May 25 • Morning Roll Call • 1737 Views • Comments Off on MORNING ROLL CALL

SPX and NASDAQ close at record highs, Fed minutes indicate three rate rises for 2017, Canadian dollar rises on interest rate rise hope

Moody’s Investor Services, one of the most respected global ratings agencies, delivered a shock announcement on Wednesday, by downgrading China’s rating for the first time in thirty years. In a statement they revealed they expect the financial strength of the Chinese economy will erode over the coming years, as growth slows and debt continues to rise. The effect on global markets was minimal (after an initial hit on Asian markets) and comes the week after China’s government announced a one trillion infrastructure project to include global partners, suggesting that the Chinese ministry of finance are well aware of the challenges ahead.

The key USA economic calendar event concerned the release of the FOMC minutes revealing the consensus decision, regarding the interest rate, when the various members of the local Feds met in early May. The narrative published appeared to suggest that a rate rise in June was still possible and that the committee was still hawkish regarding the potential for three rate rises in 2017; if they believe the economy is strong enough and the recent economic wobbles, including a very poor annual GDP figure of 0.7% released last week, is not indicative of a deeper economic malaise. New home sales data from the USA fell by -2.3% in April. On Wednesday the DJIA closed near to its record high, up 0.36%, the SPX closed up 0.25% and the Nasdaq closed up 0.40%.

European equity markets slipped during Wednesday’s trading sessions, with the exception of the UK’s FTSE, which closed up 0.40%. DAX closed down 0.13%, CAC down 0.13% and euro STOXX 50 down 0.23%. Mario Draghi’s bullish speech in Madrid, in which he suggested that the Eurozone is beginning to grow, did little to raise investor optimism. Economic calendar data from Europe was thin on the ground, Germany’s GfK Consumer Confidence Survey came in ahead of forecast, at 10.4.

Sterling had risen by circa 7% since breaching the recent lows of 1.20 in March, but has failed to maintain any momentum above the critical 1.30 handle. The recent slump in the general election polls by the incumbent Tory party has caused uncertainty, which markets and investors dislike. Sterling was 0.1 percent higher at $1.2972 and 86.18 pence per euro in the morning trading session in London. As Wednesday drew to a close GBP/USD was flat at 1.2969, whilst EUR/GBP closed out at 0.8646, up 0.3%. The euro ended the day down mostly flat versus the majority of its peers, EUR/USD closing out at 1.1214.

The Loonie (the Canadian dollar), enjoyed a rally versus the majority of its peers on Thursday, the Canadian central bank announced that the interest rate was remaining at 0.5%, the Loonie rose as a consequence. USD/CAD ending the day at circa 1.3408, having crashed through the second level of support (S2), just shy of S3. USD/JPY closed the day out at circa 111.50, resting on the daily pivot point line.

The members of OPEC have recommended another nine months of oil production cuts, whilst USA oil stockpiles have shrunk significantly, however, the news failed to improve the price of WTI oil which ended the day at circa $50.93 a barrel, down circa 0.3%, resting on the daily pivot and falling from the daily high of $51.53. Gold rose to $1258 per ounce, up circa 0.3% on the day after initial falls in Wednesday’s Asian and London sessions. Silver recovered from breaching S1 and a low of $16.89, to end the day close to R1, above the $17 handle, at $17.22 per ounce.

Economic calendar events for May 25th, all times quoted are London GMT time.

08:30, currency impacted GBP. Gross Domestic Product (YoY) (1Q P). The prediction is for the UK’s GDP to have remained unchanged at a 2.1% annual rate of growth.

08:30, currency impacted GBP. Exports (1Q P). Despite a previous boom in exports; as a consequence of the pound’s fall since the Brexit referendum decision, exports are predicted to have fallen to 0.5%, from a 4.6% growth rate in the Q4 of 2016.

08:30, currency impacted GBP. Imports (1Q P). Imports are expected to have risen by 0.8%, from the negative reading of -1.0% in Q4 2016.

12:30, currency impacted USD. Advance Goods Trade Balance (APR). The USA trade balance is expected to reveal a deterioration to -$64.5b, from the previous reading of -$64.2b.

12:30, currency impacted USD. Initial Jobless Claims (20 MAY). Weekly jobless claims are expected to rise to 238k, from the 232k reading from the previous week.

23:30, currency impacted JPY. National Consumer Price Index (YoY) (APR). Japan’s CPI is forecast to have risen to 0.4%, from the 0.2% level registered in March.

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