Friday, 31 March 2017

ABN Amro: ECB will start to reduce incentives in January

While the sources of the ECB signaled that the market has taken a sharp change in the rhetoric of central bank, ABN Amro analysts do not change their view of readiness in the near future the process of reducing the stimulus measures to begin.
Furthermore, ABN Amro adjusted its forecast and now the baseline scenario assumes the end of the program for purchases of assets.
Strategists believe that in January 2018 the ECB will start to decrease the monthly volume of purchases by 10 euro billion per month, resulting in quantitative easing program will be completed by June, then the ECB will start to normalize interest rates on deposits.
At ABN Amro believe that the first step in this direction will be held in September next year. ABN Amro still retains its forecast for EUR/USD, made in early March:
    Q2 2017 - 1.05
    Q3 2017 - 1.05
    Q4 2017 - 1.10
    1Q 2018 - 1.15
    2018 - 1.20

Impressive rise in gold for the quarter

Gold again reported a profit at the official start of Brexit process. The yellow metal has the impressive growth of 9.1% for the quarter. Gold however meets great difficulties to overcome resistance at the 200-day moving average. Silver continues to demonstrate strength after overcoming the level of 18 dollars per ounce. It is on track to record a third weekly increase, and the resistance is at 18.46 dollars.
Oil jumped to a three-week peak after it became clear that stocks in the US rose for the week by 900,000 barrels, but the forecasts were for higher growth. In addition, stocks of oil and distillates fell more than expected, while supplies from Libya are irregular. US light crude overcame 200-day moving average, which is now supposed to become a support.

Thursday, 30 March 2017

Dollar up

On Thursday, the dollar gained in price against the basket of other major currencies against the background of the weakening of the euro.
The US dollar index, which shows the strength of the dollar relative to a basket weighted by trade from the six leading currencies, increased by 0.21% to 100.00.
On Monday, amid the failure of Donald Trump's bill on medical reform, the dollar index fell to 98.67, the lowest level in four and a half months.
The withdrawal of the bill increased fears in Trump's ability to realize his economic policy, including tax cuts and increased spending on infrastructure projects.
The EUR/USD slipped by 0.27% to 1,0784, retreating from the high of 1.0905, fixed on Monday, for four and a half months.
The euro fell as a result of yesterday's trading session after Reuters reported that officials of the ECB are wary of making any changes to the statement on monetary policy in April. The fact is that the previous ECB statement as a result of the March 9 meeting was misinterpreted by the markets.
In a previous statement, ECB officials recognized the improvement in the eurozone economy, which led to increased expectations about a reduction in the financial incentive program and a possible increase in the interest rate.
President of the Federal Reserve Bank of Chicago, Charles Evans, said on Wednesday that he supports a further increase in the interest rate this year. This increased demand for the dollar.
The dollar slightly changed against the yen: USD/JPY was at the level of 111.03, recouping further from the minimum of four weeks 110.10, reached on Monday.

The pound declined after the Brexit start

The pound fell against the dollar, after on Wednesday the British Prime Minister Teresa Mei formally launched the procedure for Britain's divorse with the European Union and began a two-year period of negotiations on the terms of Brexit, which will end in late March 2019. The pair GBP/USD fell by 0.12% to 1.2418. At the same time, the pound went up against the euro: the pair EUR/GBP fell by 0.14% to 0.8644.
On Wednesday the British Prime Minister Teresa May signed a letter that will officially launch Brexit. A letter with an official notification of Britain's invoke the 50th article of the Lisbon Treaty with the aim of exit from the European Union was delivered to the chairman of the European Council Donald Tusk.

Saturday, 25 March 2017

Barclays is waiting for recovery of the euro against the franc

Currency strategists at Barclays note that investor sentiment towards the euro in recent times have changed for the better and believe that sustainable economic recovery will strengthen the market, which is of the opinion that the ECB is close enough to start removing stimulus measures, analysts said.
In the bank believe that correction of forecasts of the European central bank may give investors reason to expect an increase in deposit interest rates next year.
In addition, in the coming months, support for the single European currency can eliminate the risk premium associated with the uncertainty of the elections in France, analysts say.
At Barclays noted that such a prospect gives cause for moderate optimism in EUR/CHF - in the are bank waiting for the pair in the second quarter to come back to 1.09 and will continue to recover moderately (to 1.10 and 1.11 respectively) in the third and fourth quarters.

Thursday, 23 March 2017

BofA-ML: market positioning of dollar suggests neither growth nor decline in prices

The current market positioning of the dollar seems neutral. In addition, positions opened before and after the presidential elections in the US, were closed.
A new impetus for the growth of the US currency may give the fiscal policy of the United States (survey results show high expectations that the tax reform will be carried out this year). Market positioning suggests neither an increase nor a decrease in the dollar.
A strengthening of the volatility of the euro is quite possible. According to participants in the trade, some investors are betting on growth in the single currency and the current positioning of it is more bullish than a year ago.
Analysts believe that the weakness of the euro in the first half of the year will change because of its strengthening against the possible desire of the ECB to begin to alleviate its program for quantitative easing. Generally they say that investor sentiment for the single currency is more bullish than positions on the market.

Some fuel for NZD

The Reserve Bank of New Zealand left interest rates unchanged at 1.75% yesterday. Although the central bank felt that the currency needed to fall still further to balance growth, and monetary policy should remain adaptive for a considerable time, officials also said that inflation should grow in the coming months. Now they believe that the consumer price index will return to the goal in the medium term, rather than gradually, and GDP growth in the fourth quarter was weak partly due to time factors. Therefore, their position on the prospects for growth is positive.
RBNZ began to tighten its position in the last few meetings, and therefore I think that the New Zealand dollar should grow. Today there will be data on the trade balance of New Zealand, which can provide support for the currency, as a sharp improvement in the mood of entrepreneurs should lead to increased trading activity.

Wednesday, 22 March 2017

Goldman Sachs: Investors have become more favorable for the euro

Currency strategists at Goldman Sachs have identified a change in the behavior of market participants amid recent signals and raising forecasts by the ECB and a warning that in the absence of deterioration in the nature of incoming data in the coming weeks, the rhetoric of central bank may become more confident.
At Goldman Sachs believe that the ECB is too optimistic in their forecasts for economic growth and inflation, there is potential for further adjustment of ECB policy.
Bank analysts believe that the recovery of the euro will be felt in the crosses (Fed factor is eliminated) and retain their quarterly forecast for EUR/GBP at 0.90 level and at the level of 127 for EUR/JPY.

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Sunday, 19 March 2017

Inflation in the euro zone accelerated in February

In February, inflation in the eurozone managed to exceed the target level of the ECB of just under 2 percent for the first time in four years thanks to a new rise in energy prices, showed final data from Eurostat, confirming preliminary assessment of European statistics.
The consumer price index (CPI) in the euro zone rose in February on a monthly basis by 0.4% and increased yoy by 2.0% after rising by 1.8% in January. This is the highest inflation in the region from January 2013 onwards, when it also increased by 2%.
Thus inflation in the euro zone managed to exceed, albeit small, medium-term target level of the ECB of just under 2 percent for the first time in four years.
Energy prices jumped in February by 9.3% annually, while prices of food, beverages and tobacco products rose by 2.5 percent from a year earlier, while prices of services increased by 1.3%. These data confirm that the sharp rise in inflation in recent months is due to the greatest extent of the solid growth of energy prices and a rise in food prices.
However, the main index of consumer prices (excluding prices of food, tobacco and energy) rose for the third consecutive month by 0.9%.

Credit Agricole: The dollar was the victim of unfulfilled hopes

Currency strategists at Credit Agricole recognize the risk of an upward adjustment of EUR/USD in the short term, but expressed doubts about the sustainability of such a movement and its scope.
At the bank believe that the dollar was the victim of the "buy on rumor, sell on facts" and ahead of the FOMC interest rate futures almost guaranteed increase in interest rates and accompanying statement could not warm up expectations for more aggressive tightening policy.
The liquidation of long positions by speculators disappointed in the near future will finish and market participants will remember that the dollar is the third-yield currency of the G10 as maintaining short positions in the currency is not expensive, analysts say.
The situation of the US economy remains highly constructive and Credit Agricole believe that investors underestimate the scale of the rise in interest rates in 2018 and 2019, as suggested by official forecasts of Fed. In addition, exchange rates do not reflect fully the positive for the dollar changes in the differential rate.
Credit Agricole is sticking to its forecast for EUR/USD in the second quarter at 1,04 and 1,05 in the third, hoping that the pair will recover to 1.08 in the fourth and 1.11 in the first quarter of 2018.

Saturday, 18 March 2017

RBC: We are sincerely surprised by the market reaction - the position of the Fed has become more militant

Experts of RBC were frankly surprised by the market reaction to the outcome of the Federal Reserve and published forecasts, known as "points of Fed", which led to a weakening of the dollar.
Yes, generally short-term forecasts of the Federal Reserve remained unchanged, but in reality the change in the distribution of forecasts is more agresive. If members of the Fed expected three increases in interest rates on December 6, to March 15 their number decreased.
It turns out that currently 82% of the members of the Fed support the idea of ​​three or more increases in interest rates. Experts of RBC suggested that forecasts the outgoing head of the Federal Reserve Bank in Atlanta Dennis Lockhart stored temporarily. If the assumption is true, then head of the Federal Reserve Bank of Minneapolis and the head of the Federal Reserve Bank in St. Louis are the only ones, who does not predict at least three increases in interest rates by the end of 2017.

Moody's expected interest-rate hike from the Fed another 2 or 3 times by year-end

In a report agency Moody's says that the increase in interest rates in March by the Federal Reserve confirms that the financial representatives of the United States firmly focused on the course of monetary tightening in the country, analysts say.
After increasing interest rates in March, as was forecasted by Moody's, interest this year will be increased twice or even three times. The target range of increasing of the federal funds rate is 1.5-1.75%.
Moody's also revised upwards its forecast for US economic growth. Compared with the previous forecast of GDP growth of 2.2% in 2017 and 2.1 percent in 2018, the Agency now predicts an increase in US GDP by 2.4% this year and 2.5 percent next year.

Monday, 13 March 2017

The week of the Central banks 

Global "appetite for risk" declined on the eve of the week of the Central Banks. The ECB meeting has already taken place, but the Fed, the Bank of England and the Bank of Japan are ahead, and other regulators will also have meetings. The question of rates once again came to the fore on the background of accelerating inflation, resulting in increased uncertainty and a logical reaction followed - investors began to record profits in risky assets.
Investors are already layed 100% probability of raising the Fed rate next week. The intrigue is what will be the subsequent comment of the regulator's heads, and how aggressively the Fed will act in the future. Some market participants are already laying 4 rate increases this year, although at the beginning of the year the market consensus implied only two increases. On the one hand, this means that the US economy is in very good shape, on the other hand, volatility in markets outside the US, especially in emerging markets, will grow.

Sunday, 12 March 2017

GBP/USD: Expecting northern correction

To give a forecast on the behavior of GBP/USD in the upcoming week is quite difficult. And, despite the fact that more than 90% of the indicators point to the south, only 40% of experts support them. Most of them, along with graphic analysis on H4, took the side of the bulls, believing that the pair has already reached the local bottom and now it is waiting for the rebound to rise at least to the resistance zone 1.2250-1.2300. The next resistance is 1.2385. A support is seen at the level of 1.1985. Of the important events for this pair, the following should be noted: the possibility of starting the UK exit procedure on Tuesday, March 14, and the decision of the Bank of England on the interest rate on Thursday, March 16, which is likely to remain unchanged at 0.25%.

Deutsche Bank: Details of what will be the growth of the dollar against the yen

The upward trend in the pair USD/JPY is unlikely to go smoothly. It should contain smooth adjustments, analysts said. As demonstrated by the December report of the State Pension Investment Fund of Japan (GPIF), Japanese investors will provide strong support for the USD/JPY close to the level 110.00, but it is unlikely that they will act as a driving force that will allow prices to go above 115.00 in the near future, for example if the Fed raise rates in March, the course may briefly rise above indicated resistance, but then there is a likelihood of downward movement, according to analysts.
Nevertheless, they support the view that in long-term USD/JPY will go up after the increase in interest rates in the US. American economists of the bank expect that the Fed will raise rates this year in March, June and September and 3 more times next year. This will be the determining factor for the upward movement of USD/JPY.
The exchange rate of USD/JPY should be increased to 115 after the increase in interest rates in March and then to gain a foothold in the range of 115-118 after the increase in interest rates in June and break above 120.00, due to higher interest rates in September.

Saturday, 11 March 2017

Westpac recommends to sell the euro

EUR/USD remains under pressure and is currently trading at 1.0672. Westpac analysts note that while the pair remains within range in the short-term, it is likely its lower limit to be breached. On the one hand the market is absolutely confident in raising interest rates at the Fed meeting on March 15 and there is a risk that the US currency will be hostage to the popular strategy of "buy on rumor, sell on facts", the reaction of the dollar will depend on the nature of the accompanying statements. However, the results of the meeting of the ECB, which was held last week and some improvement data from the Eurozone in recent years has raised concerns about a possible tightening of the positions of the central bank, analysts said.
In Westpac however, believe that the lethargy in core inflation and the lack of a clear trend towards improvement will warrant the ECB to change its position, while maintaining political risk as a deterrent. This may prompt the leadership of the central bank to reaffirm its commitment to a flexible policy.
The dynamics of EUR/USD shows the prevailing bearish sentiment and evidence of the inevitable the ECB's position against the background of structural statistics from the US, which could "unleash" the hands of the sellers, analysts say. In Westpac recommend selling of EUR/USD with the expectation of a decline to 1.04 area. Bank stays true to its forecast of 1.03 this quarter, followed by  1.01.

ABN Amro: Conclusions from the meeting of the ECB

ECB's press conference from the last week suggests that the European Central Bank is standing in the way of a phased exit from its flexible monetary policy, say experts from ABN Amro.
As believe in ABN Amro, as a first step in this direction, the Central Bank of Europe will make the meeting of the Board of Governors in June. The message for the markets will become more neutral and the possibility of reducing of interest rates in the future or further quantitative easing will drop, analysts say. Then, in September, the ECB will make an announcement on plans to reduce the program for the purchase of assets in 2018, they added. This will depend on the progress of inflation.
At ABN AMRO predict that the reduction in the monthly volume of purchases of assets will begin in April 2018. The pace of reduction would be equal to 10 billion per month. Thus in September 2018 the program for the purchase of assets will be completely phased out, analysts said.
They add that the first increase in interest rates on deposits by the ECB will be in March 2019.

Wednesday, 8 March 2017

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Saturday, 4 March 2017

The head of the US Federal Reserve called "appropriate" the rate hike in March

The US Federal Reserve may raise interest rates later in March if the economic data about the state of the labor market and inflation will continue to remain at an acceptable level, said Fed chief Janet Yellen on Friday, indicating a likely imminent increase at the next meeting of the regulator.
Some of Yellen colleagues at the US central bank in recent days talked about the possibility of a rate hike at the meeting of 14-15 March.
The head of the regulator noted that this year's rate increase will be faster, because the economy this year for the first time since Yellen's FED presidency will not get any unavoidable complexity, either domestically or abroad.
Overall, the prospects for moderate economic growth are encouraging, partly due to a decrease in outbound from abroad risk, according to Yellen.
The target of the Fed about unemployment is reached and rising of prices revived.
The last time the Fed raised rates was in December, signaling of another three possible hikes in 2017.

Wednesday, 1 March 2017

The rally in the precious metals market continues

Precious metals continue from the beginning of 2017 to show impressive results, while silver prices rose the ninth consecutive week. Back on the market of precious metals investors were forced by the political risks in Europe, related to the upcoming elections in the Netherlands on March 15, in France at the end of April and in Germany in October, as well as the uncertainty surrounding the future of economic policy in the United States. Additional support to demand, resumed after a strong sell-off, which lasted until mid-December, had a closing of the trade deals after the victory of Donald Trump, which led to a decrease in US T-bills and dollar rates of return.

Investors reduced their investments in shares, worrying about the elections in France

Global investors have reduced their investments in equities in February, and many of them believe that the markets began to underestimate the risks of upcoming elections in Europe, against the background of the recent rapid rally.
Monthly poll by Reuters of asset allocation, which was attended by 48 fund managers and Directors on investments in Europe, the US, UK and Japan, showed that the total investments in equities on a global balanced portfolio decreased slightly to 45.5 percent form the portfolio in February, against 45,8 percent in January.
The share of bonds rose to 40.3 percent from 39.9 percent in January, according to the survey.
Most of the participants expressed their concerns about the upcoming elections in Europe, especially in France.