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U.S. markets rise after two days of losses, U.S. dollar index falls, and yen rises versus peers

Feb 23 • Morning Roll Call • 488 Views • No Comments

Equity markets in the USA broke their two day losing streak on Thursday, as both the DJIA and SPX closed up, encouraging jobless claims. Falling to a five week low, and continuous claims also falling, added to the overall mood of investor optimism during the New York session.

However, many analysts were quoting that institutional level investors still have concerns with regards to interest rate rises, which caused both indices to give back their gains, from over 1%. Several banking sources are now predicting that the FOMC could enact four interest rate rises in 2018, one more than previously suggested. This could see the key rate at 3% by December. Various energy inventories fell, causing WTI oil to rise by circa 1.5%, whilst gold ended its losing streak, closing out up circa 0.1% on the day.

Other North America news saw Canada’s retail sales plunge; the two key readings falling by -0.8% and -1.8% in December, causing a severe sell off in CAD, after the sales’ falls were announced. Yen jumped by circa 1% versus the U.S. dollar, whilst also rising sharply versus all of its main peers.

European news firstly centered on the various German IFO readings, all three missed forecast marginally. Thereafter, focus turned to the U.K. and various readings which disappointed markets. The second GDP estimate fell to 1.4% from 1.5%, business investment flat lined to 0.00%, whilst exports shrunk to -0.2% in Q4 QoQ, imports rose by 1.5% in the same quarter. As a consequence of these four readings, the prevailing analyst opinion is that the manufacturing and exporting renaissance that many were predicting for the U.K. due to a weak pound is quickly vaporizing as a practical theory.

The U.K. FTSE 100 fell, whilst the pound experienced gains versus several peers. The ECB account/minutes of the policy meeting for January 21st-22nd was released, reading between the lines the overall tone was neutral, neither dovish or hawkish, the translation is that the ECB will not taper its APP earlier, or more aggressively and the prospect of any interest rate rises in 2018 are not on the radar.

U.S. DOLLAR

USD/JPY slumped through the three levels of support, falling through the 107.00 handle, which the major currency pair had held as a level over the previous three days. Price is still significantly below both the 100 and 200 DMA, sited at circa 111.00. At the close of play price was at 106.74, down circa 1%. USD/CHF whipsawed in a wide range throughout the day, initially rising through to R1 in the Asian session, the currency pair began to plunge, eventually closing out the day down approx. 0.6%, on the second line of support S2, at 0.932. USD/CAD rose sharply, taking out the second level of resistance, before giving back some gains to close out at circa 1.270, up approx. 0.2%.

STERLING

GBP/USD whipsawed in a wide range with an eventual bias to the upside, initially plunging through S1 in the European session, cable recovered to breach R1 to then reject the level, closing out the day at 1.395, near to the daily pivot point. Sterling fell versus both CHF and JPY, as both currencies attracted safe haven bids. GBP/CHF fell through S1, closing the day out down circa 0.4%, just above the 1.300 handle at 1.301.

EURO

EUR/USD reclaimed some of the mean reversion losses experienced since Feb 18th when the major currency pair breached the 1.2500 handle. The pair broke the recent three day in series loss by closing out the day up approx. 0.3% at 1.233. EUR/GBP whipsawed in a tight range with a slight bullish bias, breaching R1 early in the European session, before retracing close to the daily PP, closing out up circa 0.1% on the day at 0.883. EUR/CHF eventually traded in a wide bearish daily range after initially breaking up through the daily PP, closing down 0.6% on the day, at 1.150, the currency pair has traded in a tight range now for approx. ten days.

GOLD

XAU/USD whipsawed in a tight range with an eventual bias to the upside, initially falling to S1 in the European session down circa 0.3%, whilst printing an intraday low of 1,320. The precious metal security recovered to break up through the daily PP, eventually closing out the day up approx. 0.1% at 1,331 close to the daily high of 1,322.

INDICES SNAPSHOT FOR FEBRUARY 22nd.

• DJIA closed up 0.66%.
• SPX closed up 0.10%.
• FTSE 100 closed down 0.40%.
• DAX closed 0.07%.
• CAC closed up 0.13%.

KEY ECONOMIC CALENDAR EVENTS FOR FEBRUARY 23rd.

• EUR. German Exports (4Q).
• EUR. German Imports (4Q).
• EUR. German Gross Domestic Product w.d.a. (YoY) (4Q F).
• EUR. Euro-Zone Consumer Price Index (YoY) (JAN F).
• CAD. Consumer Price Index (YoY) (JAN).

CALENDAR RELEASES TO MONITOR CAREFULLY ON FRIDAY FEBRUARY 23rd.

Germany’s position, at the heart of the Eurozone’s manufacturing base, will be confirmed if the Q4 reading comes in at the highly impressive 2.2% which is forecast. Imports are predicted to come in at 1.4% growth for the same period, once again Germany will be providing a model and impressive example of how an efficient country’s economy creates a trade surplus and a balance of payments surplus. Germany’s GDP is forecast to come in at 2.9% YoY, close on double the growth performance the U.K. economy registered this week.

The Canadian dollar slumped versus its peers on Thursday, as retail sales numbers disappointed the market by missing the forecasts. Investors may have been also eyeing the latest CPI figure, due to be released in the New York session, as if CPI falls as predicted then the BOC (central bank of Canada) will be far less likely to raise the interest rate, in the short to medium term. Therefore traders may become more bearish, in relation to the value of CAD.

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