First NFP of 2016.... "Risk On"!

Ladies and Gentlemen,

It has been a very busy start to the financial year, the stock markets have had a rough ride, the DAX is down 7% YTD and the S&P is below the pivotal 1990 level.

Risk off has been the theme in the FX market, until the correction overnight, has the sentiment turned ahead of the Non-Farm Payrolls?

The Non-Farm Payroll number will be announced at 13:30 GMT the consensus is for a 200k number following on from 211k in December, keep a keen eye out for the unemployment rate which is currently 5% and the average earnings increase, which is released at the same time. Reference to wage inflation and levels of employment where mentioned at the ‘Lift off’ press conference.

Why is this number so important? The market is trying to work out the pace of rate hikes in 2016, it is important to remember that the FED only has 8 meeting in a year. Will the hiking cycle be gradual or more aggressive? Fed Chair Yellen mentioned at her press conference that ‘future policy actions will obviously depend on how the economy evolves’ stressing that unemployment and inflation figures are factors that guide the Fed in arriving at rate hike decisions.

The Federal Reserve official publish their forecasts for the central bank’s key interest rate on a chart known as the ‘dot plot’. The dots has 4 hikes whereas Fed funds only has 3 who will be correct?

This year has already been touted as the year of ‘Doom Gloom and lack of Boom’, and i am looking forward to more positive 2016.

Good Luck

The Exaggerated Importance Of Today's NFP

Ladies & Gentlemen, 

One piece of Data that the Markets have been hanging onto (for the last fortnight now) is today's US Jobs Report. But has the Data release been overblown? Will this Data release really decide if the FED will hike in December or not? 

I think it is bizzare that we come to this point, after such a long time of FED Rate Hike talk and in fairness, we should of really started hiking back in September. In fairness to the FED, they have been transparent and the bar has been pushed lower - if yesterday's ADP result was considerably weaker the Markets would of considered changing direction, but it remains firm.

In my view, anything above 142K will be enough. My call is for 230K plus, but Markets may be focused on revisions, as it is about the "Nirvana" of finding a "Full Employment" level & Yellen more recently has stated that the "Excess" employment number has been diminished. 

So how strong is the USD? Well if you look at the Labor Participation Rate, which points to the strength of an Economy it has not really been up to par. However, these could come down to more structural demographic issues, which the FED could not really be judged on... but more-so on the "Excess capacity" of the market. 

The fact is the USD is on a tear and investors are still building more positions.. Looking at the chart, don't really see any stop in the way? Especially as Consumer Spending (which makes up 70% of GDP) is on the rise & this is also translated into incomes. The problem may come from mixed data, especially on the Manufacturing side, but if you strip this out the USD is the most bullish I have ever seen.

Best of luck today

Anish8FX @ Atom8.com

The "Long $" Play Over The Medium Term

Ladies and Gentlemen,

Tomorrow at 13:30 GMT we get the October Non-Farm Payroll number, the September figure was a disappointing 142k. A bounce to 182k is the Bloomberg survey consensus.

The FOMC members believe the chance of ‘lift off’ in December is still ‘live’, needing a reason not to hike is the new sentiment.

Tomorrow will give us further insight into the decision making process on 16^th December.

The Fed has maintained that the appropriate time to raise rates is when the sustained improvement in the labour market is attained, combined with confidence that inflation will move back to its 2% target over the medium term. These are the exact words from the press on 28^th October ‘the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of declines in energy and import prices dissipate’. The dual mandate of Fed has been talked about in previous Event Risk updates.

I see the divergence in Central Bank policy as an opportunity to express ‘Long $’ plays over the medium term.

$/Jpy sits above the 200 day moving average at 121.10 and just below the 100 day moving average at 121.70, a daily close above 122 will see momentum accounts add to existing long positions. The first Friday of the month is always interesting.

Good Luck

Anish8FX @Atom8.Com

A new month, a new quarter and the first event risk is upon us - NFP!

Ladies and Gentlemen,

A new month, a new quarter and the first event risk is upon us.

Tomorrow at 13:30 BST we get the US Non-Farm Payrolls.

At the Philip Gamble Memorial Lecture at the University of Massachusetts on 24^th September Janet Yellen said “Most of my colleagues and I anticipate that it will likely be appropriate to raise the target range for the federal funds rate sometime later this year”. There are only 2 meeting left, the next FOMC decision is 28th October and then the final meeting of year for the open markets committee takes place on 16^th December.

It is well known that the Federal Reserve do not like to surprise the market, Larry Summers former Secretary of Treasury, stated in his blog that in the last 20 years the Fed has never tightened without guiding the futures market to at least a 70 percent chance of a tightening, presently there is an 84% expectation of a December hike. Will tomorrows’ data change the market view?

Bloomberg have surveyed 93 economists and the estimates vary from a lowest approximation of 149,000 and a highest evaluation of 255,000

The average is 202,000 whilst the median is 200,000.

In August 173,000 jobs were added, down from 245,000 in July, whilst the unemployment rate fell to 5.1%

A strong number and I assume that we will see further confidence in the $ trade and whilst the commodity markets are under pressure, prefer to express this view against the commodity currencies.

Good Luck

Anish S. Lal @anish8fx

FX & Precious Metals, Atom8 Financial Services LLP

2nd Floor, Centenary House, Palliser Road, London W14 9EQ, UK

T: +44(0)20 3405 3910 | M: +44 (0)7983701816 | anish.lal@atom8.com | www.atom8.com

Risk Warning

Trading on margin (spread betting, CFDs and FX) carries a high level of risk and may not be suitable for all investors.  The high degree of leverage can work against you as well as for you.  Before deciding to trade your live account, you should carefully consider your investment objectives, level of experience and risk appetite.  You could lose more than your initial investment and should not trade with funds you cannot afford to lose.  You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

The most important NFP of 2015?

Ladies and Gentlemen

Today at 13.30 BST we get the latest employment report from the United States, it will assist government policy makers in their quest to decide on the timing of the first rate rise since 2006.

The change in Non-Farm payrolls is expected to be 217k according to the Bloomberg Survey, the report is seen as the deciding factor for the September FOMC. Commentators believe the chances of ‘lift off’ have diminished in the light of the financial turmoil, however the employment survey was concluded before this period.

The August number is heavily influenced by seasonal factors and difficult to predict. Over the last 10 years the difference between the consensus and the actually number has been biggest in both March and August, there was a 119k miss in March of this year let’s hope we are closer for August.

It is important to remember the dual mandate of the Fed, meaning that both employment and inflation will have to be at levels where tightening monetary policy is appropriate.

The unemployment rate which has already reached the top end of the Fed’s year end projection 5.2%, is a 7 year low. However, a falling oil price means away from the workforce there is a disinflationary environment and may enable the key decision to be delayed.

At Atom8 we are cognisant that this is an important number and that it is worthwhile looking at all the data that is released at 13.30 including the July revisions.

Good Luck

Anish S. Lal @anish8fx

FX & Precious Metals, Atom8 Financial Services LLP

2nd Floor, Centenary House, Palliser Road, London W14 9EQ, UK

T: +44(0)20 3405 3910 | M: +44 (0)7983701816 | anish.lal@atom8.com | www.atom8.com

Risk Warning

Trading on margin (spread betting, CFDs and FX) carries a high level of risk and may not be suitable for all investors.  The high degree of leverage can work against you as well as for you.  Before deciding to trade your live account, you should carefully consider your investment objectives, level of experience and risk appetite.  You could lose more than your initial investment and should not trade with funds you cannot afford to lose.  You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Event - The "Atomic" August NFP - What to expect?

Ladies and Gentlemen,

Today at 13.30 BST we have a plethora of data from the US, as we are all aware the Fed is “Data Dependent”.

13.30     Non-Farm Payrolls          

Average Hourly earnings

Unemployment Rate

Labor Force participant rate

The Non-Farm Payroll number will be where we look first. The market consensus is 225k. The barometer appears to be 200k with a weaker number suggesting that a rate rise in September will be off the table, whilst a strong number will make the voting members of the Federal Reserve do some soul searching.

Fed Funds has 19 basis points priced into the September Contract, 32 basis points priced in December Contract and a year from now it has 70 basis points,will this change?

The minutes of the last meeting teased the market with the word ‘some’, stating that the FED would like to see “some improvements” in data before raising rates

Dennis Lockhart, the Atlanta Fed President, a dove, said that it would take a significant deterioration in the data not to move in September.

We eagerly await the data dependent sequence…

Good Luck

Anish S. Lal @anish8fx

FX & Precious Metals, Atom8 Financial Services LLP

2nd Floor, Centenary House, Palliser Road, London W14 9EQ, UK

T: +44(0)20 3405 3910 | M: +44 (0)7983701816 | anish.lal@atom8.com | www.atom8.com

NFP Thursday

Ladies and Gentlemen,

 

The markets have been very clearly focused on Europe and specifically Greece in the last few trading sessions.

 

Tomorrow, this temporarily changes as we have the US Non-Farm Payroll number at 1.30 BST

 

The ADP employment change data today was better than expected today at 237k when 218k was consensus, this is often seen as a pre cursor for the NFPs

 

The ISM manufacturing number was also better than expected at 53.5 when 53.2 was expected, so where does this lead us.

 

The NFP consensus is 233k and last month the number was 280k but everyone knows ‘The Fed’ is data dependant and with two additional job reports before the September Fed meeting does anyone care?

 

Yes, the split seems to be how many rate hikes will there be before year end, one or two?

 

However we may need to look away from the headline figure and understand what is going on beneath the bonnet to assess how the Fed voters will interrupt the numbers

 

The labor participation rate needs to be improving, average earnings need to be ticking up the year on year, the rate is presently 2.3% and aggregate income growth needs to be positive.

 

As ever the devil is in the detail

 

Good Luck 

 

Anish Lal