March 2017 – TIQL Trading

2 key insights into US economic health

Thursday 30th March gives us two important sets of data about the US economy.

Final Quarter GDP (1.30pm GMT)
Unemployment Claims (1.30pm GMT)

The first one, GDP, looks back at the final quarter of 2016, and should give an expected 2.0% based on the previously released Advance and Preliminary figures. This is in line with the Federal Reserve Bank’s plans for economic growth and the markets will probably take it in their stride.

Less reassuring but still good are the more volatile figures for the Jobless Total, or Unemployment Claims as it’s also know. This data is far more recent and is an early indicator of economic direction. In light of recent political developments going against Trumpflation, it is likely traders will take the data to heart. Predictions are for a fall in unemployment from 261k to 244k. This is good for the economy because when fewer people are jobless, the population tends to spend more. But last week pundits forecast 240k. They were way off and there’s every chance that will happen again.

As analysts have been known to get the numbers quite significantly wrong in the past, it is likely traders will wait until the data hits their desk before reacting to this one.

Why did Crude Oil do that?

via GIPHY

Sometimes you wonder what is going through the minds of those in charge. While low prices are great for everyday folk like us and economies that manufacture lots of goods, they are not great for many other economies or the price of the commodity on the markets.

Crude Oil Inventories rose by 5.0M barrels last week. Five million barrels. Up. This is the complete opposite to the plans OPEC and other producers have in mind. In fact, OPEC members, Russia and some other producers met on Sunday to discuss their cuts, but they held back on committing to further reductions in output after the current June agreement. They are, however, reducing production and trying to stabilise the price right now, but that seems to be the last thing on the minds of those getting the stuff out of the ground elsewhere. The futures prices are looking more and more dicey and day traders need to keep a close eye on any press releases from the big oil countries.

The price per barrel in today’s trading is sliding towards the $50 mark. Will it get there? There are a number of factors involved, not least this week’s data release on Wednesday 29th at 3.30pm.

Is Consumer Confidence already out of date?

From Thursday to Friday last week

Tuesday 28th March at 3pm GMT reveals the latest Consumer Confidence data from The Conference Board Inc. 5,000 average Joes are asked how they feel the US economy is doing. They talk about the current and future economic conditions as well as labour levels and business conditions. What we all want to know is whether they were asked before or after Trump tanked on Friday.

If they were asked before, there is a good chance the response was positive. But if you factor in Trump’s moment of truth when he discovered that the President of the United States is not, in fact, a dictator or king, then their answers might be quite different. Analysts are saying to expect a drop from 114.8 to 113.9 so this may have all been factored in.

Friday changed everything for the dollar and the markets know it. We will just have to wait and see.

Article 50 29th March – where will sterling go?

PM May invoking article 50

It’s finally here. The date has been set and Prime Minister May will trigger Article 50 on Wednesday 29th March. The markets are not likely to treat sterling kindly as they set course to rip their economy away from the other 27 member states. The Brits may like to indulge in empire nostalgia, but the modern reality is a little different.

This week also delivers the UK Current Account on Friday at 9.30am. analysts predict a significant fall in the deficit from -25.5B to -16.3B. If this pans out, the markets could react more positively. Though the looming financial implications of a hard Brexit may add caution to traders’ decisions.

A positive attitude from Germany

a positive German Shepherd GIPHY

The Euro is facing tough times at the moment. Brexit will be triggered by the British this week and the French may well elect a nationalist far right president in the next few months. Campaigning is well under way and National Front leader Le Pen has been to meet the Russian president, Putin. The European project is in trouble.

But hooray for Germany and their stalwart steady production base. Today saw the release of the German IFO Business Report: a well-respected survey of builders, manufacturers, wholesalers and retailers. They delivered a resoundingly positive 112.3 against the predicted 111.2 suggesting they are not fazed by either political situation.

Is it time to relax? Not really. As we get closer to the French election run-offs on 23rd April and actual election on 7th May, the markets may start to feel less secure. However, if the dollar slides more against the Euro today, some say the large continental currency may start looking more appealing in the short term.

Yellen date for the diary 23rd March

everyone’s listening – GIPHY

Chair Yellen, or Queen of US interest rates as she’s also known, of the Federal Reserve Bank is speaking at a conference is Washington DC at 12.45pm GMT on Thursday 23rd March.

After last week’s rise, traders and market makers will be looking for her to drop clues about the timescale of the next one. Three rises are on the cards this year so it can’t be too far away. Recent dollar doldrums won’t have inspired confidence and they want to know her take on matters.

Is the UK economy growing? Find out this week

looking good – GIPHY

The Consumer Price Index, released on Tuesday 21st March at 9.30am GMT, and the Retail Sales figures out on Thursday also at 9.30am GMT are key figures for the economy.

The central Bank of England uses the CPI data as the target for inflation. Pundits predict a rise from last month’s 1.8% to 2.1% when compared to prices a year ago.

Retail Sales are a valued data set as traders see domestic demand as a key insight to the health of the economy. This month analysts are suggesting a tentative return to growth with 0.4% against last month’s -0.3%.

Both predictions suggest the economy is doing well despite longer term fears around Brexit, which is due to be triggered within days.

Oil believe it when it happens

Forecasters are predicting a drop in Crude Oil Inventories on Wednesday 22nd March at 2.30pm GMT. If it comes true, it will be the first fall since the start of the year.

There has been turmoil in the world of oil production with OPEC, Russia and other producers pitted against the United States and Europe. One side faithfully cutting output as per their agreement last year, the other increasing it by millions of barrels per week. When you take into account the recent changes in the G20 stance against protectionism (it doesn’t have one any more) and Trump’s “America first” rhetoric, it makes sense. It’s oil war.

The problem for oil producers is that the glut makes storing oil for the future rather unprofitable. There is so much spare literally floating around in tankers that prices for next January are not dissimilar to those for next May. Unless there is an unexpected surge in demand, the prices seem likely to stay low, according to analysts. But what is low?

Just compare the price over the last year to that over the last five years. Data can paint a very different picture depending on your timescale.

In the crossfire – AUD (Tuesday 21st March)

via GIPHY

The Aussie dollar is often caught up in events beyond its control, buffeted by major economies attempting to gain trade advantages. What happens to currencies like USD, GBP, CNY, and EUR can send it ricocheting up and down. You only have to look at three recent Australian market news headlines from 15th, 16th and 17th March to recognise the unpredictable nature of AUD.

15th – Dollar hardly changed against USD (just before the rise)

16th – Dollar up more than one cent (just after the rise)

17th – Dollar down against the greenback (one day later)

As there have been a number of big interest rate announcements recently, the Aussie dollar has suffered. Some are even predicting it will fall over 10% against GBP with a smaller fall against the EUR by the end of 2018. Of course, it’s not just the international currency markets which affect AUD. Internal factors such as employment levels wages, the dependency of the economy on commodities, and housing also weigh in on the currency’s value.

This week the Reserve Bank of Australia reveal the factors affecting their recent interest rate decision. Tune in at 12.30am GMT on Tuesday 21st March to see how well they believe AUD will weather current storms.

How will the week end for USD?

via GIPHY

Why do we love trading USD? Not only is it a top-performing currency, but there’s so much action. While Wednesday’s rate hike seems to be a foregone conclusion for some, you can be sure there will be some movement in USD indices and it won’t stop there.

Thursday 16th has three events that would move the currency on their own. And they’re all happening at the same time: 12.30pm GMT.

Building Permits looks likely to drop from 1.29m to 1.26m. This is still good compared to a few months ago. A key indicator of economic health, traders see approvals for residential building permits as a hint of what’s coming in the future. Companies don’t invest in new homes if they don’t think anyone will buy them.

The Philly Fed Manufacturing Index has surged from 7.6 last November to a massively confident 43.7 last month, far exceeding everyone’s expectations. Forecasters are saying we will see a drop to 30.2 on Thursday. But when they said 18.5 last month, who exactly will believe them? Either which way, Americans are feeling good about their prospects of selling their wares.

Like the ice bucket challenge, we also hear the latest weekly Unemployment Claims at the same time. Soberingly, this also rose far above expectations recently when figures rose from 223k to 243k on the 9th. Some say another increase is on the cards. This gives a different edge to the day’s trading if they’re right.

The dollar week finishes off with the Preliminary University of Michigan Consumer Sentiment data on Friday 17th at 2pm GMT. This shot up in December to 98.0 and it has stayed in the high 90s since then. A slight growth in confidence is forecast from the current 96.3 to 97.1.