Markets defy convention

13 February, 2015

The recent moves in FX markets have caught many people off guard. Perhaps not to the extent of the SNB floor removal a month ago, but the dollar strength of last year and the first part of January has come to a grinding halt. Despite the Bank of England at their quarterly Inflation Report saying that there is room to ease monetary policy further, GBPUSD rallied as growth forecasts for next year were readjusted higher. The market had become too bearish of sterling considering the growth prospects are much better than many other developed economies and recent sentiment data shows that the UK economy remains in good shape. There are now a growing number of calls expecting the BOE to hike rates before 2016. At the time of writing Cable sits above 1.5400 and with a bit of momentum behind it a test of previous support around the 1.5500 area should not be ruled out, which is the major near term resistance level for sterling vs the dollar.

The euro is the other currency defying many bears with EURUSD stubbornly recovering back above the 1.1400 level, assisted by better than expected German GDP data this morning. This is a well shorted trade and has been subject to a correction to the upside for some time, but risks surrounding Greece remain a limiter to any major move to the upside.

Another stand out move is Brent crude recovering back above $60 on the back of a weaker dollar and the prospect of spending cuts having a knock effect for production. Many are arguing that since crude prices have rallied over 20% from their lows (over 30% in fact), oil is technically back in a bull market.


Source link  
Politics Influence Markets

With fears abating surrounding the threat of Catalan independence, the EUR moved higher overnight. Catalan President Puigdemont stated...

US Unemployment at Lowest Level

On Friday, the US Department of Labour released Nonfarm Payrolls for September. The meagre forecast of 88K was beaten with an even worse...

Further Strong Data From the US

On Wednesday, the US Institute for Supply Management (ISM) released Non-Manufacturing PMI for September that surprised the market...


Upbeat Data Boosts Dollar

On Monday, the US Institute for Supply Management (ISM) released data showing the index of national factory activity surged to a reading...

Harvey & Irma Effects Still Evident

The EUR suffered a second day of selling pressure, as the markets are growing concerned that the rise in right wing nationalism witnessed...

Risk-On or Risk-Off?

The rhetoric continues between North Korea and the United States with North Korea’s Foreign Minister, Ri Yong Ho, describing President Trump’s recent comments as “tantamount...


German & New Zealand Elections

The results of the German Election have re-elected Chancellor Angela Merkel for a fourth term. Her CDU party won fewer votes than was expected and Chancellor Merkel...

Fed Holds Rates for Now But...

Unsurprisingly, the Federal Reserve kept rates on hold following the end of its 2-day meeting on Wednesday. They did, however, indicate that...

UK Unemployment at 42 Year Low

UK unemployment fell to its lowest level since 1975, data on Wednesday revealed. Unemployment fell by 75K, bringing the unemployment...

  


Share: