Financial market research and analysis

The two-day Fed meeting starts today and the US dollar is a better bid across the board. The Fed is given less than a 5% chance to raise rates at this meeting. Nevertheless, the Fed could keep the possibility of a 25 basis points rate hike before the end of this year. The market gives slightly more than 50% probability for the next hike to come in June, however, these probabilities could change very rapidly. Any hawkish hint from the Fed could trigger a sugar rush in the US dollar at the second part of the week.

The pound (-0.93%) is the biggest loser against the US dollar in London. Potential divergence between the Fed and BoE policy outlooks gives good reason for the pound to cheapen, while the agony in oil and commodity markets is certainly another factor.

Some also believe that the latest Telegraph survey, claiming that Brexit ‘out’ supporters are more more motivated to win, is taking its toll this morning.

The oil market continues its slide after reports yesterday that Iran is preparing to increase production to 4 million barrels per day. Both Brent and WTI lost more than 2% in the session, and other commodities felt the pinch with nickel and copper futures down by 1.68% and 1.21% respectively, and iron ore futures are 0.82% cheaper.

The FTSE opened sharply to the downside following the aggressive sell-off in oil and commodity markets overnight.

Antofagasta (-10.34%) has been a top loser in London after it announced a 58% drop in its 2015 profit, followed by Anglo American (-8.76%), BHP (-5.75%), Glencore (-5.004%) and Rio Tinto (-4.45%).
Antofagasta severely missed estimates as it posted a 58% slump in its annual profit following the heavy drop in commodity prices through 2015. Copper stands for a clear majority of Antofagasta sales (it stood for 83% of its sales in 2014) and having dropped more than a third of its value since May 2015, it has significantly damaged the 2015 results. The gradual recovery off the January lows is encouraging, but net income is expected to improve only progressively over the next few years. The gloomy global outlook is keeping demand lose.

Legal & General Group (-5.04%) traded in the red at the open despite satisfactory full-year results. The company announced a better-than expected increase of 14% on its full year profit, thanks to rising retirement earnings, and a 19% increase in its full-year dividend to 13.4p/share, in line with expectations.


A quick glance at Central Banks

As expected, the BoJ kept its monetary policy stance unchanged. Japan’s central bank left the annual base growth target stable at 80 trillion yen and the IOER at -0.10. There is still the possibility for more monetary action in ‘three dimensions’: quantity (more QE), quality and rates. The yen lost against all of its G10 peers. USDJPY slumped below the 113 mark and more weakness could be underway if the pair fails to recover above the 113.34, Ichimoku’s conversion line.
In Australia, the RBA minutes took the shine off the Aussie. The RBA said in its March 1st meeting that ‘low inflation to provide scope for more easing if needed’ and ‘low rates-AUD fall helping economy re-balance’. The AUDUSD stepped back below the 75 cents level. In the US, the two day FOMC meeting starts today. Any unexpected signs of hawkishness from the Fed could drag the AUDUSD back towards the 200-dma (0.7246).