Daily Market Update 16th August 2016
ECONOMIC DATA OF THE DAY
| Time | CY | Indicator | Forecast | Previous |
|---|---|---|---|---|
| 16:30 | GBP | CPI YoY | 0.50% | 0.50% |
| 16:30 | GBP | CPI MoM | -0.10% | 0.20% |
| 17:00 | EUR | ZEW Survey Expectations | 2 | -6.8 |
| 17:00 | EUR | ZEW Survey Current Situation | 50.2 | 49.8 |
| 20:30 | USD | CPI MoM | 0.00% | 0.20% |
| 21:15 | USD | Industrial Production MoM | 0.30% | 0.60% |
OVERNIGHT NEWS
- US:
- The National Association of Home Builders housing market index, a measure of home builder confidence rose to 60 (Mkt est: 60), the second-highest level of the year, from a downwardly revised 58 in July (Prev: 59)
- The Business Activity in NY went into contraction (-4.21 vs Exp. 2.00). The new orders index remained near zero while the shipments index jumped eight points to 9.0. Labor market indicators pointed to little change in employment levels and hours worked. The prices paid index edged down to 15.5.
FOREIGN EXCHANGE (INDICATIVE RATES)
| Currency | Last | % Change | Overnight Range |
|---|---|---|---|
| DXY | 95.63 | -0.18% | 95.468 – 95.787 |
| EURUSD | 1.118 | 0.26% | 1.1154 – 1.1204 |
| USDJPY | 101.24 | -0.11% | 100.87 - 101.41 |
| AUDUSD | 0.7678 | 0.41% | 0.7639 – 0.7692 |
| GBPUSD | 1.288 | -0.34% | 1.2866 - 1.2945 |
Commodities (INDICATIVE RATES)
| Currency | Price USD | % Change | Overnight Range |
|---|---|---|---|
| Gold | 1341.02 | 0.04% | 1335.8 - 1343.95 |
| Silver | 19.84 | 0.05% | 19.7001 - 20.0483 |
| Oil (BRENT) | 48.35 | 2.23% | 46.84 - 49.22 |
| Oil (WTI) | 45.61 | 2.27% | 44.38 - 45.87 |
COMMODITIES
Precious Metals: George Soros Management LLC which took a 263 million stake in Barrick Gold in the first quarter had cut its holdings in the world's biggest producer of the metal by 94 percent in the ensuing three months, a U.S. Regulatory filing showed on Monday. This comes after the stock had rose 169 percent in the year through June. Meanwhile, spot gold remains range bound in a range of of 1310 to 1375 for the past 2 months.
Oil: Oil traded above $45 amid speculation that crude producers will revive talks to stabilize prices. Oil has since rebounded more than 10 percent since closing below $40 a barrel and fear of tumbling into a bear market recently this month.
FOREX NEWS
- The USD continues to sell off sold off with no significant data dictating the market.
- The concerns regarding the Brexit is keeping the pressure on GBP which was the only underperformer overnight and now trades below 1.3000. The low of the year is at 1.2798 but the break of the 1.3000 level seems already significant. We have plenty of important data from the UK today with CPI, RPI and PPI
- EURUSD is testing again the 100d MA at 1.1229. If we manage to break higher, the next target will be 1.1400.
- The uptrend channel in AUDUSD that started on July 15th is still in place and we are trading at the bottom of that channel. The top of the trend is at 0.7825.
- In Emerging Markets, The USD selling remains in place. Despite concerns over the strong rally of BRL, the government doesn’t seem to have much tool to stop it. USDPHP 1M broke the strong support of 46.70 and is aiming for 46.00 as a first target (see our Trade View sent yesterday)
How the BOE's Stimulus Measures Up to the ECB's
The Bank of England is being decidedly less ambitious than the European Central Bank with its plan to purchase corporate bonds, but it will be no less effective, according to Wells Fargo & Co.
The BOE will buy 10 billion pounds ($12.9 billion) of U.K. company debt over 18 months while the ECB has acquired 16.2 billion euros ($18.1 billion) of notes since June. The British initiative, as a "knee-jerk reaction to the Brexit vote," is also much less lofty in its goals than the ECB, which is buying company debt as part of monetary policy stimulus that's intended to boost inflation, said Wells Fargo & Co. strategists led by Nathaniel Rosenbaum.
The BOE's program is better when it comes to transparency and attaining its stated goals, while the ECB's is superior in terms of its ambitions and scale, they said. These differences matter little though when comparing the market impact of the two:
"We expect a similar effect on spreads of corporates in both markets as central banks rapidly become large and price-insensitive buyers in relatively illiquid markets. ECB QE has already led to a crowding out effect into USD credit, and we expect BoE QE to be no different."
One key difference though could be the BOE's influence on the long end of the U.S. investment-grade credit market.
The average duration of the sterling high-grade market is 9.7 years, compared with 5.4 years and 7.5 years for the euro and dollar markets, according to Wells Fargo analysis of bond index data. What's more, bonds with maturities of 20 years and beyond represent 28 percent of the pool of bonds eligible for the BOE's program, known as CBPS, compared with just 1 percent for the ECB.
Read More at www.bloomberg.com
