Mar 3 • Morning Roll Call • 2075 Views • Comments Off on MORNING ROLL CALL

GBP/USD falls to six week low, U.S. equities retreat after record busting run, U.S. dollar rises, as bets on an interest rate hike in March rise to ninety percentbetween-the-lines1

USA equity markets found reverse gear during Thursday’s New York trading session. Technically the SPX suffered its worst day since December 28th, however, context must be attached to that statistic, given the record breaking run the index has recently experienced. Indeed, a reversion to the mean for the main indices could be experienced, if orthodox fundamental behaviour returns, once (if) the 90% expected rate rise occurs in March. A rate rise should cause an equites sell off (in theory). The SPX fell by 0.6% to close at 2,381. The DJIA fell by 0.53% to close at 21,002, with the banking sector weighing down the index with a 1.5% fall.

However, there were still signs of excessive exuberance, with Snap Inc. rising by 40% on its debut, valuing the SnapChat creator at circa $30 billion. A heady premium for a firm that lost approx $512 million in 2016 and (by its own admission in its prospectus) has no idea as to how much it can generate and how it’ll actually monetise the proposition moving forward.

Economic calendar event news for the USA was dominated by encouraging jobs numbers; the weekly unemployment claims reached a forty year low at 223k. Good economic news also came from its North American neighbour, as Canada published an annualised GDP figure of 2.6%, beating expectations of 2.0%.

Europe’s fundamental data news was broadly positive, with the exception of Swiss GDP missing the forecast coming in at 0.6% annually, versus the forecast of 1.3% and Germany’s import prices rising by 6% year on year. As to whether (or not) this represents healthy inflation remains to be seen, particularly if it bleeds into manufacturing costs, increasing export prices and hurting Germany’s export reliance. The estimate for year on year Eurozone inflation came in at 2%, whilst the bloc’s unemployment rate remained static at 9.6%.

Economic news from down under (Australia) was overall judged to be poor and caused an Aussie sell off which began in the Asian session and continued throughout the day. The trade balance deteriorated to A$1302m from expectations of A$3800m, quite a miss. Building approvals fell by 12% year on year, private house approvals fell by -3%, exports fell by -3% during the past month, whilst imports rose by 4% on the month.

European indices experienced a relatively flat day, with modest retracements registered. Germany’s DAX closed down 0.06%, France’s CAC up 0.06%, the UK’s FTSE down 0.01% and the STOXX 50 down 0.16%.

The Dollar Spot Index added 0.5%, rising for a fifth straight day to close out at the highest level seen since Jan. 20th. USD/CAD rose by circa 0.5%. As a commodity currency Canada’s Loonie generally slips in correlation with crude oil falling; WTI crude oil fell by 2.3% on Thursday, to $52.36 a barrel. EUR/USD sold off for the third day in series, falling by 0.4 percent to $1.0504. USD/JPY rose by approx. 0.6% to 114.40 per dollar, after rising by circa 0.9% on Wednesday.

Precious metals endured a significant sell off, silver ending the day at $17.79, down circa 3.9% on the day. Gold has lost its safe haven appeal since rising above $1262 on February 26th, falling by 1.4% on Wednesday, to $1235 per ounce.

GBP/USD closed the day out at circa 1.2262, some distance from its 2017 high of just over 1.2560 posted on February 22nd. Analysts polled by Reuters expect a further sell off for sterling, with some predicting a low of 1.18, once the UK moves into full Brexit mode at the beginning of April. Analysts are then predicting EUR/GBP at 87.

Economic calendar events for March 3rd, all times quoted are London (GMT) time

07:00, currency effected EUR. German Retail Sales (YoY). Germany’s retail sales data is forecast to show a move back into positive territory, with a 0.7% rise from a -1.1% fall in January.

09:00, currency effected EUR. Markit Eurozone Services PMI (FEB). The prediction is for no change, from the previous reading of 55.6.

09:00, currency effected EUR. Markit Eurozone Composite PMI (FEB). The forecast is for there to be no change, from the previous reading of 56.

09:30, currency effected GBP. Markit/CIPS UK Services PMI (FEB). The expectation is for the reading to have slipped to 54, from 54.5 previously.

10:00, currency effected EUR. Euro-Zone Retail Sales (YoY) (JAN). Retail sales in Europe are expected to have risen by 1.5%, from 1.1% in December.

15:00, currency effected USD. ISM Non-Manufacturing Composite (FEB). The forecast is for no change, on the previous reading of 56.5.

18:00, currency effected USD. Janet Yellen Gives Economic Outlook Speech in Chicago. Although late in the trading week, FX traders would be advised to stay alert with regards to Mrs. Yellen’s speech, given its potential for surprise elements.


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