Article / 03 March 2017 at 12:29 GMT

Mid-session Europe: Waiting for the yelp from Yellen

Saxo Markets
Denmark

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Foreign exchange

Forex
 
When US Federal Reserve chair Janet Yellen speaks this evening, she is widely expected to add yet another voice to the chorus of Fed board members singing to the tune of a March rate hike. While investors in European stocks have favoured caution, precious metals traders are driving gold and silver prices down ahead of the anticipated hike.

Snapchat parent company Snap Inc will commence its second day of trading in New York this afternoon after closing 44% above its opening price on Thursday. Will investors continue to believe in the social media company that's yet to turn a profit, or will Thursday's exuberance give way to caution?

Meanwhile, oil has taken a tumble to a three-week low as slow cuts compliance among Opec members is compounded by the latest data out of the US showing increased production.

Watchlist

  • US ISM non-manufacturing (1500 GMT)

Speakers (all times GMT)

  • US Federal Reserve vice chair Fischer to Speak (1730)

  • US Federal Reserve chair Yellen to Speak (1800)            

v

Forex developments

Forex markets took a rest after yesterday’s move ahead of more Fed speakers (Evans, Powell, Lacker, Fischer and Yellen), to digest whether the Fed will be hiking rates on March 15. The USDINDEX is currently at its highest level since January 11, just above the 102 mark, aided by surging odds of a Federal Reserve interest-rate increase this month. Watch out for any upward surprise on US ISM non-manufacturing; expected to be in line with previous at 56.50. 

EURUSD has recovered some of its losses from yesterday and is holding above the 1.0540 level. 

USDJPY is trading close to today’s high at 114.45 in the session. The weaker yen had started lifting Japan prices, as the Core CPI registered for the first time since December 2015. 

GBPUSD is testing fresh six-week lows during the session after UK February Services PMI missed expectations (actual 53.3/expected 54.9). Pair tested below 1.2230, something not seen since February 19.

 
FX Options volatilities
 
Vols
Vols
 
There has been a collapse in vols today after a week of continuous selling, as realised volatility continues to slide. One-week realised (daily) in EURUSD is at 4 vols versus implied at 9 this morning! Do note one-week implied has some important Fed speakers tonight, including Yellen, and also next week’s non-farm payroll.

One-month EURUSD is now at 7.7 vol and three-month at 9.75, which last week we were trading at 9.0 and 11.0 respectively. The Federal Open Market Committee event in March does seem less important as a rate hike seems avoidable.

Fixed income
FixedIncome
 
Commodities
Comm
 

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Equities

Equities
 

European stocks drove lower with caution setting in as investors wait to hear what Federal Reserve chair Janet Yellen may say about a possible interest-rate increase.

The Dax 30 fell 0.4% to 12,014. The Cac 40 edged down 0.1% to 4,959, helped by the latest French election poll by Odoxa showing that Macron would get 27% of the vote in the first round of presidential elections, up two points from a week earlier. This means that far-right and anti-EU candidate Marine Le Pen’s support fell 1.5 pts to 25.5%. The UK’s FTSE 100 fell 0.4% to 7,356.

In the mover’s list, WPP shares stumbled 6% after the world’s largest advertising company forecast slower growth for 2017 and said revenue growth fell in the second half of last year as clients in the US and UK spent less.

At the bottom of the Stoxx 600 was Berendsen as shares fell 16%. The British laundry-services company warned that the costs of solving problems with plant and machinery in the UK would continue to hurt earnings this year.

In France, the pharmaceutical company Sanofi shares edged up marginally. Sanofi and AstraZeneca have joined hands to develop and commercialize an antibody to treat the most common respiratory illness in newborns and infants.

Carrefour, the retailer, was marginally higher after two retail property companies operated by Carrefour announced their intention to merge.

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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.






yellen

Will Federal Reserve chair Janet Yellen add to the growing chorus of Fed members hinting at a March rate hike? Photo: US Federal Reserve

— Edited by Jack Davies

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

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