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15 / 05 / 2018 | Market News

Fundamental Analysis 15.05.2018 – Market Outlook

Market Recap

The European Central Bank (ECB) turned hawkish and the Federal Reserve System (Fed) hawk turned (slightly) dovish.

ECB Board member and Bank of France Governor Francois Villeroy de Galhau said the ECB still plans to end its Quantitative Easing (QE) program later this year, probably in September 2018 or December 2018, and the first interest-rate hike could come “at least some quarters, but not years” afterwards. He said inflation will resume accelerating as the EU’s temporary weakness passes and underlying price pressures increase. Currently, the ECB’s QE program is scheduled to run at least until September 2018, and rates are to stay low until “well past” the end of the purchases.

Villeroy’s comments echo those of Austria Central Bank Governor Ewald Nowotny, who said in early April 2018 that the ECB would end its bond-buying program by the end of the year and then raise the deposit rate to -0.2% from -0.4%, followed by another hike that would also include a rise in the key refinancing rate. The key point to note today though was that shortly after Ewald Nowotny spoke, an ECB spokesman issued a statement saying that his comments did not reflect the opinion of the Governing Council but rather his own personal views. 

Speaking at the same event, Cleveland Federal Reserve System (Fed) President Loretta Mester said “it is too soon to say that we have met our inflation goal on a sustained basis.” She said some of the higher inflation recently is just due to commodity prices and base effects and is therefore “likely to be temporary.” So she was not declaring “mission accomplished” even though the personal consumption expenditure (PCE) deflator recently hit the Fed’s 2% target.

This is not to say though that she thought the Fed should pause. Rather, she argued that monetary conditions are still “accommodative” and cited several examples – e.g., the real Fed funds rate is still negative (-0.3%) – and called for a continued “gradual upward path” to interest rates. (Note that if the Fed were to bring the real Fed funds rate back up to the pre-crisis average, it would be 4.38% right now, not 1.69%) And she said that as the expansion continues, it might be necessary to push rates above what’s considered to be the long-term equilibrium level, currently estimated at 3.0%. This is in line with the Federal Open Market Committee (FOMC’s) current thinking as expressed in the “dot plot,” which sees end-2020 rates at 3.38%, but is far above what the market is expecting. 

This morning in Asia, the key thing to note is that the US Treasury 10-year yield broke above 3% after Commerce Secretary Ross said the “gap remains wide” between China and the US on trade. Rising US yields have supported the dollar in Asian trading, reversing the gains made after Francois Villeroy’s comments.

NZD was the loser of the day. The movement was interesting – the currency strengthened slightly as NZD bond yields moved lower, but then suddenly in Asian trading this morning NZD yields jumped higher and the currency plunged. The spread of mycoplasma bovis, a cattle disease that’s been found in some parts of the country, is undermining confidence in the sector.


Today’s market

It’s a busy day today, with a lot of news coming out, including the most important US indicator of the week – retail sales – plus the most important speakers – the testimony of the two new nominees for the FOMC.

We start the day early with the first estimate of German Q1 Gross Domestic Product (GDP). It’s expected to show some slowdown in growth.

Three hours later we’ll get the second estimate of EU-wide Q1 GDP, and that’s expected to be unchanged from the first estimate. As the graph shows, revisions are a) rare and b) usually minor when they do occur. So the German figure would just be filling in the details.

The UK employment data will be more interesting. The news is expected to be mixed. The job market is expected to remain solid: the unemployment rate is forecast to remain at the current extraordinarily low level, the lowest since 1975, while the number of people working is forecast to rise at an above-trend pace.


But like elsewhere, the robust labor market is not necessarily translating into robust wage growth. While growth in base wages is forecast to accelerate a bit, growth in overall average wages is expected to slow by more. The Bank of England’s recent Inflation Report 10th of May 2018 said that “as slack has been absorbed the drag on wage growth is easing,” and that’s one of the reasons they have confidence that inflation will get back to trend. They called wage costs “a significant indicator of domestic inflationary pressures.” In that case, the decline in average wages suggests a decline in inflationary pressures, which means less need for a rate hike any time soon.

The question is, which among these four indicators do the markets watch the most closely? Research shows that the change in the number of jobs is overwhelmingly the major determinant of the subsequent movement in the currency. In fact, the wage data is largely uncorrelated with the subsequent movement in the currency. That being the case, The news could be positive for the pound.

Germany’s Centre for European Economic Research (ZEW) survey is expected to be another confirmation of the slowdown in the German and EU economies. The “current conditions” index is expected to fall further from its record-high level in January 2018, while the “expectations” index is forecast to remain steady in negative territory. This could be negative or neutral for the euro.


Dallas Federal Reserve System (Fed) President Robert Kaplan will speak to the Council on Foreign Relations in New York about the outlook for the energy market and the economy. Kaplan is a non-voting member of the FOMC. He spoke just a few days ago (7th of May 2018) and said that his base case for this year was still three rate hikes. He also said that energy is in a fragile supply/demand equilibrium, because shale production is unlikely to keep up with growth in global demand and major oil companies haven’t been investing in long-term projects. 

The Empire State manufacturing survey is expected to decline only slightly and remain firmly in expansionary territory (as is the Philadelphia Fed survey, due out on Thursday 17th of May 2018). This could be positive for the dollar.

But probably the US retail sales figures that come out at the same time are likely to be more important. It’s expected to show sales slowing back to trend at the headline level. That’s discouraging, especially since the previous month was a not-particularly-strong rebound from three months of declines. Apparently the slowdown this month is due mostly to lower auto sales and the other measures are expected to be either unchanged or higher. But the FX market tends to react mostly to the headline number, so this could still be negative for the dollar.


The National Association of Home Builders (NAHB) index for May 2018 is expected to rebound a bit, which in fact means remain in about the same range it’s been in recently – This could be neutral for the dollar.

Next up is probably the most interesting event of the week:  the Senate Banking Committee confirmation hearings for two FOMC appointees:  Richard Clarida, nominated to be Fed vice chairman, and Michelle “Miki” Bowman, nominated to be a Fed governor. As both would be voting members, their views are quite important.

Richard Clarida, a professor at Columbia University, is a highly respected macro economist with considerable experience in both the theory and practice of monetary policy. He’s made significant contributions to the academic study of monetary policy, particularly with a set of ideas known as “New Keynesian economics.” At point the academic view was that central banks shouldn’t worry about stabilizing the economy and should focus entirely on restraining inflation, but Clarida and his collaborators successfully argued that central banks could successfully intervene to revive economies – something we saw in earnest in the wake of the Global Financial Crisis.

At same time, he also knows Washington:  he was on President Reagan’s Council of Economic Advisers and was an Assistant Secretary of the Treasury under George Bush. And he’s an advisor to Pacific Investment Management Company (PIMCO), the huge mutual funds company.

With the departure of former Fed Chair Janet Yellen and Vice Chair Stanley Fischer, and the pending departure of New York Fed President William Dudley, the FOMC has lost a lot of its senior leaders. Clarida should reassure the markets that the Fed continues to have experienced and knowledgeable leadership.

Given that Clarida’s views are now virtually the orthodoxy among central bankers, he could be expected to align fairly well with the views of the center of the Committee, which have gradually been shifting towards four rate hikes this year. He could add another “dot” for four rate hikes and thereby tip the median.  

Bowman is an attorney who’s currently the top banking commissioner in Kansas. Her board seat is reserved for someone who works at or regulates community banks.

Bowman’s CV is far different from most other FOMC members. She has an undergraduate degree in Advertising and Journalism and a law degree. (Fed Chair Powell also has a law degree rather than an economics degree.) Much of her career was spent in Washington:  she was a counsel to the US House Committee on Transportation and Infrastructure and Committee on Government Reform and Oversight. Following the 9/11 attacks, she was appointed Director of Congressional and Intergovernmental Affairs at the Federal Emergency Management Agency (FEMA),  and, upon the establishment of the Department of Homeland Security, she was made Deputy Assistant Secretary and Policy Advisor to the-then Secretary. She also led a government and public affairs consultancy based in London.

San Francisco Fed President John Williams will speak to the Economic Club of Minnesota. He also spoke recently (4 May 2018), when he said that low neutral interest rates will be with us “for the rest of our lives.” Williams, a voting member of the FOMC, will take over as head of the New York Fed in June 2018. 

Finally, overnight Japan announces its Q1 Gross Domestic Product (GDP). It’s expected to show no growth from the previous quarter, owing to weak private consumption, housing investment and public investment. It’s not clear though whether this marks the beginning of a trend or is just a one-off caused by a) the payback from an increase in smartphone demand in Q4, and b) a drop in purchasing power because of a weather-related rise in vegetable prices. Still, consumer sentiment is weakening, so it may be that spending is unlikely to recover much. At the same time, investment spending is likely to decrease as well (the ratio of real private capital investment to real GDP is already near its historic high) and real exports are slowing too, so Japan can’t expect much growth from investment or net exports. All told the figures will probably spark some thoughts that Japan is entering a slump and the Bank of Japan and Ministry of Finance will try to help by weakening the yen, which could be negative for JPY.

The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.

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15 / 05 / 2018 | Market News

Eurostat to release Eurozone's April 2018 CPI inflation data

On Wednesday May 16th 2018, Eurostat, which is the European Union’s (EU) official statistical agency, will publish data regarding the Eurozone’s CPI (Consumer Price Index) in April 2018. The CPI is an indicator used to measure the rate at which the prices of goods and services bought by households rise or fall, which is the rate of inflation, referred to as the CPI inflation. Eurostat will also include core CPI data in the release, which measures price movements excluding these of volatile components such as food, energy, alcohol and tobacco.

Economists anticipate that the finalised CPI inflation data will show that the Eurozone’s inflation in April 2018 stood at 1.2% on an annualised basis. They also expect that core CPI inflation ticked lower, coming in at 0.7% in April 2018, on a year-to-year basis. On a month-to-month basis, CPI inflation is likely to come in at 0.3% and core CPI inflation is likely to come in at 0.2%. On May 3rd 2018, Eurostat had released its flash estimate for the Euro-bloc’s CPI inflation in April 2018 which had showed that the EU’s statistical office was expecting CPI inflation to hit 1.2%, a bit lower than the 1.3% reading recorded in March 2018. 

The Eurostat’s May 3rd 2018 report noted that energy (2.5%, compared with 2.0% in March 2018) and food, alcohol and tobacco (2.5%, compared with 2.1% in March 2018) were expected to have the highest annual rate in April 2018, followed by services (1.0%, compared with 1.5% in March 2018) and non-energy industrial goods (0.3%, compared with 0.2% in March 2018). Economists note that, historically, on occasions that Easter falls at the end of March or beginning of April CPI inflation figures tend to decline because people book their travel arrangements before the holiday period begins. 

If the economists’ forecast regarding CPI inflation is confirmed, the readings will point to sluggish inflation, well short of the European Central Bank’s (ECB) target of around 2%. The ECB aims to keep inflation below, but close to, 2% over the medium term. However, the ECB’s monetary policy so far, despite the quantitative easing (QE) programme applied in recent years, has not succeeded yet in bringing inflation close to its target. The weak inflation numbers won’t be so much of a surprise as the Eurozone’s Gross Domestic Product (GDP) growth softened in the first quarter (Q1) of 2018. To add to that, the data coming from the manufacturing sector, published by IHS Markit, have shown that the Eurozone’s and Germany’s manufacturing Purchasing Managers’ Indices (PMI) fell in April 2018 for the fourth consecutive month. In the case of the Euro-bloc, the manufacturing PMI reading pointed to the slowest growth in the factory activity in the last 13 months. 

ECB’s board members speak about the economy

Peter Praet, an executive member of the board and ECB’s chief economist spoke in a conference in London repeating that he is confident in the Eurozone’s upswing, adding that the ECB’s future policy moves will depend on examining incoming economic data and will be done in a time-consistent manner. Peter Praet also commented that “inflation developments remain subdued and an ample degree of monetary stimulus remains necessary.”

Sabine Lautenschlager, who is also one of the members of the ECB’s governing council, speaking in Copenhagen, said that the Eurozone’s economic data is still within projections, justifying the relaxed stance of the ECB’s board. The German banker reaffirmed that she is confident of an underlying trend in inflation. Francois Villeroy, the Governor of the Banque de France, when asked by reporters about the Eurozone’s inflation, answered that the underlying Euro-bloc’s inflation is set to strengthen irrespective of short-fluctuations in energy inflation. Francois Villeroy appeared calm that the current inflation slow down in inflation is temporary and that he expects it to resume its progress in the next few months. 

STO and the Euro 

The Euro to US Dollar, the Euro to British Pound and the Euro to Japanese Yen are just three of the currency pairs you can trade with on the STO platform. STO clients can select from a variety of over 30 currency pairs and plan the suitable trading strategy for them. STO provides traders with a daily fundamental and technical analysis that aims to help them reduce the trading risks. 

Trading Forex and CFDs, which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.
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14 / 05 / 2018 | Market News

What you could look for before investing in bonds

Portfolio diversification means investing and trading with different asset classes, thus moderating risks. Seasoned investors are keen on spreading their available capital between different types of assets which helps them cope with the market volatility. Some of these types of assets are shares, commodities, treasury bills as well as government and corporate bonds. 

Investing in assets such as shares and commodities doesn’t, of course, guarantee any profit as their prices are volatile and the success of an investment depends on the way that the financial markets move. However, bonds seem to attract investors’ attention, especially the high-rated ones which are considered one of the safer ways to invest money. Investing in bonds, whether they are government or corporate, has advantages and disadvantages just as any type of investment. Investors should remain vigilant and do some research before they purchase a bond if they would like to stay safe from negative surprises. 

Risk profile

Risk tolerance is one of the crucial factors that has to be assessed by every investor before proceeding in allocating capital with the objective of generating additional income. An investment strategy should be built, taking first into consideration how much risk the potential investor could take. Determining an investor’s risk profile isn’t just about how much capital could he lose in the event of a market downturn. 

The potential negative effects of an investment and the outlining of probable costs for each risk are just two of the questions that investors should think about. Another question could be what the overall target return for the investment is. Sometimes, bond investors are not familiar with the risk-return trade off although everyone has access to educational courses via internet or other channels. Risk-return trade-off is the principle which says that potential return rises with an increase in risk but only if investors are willing to accept the potential losses.

Analysing your options and examining each bond 

The bond market is quite a large one with numerous different bonds going on sale every day. Beginner investors may find it hard to stay updated, but by staying updated you can put yourself in a better position to have a clearer view of all available options. The various types of bonds are helping investors to be able to form different kinds of investment strategies according to their needs. 

Some investors prefer short-term bonds which don’t limit their ability to shift strategies. Others prefer bonds that mature in less than five years. However, it is usually the longer term bonds that have the potential to yield the most income paying a higher interest rate; although they carry much greater risk of the bonds falling in price or a reduction of payments due to higher inflation. Investors can pick up the right type of bonds depending on the strategy they would like to implement. 

Examining each bond that an investor would like to purchase is the cornerstone of every investment plan. Investors should carefully check who is issuing the bond that they are considering investing in and try to gather data in order to limit the possibilities of a failed investment. The wide range of bonds available in global markets makes the task more difficult but also more interesting for people who would like to know the tricks of investing in bonds.

Bond laddering

The expression may sound unusual but it’s one of the most important pieces of knowledge that seasoned investors are giving to the less experienced. Long maturity bonds don’t return to investors any capital for a long time and could make even experienced investors feel uncomfortable as financial conditions change. With bond laddering investors are trying to have bonds maturing every year or every second year, minimising the risk and having a gradual return of capital. This capital can be re-invested and function as a base for a new investment plan. 

STO and Investo

STO provides trading exclusively on bonds as the underlying asset of a Contract for Difference (CFD) and does not provide trading on bonds themselves. 

Our consolidated experience in portfolio management helped us develop an investment strategy for STO clients called “Investo”. Our “Investo” strategy is suitable for individuals who seek long-term investment goals, and who want to trade Forex and CFDs but lack the advanced knowledge of a professional portfolio manager or the necessary time to trade. Trading CFDs requires the potential investor to have sufficient knowledge and experience to understand the nature and the risks involved in trading CFD and the management of his/her portfolio of   leveraged derivative products. “Investo” is regulated by the Cyprus Securities and Exchange Committee (CySEC).  

Trading Forex and CFDs (Contracts For Difference), which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.
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14 / 05 / 2018 | Market News

Fundamental Analysis 14.05.2018 – Market Outlook

Market Recap

The major currencies are little changed from their overall value on Friday 11th of May 2018 morning.

US stocks ended Friday slightly higher and the futures were up further in Asian trading this morning on indications that US President Donald Trump is backing away from his threat to engage China in a trade war. A few weeks ago he cut off the Chinese telecom equipment manufacturer ZTE Corporation from its US suppliers of essential parts, citing the company’s “egregious” behavior in violating US sanctions against Iran and North Korea, but Sunday 13th of May 2018 said he had ordered the Commerce Department to find a way to get ZTE “back into business, fast.” The move comes ahead of a trip to Washington by China’s vice premier Liu He, tentatively scheduled for this week. The reduction in trade tensions should fuel a “risk on” sentiment today that could be positive for AUD and negative for JPY.

EUR even after the coalition talks between Italy’s Five Star Movement and the far-right League progressed over the weekend. They appear ready to form a government but haven’t yet decided on who will be Prime Minister. Italian bond spreads over Germany actually tightened by about 7 bp on Friday 11th of May 2018 even though the coalition opposes fiscal austerity and has big spending plans – this indicates Italian politics aren’t a major moving factor in the Eurozone yet.

AUD/NZD continued its recent climb. This trend is expected to continue as New Zealand yields remain below US yields (see below) while Australia benefits more than New Zealand from the likely rapprochment between the US and China on trade.

CAD was the major loser, although as mentioned above the overall movement wasn’t that great. Friday’s 11th of May 2018 Canadian jobs report missed expectations, with the number of jobs declining by 1.1k (+20k expected), and that sent the currency lower.

CAD is expected to remain weak as it looks like the North American Free Trade Agreement (NAFTA) turmoil will drag on. US House of Representatives speaker Paul Ryan last week said that he has to be notified of a new agreement by Thursday 17th of May 2018 in order to give the current Congress enough time to pass it this year. That’s likely to be difficult. The top officials from all three countries met together Friday 11th of May 2018 for the first time in the eight months that negotiations have been dragging on, but the talks broke up after half an hour and participants made it clear that big differences remain. This suggests that in fact they won’t make it in time, which could be negative for CAD.

Commitment of Traders report

Speculators continued to reduce their short USD positions. EUR positions were virtually unchanged; instead, the reduction in USD shorts was achieved mostly by increasing short positions in JPY, CHF, and AUD and reducing longs in NZD and MXN.

The CHF shorts stand out as speculators are now the shortest they’ve been since 2012. This wasn’t a gradual build-up, like back in 2012; speculators tripled their short positions in two weeks (-10,200 to -32,600). Generally speaking, it seems as if such extreme positions reverse relatively quickly too, which suggests that we could see some mean reversion in CHF this week – unless of course this is the beginning of an even bigger build-up of shorts. The record short position was -79,330 back in 2007, so more than twice the current short.


Speculators closed out some WTI longs and UST shorts but the overall “inflation trade” position remains enormous. They’re almost flat silver now.


Today’s market

There are no major indicators on the schedule today Monday 14th of May 2018, but a lot of speakers.

The Global Interdependence Center is holding a conference on central banks in conjunction with the Banque de France. Bank of France (BoF) Governor François Villeroy de Galhau and Cleveland Federal Reserve System (Fed) President Loretta Mester will be giving keynote addresses. There’s no indication about what specifically they are going to be talking about though 

Loretta Mester is a voting member of the Federal Open Market Committee (FOMC) and one of the more hawkish members. It will be interesting to hear how she interprets the recent stable inflation data and the soft growth in average earnings.

European Central Bank (ECB) Board Member Yves Mersch will give a keynote speech at the Central Bank Governors’ Club meeting, hosted by the Central Bank of Turkey. Considering Turkey President Tayyip Erdogan’s recent attacks on the central bank – Friday 11th of May 2018 he said “interest rates are the mother and father of all evil,” which I guess must make the Governor of the central bank, Murat Çetinkaya.

ECB Chief Economist Peter Praet will participate in a lunchtime roundtable discussion in London. Praet sparked a “gradualism” debate within the ECB a few weeks ago when he said that “smaller steps” may be appropriate when the central bank is faced with larger uncertainties. He may reinforce that idea now that EU growth and inflation are both slowing. His speech may contrast with that of ECB markets chief Benoit Coeure later in the day at the International Center for Monetary and Banking Studies conference on the World Economy. Coeure, by contrast, argued that as the economy recovers, the ECB may have to tighten policy just to maintain a given level of stimulus. So one is cautious and the other optimistic – they could have conflicting views.

St. Louis Fed President James Bullard will speak at a Blockchain technology conference in New York. This may not have anything to do with the economy or monetary policy, but it should still be interesting to get a feel for what central bankers are thinking about this new technology. Several Fed researchers wrote a paper on the subject in December 2016 (Distributed ledger technology in payments, clearing, and settlement) but it doesn’t really come to much of a conclusion – just something like “these technologies might have some interesting applications and might drive some change in the financial industry, but it’s too early to tell.”

Overnight, Reserve Bank of Australia (RBA) Deputy Governor Guy Debelle will give a speech on “The Outlook for the Australian Economy.” Not much has changed since the May 2018 Statement on Monetary Policy was released on 4 May.

China announces its usual trio of monthly indicators:  retail sales, industrial production and fixed asset investment. With little change likely, little impact is likely too, although steady growth could be perceived as positive for AUD.

The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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11 / 05 / 2018 | Market News

Fundamental Analysis 11.05.2018 – Market Outlook

Market Recap
USD weakened after the CPI figures came in below estimates (core CPI +0.1% mom vs +0.2% expected, leaving the yoy rate at +2.1% vs +2.2% expected). There are a few points to make about this miss though:

  • While the core inflation rate didn’t accelerate on a yoy basis, it didn’t slow, either. So core inflation remains slightly above the target level of 2.0% yoy.
  • Moreover, there are a lot of ways to measure inflation, and they all seem to be pointing in the same direction:  up! In addition to the core Consumer Price Index (CPI) and core Personal Consumption Expenditures  (PCE) deflator, there’s the Atlanta Federal Reserve System (Fed’s) “Sticky CPI,” which is rising 2.5% yoy, and the Cleveland Fed’s median CPI, which is up 2.6% yoy.

  • The CPI isn’t the Fed’s target for inflation anyway. That’s the personal consumption expenditure (PCE) deflator. Looking at the CPI, the deceleration from the previous month in terms of mom change was entirely accounted for by three categories (used vehicles, airfares and new vehicles) that don’t have a weight in the PCE. In fact, airfares aren’t even included in the core PCE.

Therefore the April 2018 PCE, due out on 31 May 2018, is still likely to be at least “close to” or “near” the Fed’s 2% target, as mentioned at the recent Federal Open Market Committee (FOMC) meeting. That’s a crucial indicator, because it’s the last PCE deflator before the June 2018 FOMC meeting, when the market sees a 92% likelihood of a rate hike. (The May 2018 CPI will be released on the first day of the two-day meeting). As long as the April 2018 PCE doesn’t show a slowing of inflation, then the Fed is almost certain to go ahead and hike, as everyone assumes. More importantly, the revised “dot plot” could show the median FOMC member expects four rate hikes this year, which could probably prove USD-positive.

GBP was the big loser on the day after the Bank of England lowered its estimate for inflation. It said the effect of sterling’s depreciation on inflation “is likely to fade a little faster than previously thought” and inflation “is projected to fall back slightly more quickly than in February 2018, reaching the target in two years.” The change is shown in the new forecasts that were part of the Quarterly Inflation Report.

The Bank of England apparently expects three more rate hikes by 2021, i.e. one rate hike per year. This is far beyond what the SONIA (Sterling overnight index average) market is pricing in – SONIA isn’t pricing in 1.2% until nine years from now. At the three year horizon, it’s only pricing in 0.90%, or a little bit less than two more rate hikes.

Furthermore, the Brexit negotiations seem to have hit an impasse on the British side. UK Prime Minister Theresa May Thursday 10th of May 2018 cancelled a meeting of her Brexit cabinet and put off sending her key Brexit legislation to the House of Commons, indicating that there are serious problems in getting people to agree with it. Of course – her solution to the insoluble contradictions necessary to achieve Brexit are to maintain an interim agreement indefinitely.

AUD was the biggest gainer for no reason having to do with Australia – on the contrary, Australian home loans missed estimates and were even worse than expected (-2.2% mom vs -1.8% mom expected, -0.2% mom previous). It seems to be more a function of NZD weakness –  NZD gained vs USD, perhaps on some profit-taking or mean reversion after the drop following the dovish RBNZ meeting. Both currencies may have been boosted by the fall in US yields after the disappointing CPI figures, although the AUD-USD spread was virtually unchanged as AUD yields fell slightly too. 

Today’s market

It’s Canadian unemployment day today Friday 11th of May 2018. Normally the Canadian figure comes out at the same time as the US employment does, but not this month. The unemployment rate is expected to remain at the cyclical low of 5.8% for the third month in a row (fourth month out of five), while the number of jobs is expected to increase more or less in line with the recent trend. In other words, the figures are expected to show no change in the current employment situation in Canada and therefore could be neutral for CAD, or perhaps even slightly positive if they show an increase in the number of full-time jobs rather than part-time.

US import price index is a questionable statistic. There are three series here: the mom & yoy rate of change, and a mom series excluding petroleum. None has any significant correlation with the movement of EUR/USD in the 30 minutes or one hour after it’s released. Yet there are often big moves during that time. That may just be because it comes out at the beginning of the US day and there are frequently big moves around that time.

In any event, today’s figure is expected to show all three measures accelerating, which could help to change the new narrative of stable inflation. That could be positive for the dollar.

European Central Bank (ECB) President Mario Draghi will address the European Diversity Institute’s “State of the Union” conference in Florence. The theme of the conference is “Solidarity in Europe.”

The University of Michigan’s consumer confidence index is expected to fall further from its recent 14-year high. Given the extraordinary level of confidence, and also the fact that this decline is not really being confirmed by the other major consumer confidence index.

There are two major things that affect consumer confidence:  the stock market and the unemployment rate. While stocks haven’t been doing too great recently, the unemployment rate just moved to a 3-handle, which we haven’t seen in 18 years. The April 2018 nonfarm payrolls figure wasn’t so great, but Tuesday’s 8th of May 2018 Job Offers and Labor Turnover Survey (JOLTS) report showed that the number of job openings in the US is at a record high, which suggests that demand for labor remains firm and the unemployment rate should continue to fall, which suggests consumer sentiment is likely to remain high. This could be neutral for USD.

The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.

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10 / 05 / 2018 | Market News

Fundamental Analysis 10.05.2018 – Market Outlook

Market Recap

The Reserve Bank of New Zealand (RBNZ) met and kept rates unchanged, as was unanimously expected. Indeed, the very first line of their press release was “The Official Cash Rate (OCR) will remain at 1.75 percent for some time to come.”

This statement was striking for three reasons. First off, up to now the RBNZ has put their forward guidance at the end of the statement, not the beginning. Putting it at the start emphasizes their intentions.

Secondly, it’s a change for them to specify a certain number. Previously, the RBNZ had said that “Monetary policy will remain accommodative for a considerable period.” Given the current level of rates -- a record low for New Zealand -- they could raise rates several times and still argue that rates were “accommodative.” Certainly when we look at the real (i.e., after inflation) OCR, it’s still around zero, meaning there’s plenty of scope to raise rates and still be “accommodative.”

Third, the statements said that “The direction of our next move is equally balanced, up or down.” This holds out more of the possibility of a further cut than their previous statement, which was that “Numerous uncertainties remain and policy may need to adjust accordingly.”

In other words, Governor Adrian Orr’s pledge was a stronger promise to keep rates not just low, but unchanged, for longer and a more concrete presentation of the possibility further cuts. As a result, expectations of an interest rate hike this year – already a low 27% -- fell further to only 15% and NZD fell. It’s likely to remain weak as their forward guidance is probably the strongest outside of Japan, so as rates rise elsewhere – as they inevitably will, sooner or later – the country’s historic interest rate advantage is likely to erode further, weakening the currency.

The new economic forecasts in the Statement on Monetary Policy (SOMP) were virtually unchanged. The Consumer Price Index (CPI) forecast for 2019 was lowered by 10 bps and the Gross Domestic Product (GDP) forecasts for the next several years were lowered by 10-20 bps. The RBNZ still sees the OCR remaining unchanged until 2020.


Also as expected, the Statement of Monetary Policy (SOMP) did give an explanation of how the RBNZ interprets its new mandate to achieve “maximum sustainable employment,” or MSE. It said it interprets that phrase “to mean the highest utilisation of labour resources that can be maintained over time.” If you’re none the wiser after that, don’t worry, you have lots of company.

They didn’t say what the number is, just that “We are within a broad range of indicators of MSE.”

The maximum sustainable level of employment is not directly observable and can vary over time. In addition the Reserve Bank has a limited ability to affect the long-run level of MSE. Given these limitations, the Reserve Bank does not have a specific numerical target for employment, unlike for inflation. Instead, the Reserve Bank monitors a wide range of labour market indicators to form a holistic assessment of whether the economy is currently operating at MSE.

AUD gained on the news as investors bought AUD/NZD to express a bearish kiwi view. That suggests AUD/NZD has further upside to go.

CAD was the best-performing G10 currency overnight as oil continued to rise (although the correlation between CAD and oil isn’t that robust nowadays) and Canadian 2-year bond yields rose to an eight-year high, narrowing the yield gap with the US slightly. With North American Free Trading Agreement (NAFTA) talks proceeding and US President Donald Trump having enough problems with his China trade talks, it’s likely that CAD could continue to gain.


Today’s market

Two big events today:

Bank of England meeting:  Over the last two weeks or so the odds of a rate hike at this month’s Monetary Policy Committee (MPC) meeting have gone from a near-certain “yes” of 86% to an equally certain “no” of 13%. The deceleration in growth in Q1 (much more pronounced than in the Eurozone) might have been attributed to the bad weather, but an unexpectedly steep decline in the manufacturing Purchasing Managers Index (PMI) for April 2018, when the weather was fine, suggests that there’s more to the slowdown than that. Markit’s economist said that “the three PMI surveys collectively showed only a muted rebound in business activity” and the fact that they didn’t return to February’s 2018 level suggests “that the underlying performance of the economy has continued to deteriorate.”

The question about the meeting then is not whether they’ll raise rates, but rather what they will say about the Q1 growth figures and how they will adjust their forecasts for growth and inflation in the Inflation Report that will accompany the meeting. The forecasts could remain unchanged, showing that they continue to expect inflation to remain above target over the forecast period.


The US Consumer Price Index (CPI) for April 2018, also coming out on Thursday 10th of May 2018, is expected to show a further acceleration in inflation. Both the headline and the core inflation rates are expected to accelerate further above the Federal Reserve System (Fed’s) 2% target. Of course, this isn’t the Fed’s official inflation target – that’s the personal consumption expenditure deflator, which so far has just hit 2% yoy. Besides, the two indicators do tend to move together despite some differences in how they’re constructed, so it can be assumed that if the CPI is moving higher, eventually the PCE deflator will be too.

Furthermore, although another Personal Consumption Expenditures (PCE) deflator will come out before the 13th of June FOMC meeting, this is the last CPI before that meeting (the next one comes out on the first day of the meeting). That may make it psychologically important as the FOMC members prepare their views for the meeting.

It is expected that the news will confirm the FOMC’s recent more confident tone on inflation and therefore could be positive for the dollar.

Other indicators

It really is Britain day today. In addition to the results of the Bank of England meeting, today is “short term indicator day” from the Office of National Statistics. The Office of National Statistics releases the construction, production and trade data at the same time this morning. The market largely ignores the construction data and focuses on the other two. 

First off, EUR/GBP seems to respond in a more reliable fashion to these indicators than GBP/USD does.

As for the industrial and manufacturing production figures, the manufacturing trade figures also seem to have a negative correlation with GBP. Neither is particularly well correlated with GBP/USD, although they both have a reasonable correlation with the movement in EUR/GBP after one hour. 

The UK trade account improved dramatically in February 2018 as imports plunged (-6.5% mom, vs -2.2% mom for exports). The market assumes that this was an anomaly and will be reversed in March – the forecasts for both visible and overall trade are basically the same as the six-month moving averages. If the trade deficit does widen out again, that could prove negative for sterling. 

Industrial production is expected to accelerate modestly after the weather-related weakness in February 2018, but most of that is simply due to more oil production. At the same time, manufacturing production is forecast to decline mom at the same pace as in the previous month – not a good sign, as it suggests the February 2018 fall might not have been just a one-off due to some random volatile factors. Given that the market is already worried about a slowdown in the UK, any news that confirms this bias could be negative for the pound.

Overnight, Australian home loans are expected to continue their downward trend. Housing markets remained soft through the month and prices continued to move lower. Buyer sentiment has steadied somewhat but remains depressed by historical standards. Some tightening in lending criteria may also be impacting new finance activity. All told the figure could be negative for AUD in that it reduces the need for the Reserve Bank of Australia to tighten policy. 

The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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10 / 05 / 2018 | Market News

3 things to consider before investing

Buying a house, taking care of children’s education or arranging a plan for retirement are just some of the problems that an adult will have to solve in the course of his life. Unfortunately, the salaries of most people are creating a problem in covering those needs as they are not adequate, and every costly purchase requires budgeting. While budgeting isn’t so bad as it sounds, there are certainly other ways to increase the available income. 

One of those ways is investing. Investing is the act of committing money or capital to an endeavor, expecting that an additional income or profit will be obtained. However, investing doesn’t in any case guarantee that an extra income will be constantly available as the market’s fluctuations can work in favour of an investment, but also against it resulting in the loss of the invested capital. In order to avoid a potential loss of funds the investor has to take into consideration certain things that would allow him to better prepare against market volatility. 

Which are your goals?

Every plan in life should have a set of goals and an investment plan should not be an exception to the rule. However, it’s not a rare situation to have people investing in various shares, bonds and other securities without a clear target or strategy. An investor that would like to achieve his targets should think beforehand what he wants from an investment plan and which course of action would be more appropriate to get closer to the desired result. Goals could be short-term, medium-term or long term according to the investor’s needs and they are always an essential part of an investment plan. 

Risk tolerance

One of the basic things that should be understood before starting to invest is that an investment involves risk. Risk is something that many people would like to avoid but an investor should be ready to face the consequences if the market moves against him. That’s why, before investing, the investor should decide how much market volatility could he really stand if the market falls. Experienced investors know that it’s preferable to have a realistic understanding of their ability and willingness to withstand large swings in the value of their investments. Seasoned investors also note that there is a thin line between risk tolerance and risk capability that beginner investors should consider when planning their strategies.

Buy shares of firms you know about

Warren Buffett, one of the most famous investors in global markets, has said in the past that “it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” This quote coming from an investor, whose net value according to Forbes’ list of billionaires, published on May 10th 2018, is $85.7bn, is of special importance. Warren Buffett has repeatedly advised investors to scan thoroughly the market and be focused on shares of firms that they are thoroughly informed about. Investing in firms that look attractive without knowing the right kind of data about them could result in capital loss. 

STO and Investo

Our consolidated experience in portfolio management helped us develop a specific investment strategy for STO clients called “Investo”. “Investo” is designed to accommodate the needs of every potential investor, seeking to bring more possibilities for positive returns. 

Trading Forex and CFDs (Contracts For Difference), which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.
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09 / 05 / 2018 | Market News

Fundamental Analysis 09.05.2018 – Market Outlook

Market Recap

 US President Donald Trump pulled out of the Iranian deal on Tuesday 8th of May 2018. 

The new rules give companies and banks 90 days or 180 days (depending on their activities) to wind down their existing ties with Iran. This “wind-down” period is important, because it gives some time for negotiations to proceed before the sanctions take effect. Treasury Secretary Steven Mnuchin said the purpose of withdrawing from the deal is not to isolate Iran, but rather to get Iran and the Europeans “to enter into a new agreement” that will be more to Donald Trump’s liking. So this whole move may be just a way to put pressure on the other sides in the negotiations to offer concessions to the US. The Wall Street Journal (WSJ) said, "just as the Trump administration announced steel tariffs but later provided temporary exceptions for allies, the US is leaving itself wiggle room should its actions prove to be too disruptive or too tough to enforce.”

If this brinksmanship doesn’t work and Iran does get isolated, this in theory takes some 3.75mn barrels out of the world’s daily oil supply. That’s about 12% of total OPEC production, which is a lot. Notice too that total OPEC output has been declining even while Iranian output has been steady. Without Iran, OPEC output would be falling much faster.

Of course not all of Iran’s production is exported, but enough is to make a difference in world oil prices at a time when oil inventories are no longer in large surplus.

But how much would this actually stop exports? It’s likely that several countries, such as China, India, Turkey and Russia, would simply ignore the US move. These countries account for a little over half of total Iranian exports. So the impact might not be as much as feared.

CHF was the main gainer in the FX world overnight. The contrast between the strong CHF and the weaker JPY may be explained by the central role that Europe plays in the Iran issue. Japan is likely to go along with US sanctions, but the EU is in a pickle since it has much closer ties.

CHF may also have been hit simply by buyer fatigue due to its inability to hold above the previous 1.20 floor. It hit 1.20055 on 20 April 2018, but since then has traded below 1.20. EUR/CHF fell yesterday Tuesday 8th of May 2018 from around 1.1954 to 1.1893, although note that this selling was right from the beginning of the European day yesterday, so it was certainly not in response to President Trump’s move – it may also have been influenced by the political disarray in Italy, where the Five Star Movement refused to back a technical government and instead called for a vote in July 2017. That could be a negative factor for EUR. With geopolitical risks in North Asia calming down and the Mideast heating up, plus questions over Italian politics, we could see the two safe-haven currencies moving independently for the time being.

AUD on the other hand was the main loser. Most of the decline took place before the Federal budget was announced at 0930 GMT yesterday, so it probably has more to do with risk-off sentiment and the decline in metals and iron ore prices than with the slightly narrower-than-expected budget deficit (AUD 14.5bn vs forecasts of some AUD 15.0bn).

Emerging market currencies were hit after Federal Reserve System (Fed) Chairman (Chair) Jerome Powell said that the gradual rise in interest rates in the US “should continiue to prove managable” for EM currencies.

Today’s market

No major indicators out during the European day today.

The day starts out with US producer price index (PPI), the precursor to tomorrow’s Thursday 10th of May 2018, consumer price index (CPI). Growth in producer prices is expected to slow. This is surprising, considering that the Institute for Supply Management (ISM’s) prices paid index has been rising steadily and recently reached the highest level since 2011. Producer prices have been rising fairly steadily though since 2016, and recently core producer prices started accelerating. The expected slowdown in April 2018 may just be some mean reversion after the recent acceleration and won’t necessarily signal a turning point. Nonetheless, the market is closely attuned to the inflation outlook, so any indication of slowing inflation could be taken as negative for USD.


Atlanta Fed President Raphael Bostic will speak today 9th of May 2018 on the economic outlook and monetary policy. He made some welcoming remarks at the bank’s financial market conference on Monday 7th of May 2018, while last Friday 4th of May 2018 he was interviewed by Reuters. Yesterday he said he was “comfortable with some degree of overshooting the 2% target,” which is in line with the Federal Open Market Committees (FOMC’s) view of their “symmetrical” target.

The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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09 / 05 / 2018 | Market News

Markets await BoE's interest rate decision

Thursday May 10th 2018 will be a day full of financial data releases. The Reserve Bank of New Zealand (RBNZ) is going to announce its decision on interest rates with analysts expecting that the RBNZ’s board will keep them on hold at 1.75%. In the United States (US), data regarding the Consumer Price Index (CPI) inflation will be published. The most important financial update in Europe will come from the United Kingdom.

The Bank Of England to decide on interest rates

On May 10th 2018, the Bank of England (BoE) will be having its monetary policy meeting. The Monetary Policy Committee (MPC) of the BoE will convene to decide on interest rates. Currently, the BoE’s benchmark interest rate stands at 0.50%. The last time that the central bank of England raised its interest rates was back in November 2017. The interest rate hike in November 2017 was the first since 2007. The BoE had proceeded in lowering interest rates from 2007 until 2016 in an effort to help the UK’s economy avoid the consequences of the severe financial crisis that hit it.

Although economists were forecasting that an interest rate hike by the BoE was almost certain some days ago, a series of disappointing data releases seem to have reduced the possibility of a rate hike. On April 9th 2018, the Office for National Statistics (ONS) published data regarding UK retail sales in the UK for March 2018. The data revealed that retail sales fell by 0.5%, on a month-to-month basis, when compared with February 2018. On Tuesday April 24th 2018, a BoE report, titled “BoE’s monthly money and credit statistical release”, showed that mortgage approvals for house purchases fell back to the second lowest level (after December 2017) since August 2016. 

Another ONS report, titled “GDP: Quarter on Quarter Growth,” about the UK’s economic growth in the first quarter (Q1) of 2018 disappointed the financial markets on April 27th 2018. According to the ONS report, the UK’s economy expanded by just 0.1% in Q1 2018 which was the weakest quarterly growth rate recorded since 2012. Economists suggested that bad weather conditions in February and March 2018 played a role in the low growth rate, but also noted that there were underlying signs of financial weakness among households deriving from the squeeze on salaries. 

Banks don’t anticipate a BoE rate hike

Analysts at Westpac, which is one the major Australian banks, said in their report published on May 7th 2018 that they don’t anticipate an interest rate. “We expect that the BoE will keep its benchmark interest rate on hold at 0.5% at its May 2018 meeting. We also expect that they will maintain their gradual tightening bias. Inflation remains well above 2% but has been easing back, and some further softening is expected over the coming months,” noted the Westpac’s analysts. 

Economists at the Internationale Nederladen Groep (ING) suggested in their May 7th 2018 report that “the BoE will likely err on the side of caution and keep interest rates unchanged on May 10th  2018 MPC’s meeting.” The report notes that a rate hike “could be one headwind too many for the faltering consumer-facing sectors.” ING’s analysts forecast that a rate hike over the summer 2018 is likely, unless retail sales conditions get worse. 

STO and the British Pound

The British Pound against the US Dollar, the Euro and the Japanese Yen are just some of the currency pairs you can trade with on the STO online trading platform. Traders can take advantage of the STO’s Forex variety and choose from over 30 currency pairs when trading. STO provides its clients with educational courses to help them encounter the various trading challenges. 

Trading Forex and CFDs, which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.
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08 / 05 / 2018 | Market News

Fundamental Analysis 08.05.2018 – Market Outlook

Market Recap

EUR was weaker – and conversely, USD stronger – following disappointing German factory orders for March 2018 (-0.9% mom vs +0.5% expected, previous revised down to -0.2% from +0.3%). This was the third consecutive mom decline for the series. The news provides some hard evidence of the slowdown shown in both the Ifo indices and the manufacturing Purchasing Managers Index (PMI), that the Eurozone economy lost momentum in Q1.

The figures throw doubt on the idea of globally synchronized growth based on rising investment or capital spending. One of the worst-performing sectors in the figures was foreign orders investment goods, which fell more than 7.5% over the last three months compared to the previous three months. The last time the rate of growth plunged by that much was in 2015; eventually the European Central Bank (ECB) had to increase its Quantitative Easing (QE) program. 

Oil fell after US President Donald Trump sent out a tweet on Monday 7th of May 2018 saying he’d announce his decision on whether to remain in the Iran nuclear deal at 2 PM local time (18:00 GMT)

Federal Open Market Committee (FOMC), Richmond Federal Reserve System (Fed) President Thomas Barkin, gave his first big speech since taking on his current role. “It is hard to argue that accommodation is appropriate when unemployment is low and inflation is effectively at our target,” he said. “You probably ought to go to neutral in that environment.” Note that the official Fed line is that inflation is “close to” or “near” the target, not “at.”

He added that one reason inflation is under control is because of the Fed’s willingness to step on the brakes if necessary and added, “we don’t want to risk our credibility of our commitment to low and stable inflation.

In that respect, Bloomberg had an interesting article pointing out that when New York (NY) Fed President William C. Dudley retires on 17 June 2018, it will set into motion a series of events that will give a vote to Kansas City Fed president Esther George. When she last voted, in 2016, she voted to hike rates at five of eight meetings, even though the Committee wound up raising rates only once that year. So with the addition of Barkin and George, the FOMC may take on a distinctly more hawkish tendency. This could increase the “interest rate divergence” trade and be bullish USD.

Today’s market

Early in the European day Tuesday 9th of May 2018, we get two indicators out from Germany:  trade and industrial production.

The German trade figures are now politically sensitive as the President Trump administration tries to prod world trade into balance. In that respect, the forecast rise in Germany’s trade surplus could be positive for the euro/negative for USD.

One of the highlights of the week will be today, when Fed Chair Jerome Powell will participate in a panel discussion on “Monetary Policy Influences on Global Financial Conditions and International Capital Flows” at a conference on the international monetary system sponsored by the Swiss National Bank and the IMF. With the FOMC pretty evenly balanced between the three- and four-rate-hike crowds, the position of the Chair, with the ability to sway other members, can be crucial. 

It’s Tuesday night 8th of May 2018 in Australia and Treasurer Scott Morrison will present the Australian Federal 2018 budget to Parliament. The budget should show that the government’s fiscal position has improved relative to the Mid-Year Economic and Fiscal Outlook (MYEFO), released in December 2017, as job growth has been stronger and commodity prices higher than expected. The government is likely to announce a narrower deficit for both 2017/18 and 2018/19. (The Australian fiscal year runs from July to June.) What would the market impact be? In theory an improved fiscal position should be positive for the currency, but on the other hand, less need to borrow could mean lower bond yields, which could be negative for AUD.

Here are the previous estimates from the Mid-Year Economic and Fiscal Outlook (MYEFO):


The National Federation of Independent Businesses (NFIB) small business optimism index is expected to be unchanged. It peaked back in February 2018 at the highest level since 1983, so even remaining unchanged at around these levels is pretty good (104.7 vs the average for the last 10 years of 93.8). Note from the graph too that the “hiring plans” index, which is already out, fell further during the month. That makes it even more impressive that the overall index can stay unchanged. This could be positive for USD.

Canadian housing starts are forecast to slow further. That’s to be expected, with prices falling – an indication of slowing demand. Bank of Canada Governor Stephen Poloz last week highlighted the deeply indebted state of Canadian households, where debt is at a record high relative to income. A slowdown in housing would mean less need for tightening to avert a crash, and therefore it could be negative for CAD.


The US job openings and labor turnover survey (JOLTS) report is the converse of the unemployment data – instead of the number of people looking for jobs, it’s the number of jobs looking for people. While there’s been some month-to-month fluctuations, the six-month moving average has been remarkably steady since last September 2017 at around 6.05mn openings. In that respect, this month’s forecast of 6.075mn would be an above-trend figure – remarkable after 91 consecutive months of job increases. This could be positive for USD.

Overnight comes the Japan labor cash earnings figure. This ought to be a much more important figure than it is – it’s the equivalent of the average hourly earnings in the US or average weekly earnings in the UK. All central banks are waiting to see tighter labor markets feeding through to higher wages, which would be the sign that the fabled Philips Curve is alive and well. In this case, earnings are expected to grow at 1.0% yoy again, suggesting that earnings are still trending higher. In order to reach the Bank of Japan’s 2% inflation target, they’d probably have to be running at well over 2% a year. So this may be progress, but it’s slow progress indeed. Still, it may be slightly JPY-positive.


The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.

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