Three decent European sessions this week look set to come to an end this morning as uncertainty over the next steps for Federal Reserve interest rate policy and another slide in commodity prices serve to keep investors on edge.
If truth be told the incessant speculation as to whether the Fed will act next week is becoming somewhat tiresome with the “will they, won’t they”
speculation prompting the feeling that they should simply rip the band aid off and have done with it, one and done so to speak.
Certainly the gains of the last few days have been prompted by a belief that we will get further easing measures from Chinese policymakers, as well as entreaties by eminent economic organisations like the IMF and World Bank
, urging the Fed to be cautious, with respect to what it does when it meets next week.
These promptings from the side lines have prompted a tide of opinion that some believe the Fed will find difficult to ignore, however a strong (JOLTS) new job openings number for July,
and another slide in crude oil prices, prompted a renewed bout of nervousness, and sent US stocks tumbling into negative territory after an initial strong opening, with not even an Apple launch event managing to keep a floor under the market.
This week’s weak August Chinese trade numbers have been followed this morning
by the latest inflation numbers for August from the world’s second biggest economy, and they have once again reinforced concerns about the low inflation outlook
While CPI for August came in at 2%, above expectations due to rising pork prices, factory gate prices continued to collapse.
Having fallen at their fastest rate since October 2009 in July, they continued their downward plunge, coming in this time at -5.9%, well outside expectations of a -5.5% decline.
This weak US finish, is set to see European markets open lower this morning,
with the main focus for today set to be on the latest Bank of England rate meeting, as well as the latest minutes.
Last month we got the first dissent this year amongst MPC policymakers
when external member Ian McCafferty broke ranks to argue for a 0.25% rise in interest rates. Somewhat surprisingly he wasn’t joined by his partner in crime from last year, Martin Weale, who 12 months ago joined him in pushing for a rise in borrowing costs.
Expectations for the voting patterns this month aren’t expected to change
, given the direction of travel of the economic data since the August meeting. Since then unemployment has edged slightly higher, while other areas of the economy have come in below expectations, expanding at a much lower than expected rate. Given this it would be surprising if we get a change from the 8-1 split we saw in August, which means the tone of any statement is likely to be a key driver of any sterling move.
Back in the US the latest weekly jobless claims data are expected to come in at 279k.
– found support at the 100 day MA yesterday just above 1.1100, and while above here and the 50 day MA the risk remains for a return towards the 1.1400 level, but we need to get back above the 200 day MA at 1.1280 first.
– the tweezer bottom at 1.5170 and bullish engulfing day seen this week has the potential to see a sterling move through 1.5430 towards 1.5520. Yesterday’s pullback has thus far held above support at the 1.5330 area. A move below 1.5170 argues for a test of the May lows at 1.5080.
– we’ve so far managed to hold above the 0.7230 level, and any bounce needs to get beyond the 200 day MA at 0.7360. Only above 0.7400 argues for a move towards the May highs at 0.7485. Below 0.7230 suggests a return to 0.7180.
– yesterday saw the US dollar pull back above the 200 day MA with a view to retesting the high of last week at 121.75. The US dollar still looks vulnerable to a return to the 116.20 area seen a couple of weeks ago, but for now appears to be range trading between 118.50 and 121.50.
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