Stocks rally, inflation sticks, earnings on tap

Stock markets rose in early trade as investors parsed the latest signs of inflation and the central bank reaction function, whilst earnings season has got underway across the pond with some decent numbers from JPMorgan. Wall Street rose mildly, snapping a three-day losing streak. VIXX is off sharply, which maybe reflects increasing comfort that the market has stabilised, if not able to make new highs just yet.

Earnings season gives investors a chance to ignore some of the noise and market narratives and get into actual numbers. Only this time we expect the corporate reporting season to underline the inflation narrative – the question is whether it’s just inflation or stagflation. Probably we get a bit of both – watch for sandbagging. JPMorgan numbers were positive, but as ever the stock fell despite beating on the top and bottom line. Profits were boosted by better-than-expected loan losses. Trading revenues were robust, asset and wealth management strong, loan growth improving and likely to pick up in 2022. Delta Air Lines also posted numbers that topped expectations including a first quarterly profit ex-state aid since the pandemic. But higher fuel costs and other expenses will hit the fourth-quarter profit – shares fell over 5%. Today sees Citigroup, Bank of America, Morgan Stanley and Wells Fargo report.

Chinese producer price inflation rose 10.7% in September, the highest level since 1996. The China PPI number is an important leading indicator for global consumer inflation. On that front, US consumer price inflation accelerated in September to 5.4%, with prices up 0.4% month-on-month. Core rose 0.2% from August, leaving prices ex-volatile items like energy and food at 4%. US PPI inflation today is seen at +0.6%, +0.5% for the core reading.

Minutes from the Fed’s last meeting indicated the US central bank is likely to commence tapering asset purchases next month. “Participants generally assessed that, provided that the economic recovery remained broadly on track, a gradual tapering process that concluded around the middle of next year would likely be appropriate,” the minutes said.

Post the CPI and FOMC minutes we see Treasury yields lower, the dollar lower, gold firmer. Lower bond yields lifted megacap growth, or at least provided some marginal buying excuse to do so. Inflation is still hot but not getting much hotter. Narrative has clearly exited team transitory to support team sticky. The question now is whether we are at peak in/stagflation fears and this allows the market to move on to start pricing for 12-18 months hence, by which time you’d feel a lot of the post-pandemic bottlenecks and pressures will have eased. The problem for this – still team transitory if you like – is that anything that raises the costs of getting goods from source to consumer is inflationary and the pandemic has certainly been that. But so too is the shift in globalisation trends, eg Brexit.

Sterling is firmer as the dollar weakened in the wake of the CPI report. GBPUSD has broken free of the trend resistance and with bullish MACD crossover in play. Bulls would like to see the previous two highs on the MACD cleared (red line) to confirm reversal of the downtrend since May.

GBPUSD Chart 14.10.2021

Chart: Dollar index easing back to the middle of the channel, but faces pressure from bearish MACD crossover.

Dollar Index 14.10.2021

Yesterday I noted that gold was likely to face some volatility and break free from its recent consolidation. CPI numbers were indeed the catalyst and we saw gold prices hit the highest in a month, approaching $1,800 before pausing. Near-term, consolidation again with the 1hr chart showing a clear flag pattern with the lower end capped by the 23.6% line.

Gold Chart 14.10.2021

Chart showing gold price movements on 14.10.2021

Oil has firmed, with WTI recovering the $81 handle, though price action remains sluggish and sideways for the time being. OPEC yesterday cut its global oil demand growth forecast for 2021 but maintained its 2022 view and cautioned that soaring natural gas prices could boost demand for oil products.

OPEC cuts its demand growth forecast for 2021 to 5.82 million barrels per day, down from 5.96 million bpd. As we noted some months ago, it was always likely that OPEC would need to trim its 2021 forecast since it had always backdated so much of that extra demand to come in H2. The original 6m bpd forecast implied 1m bpd in H1, 5m bpd in H2, which always seemed optimistic. Critically, though, it was not wildly optimistic – demand has come back strongly after shrugging off the summer Delta blues. The cartel maintained its 4.2m bpd growth forecast for next year. EIA inventories today – a day late due to the Columbus Day holiday – forecast 1.1m build.

Crude Oil Futures Chart 14.10.2021

Nat gas – holding the trend support and 20-day SMA, bearish MACD crossover still in force.

Natural Gas Chart 14.10.2021

Hays shares +4% as fees rose 41% from a year ago. Strong leveraged play on record numbers of job vacancies and staff shortages. Shares have been flat the last 6 months, though +17% YTD, +45% the last 12 months leaves not a lot of room left on the table.

Dunelm still performing strongly against tough comparisons. Total sales in the first quarter increased by 8.3% against a very strong comparative period in FY21, when sales grew by 36.7%. Gross margins were down 10bps and expected to be 50-75bps lower than last year for the full year. Management warned on supply chain problems and inflation but stressed that good stock levels should provide them some cover. Some way to go to for the shares to recover recent highs but encouraging signs.

Stocks rally into quarter end

It’s month and quarter end. Scores on the doors are FTSE 100 up 1.6% for the quarter, 0.5% for September, which is not bad going considering the kind of volatility we have seen. Less positive for the US indices with the S&P 500 down 3.6% in September, just holding onto its quarterly gain of 1.4%. The Nasdaq 100 is down 5% this month. The DAX is down for both the month and the quarter. Hang Seng –15% almost for the quarter after all the tumult for tech stocks and Evergrande. Three-quarters of the way into 2021 and the S&P 500 is up 16%, the FTSE 100 up 10% and the DAX up 12%. The FTSE All World Index – a measure of global stocks – is lower for September, flat for the quarter, but still up 26% over the last 12 months. Flattish performance this quarter reflects stagnating growth rates globally and a rocky month we have just seen. September lived up to its promise for volatility, October is set to bring more with inflation, central bank tightening and slowing growth combining to create a less positive backdrop for equity markets. Investors should also be keeping a close eye on Washington – whilst a default is unthinkable – the merry dance keeps bond markets guessing.

This morning European stock markets opened firmly in the green after a broadly positive session in Asia, though shares in Tokyo and Hong Kong fell. The selloff on Wall Street on Tuesday failed to gather steam, with the broad market managing a mild gain yesterday, though the Nasdaq notched a mild decline as the pressure from higher bond yields and inflation concerns persisted.

Boohoo shares tumbled 10% as the company warned that rising costs were hitting margins. Management warned on supply chain and wage costs, whilst a higher number of customer returns and ongoing business investment were also a factor in the lower margin guidance. Boohoo might be at the sharp end of rising input inflation but it’s a marker for the rest of the market. We might expect to see other companies performing a similar degree of expectation management, albeit there is always the chance some will be sandbagging.

The FTSE 100 broke clear of the recent range to notch its best since Sep 7th, clearing a high above 7,150 and taking back into the area traded in the second half of August. Weakness in sterling might be a factor in its favour.

Dollar on the rampage: Sterling continues its run lower despite UK growth being revised higher than earlier estimates. GDP rose by 5.5% in the second quarter, above the initial indication for growth of 4.8%. It means the economy is about 3.3% below where it was before the pandemic. Meanwhile, house prices chalked up a 5th straight month of double-digit rises. Cable is still in the doldrums however after two large down days, with the 1.340 round number support tested this morning. Fears that the Bank of England will be raising rates just as growth is stagnating is hurting sentiment towards the pound a touch, whilst the dollar is going gangbusters. DXY has broken above 94 with an exceptionally strong move yesterday and EURUSD has a 1.15 handle again for the first time since July last year. USD is just moving a little lower in early trade after yesterday’s rampage.

Briefly:

• China’s manufacturing sector entered contraction for the first time since the pandemic

• Oxford Nanopore Technologies shares open at 545p on debut, above the IPO price of 425p, extend gains to trade +40% higher around 588p.

• Look ahead to German inflation later in the session, plus more from Powell and a raft of Fed speakers. Chicago PMI and weekly unemployment claims also on the tape alongside the final US Q2 GDP reading.

الأسبوع المقبل: هل تدفع بيانات نفقات الاستهلاك الشخصي الأمريكية تدريج الفيدرالي؟

على جدول أعمال هذا الأسبوع: نودع إنجيلا ميركل، حيث تواجه ألمانيا مستقبلًا دون قيادتها لأول مرة منذ أكثر من عقد. لدينا أيضًا مجموعة من إصدارات البيانات الضخمة من الولايات المتحدة تشمل معيار التضخم المفضل لدى الفيدرالي، وإحصائيات الناتج المحلي الإجمالي الكندي. هل ينتكس مرة أخرى؟

نعلم جميعًا أن الفيدرالي يحب بيانات نفقات الاستهلاك الشخصي. فنفقات الاستهلاك الشخصي هي معيار التضخم المفضل لديه، وهو معيار يمكنه أن يفرض ذلك التدريج الذي يُناقش دائمًا منذ وقت مبكر، بحسب تقرير أغسطس.

يُجمِع السوق إجماعًا عامًا على أن الفيدرالي سيبدأ التراجع عن دعمه الاقتصادي في نوفمبر أو ديسمبر، لذا فالسؤال الآن يدور حول رفع المعدلات. لقد رفع الفيدرالي بالفعل توقعات تضخم نفقات الاستهلاك الشخصي الأساسي لعام 2021 إلى 3.7% بدلًا من 3% في يونيو، فهم يدركون أنه آخذ في الارتفاع. لقد أعلن أيضًا الرئيس بويل إلى حد كبير أن الفيدرالي سيبدأ التدريج هذا العام. السؤال الآن هو ما إذا كان يتعين على الفيدرالي مراجعة هذه التوقعات لتصبح أعلى من ذلك، وما الذي قد يعنيه هذا بالنسبة لمسار رفع معدلات الفائدة. سيؤجج أي تقرير يتجاوز التوقعات هذا الأسبوع المخاوف من أن يكون الأمر كذلك.

هناك عوامل خارجية أخرى تلعب دورًا. ينبغي الإشارة أيضًا إلى أن قفزة يوليو البالغة 0.4% كانت متماشية مع التوقعات وأظهرت هدوءًا مقابل أرقام يونيو.

بلغ معدل التضخم العام في يوليو 4.2%. ومرورًا ببيانات مؤشر سعر المستهلك الصادرة حديثًا، ارتفعت تكلفة البضائع الاستهلاكية بنسبة 5.3% في أغسطس. كان هذا متماشيًا مع التوقعات. قد يكون هذا مؤشر أيضًا للاتجاه الذي تتجه إليه بيانات نفقات الاستهلاك الشخصي.

قال الفيدرالي إنه راض عن ترك التضخم يتجاوز هدفه البالغ 2%، حيث إنه يعتبر المستويات المرتفعة الحالية «انتقالية».

تخرج الولايات المتحدة من اقتصاد الجائحة، كما هو الحال مع كل الاقتصادات الكبرى، وتحاول أن تصل إلى شكل من أشكال الحياة الطبيعية. قد يكون الوضع هو أن التضخم الحاد سيواصل سفع الاقتصاد قبل أن يخمد ويختفي في 2022.

تصدر أحدث قراءات نفقات الاستهلاك الشخصي يوم الجمعة.

يرتبط بهذا ثقة المستهلك الأمريكي. منطقيًا، تشير الأسعار الأعلى إلى انخفاض في ثقة المستهلك. انعكس هذا على بيانات أغسطس، وقد يكون الحال هكذا عندما نحصل على بيانات سبتمبر بعد ظهر الثلاثاء.

انخفضت ثقة المستهلك في أغسطس إلى أدنى قيمة في ستة أشهر. حيث هبط مؤشر Conference Board إلى 113.8 من قراءة معدلة بلغت 125.1 في يوليو.

قالت لين فرانكو، المدير العام للمؤشرات الاقتصادية في Conference Board، في بيان لتفسر الهبوط، «إن المخاوف بشان المتحور دلتا، وبدرجة أقل، ارتفاع أسعار الغاز والطعام، نتج عنها نظرة أقل إيجابية للظروف الاقتصادية الحالية وتوقعات النمو في المدى القريب».

لقد سُجلت أكثر من 39 مليون إصابة بكوفيد 19 في الولايات المتحدة منذ بداية الجائحة وحتى الآن.

بعيدًا عن الولايات المتحدة، تطوي ألمانيا صفحة ولاية أنجيلا ميركل كمستشارة. بعد 16 عامًا تتنحى ميركل، مما يمنح انتخابات اليوم جوًا من التغيير الجديد المثير.

بحلول نهاية اليوم، ستحظى ألمانيا بمستشار جديد. قائد الحزب الديمقراطي الاجتماعي أولاف شولتس كان متصدرًا في الإعدادات للانتخابات، متجاوزًا المنافسين من الاتحاد الديمقراطي المسيحي والخضر.

ومع قول هذا، فإن الاعتقاد السائد هو أن الخضر، الذين كانوا في طريقهم لتحقيق أفضل نتائج لهم على الإطلاق قبل أن يذهب الألمان إلى استطلاعات الرأي، قد يصبحون الشريك الرئيسي للحزب الديمقراطي الاجتماعي في ائتلاف جديد.

خبيرتنا في الاقتصاد الكلي والسياسة هيلين توماس استعرضت الانتخابات الفيدرالية الأخيرة في ألمانيا. هل تثبتت صحة توقعاتها؟

بالحديث عن الانتخابات، صوت الكنديون مؤخرًا في موجة جديدة من التغيرات السياسية، مع تمسك رئيس الوزراء ترودو بمقاليد السلطة لفترة ثالثة. تهددت الأغلبية الليبرالية، وهو ما قد يدفع اقتصاد الدولة لتحريك الفائدة.

صدرت هذا الشهر أرقام الناتج المحلي الإجمالي الكندية شهر مقابل شهر بعد انكماش بنسبة 1.1%. دعت التقديرات إلى نمو بنسبة 2.5%، لذا حتى مع الانتخابات المبكرة التي أبقت ترودو في السلطة، فإن التحديات التي كانت تواجهه من قبل هي نفسها تحدياته التي يواجهها مرة أخرى.

بحسب محافظ بنك كندا تيف ماكلم، فإن التعافي الاقتصادي «سيتسمر في احتياجه نفس مستوى الدعم الاستثنائي». ليس متوقعًا حدوث أي تغييرات في السياسة الاقتصادية، بالرغم من الناتج المحلي الإجمالي الباهت الذي صدر الشهر الماضي. ربما نرى انعكاسًا هذا الشهر، أو تعكيرًا محتملًا للصفو بسبب حماسة الانتخابات.

أهم البيانات الاقتصادية لهذا الأسبوع

Date  Time (GMT+1)  Asset  Event 
Sun 26-Sep  All Day  EUR  German Federal Elections 
       
Tue 28-Sep  2.30am  AUD  Core Retail Sales m/m 
  3.00pm  USD  CB Consumer Confidence 
       
Wed 29-Sep  3.30pm  OIL  US Crude Oil Inventories 
       
Thu 30-Sep  2.00am  CNH  China Manufacturing PMI 
  1.30pm  CAD  GDP m/m 
       
Fri 01-Oct  8.55am  EUR  German Final Manufactuing PMI 
  1.30pm  USD  Core PCE Index m/m 
  3.00pm  USD  ISM Manufacturing PMI 

 

Fed to announce QE taper?

Whilst markets do not expect the Federal Reserve to race towards tapering asset purchases – the soft jobs report did for that – there is a broad consensus in the market that it will begin dialling back the pace of its QE programme from November. That means this week’s meeting may be an appropriate moment for the Fed to give the market fair warning. Or not. In a sense it doesn’t matter much what they say or don’t say on tapering – the risk lies in what the Fed does or doesn’t say about rate hikes. And though Monday’s market sell off may have caught the Fed off guard, with stocks just 4% off record highs and credit markets accommodative, there is not any reason for panic. Stocks have been rolling over since the weak jobs report, and Fed officials should be prepared to look through some softer data and mild pullbacks in equity markets.

Last week’s CPI inflation clouded the outlook a touch – it was a little softer than expected, giving the Fed some more breathing space. More importantly, the very weak August jobs report suggests the Fed might not want to nail its colours to a November taper launch just yet. It could signal it still believes that tapering is appropriate this year without giving a fixed schedule. But we’re talking on the margins here – expectations still squarely on the Fed to taper this year, November seems likeliest. And the bounce back in retail sales in August should give policymakers some confidence that the worst of the Delta effect – a notable chilling of confidence and spending (and hiring) – is over. So too the fact jobs openings are very high and business confidence is improving again.

Investors will be most interested in how policymakers assess the pace of the labour market recovery, and whether they believe inflationary pressures are becoming less transitory than they thought. Close attention will be paid the latest round of economic projections for a guide on whether the Fed is changing its mind on the pace of inflation and growth. My own view is that we get a Fed that is more ready to accept – at least in the projections and dots, if not Powell’s words – that inflation is stickier than they thought it would be.

And the dot plot will be scrutinised of course. The last round brought the first rate hike into 2023, but there could be an even more hawkish shift calling for lift-off sometime next year once the tapering is complete. We’ve been hearing a fair bit from some of the more hawkish members of the FOMC lately about getting on with it, but the central view of the Powell/Clarida/Williams ruling triumvirate is more dovish – so dots could offer a more hawkish outlook than is the case.

In March, 4 Fed officials expect hikes in 2022 and seven Fed officials in 2023. In June, 7 Fed officials see hikes in 2022, while 13 fed official see hikes in 2023.

Fed Dots Matrix 21.09.2021

On inflation – we surely have to see some uplift to the median forecasts for 2021/2022 which would accompany a more hawkish looking dot plot/communique. The forecasts just look plain wrong now.

Fed Inflation Forecasts 21.09.2021

Stocks stage a bounce after Monday selloff

A battling close lifted the spirits on a very tough day for equity markets on Monday. European markets are taking that bounce at the death on Wall Street – and a firmer close for Europe – and rallying this morning after a drubbing in yesterday’s session. Basic resources leading the way – what went down furthest yesterday is bouncing the most today. Shell rallied 3% in early trade, whilst IAG continued to catch bid on the reopening of the lucrative transatlantic trade. The airline group trades +6% after a double-digit rally yesterday as the US said it would let UK and EU travellers back in. Lufthansa is also up more than 4%.

Question now is whether this rally has enough puff or if there is a tendency – as I suggested last Wednesday – to sell into rallies rather than buy the dip. Not a lot of data to get in the way and a two-day Fed meeting that starts today suggest risk appetite will be moderate for the time being. Market indicators are flashing – US 10yr swap spreads at widest in 6 months, Vix spiked to its highest since May. To answer this – have market fears that led to the sell-off gone away or been fully priced? For now, I like a -10% decline rather than just 5% but so much depends on what the Fed delivers tomorrow.

The S&P 500 closed down 1.7%, its worst daily decline since May, but rallied a solid 50pts in the last 45 minutes or so of the session. That ought to offer some encouragement for bulls that there are still dips to be bought but we should caution that the uptrend is broken, and we should look for recovery of the Sep 14-16 highs around the 4,485 mark for a sign that the downswing is over. The Nasdaq fell 2.2%. Shares in Tokyo fell 2% as it caught up following a holiday – just wait until Chinese equity markets reopen on Wednesday. Hang Seng almost flat, Evergrande down a little over 1% as the panic moderated.

European stocks closed off the lows: FTSE –0.86% at 6,904, having touched an intra-day low of 6,8027. The DAX finished –2.3% at 15,117, having hit a low of 15,132. Bid started to come through just ahead of the US cash open- which though soft – was encouraging as it marked the low of the day for the futures. 4,350 is the key near-term support for the S&P 500, eyes down for the 200-day SMA at 4,100, having tested the 100-day SMA at 4,326 with a low of 4,305 yesterday.

Briefly:

• Coinbase stock fell 3.5% as the company dropped plans to launch its Lend programme, following a major spat with the SEC.
• Tesla dropped 4% as regulators took aim at the carmaker’s self-driving function. The US National Highway Traffic Safety Administration (NHTSA) has already announced an investigation into Tesla’s Autopilot over its possible involvement a number of crashes. Now the National Transportation Safety Board (NTSB) is weighing in, calling the approach Tesla is taking “misleading and irresponsible”. Jennifer Homendy, the new head of the regulator, told the WSJ that “[Tesla] has clearly misled numerous people to misuse and abuse technology.”
• Shares in Universal Music Group surged on debut in Amsterdam, rallying +35% above the reference price after its spin-off from Vivendi, which declined 17% on the dilution. Tomorrow will be a difficult second album for the biggest listing in Europe this year.
• Minutes from the Reserve Bank of Australia reiterated that there will be no rate rise until 2024 and that the Delta variant “delayed, but not derailed, the recovery”.
• Stagecoach +17%, National Express +5% on news that they are exploring a merger that would create some big synergies and an even bigger national travel operator. Immediately I think competition concerns might be a problem. Shares in the pair have been cut by the pandemic – a tie-up makes sense.
• Return of sporting events lifted Compass, with revenues +86% over 2019 levels. Shares just traded a tad light on the news.
• Kingfisher shares down 5% to the bottom of the FTSE despite strong performance and a hike to the dividend. The interim dividend is up 40% and LFL sales up 22.8% and corresponding 2-year LFL up 21.3%. Retail profits rose 45%, though free cash flow was 30% lower as result of the reversal of working capital inflow in the prior year related to inventory. But H2 is up against some very tough comparisons as Kingfisher was a big winner from lockdowns. Management expect LFL sales to be between -7% to -3% (previously -15% to -5%), with corresponding 2-year LFLs of +9% to +13%. Full year adjusted pre-tax profit is now seen in the range of c.£910 million to £950 million. Always going to be incredibly tough for KGF after the monster rally during the pandemic on some pretty amazing performance – investors will want to see more on the longer-term strategy on how to carry on the momentum.

Elsewhere, Bitcoin dropped to its weakest since the start of August having crashed through its 200-day SMA as the entire crypto space was smashed down as it was caught up the broad market sell-off. The riskier the asset, the quicker it is to be sold in times of stress, so hardly a surprise that crypto takes a beating whenever markets turn.

New highs for the dollar were made yesterday but just seeing some pause in early trade this morning. EURUSD still looking weak and bearish MACD still in play. Bit of RSI divergence to watch that might call for a flip as dollar strength looks overdone.

EURUSD Chart 21.09.2021

GBPUSD: Again some pushback from sterling bulls this morning – RSI/MACD divergence may be calling for a rebound once the descending triangle plays out.

GBPUSD Chart 21.09.2021

What is Forex trading and how can you start?

If you’re a newcomer to the world of forex trading, it might seem a bit intimidating. In this beginner’s guide, we run through the basics so you can start your FX trading journey.

Forex trading?

What is forex?

Forex, also shortened to FX, stands for foreign exchange. In practice, it’s the exchanging and trading of different currencies.

FX is the most popular trading activity in the world. Every day, $6 trillion – more than the GDP of the UK and France put together – exchanges hands.

A number of different types of traders are involved in the FX trader, including banks, companies, individual retail investors, and even governments.

There is no centralised exchange when it comes to Forex. It’s typically done over-the-counter. Essentially, anyone can get involved – but please only commit any capital if you are comfortable taking any losses.

In our case at Markets.com, we offer FX trading via contracts for difference (CFDs). With CFDs, you do not own the underlying asset. These are leveraged products. That means you gain exposure for a fraction of the total trade’s value. However, profit and loss is gauged by the total size of your position, not your deposit, and can far outweigh your initial deposit. Your risk of loss is higher.

What makes FX trading appealing?

There are lots of reasons why foreign exchange is so popular, such as:

  • Market size – roughly $6 trillion changes hands every day!
  • Variety – We offer over 60 different currency pairs to trade at Markets.com
  • Accessibility – Unlike stocks and other assets tied to exchanges, currency can be traded 24/7
  • Leverage – As mentioned above, currency pairing CFDs allow you to open a trade at a fraction of the trade’s total value

There is also a degree of flexibility with forex.

CFDs allow speculation on price movements in both directions. If you think the currency pairing is going to lose value, you will take a short position. If you think it will gain value, you’ll take a long position.

What are currency pairs?

Currency pairs are the financial instrument used in foreign exchange.

It is a quotation for two different currencies. It’s basically the amount you would pay in one currency for another.

Let’s look at an example.

The currency pair is GBP/USD at 1.15.

That means you could exchange 1 GBP for 1.15 USD.

If one of the paired currency’s value changes, then the currency pair’s value will change too.

For example, GBP/USD has started the day at 1.15. By the end of the day, it has risen to 1.16. That is because the strength of pound sterling has risen in value against the US dollar.

If the currency pair starts the day at 1.15, then drops to 1.13, for instance, that means the value of pound sterling has weakened against the US dollar.

At Markets.com, our currency trading offer is split into three categories: Majors, minors, and exotic.

Majors are some of the most popularly traded pairs on the market, coming from the largest global economies. They’re essentially the engines of global commerce and economics. Major currency pairs include:

  • GBP/USD – Pound sterling to US dollar
  • EUR/USD – Euro to US dollar
  • JPY/USD – Japanese yen to US dollar
  • USD/CHF – US dollar to Swiss franc
  • AUD/USD – Australian dollar to US dollar
  • NZD/USD – New Zealand dollar to US dollar
  • CAD/USD – Canadian dollar to US dollar

The minor pairings are still from important economies but do not include the US dollar. These are still popular trading assets. Take a look at some examples below:

  • AUD/CAD – Australian dollar to Canadian dollar
  • CAD/JPY – Canadian dollar to Japanese yen
  • EUR/GBP – Euro to pound sterling
  • USD/DKK – US dollar to Danish kroner

Exotic pairings are pairings featuring potentially more volatile currencies. In the past, such currencies may also have had unique or difficult conversion requirements. Many come from emerging economies.

  • CHF/PLN – Swiss franc to Polish zloty
  • EUR/RUB – Euro to Russian rouble
  • GBP/TYR – Pound sterling to Turkish lira
  • USD/ZAR – US dollar to South African rand

What factors affect the currency market?

Like any financial instrument, currency pairs are affected by numerous external factors. If you’re looking to enter the world of forex trading, be aware of the following:

  • Central bank policy & interest rates – It’s the job of central banks to essentially watch over all aspects of a nation’s monetary policy. That will give it oversight over many things that can affect currency prices. Interest rates are a key part of this. If a central bank increases its overnight rate, then currency traders looking to enjoy higher yields may end up buying more. This can make currency prices rise.
  • Economic releases – Big economic releases, such as monthly, quarterly, and annual GDP growth figures, manufacturing and services PMIs, employment figures, and inflation all have an influence on FX prices.
  • Politics – It goes without saying that political tussles can affect a currency pairing’s valuation. Think how the pound slid dramatically after the Brexit vote, or how the USD wobbled in the wake of the US/China trade war under the Trump administration.
  • Volatility – The above factors will have an impact on price volatility, which can then affect how traders trade. Some may prefer to trade on volatile currency pairs; others may wish to hold off until markets fall back to normal. Be aware that some currency pairings are more volatile than others.

Some currency trading tips for beginners

  • Research – Don’t commit any of your money until you’ve done your research. Study the markets. Take time to head over to our news and analysis section. You’ll find plenty of pieces on what’s moving markets and how major currency pairs are currently fairing. The old adage fail to prepare; prepare to fail runs true here. Make sure you’re informed before placing a trade.
  • Practice – A com demo account lets you practice trades with $10,000 in demo credit to play about with. That way you can get a feel for currency markets, familiarise yourself with our platform, and see how tools can help impact your trades, in a risk-free environment. You won’t be spending any money.
  • Tools – We have a suite of powerful trading tools designed to help you. From various different charts to sentiment indicators, and much more besides, these are all designed to give you a potential trading edge. Click here to learn more about our tools.
  • Know your limits – Only trade if you are comfortable taking losses. Don’t be afraid to cut your losses either if you feel you are losing too much. Do not overextend. At the same time, don’t be tempted to take all of your potential profit out the first time it appears. You can be confident – but only you will know your own limits.

Remember: trading is inherently risky. The value of your trades can down as well as going up. Bear this in mind if you decide to take the forex trading plunge.

Cautious tone ahead of Powell’s Jackson Hole speech

There has been a mixed start to the open in Europe as investors look ahead with some caution to Fed chair Jay Powell’s Jackson Hole speech. Stocks are hovering around the flatline with the FTSE just in the green. Today in London the miners are back on the front foot with energy and basic resources leading the gainers, while tech led the decline as JustEat Takeaway.com fell 3%.

Explosions at Kabul airport were the big story and clearly didn’t help sentiment in the market on Thursday. Wall St opened higher with the Nasdaq Composite hitting a record high before getting shaken lower on the violence in the Afghan capital, though broadly stocks were already having a tough session. The major US indices all ended the day down by around 0.6%.

Whilst the situation in Afghanistan removed any idea of a fresh set of closing highs on Wall Street, there was anyways a sense of caution at the highs, which may not be a bad thing for a bull as it’s not the big end-of-rally melt-up you see as a bull run consumes itself. But it’s also not a sign of total confidence in valuations and that really depends on what the Fed does next. Cyclicals showing signs of pause and investors looking for defensive/quality names.

Data was unexciting: Initial jobless claims were steady at 353k, a modest increase from the 349k last week, whilst the second reading for GDP in Q2 showed the US economy grew by 6.6%.

It’s all about today’s Jackson Hole event – lots of talk but ultimately, it’s going to come down to whether Powell talks up the taper or talks it down. Yesterday among the various ‘sideline’ chats, Dallas Fed president Robert Kaplan didn’t say anything new – he expects to taper this year and hike next year but stressed the two decisions are entirely separate. James Bullard and Esther George also reiterated their view that the taper should start sooner rather than later. All three are on the hawkish end of the committee so this is not that big a deal or anything we didn’t know already. What matters ultimately is what Powell, Williams and Clarida think.

Away from Jackson Hole we have some actual data that is important – the core PCE price index, which as well know is the Fed’s preferred measure of inflation. It’s expected to rise 0.3% month-on-month in July, easing from the +0.4% in June. Last month’s annual print showed inflation excluding energy and food rose at +3.5%, the fastest pace in 30 years. PCE including those more volatile elements rose 4%, the most since 2008.

Stagflation: German import prices rose 15% in July – the fastest clip in 40 years. The increase, the highest year-on-year-change since September 1981, increase from +12.9% in June and +11.8% in May. Excluding the energy component, prices rose 9%.

Peloton shares tumbled in after-hours trade after it reported a wider fourth-quarter loss and issued disappointing guidance. PTON reported a loss per share of $1.05 vs $0.45 expected as revenue growth hit the front brakes in the fourth quarter. This was partly due to the recall of its treadmills. Meanwhile it’s also cutting the cost of its Bike product by 20%. Stock is now –21% YTD as the wheels have come off this particular ‘Covid winner’. Interesting to look across the pond to our own Covid winners – Ocado is –12% YTD and JustEat –20%.

The dollar is a tad weaker, and we note that DXY has twice failed to break above 93.15 area on the hourly chart. Could retest bottom of the channel at 92.83. Breach here could up downside with a clear path to 91.80.

Dollar Index 27.08.2021

Gold: more solid footing as $1,800 is recaptured – next leg up depends on how dovish Powell sounds in the face of all this inflation.

Gold Chart 27.08.2021

Oil: Spot WTI regaining the trend line just and back above the 100-day SMA with the bullish MACD crossover confirmed.

Spot Oil Chart 27.08.2021

Ex-divis hold back FTSE, European stocks steady

Take your pick: Talk down US shale, discourage investment in the oil sector, close key pipelines and virtue signal about climate change, pump vast amounts of cash to stimulate demand and then call on OPEC and its allies to pump more oil because inflation is biting in your country. Or you could be a billionaire who virtue signals about green things but backs a mining operation to dig up one of the last pristine areas of land on the planet to find essential elements to make electric cars. Welcome to the new green agenda. It’s not consistent but it’s dogma so you just better go along with it.

After KoBold Metals, which is backed Jeff Bezos and Bill Gates, signed an agreement with London-listed Bluejay Mining to dig up Greenland for critical materials used in electric vehicles, the White House has come out with another blinder: telling OPEC it needs to pump more oil to keep US consumer prices down. It came ahead of the latest CPI inflation report, which showed energy prices accelerating. The energy index increased 1.6% in July after rising 1.5% in June. President Biden, the White House proclaimed in a statement, “has made it clear that he wants Americans to have access to affordable and reliable energy, including at the pump”. I thought the new administration was all green and cuddly and definitely not pro Big Oil. Or maybe it’s only pro Big Oil when it’s Aramco and not Chevron or Exxon who stand to gain…? Senator John Cornyn summed it up: “If the president is suddenly worried about rising gas prices, he needs to stop killing our own energy production”. He could also have a word with Jay Powell…but there is definitely a point here about countries offshoring their carbon emissions to meet targets.

So, the White House sounds worried about inflation, even if the Fed does not seem to be racing to get on top of it. Yesterday’s report showed headline inflation was steady at 5.4% year on year, with prices advancing 0.5% in July vs the +0.9% in June. Core month-on-month was down to +0.3% from the +0.9% in June and a little light of expectations for +0.4%. It was the smallest rise in four months, and showed some degree of cooling, but the headline rate remains at a 13-year high.

Shelter, food, energy, and new vehicles all increased in June, but used vehicles were a lot cooler at +0.2% vs the +10% we have seen in two of the previous three months. According to the BLS, the deceleration in the used cars and trucks index was a major factor in the smaller monthly increase in the index for all items less food and energy. The WH said there were signs inflation in some items was ‘coming off the boil’. There were signs of recovery in pandemic-affected industries and pointing arguably to the kind of staffing and wage pressures felt in the hospitality sector as the food away from home index rose 0.8% in July, its largest monthly increase since February 1981.

Briefly 

  • The FTSE 100 finished Wednesday +0.82% at 7,219.90, a new post-pandemic high– it’s been slower to recover than some peers which is largely reflective of the make-up of the index and propensity to more value and cyclical global growth plays and much less big tech, growth + momentum names. This has held it back, whilst the persistence of cases globally has left investors a little hesitant. It compares less favourably with the more domestically focussed FTSE 250 which has been smashing out record highs because the vaccine-driven recovery in the UK has been strong, whilst it too was coming from an exceptionally low base, which was driven by the harder hit Britain took initially from the pandemic and the lingering discount from Brexit.
  • European stock markets broadly higher in early trade Thursday after Wall Street set fresh record highs, though the FTSE 100 lags with ex-dividend factors clipping 32.74 pts today, sending the index into the red. Insurers led the way higher in Europe as Aegon reported Q2 numbers well ahead of expectations. Asian shares were broadly weaker.
  • Despite the records for the S&P 500 and Dow Jones, the Nasdaq dipped as the rotation back from mega-cap growth/momentum into cyclicals continued.
  • The UK economy grew 4.8% in the second quarter, exceeding expectations.
  • Bitcoin rose to its highest since May, but is weaker this morning
  • There was a small-than-expected draw on oil inventories, with the EIA reporting a draw of about 450k vs –750k expected. However, oil prices have bounced to regain trend support with WTI again north of $69.
  • Southwest Airlines warned on Delta – not its rival, the covid variant – saying that the spread of the disease has hit bookings and increased cancellations. As hospitalisations hit a 6-month in the US, the carrier became the first to trim its guidance for the third quarter and warned it may not be profitable in Q3. Share erased early losses to end up more than 1%.
  • Moderna shares tumbled, down 16% to wipe out the Monday rally and then some. A bearish Bank of America note didn’t help. BioNTech shares also fell as the European Medicines Agency said it was investigating reports about conditions related to the skin and kidneys following vaccinations. BioNTech shares jumped 10% in Frankfurt this morning however, indicating that investors are still arguing over the valuations of these drugmakers.
  • Cineworld said it is considering a US listing – trying to capture some of the AMC stardust perhaps? Shares +5% after also reporting that first half pre-tax losses narrowed to $576.4m from $1.64bn last year. Confidence returning as lockdown era is past.
  • Coming up today – US PPI inflation seen at +0.6%, core at +0.5%.Also US unemployment claims data (fc +375%).

Infrastructure bill – what to own?

We noted that Caterpillar was the big riser on the Dow as the House passed the $1tn infrastructure bill. But Bank of America has come out with some handy plays. The package includes $550 billion over five years for roads, bridges, airports, waterways, broadband, water systems and the power grid. BoA says engineering firms like Jacobs and AECOM are best placed to benefit from spending on core projects like roads. Meanwhile think along the lines of construction equipment makers Caterpillar and Deere, as well as engine and generator maker Cummins, the bank says.

For UK stocks, we look to the likes of Ashtead, the industrial equipment rental business, which rallied over 1% again on Wednesday to take its 5-day gain to +5%. Likewise building materials business CRH rallied more than 2% for a +5% 5-day performance.

US CPI inflation on the money, futures higher

Dow futures rallied and pointed to a solid opening for Wall Street after another hot inflation print. Inflation remains elevated but the print did not exceed already lofty expectations. Dow being called to open up about 50-60pts, with the S&P 500 seen opening up around 4,442. US 10yr yields slipped and now trade a shade under 1.36%, gold moved up on the print to $1,745 from $1,735, whilst the dollar was offered on the news with EURUSD back to 1.1750 area having tested the YTD lows earlier in the session, before paring gains.

Increasing sense that inflation is here to stay but we’re not sensing the Fed is getting more angsty just yet, so allowing gold to climb. Indeed if anything, deceleration in price growth allows the Fed to take a slower route to the taper, so risk is finding some bid. Elsewhere the bid for equities filtered through to the FTSE 100, which hit a new HOD above 7,200, marking its strongest intra-day level since the pandemic struck.

Headline inflation was pretty much on the money and steady at 5.4% year-on-year, with prices advancing 0.5% in July vs the +0.9% whopper in June. Core month-on-month was down to +0.3% from the +0.9% in June and a little light of expectations for +0.4%. It was the smallest rise in four months. Shelter, food, energy, and new vehicles all increased in June, but used vehicles were a lot cooler at +0.2% vs the +10% we have seen in two of the previous three months. According to the BLS, the deceleration in the used cars and trucks index was a major factor in the smaller monthly increase in the index for all items less food and energy.

Some signs of recovery in pandemic-affected industries and pointing arguably to the kind of staffing and wage pressures felt in the hospitality sector as the food away from home index rose 0.8% in July, its largest monthly increase since February 1981. Ultimately, I would not see this as a narrative-changer for the Fed and the timing of its tapering. Of course, there is ever-present problem for the Fed in trying to balance employment with inflation – real wages, which are declining. Most people have a job, so most people are seeing their purchasing power eroded. What price jobs, jobs, jobs? Real average weekly earnings were -0.1% month-on-month vs -0.9% in Jun, though this was revised to -0.5%.

European stocks to open higher on rebounding risk sentiment

Key European indices are set to open August positively as risk sentiment lightens after last week’s poor close for the markets.

The FTSE100 starts on the front foot, tracking over 70 points higher this morning. The DAX jumps up 112.27 points, while the CAC40 is up by 55.08.

It’s good to see the markets in a broadly confident mood this morning. Asian equities, which performed stolidly last week following a spate of new Chinese regulatory crackdowns, also begin August with strong positive movements. The Hong Kong Hang Seng, for instance, has taken big strides to reach 26,195 at the time of writing – up 270.

Elsewhere, a number of confident earnings reports from global large caps is helping power positive stock market sentiment.

HSBC, for example, reported at the start of Asian trading it had grown profits fourfold this quarter, reaching $5.1bn. Europe’s largest lender’s H1 profits are up 150% year-on-year, totalling $10.8bn. Total revenues, however, are down from $13.1bn in Q1 to $12.6bn. Even so, a very strong quarter for HSBC has been seen.

Rolls-Royce and Taylor-Wimpey are amongst the European firms reporting quarterly earnings today. On Wall Street, technology provider Arista Networks kicks off another busy earnings week later on, while Uber, scandal-rocked Activision Blizzard, GM, and Virgin Galactic all due to share quarterly figures later this week.

Check our US earnings season calendar for more information.

The USD continues its bearish form, with the Dollar Index dropping to the 92 level, after dipping below that. This is the greenback’s worse performance since May and hasn’t been helped by the Fed’s dovish stance on rate hikes.

The weaker dollar has been fairly good news GBP/USD, however. The pairing has climbed to fresh daily tops of 1.3925, helping reclaim territory that slide away on Friday. The pound has been supported by falling Delta variant COVID-19 case numbers in the UK, as well as the softer dollar.

UK PMI data is due this morning although the markets may be anticipating a slowdown in both services and manufacturing output. Labour shortages and higher input costs, similar to those in the US market, may have stymied July’s growth.

Crude oil, both WTI and Brent, drop away from gains made over the weekend. WTI futures are currently trading at around $73.11, while Brent is hovering around the $74.60 area.

Bitcoin has cleared $40,000 this morning, but it did so several times in the last week before falling away again and staying in the $39,000 range. The world’s most popular cryptocurrency has had a tough time sustaining incremental gains last month, so it’ll be interesting to watch BTC price action as August progresses.

CySEC (أوروبا)

  • يتم حفظ أموال العملاء في حسابات مصرفية منفصلة
  • تعويضات صندوق تعويضات المستثمر FSCS تصل إلى 20000 جنيه إسترليني
  • تغطية تأمينية بقيمة 1000000 يورو**
  • حماية الرصيد السلبي

المنتجات

  • CFD
  • تعاملات الأسهم
  • Quantranks

Markets.com، التي تتولى تشغيلها شركة Safecap للاستثمارات المحدودة ("Safecap”) مرخصة من قبل مفوضية قبرص للسندات والتداول (CySec) بموجب الترخيص رقم 092/08 ومن قبل هيئة سلوكيات القطاع المالي ("FSCA") بموجب الترخيص رقم 43906.

FSC (العالمية)

  • يتم حفظ أموال العملاء في حسابات مصرفية منفصلة
  • التحقق الإلكتروني
  • حماية الرصيد السلبي
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المنتجات

  • CFD

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FCA (المملكة المتحدة)

  • يتم حفظ أموال العملاء في حسابات مصرفية منفصلة
  • تعويضات صندوق تعويضات الخدمات المالية تصل إلى 85000 جنيه إسترليني *بحسب المعايير والأهلية
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المنتجات

  • CFD
  • المراهنة على الهامش

Markets.com، التي تتولى تشغيلها Finalto Trading Limited مرخصة من قبل هيئة السلوك المالي ("FCA") بموجب الترخيص رقم 607305.

ASIC (أستراليا)

  • يتم حفظ أموال العملاء في حسابات مصرفية منفصلة
  • التحقق الإلكتروني
  • حماية الرصيد السلبي
  • تغطية تأمينية بقيمة 1000000$**

المنتجات

  • CFD

Markets.com، التي تتولى تشغيلها Finalto (Australia) Pty Limited تحمل ترخيص هيئة الخدمات المالية الأسترالية رقم 424008، وهي مرخصة لتقديم الخدمات المالية من قبل هيئة الأوراق المالية والاستثمار الأسترالية ("ASIC”).

سيؤدي تحديد إحدى هذه الجهات التنظيمية إلى عرض المعلومات المتوافقة على نطاق الموقع الإلكتروني بأكمله. إذا أردت عرض معلومات عن جهة تنظيمية أخرى، الرجاء تحديدها. لمزيد من المعلومات، انقر هنا.

**تنطبق الأحكام والشروط. شاهد السياسة الكاملة لمزيد من المعلومات.

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