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Article / 26 August 2016 at 11:18 GMT

Mid-session Europe: Markets locked and loaded

Saxo Markets


Foreign exchange

European markets are trading in a tight range in anticipation of Federal Reserve chair Janet Yellen's Jackson Hole speech at 1400 GMT, which many hope will provide some direction on the Fed's policy intentions and thus the USD.

(And thus gold, oil, USDJPY, EURUSD, and all the rest...)

Meanwhile, we have the aftermath of the soft Japanese inflation data released overnight to animate (probably too strong of a word) markets, as well as a US advance GDP print at 1230 GMT.

European stocks are broadly lower on the day with one standout being SIM card maker Gemalto, whose shares rose 7.2% on strong quarterly earnings. 


  • US July Adv. Goods Trade Balance. (1230 GMT)
  • US Q2 Preliminary GDP expected at 1.1% q/q (1230 GMT)
  • US August Final University of Michigan Confidence exp. 90.8 (1400 GMT)

  • Fed chair Janet Yellen scheduled to speak at 1400 GMT

Forex developments
EURUSD is resting around its 10-day moving average around 1.1287 and is flat on the day. We watch either a break of 1.1365 on Jackson Hole noise or the 1.1120 area. The concern according to John Hardy is that lack of short-term signals may be seized on for action, when the longer term implications of what Yellen is saying are given short shrift – meaning we may not get the “correct” or decisive move today.

In USDJPYm on any disappointing Yellen today we watch the 99.5 area which if taken out can deepen the correction. A weekly close below 100 would be the first since November 2013. Top side still congested and moving average comes in around 101.05.

GBP is resting at the bottom of an upward channel around 1.3180 versus USD. The 21-day moving average comes in around 1.3110 (the 50% Fibo of the drop starting August 3 comes at around 1.3117 so interesting support levels if upside needs to continue). 1.3250 has been tested two times this week with failure to close day above them. Closing the day and week above would be a noticeable close.

FX Options volatilities

Very little activity as everyone waiting for a result from Jackson Hole. We still see some demand in the interbank market to buy low-delta USD calls for hedging. One- to six-month is trading neutral. 

We also saw buying interest in EURJPY out on the curve. Jackson Hole only influences USD crosses, while crosses like EURJPY rea out of focus; this may change next week when the result is known.

Fixed income

Markets are very calm ahead of the much-anticipated speech later today, although there is no promise she will deliver any material news at all. However, the chance of such – as well as a prominent line-up of other central bank speakers, including the BoJ’s Kuroda – has fixed income markets unresolved at levels barely changed for the session. 

Thus, bunds are range-capped at the mid-167s and XOVER is stuck slightly above the 300 bps mark.




European stocks eased Friday with the Dax shedding 0.2% to 10.507.85 while the CAC 40 fell 0.4% to 4,391.31 as investors waited to hear from Fed chair Yellen for clues about what’s next for US interest rates. 

Sector wise, only the basic materials, oil and gas and telecommunications sectors showed modest gains. 

In focus Friday was Vivendi, whose shares slumped 4%. The media company’s second-quarter adjusted earnings fell 3.1% to €187 million, missing analyst expectations. Vivendi said it’s cutting €300 million in costs from its pay-TV unit Canal Plus. At the same time, Mediaset fell 2% after Vivendi, which has been seeking to amend an agreement with Mediaset to buy its pay-TV business, said Thursday the contract could become void Sept. 30. 

Mediaset reiterated that the contract is binding and that it remains unwilling to change the terms of the deal.

On the positive side, Gemalto shares surged 7.2% after the SIM card maker’s quarterly results came in above expectations.

BAE Systems PLC rose 2.1% as the defence company’s rating was upgraded to buy from hold at Berenberg.

Volkswagen picked up 1.8% after the German automaker reached an agreement with about 650 US franchise dealers affected by the company’s diesel-emissions scandal. A September 30 deadline was set to complete the details.

US stock futures were locked in a holding pattern. DJI futures shed less than 0.1% while S&P 500 futures were flat. 

The replay of our Morning Call can be found here.

Read more

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.

Jackson Hole, Wyoming
Like the sign says, Janet: This is your decision point. Photo: Wikimedia Commons

— Edited by Michael McKenna

The Global Sales Trading desk is a multi-asset team providing customised trading solutions


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