Markets round up

15 August, 2016

Friday’s macro data from the world’s largest economies goes to show why the major central banks are still uber-dovish. China’s latest industrial production, retail sales and fixed asset investment figures all disappointed expectations overnight, capping a week full of disappointing data from the world’s largest economy that included weak trade figures on Monday. Data from the world’s largest economy, the US, has also been poor this week, causing the dollar to relinquish most of it gains made on the back of last Friday’s solid jobs report. On Tuesday we saw nonfarm business productivity, which measures the goods and services produced each hour by American workers, slumped by an annualised rate of 0.5% on a seasonally adjusted basis in the second quarter as hours worked increased faster that output. It was the third consecutive quarter of declining productivity, representing the longest such streak since 1979. In truth, the market only paid so much attention to this one piece of news because of the lack of any other significant data earlier this week. Nevertheless it did trigger a slid in the dollar as the odds of a 2016 rate increase were slashed once again. The focus was again on the dollar in today’s North American session as traders awaited the release of retail sales, producer price index and a closely-watched gauge of consumer sentiment. Well, as it turned out, headline retail sales were flat month-over-month in July, core sales fell 0.3% and PPI dropped 0.4%, while the UoM consumer sentiment index for August rose only slightly to 90.4 from 90.0 and inflation expectations declined to 2.5% from 2.7% previously. All of these figures were below expectations.

Yet, so strong is the downward pressure on the GBP/USD that not even a week full of disappointing US macro data was able to support it. The Cable dropped to a new weekly low of 1.2930 at the time of this writing. It was not helped by poor figures from the UK this week; among them, manufacturing production fell 0.3% and construction output declined 0.9% month-over-month.  Data from mainland Europe has been generally in line with the expectations, including the Eurozone GDP, which grew 0.3% in the second quarter. Thus, the EUR/GBP has been able to march higher and on Friday it hit its best level since August 2013. Will next week’s UK inflation and jobs figures be able to lend the downbeat pound some support? Time will tell.

But the dollar’s weakness was apparent against stronger currencies on Friday, such as the Japanese yen and some commodity currencies, including the Canadian dollar.  The Loonie tumbled below the key 1.30 handle yesterday as oil prices jumped. Next week’s Canadian data include manufacturing sales on Tuesday, followed CPI and retail sales on Friday. There will be some important employment data for the other two major commodity currencies too, namely the Australian and New Zealand dollars. But the most important data will probably be the US CPI on Tuesday, which should give us a clue in terms of how far or near we are to another rate increase from the Fed.

Meanwhile crude oil prices have stormed back to life over the past couple of weeks, albeit in a volatile manner. The latest trigger behind the rally has been attributed in the media to comments from Saudi Arabia’s energy minister, who on Thursday said his country, which is the largest OPEC oil producer, could participate in co-ordinated action to help balance the crude oil market.  I am not sure if this is the main reason, for prices had already bounced last week. What’s more, similar promises were made earlier this year and no action taken. Yet oil prices were able to march on regardless then. On top of this, I am not convinced that the previous $10 drop in oil prices was justified. Thus, short-covering seems to be a logical explanation for the oil price rally.

With this week’s data justifying central banks’ desire to remain uber-dovish and oil prices bouncing back, and bond yields hitting record lows, investors may continue to pile into equities next week.


Source link  
Gold surges to major $1250 resistance as uncertainty prevails

Gold surged Thursday on a breakout of its previous consolidation to hit and slightly exceed major technical resistance at $1250, a level not seen since early November...

Gold remains vulnerable amid hawkish Fed, strong dollar, equity highs

Gold has climbed sharply since the beginning of the year as the US dollar has pulled back from its late-2016 highs and the US Federal Reserve has exercised characteristic restraint in raising interest rates further after the last rate hike in December...

Gold well-supported on safe-haven flows, lagging dollar

Increasing political and economic uncertainties under the new Trump Administration, coupled with a sliding US dollar since the beginning of the year, have led to a sharp rise in gold prices for more than a month...


Gold pressured as dollar and equities remain supported

As the US dollar found some new life on Thursday and US equity markets hovered right around their new all-time highs, gold extended its recent pullback well below the $1200 handle. Since late December, the price of gold had been in a sharp relief rally from its 10-month lows around $1125 support...

Crude oil maintains bullish trend

Oil prices were initially weaker at the start of the new week, but they have now recovered to trade almost flat at the time of this writing. At the weekend, the OPEC and some producers outside of the group met to discuss the progress of their oil production deal...

Trump press conference fails to deter equity bulls

President-Elect Donald Trump spoke on Wednesday morning at his first formal press conference since the November elections, and the markets were all ears. Trump covered a lot of ground with multiple topics that included...


Gold ripe for potential relief rally

The charts tell a clear story of the unrelenting plunge in gold prices since early November. This steep dive has been the result of several related factors, all of which have the potential to extend well into the new year. These largely Trump-driven factors include...

Could EUR/USD finally break 1.05 on this FOMC day?

The market is demanding a rate rise and the Fed better deliver it today, for if it doesn’t the bank’s credibly will be severely damaged. There is really no excuse not to do so. Economic data has been improving, financial markets are calm...

Mixed Jobs Report Keeps High Fed Expectations Intact

As we noted the day before Friday’s US jobs report, only a significantly worse-than-expected reading for November would have likely made the Federal Reserve’s next interest rate decision more difficult...

  


Share: