25 August 2016 at 11:32 GMT
Somebody sure has pressed the pause button in global markets and sleepy, lacklustre trading spiced with a pinch of fearful anticipation is spread right across all asset markets ahead of Fed chief Janet Yellen's keynote at the Jackson Hole symposium tomorrow. The exact timing of her appearance will be released at the start of the event's dinner at midnight GMT tonight.
Meanwhile, a slew of mildly disappointing European data so far today: French Manufacturing Confidence for August came out at 101 vs the expected 103. Business Confidence for Aug also slightly missing expectations at 101 vs 102 expected.
German IFO numbers also miss expectations: German IFO Business Climate out at 106.2 vs 108.5 expected, which remains above 10-year average of 105.7. Current Assessment also misses expectations at 112.8 vs expected 114.9. Ifo Expectations at 100.1 vs expected 102.4.
- US Weekly Initial Jobless Claims (1230) Expected at 265k, Prior 262k
- US Jul. Preliminary Durable Goods Orders (1230) Expected 3.4%, Prior -3.9%
- US Aug. Preliminary Markit Services PMI (1345) Expected 51.9, Prior 51.4
Durable Goods Orders for July will be the first test for USD before the big event tomorrow. A poor figure might start questioning how hawkish Yellen can be. At the end of July USD was on the back foot and started its assault higher above the 200-day moving average which was then 1.1073. This was following two events: poor Durable Goods Orders which were reinforced with poor GDP figures the following day. USD has to see some inline results at least today from Durable Goods. EURUSD is now above a slight Fibo level of 1.1290 from the rally starting August 5. Main tech supports 1.1222 (100-day moving average) and 1.1365 tech resistance.
: Chatter on helicopter money increasing and has supported a somewhat weaker JPY, but if this verbal weakening is not maintained by more talk until September 21 then USDJPY can risk taking another leg lower, especially on a weaker USD and opening for 95 level. We still like buying calls in USDJPY to cover September 21. The risk remains in the short term for a push lower in USDJPY, but that does not change the idea of buying calls at a lower spot rate if possible.
rally pulled through local resistance of 1.3250 yesterday but only took us up some 20 pips. GBP is selling off now and the first interesting tech level around 1.3177 area (also a slight Fibo level from rally starting August 15). The 21-day moving average comes in around 1.3109.
NZD: Positive milk price forecasts from New Zealand’s Fonterra overnight boosts NZD, but NZDUSD is still constrained by the recent highs of 0.7350. It looks more and more like it wants to take out 0.7350 but needs a good excuse, which a poor Durable Goods could be or more importantly a failure of the Fed to support USD post Friday’s event. 0.7500 is the next decent level. Downwards, there's interesting support at 0.7250 area, which is roughly the bottom of the upwards trend starting around July 25 and also around highs of June 23.
FX Options volatilities
Vols started at same levels as during yesterday’s European session, however here in the middle of the day, we are seeing a round of selling in EUR, GBP and EURGBP. Still the big focus is the meeting in Jackson Hole this Friday (after options exercise). Same pattern in where the market seems to have bought enough of the USD calls which have been bid lately, and now vols also trading south again.
European shares were lower this morning as investors had one eye on Yellen’s address at Jackson Hole tomorrow. Pharmaceutical shares led the declines on comments made by Hilary Clinton yesterday evening relating to rising drug prices while Glencore and Anglo American pulled the mining sector lower on weaker iron ore prices. Playtech Plc rose 3.9% on increased H1 revenue and announced a special dividend, similarly, Irish construction company CRH rose 3.2% on better than expected sales in the first half of the year.
Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.
Oil dipped yesterday on unexpectedly high inventories but has since found support. Pic: iStock
— Edited by Clare MacCarthy