Feb 17 • Morning Roll Call • 2264 Views • Comments Off on MORNING ROLL CALL

Sterling and the dollar fall, as investors speculate on the timing of the next USA interest rate risebetween-the-lines1

Although our morning roll call generally concentrates on the previous day’s European and American news, whilst also prepping our clients to be aware of the coming day’s news, we thought we’d start off by mentioning (and therefore reminding our clients of) happenings in the Southern Hemisphere and the East.

China published information on Thursday that might prove to be prescient; their foreign direct investment fell by -9.2%, versus the expectation of a 1.4% rise. Meanwhile Australia, an economy that has enjoyed spectacular expansion over recent years, due primarily to its close proximity to China, saw its labour participation rate fall marginally to 64.6%. The unemployment rate fell slightly, to 5.7% from 5.8%. However, the continent appears to be suffering from a similar malaise to the USA; the labour participation rate is extremely low and indicating early signs of harmful, generational divides.

If China wobbles, or if it becomes the next “big short”, then Australia will be hit first. The Aussie sold off sharply on Thursday morning; AUD/CHF, AUD/JPY, AUD/NZD all slumping through the second level of support, whilst EUR/AUD crashed up through R3.

In the USA, the usual mixture of polar opposite fundamental news continues to be reported; monthly housing starts have fallen by -2.6%, but monthly building permits have risen by 4.6%. Jobless claims rose, as did continual claim numbers. By far the most spectacular economic calendar news of the day was the Philadelphia Business Outlook index, which rose to 43.3, a thirty three year high, from the previous reading of 23.6, smashing expectations of a fall to 18.

Having initially rallied early in the New York trading session, pushing up through R2, the DJIA index fell back to finish the day close to the daily pivot point, closing at 20,619. The SPX closed down marginally at 2,347 and the NASDAQ down to 5,814. European markets retreated sharply, STOXX 50 down 0.38%, DAX down 0.31%, CAC down 0.52% and the UK’s FTSE closed down 0.34%.

The Dollar Spot Index lost 0.3%, after the U.S. housing and jobs data failed to impress investors. USD/JPY fell by circa 0.8% on the day to 113.27, yen was the best performing currency of the day, behind the Swiss franc, in the seventeen main currency peers.

Oil advanced by circa 0.6% to $53.20 a barrel, after a USA government report on Wednesday revealed that U.S. crude inventories rose to their highest levels (in weekly data) going back as far as 1982. Gold rose for a third day in series, gaining 0.6% to $1,238 an ounce. Silver finished the day at $18.06 per ounce, up circa 0.5% on the day.

GBP/USD was close to flat on the day at 1.248, but versus yen and the Swissie sterling fell sharply. EUR/GBP finished the day close to 0.8545, up circa 0.7%, whilst EUR/USD gained circa 0.7% at 1.0669.

Economic calendar events for Friday February 17th, all times quoted are London (GMT) time

09:30, currency effected GBP. Retail Sales (YoY) (JAN). The forecast is that the UK’s retail sales will have fallen moderately to 3.9%, from the previous reading of 4.9%.

09:30, currency effected GBP. Retail Sales Inc Auto Fuel (YoY) (JAN). A wider measurement for the UK’s retail performance includes auto fuel, the expectation is for a fall to 3.4%, from the previous reading of 4.3%.

15:00, currency effected USD. Leading Indicators (JAN). The leading indicators previous reading was 0.5%, there is an expectation that the reading will remain static.

18:00, currency effected USD. Baker Hughes U.S. Rig Count (FEB 17). As always the rig count for the USA will effect the price of WTI oil and the value of the dollar. An increase from current levels of 741, would indicate that USA oil producers are feeling confident enough to increase rigs as a consequence of the oil price hovering around a price of $52 a barrel, making new exploration programmes financially viable.

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