FED : Risk Event or Non-Risk Event?

Ladies and Gentlemen,

 Today the two day Federal Reserve meetings start. Chairwoman Janet Yellen is not holding a press conference and updated economic projections will not be released. This meeting is dismissed as a ‘non-event’, however the statement will be released at 19:00 BST and should be digested quickly just in case it is an ‘event’. Look out for the following:-

•       Rates on hold, the last rate hike was in 2006, a hint might be given by tweaking their description of the economy.

•           The Fed has a dual mandate, both employment and stable prices.  An upbeat assessment of the job market whilst energy prices have weakened could signal lift-off.

•           The last five Fed Policy Statements have been approved by a 10-0 vote, will this unanimity last forever? Jeffrey Lacker, Richmond Fed President, is seen as the possible dissenter

If this is a non-event we have to wait until September 17 for our next guidance

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.

Will the markets gap for a third week in a row at market open?

Dear  Traders

Will the markets gap for a third week in a row at market open?

EU leaders have issued an ultimatum to the Greek government, ‘reach an agreement with your creditors or face crashing out of €uro’

Alexis Tspiras has made a three year proposal and it looks as if Germany are bowing to pressure to avoid a disastrous rupture to monetary union.

It is acknowledged that Greece’s public debt, 180% of GDP, can never be repaid and German Chancellor Angela Merkel said “a classic haircut” is out of question.

If you look at the FX option market, volatility has fallen, are investors missing the point that the GREXIT could happen this week end?

Below is the time line for the next 72 hours

Athens have formally submitted a request for a three year bailout. The two previous bail outs where submitted before the ESM (European Stability Mechanism) even existed. The European Commission in liaison with the ECB must evaluate this request in 24hours.

Saturday

Under the ESM treaty, the ESM’s board of governors (the Eurozone’s 19 finance ministers) decide whether formal negotiations should begin.

If there are grounds for progression the trio of bailout monitors – the ECB, the European Commission and IMF - will develop a ‘memorandum of understanding’. This title may be changed as it presently stands for the austerity measures that the Greek people are living under.

Sunday

If the Eurozone’s finance minister agree to commence bail out talks this summit may not be needed. However if no deal has been struck, leaders from all 28 EU countries will be summoned to Brussels to sort out the mess. There is a humanitarian relief programme that may be required for fuel, food and medicine.

Monday

If a deal has been approved by the finance ministers then parliamentary approval will be need before permission is officially granted

If no deal has been agreed then the ECB governing council will convene to withdraw the €89bn and the GREXIT will ensue

I hope this helps your understanding of the events. 

The Greek Drama reaches the final curtain, YES or NO?

Dear Traders 

This week end the Greek people get to decide whether or not to accept the bailout conditions proposed jointly by the European Commission(EC), the IMF and ECB on 25^th June 2015

Legal Validity

Today the Greece’s top administrative court, the Council of State, is due to rule on the legality of the referendum

The referendum may violate the country’s constitution by posing a question about public finances

The Question

Voters will be asked whether they approve the proposal made to Greece by the EU, the IMF and the ECB during the Eurogroup meeting on 25 June.

The proposal consists of two documents, titled Reforms for the completion of the Current Program and Beyond, and Preliminary Debt sustainability analysis.

The question will contain two choices stated as

·         Those citizens that reject the proposal of the three institutions vote 'No’ – not approved

·         Those citizens that agree with the proposal of the three institutions vote 'Yes' – approved

Alex Tsipras, the Prime Minister of Greece, recommends a ‘No’ vote

Although the consequence might be the exit of Greece from the Eurozone, there has been rhetoric that this could be used as a tool for Greece to renegotiate its position within Europe.

From a practical point of view the banks re open on July 7th

The Polls

I have seen 4 polls the latest was from the University of Macedonia with 1,042 people survey 42.5% Yes and 43% no.

Alco’s polls was a ‘yes’ whilst Focus and pro rata were both ‘no’

This is all destabilising and if the price action from last week end is anything to go by then a move lower in €/$ is what we expect.

Our original comment was that 20^th July was is the most significant date as the ECB’s position will harden if their payment is missed

Enjoy your week end if you can.

Anish S. Lal @anish8fx

FX & Precious Metals Sales, 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.

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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 

 

In it's quest for 1.70 is GBP the new safe haven asset?

Positive Momentum Shift

In the past two weeks we have witnessed an epic 750 pips + rally in Cable of the back of amazingly positive data from the UK, with both Retail Sales & GDP posting results above expectations.

Cable touched 1.59 for the first time this year yesterday, as it shook off the "2015 story" of range-bound cobwebs of 1.45-1.52 marks. By breaking the important structure level of 1.58... we shift back to harmonics as the AB=CD pattern lines up pointing towards further demand.

The A-Kill zone stars around 1.5850's and if you are a trend trader this market looks like it is going to be bullish and current levels would be a buying at a bargain price.

So... is GBP the new CHF? 

With absolutely 0 hope for Greece reaching a deal the risk looks to be all on the EUR, as the bulls look for shelter. And with EURUSD potentially breaking parity..Where will all these sellers flock? The GBP? Possibly so!

With heavy risk on the SNB post the break and with CHF Economic data all over the place, investors are looking for a new safe haven. The GBP offers a large financial sector and capital markets strong enough to absorb the influx of flow. Historically, GBP has been used as a "quasi" safe haven in times of stress, for example during troubled times in the Middle East and the Economic recession of 2008-2009. However, the correlation between the EUR and GBP would be critical in determining the extent of damage caused from a prospective Grexit.

The Pound Packing A Punch

With the UK job market recovering, industrial activity heavily expanding and GDP at a healthy 2.7%... We are almost back to 2007 (pre-crisis) levels. - In fact, creating a huge contrast in the Euro zone.

With EURGBP heading south... it could be argued that the GBP is even more of a sage haven.

With the BOE looking to increase rates in either the 3rd or 4th quarter - the ECB in line is still committed to it's QE program and I am just so darn excited about this move.... I genuinely think we will hit 1.70 soon and then 1.80 all before 2016...

Trading with Atom8

For range-traders... Trend Followers... Scalpers... Carry guys/girls.... Atom8 offer superior conditions for FX trading... especially on GBPUSD and other GBP crosses.. with raw ECN spreads as tight as 0.3 on Cable.. no wonder we are growing so fast...  (anyways)... Check us out at www.atom8.com and if you have any questions, you can always mail me.

Peace & Love

Anish

Is Gold powering to $1,000 per oz?

The biggest quarterly fall in Gold 

Growing prospects of the FED raising rates have kept this shiny metal posted below the recently tested $1,200oz mark and expectations of higher borrowing rates in the future has also helped to hold the price of this precious metal down, as it now struggles to compete with yield-bearing assets when rates are on the rise. 

A Fear-Based Asset

Firmer US data supported the biggest 2-day dollar move in recent times as the price of Gold fell to only find stability at around the 1170/80 levels. However, reports from Asia say there is still no stopping demand from price-sensitive customers. 

China's new $16bn Gold Fund

China's initiative to boost Gold trade is firmly embedded into their Economic policies.   The new entitiy may include an exchange traded fund for Gold and aims to raise about $16bn or £10bn in three separate tranches. 

This news could restore some Asian buying strength, struggling to offset the prospect of US rate rises.  China still remains the largest Gold producer and consumer of Gold (according to the World's Gold Council. However, the USA still holds the largest Gold Reserve. 

The Future of the Gold Price

If you ever like to know what the Banks think - Commerzbank expects a significant Gold recovery and pin the move lower down to "uncertainty" over rate rises - they expect Gold to be trading back at around $1,250 by 2016.... And moving forward, Chinese officials expect their activity in Gold trading will result in an extra $2.5 trillion in the next 10 years. 

My View

For the best part of the year I have remained bullish on metals, amidst the forthcoming FED rate raises.... and when shit hits the fan... it really does! I think we will still see a large reversal in the Metal as we continue to rest on a support of uncertainty. However, once clarity is restored.... I eye a move higher to the $1300 region. 

As always guys...... Trade Smarter.

Peace & Love - Anish

What does a Conservative victory mean for the £GBP?

The Shooting Sterling Star

Upon confirmation of a Conservative strong-hold on today's election, Cable (or GBP vs USD) soared through a significant psychological barrier (1.545), as a sign of investor support for PM David Cameron and also a sigh of relief.

Cable has trades with steady strength today nearing fresh monthly highs, as investors eye a referendum to be held on the UKs exit from the EU.


Why did the polls get it so wrong? 

A few months back, large banks were calling for further lows in Cable past 1.30, as we were in for the most "uncertain" election of recent times and the prospect of another hung parliament was not likened among investors.

The idea of a Labour victory did not sit right with most traders as they planned to slower the pace of fiscal tightening leading to a BOE tightening of the UKs Monetary Policies.  However, in recent weeks the dust settled and Cable has been posting strong gains of around 4.3% in the past month as the markets now eye a Conservative backed EU referendum.

"The most market-friendly outcome" Goldman Sachs

The thing is... Markets like security and by continuing on from where we left of... we keep our "status quo".

The Conservative Economic Policy focuses around reducing the UKs huge budget deficit through cutting expenditure (Goodbye NHS)... rather than raising Taxes (Yes!).

Also, there is a more probable chance of a UK exit from the EU following a commitment to hold a referendum in 2017. Albeit a negative for trade or UK assets, our nation has slowly began to accept the reality of our shores (relying on becoming more self-sufficient) and a cry for true independence is seen as more acceptable for the public.  However, could this then spur another Scottish referendum, causing further outcry for an independent state to the North of the capital.

My long-term view for GBPUSD

On a monthly time frame we can see the impacts caused over the build up from last year into 2015 and also the knock-on effects of the (nearly 40%) fall in the Euro against the Winter/Spring bull of he USD.  However, as Yellen becomes more dovish and US rate cuts loom daringly in June, this has given strong grounds for a spur in Cable - especially for today's power move.

I anticipate a move back to the 1.68-1.70 mark through to the end of 2015 and early 2016 as the Conservatives begin another 5 year term in power.

Any thoughts/feedback would be greatly appreciated. 

Written by, Anish S. Lal, Atom8 FX