Morning Call

Traders are awaiting the US employment figures for May at 13:30pm London. The median expectation is for the headline Non-Farm Payrolls to be +225,000 jobs (+223,000 in April), and for unemployment rate to remain unchanged at 5.4%. The Fed has signalled wage growth and the tightening labour market to be the signal to tighten monetary policy. The market consensus is for a rate hike in September 2015, however Christine Lagarde (IMF) urged the Fed to hold off until 2016 before beginning to tight…

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The Markit / CIPS UK Services PMI missed analysts’ expectations; the reading was 56.5 in May compared with a strong figure of 59.6 in April. The release for May was the ninth consecutive month above 50.0, signifying expansion. The Services PMI figure followed Tuesday’s Manufacturing PMI release that also missed the analyst consensus. The Markit release highlighted that the outcome of the UK election had reduced business uncertainty. A key point that the market seems to have…

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In the FX markets Sterling (GBP) weakened against the other major currencies as the Markit / CIPS UK Manufacturing PMI missed expectations. The release from Markit showed manufacturing output had expanded in May, with the index at 52.0 compared to the revised April figure of 51.8. Manufacturing is only a small component of the overall UK GDP, with services being the major contributor to the economy. Following the release Sterling was offered against the US Dollar, trading to down below…

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On Tuesday indices in Europe and the US were weak after the long weekend, with the USD bid across the board, commodities were softer. During Wednesday morning’s session, the US dollar has pulled back from Tuesdays highs against the majors; EURUSD: 1.0920 GBPUSD: 1.5422 USDJPY: 123.00 The strong data from the US on Tuesday reminded traders that that the “data dependent rate hike” from the Fed, might not be as far off as had been expected. Openin…

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Traders in the UK and US returned to their desks on Tuesday, following a three day weekend, due to public holidays on Monday. The US Dollar has surged from the levels of last week, with EURUSD trading to a 1.08 handle, and GBPUSD to 1.53, with USDJPY trading over 123 for the first time since the summer of 2007. Strong US data, is fuelling the long US dollar, with commodities on the back foot: WTI Oil: $59.06/barrel Spot Gold: $1189/oz…

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At the meeting the committee voted to leave interest rates and asset purchases (QE) unchanged at 0.50% and £375bn. Today’s release of the Minutes of MPC meeting 7 and 8 May 2015, were as analysts had expected that the members voted unanimously to stay unchanged. The headlines from the minutes were that two MPC members decision were “finely balanced” between unchanged and raising interest rates. The market impact from the minutes was minimal, the release was as the mar…

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The ONS will release their latest reading of UK inflation at 9:30am this morning, and there is a strong chance that the reading will be negative. The previous inflation reading was zero, in short prices measured on a basket of goods, were unchanged from the previous month. The Bank of England’s mandate is to target a 2% inflation rate; during the financial crisis this was consistently overshot peaking above 5%. The Governor, Mervyn King would write a letter to the Chancellor explaining…

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Crude prices have move higher from the low 40 dollars in March, with WTI now stabilising around $60/barrel. The market has found support after the sustained and dramatic freefall, with the shift after the oversupply. Over the weekend there were reports that Islamic State (IS) had seized the city of Ramadi, previously a report that the group had expanded their grip within the volatile region would have pushed oil prices significantly higher. Though the announcement put a slight bid in…

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At 10pm on Thursday 7May the BBC exit polls were released, defying the opinion polls from before the election, predicting the Conservative Party would gain the majority of seats. Sterling rallied in the FX markets nearly 2 cents (1.5245 – 1.5447), as traders repositioned for the exit poll outcome. The expectation in the run up to the election had been for a coalition government, however the permutation’s of government varied, but a Conservative majority was a distant outlier.…

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The Bank of England released their inflation report following a self-imposed 6 week quiet period for the UK general election. The Bank revised their estimates for growth in 2015 from 2.9% 2.5% and 2.9% to 2.6% in 2016. At the same time the report highlighted their view that inflation was expected to rise notably, once the short-lived factors such as fall in crude price dissipate. The base interest rate has been at 0.50% for the last 6 year, with inflation for multiple years overshootin…

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Sterling has rallied from early April lows to trade at the highest level against the US dollar since the start of 2015 (YTD). In 2014 GBPUSD peaked at just below 1.72, then trending down to the April 2015 low of 1.4565. As the pair traded to the April lows, the media coverage was bullish on the US Dollar with the expectation of a June rate hike from the Fed, and bearish on Sterling with the UK election outcome uncertain. Fast forward to the middle of May, and the US Dollar has been on the ba…

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The pivotal US employment report, Non-Farm Payrolls is released by the Bureau of Labor Statistics at 13:30 (London) today. The statistical reading is released on the first Friday of each month to assist government policy makers, and is seen as a bellwether of the US economy. Fed Chair Janet Yellen has cited the data dependency for the Federal Reserve to vote to raise interest rates, adding further volatility to the release, for an already pivotal number. The ADP employment report…

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Sterling surged as the exit polls were released last night, will the unexpected forecast that the Conservative Party would gain an even larger share of seats. The opinion polls prior to the election had the Labour and Conservative Party tied, however the Tory’s support has come through at the ballot box. The number of seats required to have an outright majority is 326, the initial exit polls estimated 316, with the latest view being around the number for a clear majority. T…

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Initial reaction in the FX market is that Sterling surged against the US Dollar and the Euro. The BBC exit polls released at 10pm (London) estimates that the Conservative Party have gained a larger amount of seats than had been estimated, approximately 316, meaning that they are the largest party. The Tory’s wouldn’t have enough seats to have an outright majority (326 seats), however the market’s reaction is that they believe the Conservatives will hold power in some form o…

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