Tag: US

US Futures Higher on Easing Trade War Fears

Reduced Chinese Tariffs Further List Sentiment in Markets

US futures are pointing to another higher open on Tuesday, building on Monday’s strong gains and benefiting from an apparent easing in trade tensions between the world’s two largest economies.

The postponement of new tariffs by both the US and China and the revelation that the latter will cut import tariffs on cars from as much as 25% to 15% and on car parts to 6% is seen as an important step away from a trade war that could have negative implications globally. Trade protectionism was one of the fears of a Trump Presidency and his announcement of tariffs and his approach to trade agreements went some way to justifying such views but this could be an important breakthrough.

Fed Minutes Will Provide Further Insight on Interest Rates on Wednesday

With sentiment gradually improving and risks subsiding, we could see stock markets edge their way back towards the levels we were seeing earlier this year, although we are still around 5% below those levels. It’s also worth noting the role that rising US yields could play with some citing the anticipated pick-up in yields as contributing to the less bullish environment.

Dow (US30) Daily Chart

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The recent comments from the Federal Reserve suggest they’re in no rush to raise rate forecasts despite the uptick in some of the data, particularly inflation. If the central bank is willing to accept above target inflation for a time, as long as it doesn’t rise too much, it could ease investor concerns. We should find out more about policy makers views on this in the FOMC minutes which will be released on Wednesday.

DAX Unchanged, German PMIs Ahead

GBP Pares Gains as BoE Offers Little New Direction on Interest Rates

The Bank of England inflation report hearing today had the potential to be a very interesting event given the decision by the Monetary Policy Committee earlier this month not to raise interest rates, despite spending months laying the groundwork for such a move. Policy makers have come under fire on numerous occasions in recent years for failing to provide accurate and reliable forecasts both on the economy and for interest rates and the latest move will not help this reputation.

The hearing itself was quite tame compared to what it has been in the past and I’m not sure there was anything noteworthy to take away from it. Governor Mark Carney was keen to stress that the outlook of a few hikes over the next few years hasn’t changed and that the timing of the first is not overly important. There was also clear opposition to the suggestion of providing more precise interest rate forecasts each quarter which given the difficulty with them already seems sensible.

GBPUSD Daily Chart


While the pound pared earlier gains during the hearing, it’s clear that traders took little away from the event itself and will instead be more focused on how the data develops in the months ahead. With the markets now only pricing in a rate hike later this year, the central bank and the economy has plenty to do to convince traders that could come earlier in August if it’s planning to get the ball rolling earlier. Given the stage that Brexit negotiations are at, it may be worth waiting until the end of the year as policy makers will have a much clearer understanding of the outlook for the economy.

Trade Ceasefire Supports Risk Assets

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

NAFTA Negotiations Ongoing But Not Dead

Talks between the U.S., Canada and Mexico on revamping the North American Free Trade Agreement are continuing but it appears unlikely there’s enough time for the U.S. Congress to vote on a deal before the end of the year, analysts say.“I don’t think they’re going to get a text to Congress at all within the next weeks or even months,” said Laura Dawson, director of the Canada Institute at the Wilson Center in Washington.On Thursday, U.S. Trade Representative Robert Lighthizer said the three nations are “nowhere near close to a deal” and cited major differences on issues ranging from intellectual property to labor rules. He said negotiations would continue. Friday, White House National Economic Council Director Larry Kudlow told reporters “some areas have come together and some have not.” He added, “It’s not dead.”

Source: Here’s what is next for Nafta as U.S., Canada and Mexico fail to strike deal – MarketWatch

EUR/USD – Euro Edges Lower, German Markets Closed for Holiday

A Test of the Breakouts

Meaningful Progress Made in US and China Trade Talks

Treasury Secretary Steven Mnuchin put a positive face on the state of U.S.-China trade negotiations, saying Monday the talks so far already have yielded tangible benefits.”I think we’ve made very meaningful progress,” he told CNBC’s “Squawk Box.” “Now it’s up to both of us to make sure that we can implement it.”His comments come amid a back-and-forth tussle between the two countries over the state of trade, a key issue that President Donald Trump has vowed to resolve. Administration officials have been meeting and negotiating with their Chinese counterparts over myriad issues, including but not limited to technology, agricultural and energy products.

Source: Mnuchin: We’ve made ‘very meaningful progress’ with China on trade – CNBC

EUR/USD – Euro Edges Lower, German Markets Closed for Holiday

A Test of the Breakouts

Will Oil Sanctions Follow For Venezuela?

The U.S. is almost certainly preparing to impose targeted crude sanctions against Venezuela, analysts told CNBC on Monday, in a move likely to constitute a “devastating” blow for the oil-dependent state.Venezuelan President Nicolas Maduro won re-election to another six-year term on Sunday, despite widespread anger over the South American country’s crushing economic and social crises. The vote was marred by low voter turnout, allegations of vote-rigging and an opposition boycott.”The next step is sanctions against the oil sector,” Diego Moya-Ocampos, principal political analyst for Latin America at IHS Markit, told CNBC’s “Squawk Box Europe” on Monday.

Source: US likely to slap oil sanctions on Venezuela after Maduro election – CNBC

EUR/USD – Euro Edges Lower, German Markets Closed for Holiday

A Test of the Breakouts

Iran and Venezuela Could Keep Oil Elevated

Potential oil supply disruptions in Iran and Venezuela have prompted oil traders to focus on geopolitics rather than fundamentals, the International Energy Agency (IEA) said in its latest monthly report Wednesday, warning that any supply cuts could prompt prices to rocket.”The potential double supply shortfall represented by Iran and Venezuela could present a major challenge for producers to fend off sharp price rises and fill the gap, not just in terms of the number of barrels but also in terms of oil quality,” the Paris-based organization said.President Donald Trump’s decision to withdraw the U.S. from the Iran nuclear deal just over a week ago — and the expected re-imposition of sanctions on the country — coupled with political and economic disorder in recession-hit Venezuela has cast the supply of Iran and the Latin American country into doubt.

Source: Iran and Venezuela are ‘a major challenge’ to avoiding oil price hikes, IEA warns

US and Oil Data Eyed as Italy Nears Populist Rule

DAX Steady as German CPI Matches Estimate

Italian Politics Pounds Euro

US and Oil Data Eyed as Italy Nears Populist Rule

US Data in Focus After Encouraging Retail Sales Figures

US futures are flat ahead of the open on Wall Street on Wednesday, as we await a number of data points from the world’s largest economy and Italy closes in on a eurosceptic coalition government.

We got some interesting retail sales figures from the US on Tuesday which helped lift yields and saw a fourth rate hike this year being around 50% priced in. There’s plenty more data to come today which may further lift expectations including housing starts, building permits, capacity utilization and industrial production. The dollar is making gains again early in the session having pared gains late last week and has already set a new high for the year so far, ahead of the figures.

Oil Inventories Could Trigger Some Profit Taking

We’ll also get EIA crude inventories figures today, which comes shortly after OPEC published figures showing inventories in OECD countries had fallen to nine million barrels above the five year average from 340 million at the start of last year. Clearly the production cuts have been working but with the deal rolling on and Iranian sanctions potentially restricting them further, oil prices could rise further before they stabilise.

A drawdown of around three quarters of a million barrels is expected to be reported today although API reported their figures on Tuesday and they indicated that stockpiles actually rose by 4.854 million barrels. A similar reading from EIA today could relieve some of the upward pressure on prices and trigger some near-term profit taking.

Italian Politics Pounds Euro

Italian Yields Spike and FTSE MIB Slips as Draft Program is Leaked

In Europe, much of the focus has been on Italy where a leaked draft of the joint program of Five Star Movement and League has unsettled investors, leading to 1.5% losses in the FTSE MIB stock index and a spike in Italian yields with the 10-year rising back above 2%. Markets haven’t necessarily been complacent about the prospect of a eurosceptic coalition until now but investors have taken the developments very much in their stride and not got carried away.

Italy 10-Year Yield Daily Chart

Source – Thomson Reuters Eikon

The draft program though has fuelled investors’ fears about what a coalition of the two parties – both of which have openly opposed membership of the currency union in the past and most likely still do despite it not being a key feature of the election campaign – will mean for the country. The most concerning component was the desire to create economic and judicial procedures that allow member states to leave the monetary union, which makes clear their ultimate intentions.

While both parties have since claimed the draft was an old version and they had since decided against calling into question the single currency, it’s impossible to ignore and even if an exit isn’t pursued in the immediate future, it looks a case of when rather than if they do so, if the coalition is formed. There were other aspects of the draft that will also concern investors, not to mention the joint desire to no longer be constrained by the currency blocks fiscal rules.

It seems euro leaders were too quick to congratulate themselves on a job well done when defeating populists last year and may have a massive job on their hands that makes Brexit look more straight forward. I also wonder how much this could affect the European Union’s approach to Brexit as other leaders will be wary about giving the populists more reason to push for an exit of their own, citing the deal the UK got as an example of what can be achieved.

I’m a Believer

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

Live FX Analysis – 15 May 2018 (Video)

It’s been an interesting month in financial markets in which the dollar has rediscovered its mojo, geopolitical risk has remained heightened, US corporates have shown their strength and central banks around the world have become less bullish.

Ahead of another busy data week, Senior Market Analyst Craig Erlam gives his views on the markets at the moment and takes you through the week’s key economic events.

Craig also gives his live analysis on EURUSD (13:23), GBPUSD (15:08), EURGBP (17:25), AUDUSD (19:08), USDCAD (20:33), GBPCAD (22:02), NZDUSD (25:22), USDJPY (27:14), GBPJPY (29:15) and EURJPY (30:53).

DAX Trading Sideways after Eurozone, Germany GDP

US Futures Pare Gains Ahead of Retail Sales Data

Rate Differentials and Trade Fears Handcuff Capital Markets

US Futures Pare Gains Ahead of Retail Sales Data

US Equities Looking Less Vulnerable After Recent Breakouts

US equity markets have been on a good run of late but are poised to open slightly lower on Tuesday, paring the steady gains achieved over the last couple of weeks.

This comes after the Dow and S&P 500 both surpassed the previous peak which came almost a month earlier in what could be a symbolic indication that the worst of this particular correction is now behind us. From a technical standpoint, the failure to make a new low a couple of weeks ago before now making a new high is encouraging as a signals the end of a downtrend.

Retail Sales Expected to Rebound After Tough Winter

There’s a number of data releases that will grab traders’ attention today and could determine whether we see an early rebound in stock markets. The most notable of these is the retail sales data for April, which is expected to be relatively good for a second consecutive months following a few poor numbers that were a little worrying. Core retail sales are also expected to be good, rising by 0.5% compared to March.

Rate Differentials and Trade Fears Handcuff Capital Markets

UK Jobs Data in Line as Wages Rise Most Since 2015

The UK labour market figures offered little support to the struggling pound this morning, which continued to hover around four month lows against the dollar and look vulnerable to further declines. While unemployment remains at the lowest since 1975 and employment at the highest since records began, the numbers were all pretty much in line with expectations and was therefore priced in.

GBPUSD Daily Chart

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The potential for upside would have likely come from the earnings data but even this was in line, although excluding bonuses, they did rise to 2.9% which is the highest since August 2015. Still, with inflation still high, real wages were unchanged once bonuses were taken into consideration which is likely to continue to weigh on the economy and confuse matters for the Bank of England, which is being heavily criticised after not raising rates last week.

China Data Flash

Clearly traders don’t view the increase in wages as increasing the chances of a rate hike from current expectations. It could well be that traders view the recent wage data as being a temporary response to last year’s increase in the cost of living due to higher inflation as opposed to something more sustainable or that the recent improvement is being flattered by the year on year comparison after a dip 12 months ago.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

Trump Now Pledges to Save ZTE

China has welcomed a pledge from Donald Trump to help save ZTE, one of China’s biggest telecoms companies.The firm has suspended operations after the US last month banned American companies from selling it components. ZTE had admitted to making illegal shipments to Iran and North Korea.But Mr Trump has now tweeted he will work with President Xi to help ZTE get “back into business fast”, saying too many jobs in China were at risk.China’s called the comments “positive”.

Source: Trump seeks to save Chinese jobs at ZTE ahead of trade talks – BBC News

DAX Dips, All Eyes on German GDP

U.S Dollars Plight shaped by Trade Talks and Geopolitics

A Crowded Tale of the Tape

Oil Stabilizes After Hitting Multi-Year Highs

Oil prices steadied below 3-1/2 year highs on Monday as resistance emerged in Europe and Asia to U.S. sanctions against major crude exporter Iran, while rising U.S. drilling pointed to higher North American production.Brent crude LCOc1 was up 15 cents at $77.27 a barrel by 1130 GMT. U.S. light crude oil was up 5 cents at $70.75.Both oil futures contracts hit their highest since November 2014 last week at $78 and $71.89 a barrel respectively as markets anticipated a sharp fall in Iranian crude supply once U.S. sanctions bite later this year.

Source: Oil steady near multi-year highs as U.S. drilling rises | Reuters

DAX Dips, All Eyes on German GDP

U.S Dollars Plight shaped by Trade Talks and Geopolitics

A Crowded Tale of the Tape