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Risk-off pre-Yellen, PMI weighs on GBP
Cable extended losses to 1.2245. The UK’s services PMI came in slighlty softer than estimates. The disappointment accelerated the sell-off as the pair had already taken off 1.2260 support, the major 61.8% retracement on January 14 to February 1st recovery. Further depreciation to 1.2153 (minor 76.4% retracement) is on the horizon. Against the euro, the 0.8600 level is where bulls and bears carry the fight.

The FTSE 100 opened downbeat on the back of deterioration in the global risk appetite. Nevertheless, a further slide in the pound against the US dollar and the euro could limit the downside in the UK stocks markets.

U.S. stocks pauses before Janet Yellen's speech

The US stocks slipped from record high levels heading into Federal Reserve (Fed) Chair Janet Yellen’s speech due later today. There is no doubt that Yellen is in a solid position to raise interest rates at the FOMC’s March meeting without squeezing the markets. According to the activity in the US sovereign bond markets, investors price in 25 basis points rate hike in March at 88%. In fact, an eventual non-action is a higher risk than a broadly anticipated rate hike on March 16. At this point, it would be difficult for Janet Yellen to step back.

The Dow Jones and the S&P500 wrote off 0.53% and 0.59% respectively. All sectors, including technology, traded under pressure. Snap Inc. made an awesome debut, as its shares traded 44% higher at the first day of trading. Of course, many questions remain unanswered about Snap’s ability to grow its user base and generate income. Still, Snap’s IPO (initial public offering) has been the biggest since 2012.

The appetite in the US dollar remains tight on the back of a clear divergence between the Fed and other leading central banks’ monetary policy outlooks.

François Fillon loses support

In France, former PM François Fillon is gradually losing support at the presidential race less than two months before the first round of the election. At least sixty politicians pulled away their support as Fillon’s home has been raided by corruption investigators after the scandal claiming that Fillon’s wife had received some half a million euros over the last eight years as parliamentary attaché without ever being seen in Parliament. Fillon’s misfortune could be an additional push for anti-European, far-right candidate Marine Le Pen, who is seen as the biggest risk at the coming French elections. Her lead weighs on the euro, meanwhile the independent candidate Emmanuel Macron’s rising popularity has been a temporary relief to many this week.

The Eurozone's services PMI came in slightly short of estimates. The EURUSD is testing the 1.0500 support, if broken could encourage a further slide to 1.0456 (minor 76.4% retracement on January 1 to February 1 recovery).

USDJPY trades higher yet lacks momentum

The USDJPY traded at 114.48 in Tokyo, yet failed to revive appetite in Japanese stock markets. News that the Bank of Japan (BoJ) reduced its purchases of 25 to 40 year JGBs by 20 trillion to 100 trillion yen may slow the positive trend pre-115.00, yet would certainly not prevent the US dollar from gaining further ground against the yen. The USDJPY is 1.8% lower on the week, though the BoJ remains firmly accommodative on its policy.

The Nikkei (-0.49%) and Topix (-0.42%) retreated on Friday following three days of gains. Hang Seng (-0.74%) and Shanghai’s Composite (-0.36%) had another day of losses, after the Chinese PMI data pointed at the slowest services expansion in four months.

Chinese could revise the growth target down 

Three thousand Chinese lawmakers will meet on Sunday to discuss about the future plans on many platforms. The agenda is busy with the world's biggest emerging market's relationship with the US, financial reforms, deficit spending plans and more.

To us, one of the most important talking points would be the 2017 growth target. Chinese officials could trim the growth targets to 6.5% in 2017, down from 6.5%-7% range a year ago.  

Lack of carry appetite weighs on Antipodeans

The antipodeans, AUD (-0.17%) and NZD (-0.38%), continued losing ground against the greenback. The AUDUSD cleared 0.7604 support (minor 23.6% retracement on December – February rise) and is currently testing the 200-day moving average (0.7544) on the downside. The key support is eyed at 0.7520 (major 38.2% retracement), which will distinguish between a rebound and a short-term bearish reversal. Improved US yields are an important barrier to carry traders.

Gold hits our first support, $1310

Gold continues paring gains. The yellow metal retreated to $1230, minor 23.6% retracement on December 14 to February 26 recovery. A further slide to $1210 is possible without compromising the mid-term positive trend.