Jun 14 • Morning Roll Call • 1554 Views • Comments Off on MORNING ROLL CALL

Main USA markets close at record highs, as investors anticipate a rate rise announcement by the FOMC, sterling finds market support

Tuesday’s main economic calendar news began with a raft of UK inflation related data, released by the UK’s official ONS statistics body. The key inflation metric, CPI (consumer price inflation), came in at 2.9%, missing the forecast of 2.7% and the highest level reached for approx. four years. The RPI (retail price inflation), excluding mortgage payments, came in at 3.9%, and with wage rise at circa 2%, both inflation metrics pose imminent problems for cash strapped and over indebted UK consumers. Input price inflation did recede to 11.6% from 15.6%, in line with the pre-election improvement the UK’s pound has made (specifically versus the euro), in April and May.

Sterling recovered versus the euro and U.S. Dollar on Tuesday, GBP/USD closed the day out up approx. 0.8% resting on R1 at 1.2752, after slumping 0.7% on Monday. EUR/GBP closed down at 0.8786, resting at S1. Investors may be anticipating that once the horse trading over the minority government are concluded, if inflation continues to rise, then the Bank of England may consider raising rates. For now sterling has risen modestly versus its peers, as a consequence of the small Irish political party appearing to be pushing forward its deal to support the conservative minority in the UK’s parliament.

The euro experienced a mixed day, falling versus the majority of its main peers; EUR/USD ending the day effectively flat at 1.1207, resting on the daily pivot point level. European equities closed ahead on the day, with the exception of the UK’s FTSE, which closed down 0.15%. STOXX 50 closed up 0.39%, CAC up 0.40% and DAX up 0.59%. The major high impact calendar news from Europe concerned the ZEW economic sentiment survey/index, coming in at 18.6, missing the forecast of 21.8.

Looking towards the USA the main equity markets, the DJIA up 0.44% and the SPX at 0.45% closed at new record highs. There was no evidence of hard data, or earnings for quoted companies, propelling this rise, other than low impact PPI data, which mainly came in as forecast. More likely; the confidence the FOMC is likely to project, with an interest rate rise to be announced tomorrow, caused investors to bid stocks up, in the simple belief that if the Fed are so confident in the USA economy that they can raise rates, then investors should follow suit.

USD/JPY closed out the day up by 0.1% at 110.07. The dollar spot index fell by circa 0.2% on the day, the general sentiment amongst FX traders appeared to suggest that the assumed FOMC rate rise pencilled in for Wednesday, is already priced into the markets. WTI oil (West Texas Intermediate) crude ended the day at approx. $45.74 per barrel, slipping back despite at one stage being up on the day by circa 0.8%. OPEC reported rising production, offsetting expectations of further declines in U.S. stockpiles. Gold slipped by circa 0.2% percent to $1,266, recording a fifth day of losses, the longest losing streak in over a month. The precious metal held no safe haven appeal, as investors anticipate the FOMC rate hike.

Economic calendar events for June 14th, all times quoted are London GMT time

02:00, currency impacted CNY. Industrial Production (YoY) (MAY). The forecast is for a slight fall in annual Chinese industrial production growth, to 6.4%, from 6.5% in April.

04:30, currency impacted JPY. Industrial Production (YoY) (APR F). The prediction is for no change, from the reading of 5.7% in March.

06:00, currency impacted EUR. German Consumer Price Index (YoY) (MAY F). The expectation is for no change, from April’s reading of 1.5%.

08:30, currency impacted GBP. Weekly Earnings ex Bonus (3M/YoY) (APR). The forecast is for a fall to 2.0%, from the 2.1% reading recorded in March.

08:30, currency impacted GBP. ILO Unemployment Rate (3M) (APR). The prediction is for the UK’s unemployment rate to remain unchanged, at 4.6%.

09:00, currency impacted EUR. Euro-Zone Industrial Production (YoY) (APR). The expectation is for 1.4% growth, from the 1.9% figure recorded in March.

11:00, currency impacted USD. MBA Mortgage Applications (JUN 09). Mortgage applications rose by 7.1% last week, the prediction is this figure to be maintained.

12:30, currency impacted USD. Consumer Price Index (YoY) (MAY). The headline inflation rate is forecast to drop to 2.0%, from 2.2% in April.

12:30, currency impacted USD. Advance Retail Sales (MAY). Retail sales are predicted to fall to 0.1% growth, from the 0.4% registered in April.

14:30, currency impacted USD. DOE U.S. Crude Oil Inventories (JUN 09). Last week the figure was 3295k, with the oil price being extremely volatile lately, this figure will be carefully monitored.

18:00, currency impacted USD. Federal Open Market Committee Rate Decision (JUN 14). The expectation is for a rise to 1.25%, from the current rate of 1.00%.

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