Mar 17 • Morning Roll Call • 1988 Views • Comments Off on MORNING ROLL CALL

USA equities slip back after their post Fed rally, sterling and Swiss franc climb due to the hawkish BoE and SNB narrative accompanying Thursday’s interest rate decisionsbetween-the-lines1

Early Thursday morning, during the Sydney/Asian session, the Australian Bureau Of Statistics published data revealing unemployment had risen to 5.9% from 5.7% previously, as a result of the Australian economy losing 6.4k jobs, versus the forecast of creating 16k in the month of February. Data from the ABS also revealed that inflation is running at 4%, a reduction from 4.1%, but still one of the highest rates amongst ‘developed’ economies.

This varied data provides a possible warning that the Australian economy, so unilaterally dependent on China, is not necessarily in as robust health as many market commentators would like to suggest. However, the overall impact on the Aussie was minimal, although the currency did fall versus the Swissie and yen, during the overlap between the European and the New York session.

The Swiss franc enjoyed a modest rally versus its major peers on Thursday after the SNB announced interest rates were remaining at -0.75%, but intimated there may be rate rises forthcoming. Similarly sterling rallied, after the BoE’s MPC (monetary policy committee) announced the base interest rate was remaining at 0.25%, with the asset purchase programme/target staying steadfast at 435b. The accompanying narrative; that the MPC had concerns with regards to the rapid inflation rise in the UK’s economy, was taken by investors and analysts as a clue that a rise in the base rate may be imminent. In other European calendar news released on Thursday, the annual CPI rate for Europe has remained unchanged at 2%.

USA fundamental news published on Thursday proved to be inconclusive. Housing starts for the month of February were up 3%, beating expectations of 1.4%, but housing permits fell by -6.2% in the month. Whilst the weekly unemployment claims came in at 241k, just missing the forecast. Job openings (referred to as JOLTS) have improved, up to 5626, beating the forecast of 5556. The DJIA fell by 0.07% and the SPX by 0.16%.

In Europe the main indices enjoyed an extremely positive day’s trading; the STOXX 50 rose by 0.90%, UK’s FTSE by 0.64%, DAX by 0.61% and France’s CAC by 0.56%. The bullish conditions in European markets were aided by the Dutch election not resulting in a swing to the extreme right wing party, and polls indicating that support for the Front National party in France may have peaked and be subsiding, suggesting that; despite the rhetoric and inflammatory language, Europeans (en masse), still appear wedded to and unified in their support and belief of the European Union.

The Dollar Spot Index lost 0.2% on Thursday, after suffering a 1.3% fall on Wednesday, as a consequence of the FOMC rate rise. EUR/USD rose late in the day to $1.0770, reaching a five-six week high, after gaining 1.2% on Wednesday. EUR/CAD, EUR/AUD and EUR/JPY all experienced the most notable gains for the euro on the day.

GBP/USD erased early London session losses to end the day trading 0.5% higher at $1.2348. Similar to the euro, sterling enjoyed gains versus the majority of its peers during Thursday’s trading sessions, principally due to the MPC’s statement regarding inflation concerns.

West Texas Intermediate crude fell to $48.60 a barrel on Thursday, after Saudi Arabian Energy Minister Khalid Al-Falih admitted concerns regarding high levels of global inventories. Crude rose on Wednesday, after the U.S. reported that its stockpiles finally declined, for the first time in 2017.

Gold has enjoyed a considerable (circa 2.2 percent) rally since Wednesday, to end the day at circa $1,226 an ounce in New York, the precious metal is currently headed for its first weekly increase since Feb. 24th.

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

13:15, currency impacted USD. Industrial Production (FEB). USA production fell by -0.3% in January’s data, economists polled are forecasting a return to positive growth, of 0.2% in February.
13:15, currency impacted USD. Manufacturing (SIC) Production (FEB). Manufacturing production is forecast to have risen to 0.3%, from 0.2% in January.

14:00, currency impacted USD. U. of Michigan Confidence (MAR). Soft data, in terms of sentiment and confidence releases, have been extremely bullish in the USA lately. Therefore, it would come as no surprise (given the prevailing levels of optimism) if the forecast for a reading of 97, above the 96.3 printed in Feb, was breached to the upside.

17:00, currency impacted USD. Baker Hughes U.S. Rig Count (MAR 17). The current count is 768, a significant rise on this figure could affect the price of crude and therefore the U.S. dollar.


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