Financial market research and analysis

Energy and mining stocks pressured the FTSE 100 lower at the London open. Stronger pound further dented the appetite. The pound tested the 1.25 mark on the upside against the US dollar.


Cable rangebound between 1.2410 and 1.2575

The Bank of England (BoE) expectations are somewhat baffled by the recent inflation and unemployment data. Higher inflationary pressures, yet combined to slower wages growth are keeping the BoE hawks contained as Governor Mark Carney said the economy is approaching the full employment, which could mean that the labour market could further tighten, however with decreasing upside pressure on salaries. As a result, the pressure on inflation would also be marginally lower.

The pound is better bid, yet there are no signs of a sustainable positive breakout. We keep our neutral stance between 1.2410 and 1.2575. Solid EURGBP resistance is eyed at 0.8580 (200-day moving average).


US stocks consolidate as March Fed hike expectations rise to 44%

The Dow Jones and the S&P500 extended gains to new records, as FOMC Chair Janet Yellen testified before the House Financial Services Committee yesterday.

Global stocks traded at a record high too. The MSCI All World index hit a record for the first time in 18 months, as the Federal Reserve (Fed) hawkishness and faster US inflation fueled optimism across the global equity markets.

The small business optimism advanced to the highest since 2004, as the US inflation hit a four-year high.

Rising inflation further rejuvenated the Fed hawks; the expectation of a March Fed rate hike rose to 44% from 30%. The VIX, also known as the S&P500’s volatility index, rose by 11%.

At this point, we have a preference for status quo at the March meeting, while June, with 78.6% probability, increasingly appears as an appropriate timing for the Fed’s next interest rate move. We remind that the Fed is expected to hike rates two to three times before the end of 2017. As such, the appetite for the US dollar is expected to remain firm in mid-term; pullbacks could be interesting opportunities for greenback lovers to strengthen their position.

The Dow Jones and the S&P500 are set for a positive US open.


Asia traded mixed, as US dollar softened

Asian markets traded mixed, as the US dollar pared yesterday’s gains against all of its G10 counterparts. The yen (+0.39%) gained the most against the greenback. Stronger yen dented the appetite in the Japanese stocks; Nikkei (-0.47%) and Topix (-0.17%) were slightly softer.


Australian full-time jobs declined significantly in January, AUD capped

The Australian dollar remained on the back foot as the employment figures disappointed in Sydney. Although the overall employment change was better than expected in January, it was mostly due to part-time jobs (+58.3K), whereas full-time employment took a significant hit (-44.8K). AUSDUSD resistance is eyed at 0.7775/0.7800.


Gold firms, resistance eyed pre-$1250

Gold was better bid in Asia, as the US 10-year yields were capped below 2.50%. The ounce of gold traded at $1236. The key short-term resistances are eyed at $1244 (Feb 7 – 8 double top), before $1250 (Fibonacci 50% on July – December decline). Breaking above would move the attention to the 200-day moving average, $1262. Failure to clear $1250 offers could encourage a correction to $1220 (major 38.2% retrace).