs -2.72M) confirming the API beat, and Oil’s expected response, up 1.39% on the day. The Oil price action this week was unusual. The future moved from 49.00 to 49.60 in the European session, in advance of the EIA print, gave it all up on the print, despite the beat, and put it all back on (and another 10c) by the pit close at 1830. Bond yields did their own thing, fading hard into the Labor Costs (strong miss) and Non-Farm Productivity (beat) reports at 1230, and rebounding straight afterwards to end the day flat. The NZD rate hold at 2200 did not have an instant reaction, but the Kiwi dollar had given up a massive 1.58% to hit a one-month low by the end of Thursday’s Asian session.

Thursday saw no resolution of the North Korea issue, and risk off intensified. SPX fell 1.5% to a one-month low and below its 50-day moving average. VIX was up 40% on the day, NDX fell an even bigger 2.1% (although this was partly on tech news/earnings). DJIA was relatively unscathed down 0.9%. Similar losses were seen in other indices around the world. Once again, USD was strong against AUD, CAD, GBP and EUR (although this rallied later in the day), but down sharply against JPY losing 0.8% on the day. Gold and bonds were up again (yields were down) as investors sought safe havens. After breaking the psychological $50 point briefly, Oil fell $1.50 on reports that OPEC had increased output, something not mentioned in the earlier meeting. The day’s news was low-key and with mixed results and had little effect.

After falling for the most of the week, some equities staged a slight recovery on Friday. SPX and DAX made small gains, NKY was flat. Only FTSE continued to fall after a strong performance from GBP which recovered two days of losses. USD was down across the board after the inflation (CPI) miss at 1230. However, risk was still off, as JPY held steady and Gold rose again. Bond yields briefly spiked up on the CPI print, but ended the day flat, and Oil made a slight recovery.


These are the prices movements for the week on the instruments we cover. The best forex trade of the week would have been short AUDJPY, down 1.76%. The strongest index movement was NIFTY, down 3.58%

AUDNZD 1.0783 (+0.84%)
AUDUSD 0.7893 (-0.45%)
EURGBP 0.9087 (+0.62%)
EURUSD 1.1821 (+0.40%)
GBPUSD 1.3009 (-0.21%)
USDCAD 1.2680 (+0.23%) 
USDJPY 110.68 (-1.34%) 
DAX     12003 (-2.30%)
FTSE     7301 (-2.85%)
NIFTY    9710 (-3.58%)
NKY     19427 (-3.10%)
SPX    2442.1 (-1.31%)
GOLD  1289.08 (+2.41%)
OIL     48.79 (-1.47%)

NEXT WEEK (all times are GMT)

Campaigning starts for the German Federal Elections this weekend. The incumbent CDU (Merkel) party have a 16-point poll lead, and so the market is pricing in continuity. At least we think so, the DAX is down 650 points against this time last month, but this is largely to do with EUR strength. We think that the North Korea situation, along with Russiagate, is still the biggest damper on the market. However, negative sentiment tends to fade, and if nothing further is heard this week, we may well be back to business (equities rising) as usual.

Monday’s news is all at the beginning, with the RBA meeting minutes at 0130, and Chinese Retail Sales and Industrial Production at 0200. Mondays have been quiet the last few weeks, and we expect this to be no exception.

Tuesday is Indian Independence Day, and Assumption Day in France and Southern Europe. We will be watching GBP from the London futures open (0600) to see if the price/action indicates whether the inflation (CPI) print at 0830 is a beat or miss against the 2.7% estimate. There has been much speculation about whether these figures are leaked in advance, or whether ‘buy the rumor, sell the news’ applies. However, we have called the UK release beats/misses about 80% of the time based on the early morning action. The release is important because a miss will definitely be seen as dismissing hopes of an early rate hike, and sterling is likely to fall. USD Retail Sales at 1230 is also important (to USD recovery). The estimate is ambitious at 0.3% after last month’s -0.2%. Even a small beat should help USD rise against EUR and GBP. Whether USDJPY rises depends on the ongoing NK situation. Don’t forget the milk auction (prev -1.6%), which will help NZD if the figure turns positive.

Wednesday has UK unemployment statistics. Despite the figures being produced by the International Labour Organisation, these are ONS (UK Government) statistics so our caveat about leaks also applies. Unusually, Canadian and US Housing Starts come in within 15 minutes of each other at 1215 and 1230. If the first spikes USDCAD, the second may well revert it. The EIA Oil Stock arrives on time at 1430, and this week we have an estimate, -2.72M, a lower figure than last week’s -6.45M. As usual, follow the previous day’s API print. However, the big news is the FOMC Minutes, in particular, the Fed view on balance sheet reduction/tightening. This may be the trigger for the beleaguered dollar to rise, particularly against EUR.

Thursday’s focus is away from the US. First, we have the Australian employment/unemployment data, their version of NFP at 0130. We don’t have an estimate yet, but last month’s figure of 14k was modest (after 61k in April and 42k in June). The figure is, like last month, regarded as high volatility. In the European session, there is first UK Retail Sales for July (est 1.4%, follow previous comments re leaks). Then the key releases of the day are the Eurozone inflation print at 0900, followed by the ECB MPC accounts at 1130. We have discussed in subscriber news how EUR is out of sync with bond prices (too high). Traders need a reason to sell, and this could be it. The day continues with various low-level US releases.

Friday is light, the main news being Canadian inflation. A beat on the 1% YoY estimate will strengthen the case for a rate hike, Canada being behind the US curve, and may stop the recent USDCAD recovery in its tracks.

CALENDAR (high volatility items in bold)

Mon Aug 14
0130 AUD RBA Meeting Minutes
0200 CNY Retail Sales
0200 CNY Industrial Production
0900 EUR €Z Industrial Production

Tue Aug 15
0600 EUR Germany GDP
0830 GBP UK inflation (CPI)
1230 USD Retail Sales
1230 USD Import/Export Price Indices
1400 USD NAHB Housing Market Index
1430 NZD GDT Milk Auction (time approx.)
2030 WTI API Stock

Wed Aug 16
0830 GBP ILO Unemployment/Claimant Count Change
0900 EUR €Z GDP
1215 CAD Housing Starts
1230 USD Housing Starts/Building Permits
1430 WTI EIA Stock
1800 USD FOMC Minutes
2350 JPY Imports/Exports/Trade Balance

Thu Aug 17
0130 AUD Employment/Unemployment
0600 EUR Germany Wholesale Price Index
0830 GBP UK Retail Sales
0900 EUR €Z inflation (CPI)
1130 EUR ECB MPC Accounts
1230 USD Initial/Continuing Jobless
1230 USD Philadelphia Fed Manuf Survey
1315 USD Capacity Utilisation
1315 USD Industrial Production

Fri Aug 18
0600 EUR Germany PPI
1230 CAD Canada inflation (CPI)
1700 WTI Baker Hughes Rig Count