UK Current Account Friday 30th Sept

Hands up who doesn’t hate checking their bank balance. I thought so. Like most of you guys I often need a stiff drink when it’s time to peruse the old finances. If it’s bad for me, then it’s got to be worse for an entire country. Especially when the currency has taken a hit as big as the UK pound. On the plus side, it’s fantastically cheap to visit London right now. Holiday methinks?

londonholiday

The Current Account quarterly data is the balance of payments between a country’s residents and the rest of the world. Last year, 2015, the UK recorded a record level of deficit of G7 countries at 5.4% of normal GDP. Not a record to be proud of. Q1 data released in June was -32.6B against predictions of a slightly softer -27.3B. Q4 2015 gave us -32.7B was a substantial drop from the -17.5B only a quarter before that and it’s put the willies up the GBP market.

Q2 2016 predictions are for an improvement to -30.5B but I wouldn’t hold my breath about that due to the amount of volatility surrounding GBP and its decreased value since Brexit (the Brits voted to leave the EU though they haven’t actually left yet). One thing is for certain though – traders will love it and we can finish the week with a bang having some serious fun on TIQL like the cat in the cupboard. Boom.

Midweek USD plays

by sonofdirk
by sonofdirk

Get your skates on and set up your position to ride the reaction to the CB Consumer Confidence report due at 3pm GMT today. Around 5,000 random US citizens judge the state of the economy and traders take it very, very seriously. Last month delivered the third positive result in a row with a resounding 101.1, but pundits expect levels to take a hit this time around with predictions as low as 98.6. If the actual level is higher, we can expect the dollar to climb. But we all know the markets are not that predictable.

Wednesday 28th September sees three market-moving events for the dollar. First up, the Core Durable Goods Orders at 1.30pm GMT gives market watchers an insight into levels of production in manufacturing. If it’s rising, this will stimulate the economy and add value to the currency. Last month gave us a surprise upswing after two months of decline moving from -0.4% to 1.3%. But forecasters don’t think it will last and a drop to -0.5% is on the cards.  Yellen’s testimony at 3pm GMT is sure to set the cat among the pigeons when it’s time for the Q&A part of events. Traders will be paying close attention and so should you. Then, to finish off Wednesday, stick with the dollar action at 3.30pm GMT for the weekly crude oil inventories rollercoaster. Predictions have been obstinately positive despite falls for the whole of September so far and it’s anybody’s guess where it’s going this week.

model_trains_turnhout_20080511_007

Thursday 29th September keeps the dollar train rolling with the 1.30pm GMT revelation of the quarterly Final GDP figures. Less impactful than the advance results announced a few weeks back, they still rank highly in market-moving terms. Growth is forecast from 1.1% to 1.3% from last quarter. At the same time (1.30pm GMT) the US Unemployment Claims weekly figure is revealed. Early indications are for a rise to 260K, which isn’t good news for the currency, despite last week’s warmly-received decline to 252K.

Yellen
Yellen

Yellen is at it again at 9pm GMT giving a speech to the Minority Bankers Forum in Kansas. See our post about speeches this week for more details and decide on your exit strategy for your USD plays when it’s over.

Round the world with 4 currency-moving speeches this week

There’s a distinctly global vibe to Forex events this week and I feel like someone should be getting an award or talking at a rally with all the speeches being given. If you trade Euros, US dollars, the Yen or Aussie dollars, then the chances are you’ll be watching someone from a bank reading an autocue before the week is out.

Traders love Draghi, the man with the plan for short-term Euro interest rates, but will they get excited to hear him mere days after his last speech? Most likely yes, yes they will – and at 3.05pm GMT (16.05 CET) on Monday 26th September, they will get that chance when he makes an introductory statement in Brussels in front of the Committee on Economic and Monetary Affairs of European Parliament. Expect high levels of volatility in EUR pairings.

A chart showing the FX pair EURUSD
Will 1.11 hold this week on EURUSD?

If you’re in the southern hemisphere, or if you just enjoy trading Aussie dollars for that whiff of sunshine, then watch the action at 1.20am GMT on Wednesday 28th when the RBA’s Assistant Governor Edey speaks at Melbourne’s Australian Financial Review Retail Summit.

edey

He’s not the top dog at the Reserve Bank so his speeches aren’t as big a deal as some others this week, but he gives the Board Members advice on economic matters so he has clout. Clues are often subtle where Edey’s concerned so the slightest hint could send ripples or even waves through the AUD markets.

A chart showing the FX pair AUDUSD
The 0.7425 level holds for now.

Over in Tokyo at the National Securities Industry ConventionBank of Japan Governor Kuroda is giving a speech at 7.35am GMT on Thursday 29th.

A chart showing the USDJPY FX pair
Will the 100.5 level hold this week?

A key figure for the Yen’s interest rates, his speeches are picked apart like the last piece of chicken in a family bucket. JPY traders will be getting excited and we all know what happens when they do.

If some currency traders love Draghi and Kuroda and Edey, all currency traders love Yellen. This may not be technically true, but they know she’s the most influential person in the world when it comes to USD interest rates so when she has something to say every USD market goes a little haywire. I just caught myself rubbing my hands together in anticipation. It’s going to be a wild ride at 9pm GMT on Thursday 29th when she speaks at the Minority Bankers Forum in Kansas City. Expect erratic changes of direction as traders attempt to decipher and deduce any hints she may drop as to the future direction of her interest rate policies for the dollar.

A chart showing the S and P index
The S&P index has been known to move on the Yellen effect

Now I think it’s time to get started on a speech of my own. That one by Michelle Obama the other day was awesome. So inspiring, so original. Maybe I could copy a few lines from that. No-one will notice a thing.

 

 

ECB President Draghi’s glittering speech this Thursday

Glitter bombed
Glitter bombed

Last year Draghi got more than he bargained for when protestors glitter-bombed him during his speech. This time his 2pm GMT on Thursday 22nd should sparkle for other reasons as traders get a little over-excited picking apart his every word.

Will buyers come into EURUSD at previous demand?
Will buyers come into EURUSD at previous demand?

When it comes to short-term interest rates, Draghi is more influential than anyone else alive and his speech to the European Systemic Risk Board annual conference should contain some hidden gems that could reveal the future direction of the ECB interest rate policy. EUR/USD traders – your time is now.

Drilling down looking at recent price action
Drilling down looking at recent price action

USD traders – heads up on 21st

fomc

Where are you trading from? This is either going to be a late night or an early morning for you unless you’re lucky enough to be in one of the same time zones as the USA. Wednesday’s four FOMC events are big news for the dollar.

The Federal Open Reserve Committee is gearing up to release its quarterly report. This is the main tool they use to talk to investors about projected economic and monetary matters for the next two years. Significantly, its also how they communicate individual members interest rate forecasts. In June growth was downgraded to 2.0% for 2016 and 2017. Traders will want to know if there’s going to be any movement on those figures and they’re already making their plays to go long or short on USD pairs.

Sometimes short beats long
Sometimes short beats long

First up at 7pm GMT is the FOMC Economic Projections report closely followed by the FOMC Statement. Released 8 times a year traders look closely at any changes from the last report. Indications from speeches earlier in the month are that rates will hold.

Around the same time, the Federal Funds Rate are announced. This affects short term interest rates so has a direct impact on currency. It’s been at <0.50% for almost a year. But the main FOMC statement is far more attention-grabbing. So the smart move is to cast one eye over the announcement as it can move the market, but keep your other eye firmly on Statement news.

You never know what will happen at a press conference
You never know what could happen at the press conference

Once all the announcements are made the vultures press get ready for the Press Conference at 7.30pm. Juicy nuggets of info can be extracted by clever questioning so the markets are often volatile when the floor is opened up around half way through. All eyes are on the press conference webcast on the Fed’s Ustream channel. It’s a wild ride with opportunities to win (and lose) big.

Something’s brewing at the Bank of Japan

Bottoms up
Bottoms up

No, not sake but it could be trouble.

With no time scheduled yet, pundits are at odds over when the BOJ monetary policy statement will be released. Most feel it will come out after 7pm GMT but watch for updates. Scheduled for the same day as the Feds announcement and with speculation rife about what they’re going to do, the Bank of Japan is predicted to do something significant and currency traders will be poised for action. Will it be negative interest rates or buying long-term debt and selling short-term debt? Views abound about what the Bank will do.

Whatever it is, the JPY and USD will react and the BOJ Press Conference following the statement will give you even more serious fun. Expect events to last around 2 hours.

Treasure for AUD traders – 2 events to rock the markets

Tuesday 2.30am GMT

Monetary Policy Meeting Minutes

There are easier ways to find out what the RBA said
There are easier ways to find out what the RBA said

Traders would love to know what’s going on in the minds of those setting rates and creating monetary policy. And wouldn’t you know it, the powers that be are happy to oblige with Tuesday’s announcement from the RBA, two weeks after the Cash Rate was announced, giving traders an inside view of what led to the decision to keep it at 1.50%. If there’s anything unexpected this could give their hearts a little flutter and cause the AUD to jump or dive.

A chart showing the price action of this FX pair
The half way back has held on AUDUSD
A chart showing the recent price action on the AUDUSD FX pair
Will we see more short selling on this pair?

Wednesday 1.30am GMT

Mid-Year Economic and Fiscal Outlook

Treasure
Trading treasure

It’s time for the big guns to let rip. The Australian Treasury is due to release the catchily-monikered MYEFO (Mid-Year Economic and Fiscal Outlook) giving traders an overview of their fiscal performance compared to the Annual Budget plan. If they’re spending more this creates job opportunities and stimulates the economy, but if they’re borrowing too much this can negatively affect their credit rating.

Key FOREX events for USD (14th to 16th Sept)

bigger lots of buses

When is USD trading like a London bus? When you wait for ages and then everything arrives at once.

You’d think someone could plan it better, you know, spread the events out, give traders a chance to digest and react to them before the next one arrives but no, this week, it’s all happening in around 48 hours. So we’re ordering take out and setting up our plays from Wednesday 1.30pm GMT as the USD takes a ride to the end of the week.

Wednesday 1.30pm GMT

USD Import Prices

The first significant announcement of the week, this is the earliest government-released inflation data, which is why traders are interested. It’s been just about keeping its head above water in recent months so this is the first negative forecast (-0.1%). But the reality has been lower than the forecasts most of the time recently so maybe that will happen again.

Wednesday 3.30pm GMT

Crude Oil Inventories

Traders always love oil and last month’s shocking -14.5M drop against the expected 0.6M rise will be at the front of their minds this week. There’s no current forecast so it’s anyone’s guess what will happen.

Thursday 1.30pm GMT

This is the gloves off bare knuckle ride of the week as 8 major events vie for traders’ attention and the markets can expect a crazy rollercoaster ride.

colour rollercoaster

Core Retail Sales

This was better than or as predicted from April to August when it dropped to -0.3%.The Core data excludes automobile sales which have a habit of fluctuating wildly so it’s seen as a more reliable indicator of the public’s spending habits than Retail Sales, and this is a key factor for currency.

Producer Price Index

The last six months have been variable with no consistent pattern of growth or contraction. Last month produced a surprising contraction of -0.4% against the 0.1% growth forecast. Pundits are saying a tiny return to growth this month at 0.1%. The PPI is a leading gauge of consumer inflation – when producers charge more for goods and services the higher costs are usually passed on to the consumer.

Philly Fed Manufacturing Index

Around 250 manufacturers in one small district of the States are asked to rate the relative level of general business conditions and the stock markets take this very seriously. The mind boggles but it is, apparently, a key indicator of economic health. Results have been highly variable over the last six months with a massive drop from 4.7 to -2.9 between June and July then a bounce back to 2.0 in August. Predictions are for a cautious 1.1 this  month but either way currency traders will be watching closely.

Retail Sales

Consumer spending is the single biggest factor in the level of overall economic activity. This result is the earliest and broadest look at vital consumer spending data. While it has been generally positive for last six months, there was a surprise drop to 0.0% in August against the anticipated 0.4%. It’s looking worse for September with forecasts of -0.1%. Not good.

Unemployment Claims

Sit up, drink up and listen up. When people are out of work, they tend to spend less so the change in new unemployment insurance claims is serious business for the economy. Not only that but unemployment is also a major consideration for those steering the country’s monetary policy and that means interest rates. When the markets are in turmoil or more uncertain than usual, traders pay more attention. Figures dropped from 267K a month ago to 259K last week and predictions are for a rise to 262K. Not good again.

Core Producer Price Index (Core PPI)

This Index excludes food and energy so it’s not as important for the markets as the PPI also being announced at this time. It dipped last month after a few months’ increase and predictions are for a moderate rise to 0.1% from -0.3%. Don’t muddle this event up with the very important Core CPI on Friday. Traders care a lot about that one.

Current Account aka International Transactions

Currency traders are interested as this is directly linked to the demand for a currency. If foreigners are buying currency so they can do business in that country there is a rising surplus. This is a quarterly announcement and it’s been negative for a long time. Last quarter’s -125B is still a long way below figures a year ago (-110B). Forecasters currently predict an improvement of 5B (-120B).

Empire State Manufacturing Index

empire state building

Sounds sexier than it is. This survey looks at New York instead of Philadelphia and only asks 200 manufacturers but traders still rate it extremely highly and the markets are going to jump around whatever the figure is. There was a cold blow to the currency last month with an unpredicted nosedive in confidence ratings to -4.2. Not good when forecasters had been saying 2.1. This time a climb back to -0.9 is predicted, which is still not good but better.

Thursday 2.15pm

Capacity Utilization Rate

When producers, utilities and mines are working near their capacity they raise prices. This hits the customers and then we’re looking at inflation increases. It’s good for currency trading when the rate is higher than the forecast. There’s been a couple of good months recently with a rise from 74.9% to 75.9%. Indications are for 75.8% so not much change. But if there is, traders will react.

Industrial Production aka Factory Output

Another indicator with a couple of good months recently with bigger than predicted rises. This month pundits are predicting a drop from 0.7 to -0.2. Not good news for the dollar. But with everything else going on will this be enough to sway traders?

Friday 1.30pm

Consumer Price Index

Important but not half as important as the Core CPI coming out at the same time. Inflation is heavily related to consumer prices and a domino effect can cause a rise in interest rates if there is enough upwards pressure. Last month the forecast matched the reality with both at 0.0%. Predictions are for minimal growth to 0.1%.

Core CPI

This is it. One of the biggest USD figures for traders to crunch this week. Taking food and energy out of the mix removes a lot of the volatility of the CPI and the markets and the FOMC listen carefully. So should you. It’s been around 0.1% to 0.2% for months. Last month slid to 0.1% but the news on the grapevine is a nudge back to 0.2%. Good news if true.

Friday 3pm

Prelim UoM Consumer Sentiment

The last sizeable piece of action this week. Make sure to close your trades after you ride this one out; plan your strategy and your exit. How confident Joe Public feels about his finances is a major clue to his spending habits. Is he raising the financial drawbridge and tucking that paycheque under the mattress or heading to the mall to splash out. 500 average Americans tell the University of Michigan how they feel and a figure is spewed out. Confidence has been dropping since May and currently stands at 89.8 though, despite the other news this week, there’s a predicted rise to 91.0. Do they know something we don’t or are they being too optimistic?

In it to win it – an extra $10 for the week’s best trade

This is a happy squirrel

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