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04 Feb 2016
By Ipek Ozkardeskaya
Super Thursday to disclose risks
The FTSE is 100 points higher in London. A bounce in commodity and oil prices has benefited Anglo American (+9.50%), Glencore (+8.09%) and BHP Billiton (+6.48%), although the situation in UK’s oil companies is far from encouraging.
After news that BP profits slumped 91% earlier this week, Shell announced 44% slide in its Q4 profits. Royal Dutch Shell gained past 5% however as BG acquisition and growth prospects should allow the company to avoid cutting on dividends.
Despite the build in inventories, WTI has gained 12% on an aggressive sell-off in USD. Some of this can be attributed to some comments from the FOMC’s Dudley who stated that further rate hikes in the face of the current climate may not materialise.
Brutal fade in Fed expectations despite strong ADP print
Little explanation was given to yesterday’s ruthless USD move, which damaged important technical levels. EURUSD and gold rallied past their 200-day moving averages.
In New York, the EURUSD surpassed the 200-day moving average in a single move yesterday. The pair surged to 1.1161 this morning, even after ECB President Draghi stepped in to ease the Euro-bulls. Draghi warned that monetary policy cannot be relaxed about series of supply shocks, adopting a wait-and-see attitude would carry risks. As we edge towards overbought conditions (RSI 65%) on the back of Draghi’s words, but in the main on the rush to the perceived safety of the (mostly) negatively yielding Eurozone bonds, the euro market could well be handed back to the bears should the upside momentum reach exhaustion point.
The ADP released a solid jobs report yesterday, which at least verified that the jobs data was not the reason behind the USD sell-off. The US economy added 205,000 private jobs in January. The ADP employment report was weaker than the previous month’s 257,000 additional jobs, yet fairly better-than the consensus, 193,000. Due on Friday, the NFP is expected to be around 190,000 in January; this is more than 100,000 less than December print, 292,000. A soft release may offset any possibility of a Fed hike in 2016, whereas a fourth straight month of positive surprise could improve the US economic outlook, bring the Fed hawks back in the game and revive the expectation that the Fed could at least carry on with a 25-50 basis point rise before the end of the year.
The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please note that 71% of our retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing money.
