Posts
NEWS
16 July 2015, 10:21
Poland headline CPI fell by an expected 0.8% y/y vs. 0.9% y/y in June. Food
and beverage prices rose more than expected, and fuel prices turned less
deflationary, both of which exerted upward pressure on the headline. Latest data
show that deflation in Poland is narrowing.
Interestingly, the breakdown suggests that core inflation likely moderated from 0.4% y/y to 0.2% y/y. If this is confirmed by today's data, it will be a rather dovish development, given the contrasting regional trend of upward inflation surprises.
"That said, this core inflation will likely stabilise in coming months and begin to inch higher. At this point in the cycle, a 0.2% reading might not trigger any monetary policy response, hence this should be PLN neutral", says Commerzbank.
Interestingly, the breakdown suggests that core inflation likely moderated from 0.4% y/y to 0.2% y/y. If this is confirmed by today's data, it will be a rather dovish development, given the contrasting regional trend of upward inflation surprises.
"That said, this core inflation will likely stabilise in coming months and begin to inch higher. At this point in the cycle, a 0.2% reading might not trigger any monetary policy response, hence this should be PLN neutral", says Commerzbank.
16 July 2015, 10:18
It may be possible to find someone within the ECB or EU Commission who would
be willing to confirm the debt levels, can most definitely not be fulfilled any
longer, as the IMF made it clear in writing yesterday that the Greek debt is
"highly unsustainable". The IMF had pointed that out in a similar manner before
the negotiations started last weekend.
"The way the ESM is used illustrates the misconstruction as pointed out by Krugman and thus also the risks for the long term stability of the euro. A simple glance at the ESM treaty illustrates two legally binding conditions for aid payments from this pot. The financial stability of the entire Monetary Union has to be at risk. The debt levels of the country that is to receive aid have to be sustainable. Whenever possible the IMF is to be involved in ascertaining these facts", says Commerzbank.
Neither the Finance Ministers nor the heads of government seemed to have been fussed by that. They use the ESM as a pot to rescue an over-indebted member state so that this country does not have to introduce its own currency, even though the ESM was only set up to prevent healthy countries from being affected, i.e. to make the exit of an over-indebted country less threatening.
So if Mr Krugman points out that the misconstruction of the single currency is becoming increasingly obvious that is also due to the fact that the politicians are not prepared to live by the current rules. However, it is not the lack of redistribution within Europe that poses a risk for the euro but the fact that existing treaties are not adhered to so as to avoid the no bailout clause.
"The fact that the politicians are de facto creating a new single currency is what constitutes the risk for the euro. And they are doing that in all night meetings that are not open to the public and lacking an agenda. The ECB clearly considers all Greek banks to be solvent as otherwise ELA support would be strictly prohibited", added Commerzbank.
"The way the ESM is used illustrates the misconstruction as pointed out by Krugman and thus also the risks for the long term stability of the euro. A simple glance at the ESM treaty illustrates two legally binding conditions for aid payments from this pot. The financial stability of the entire Monetary Union has to be at risk. The debt levels of the country that is to receive aid have to be sustainable. Whenever possible the IMF is to be involved in ascertaining these facts", says Commerzbank.
Neither the Finance Ministers nor the heads of government seemed to have been fussed by that. They use the ESM as a pot to rescue an over-indebted member state so that this country does not have to introduce its own currency, even though the ESM was only set up to prevent healthy countries from being affected, i.e. to make the exit of an over-indebted country less threatening.
So if Mr Krugman points out that the misconstruction of the single currency is becoming increasingly obvious that is also due to the fact that the politicians are not prepared to live by the current rules. However, it is not the lack of redistribution within Europe that poses a risk for the euro but the fact that existing treaties are not adhered to so as to avoid the no bailout clause.
"The fact that the politicians are de facto creating a new single currency is what constitutes the risk for the euro. And they are doing that in all night meetings that are not open to the public and lacking an agenda. The ECB clearly considers all Greek banks to be solvent as otherwise ELA support would be strictly prohibited", added Commerzbank.
16 July 2015, 10:15
SWISS RETAIL SALES -1.8 PCT IN MAY
16 July 2015, 10:12
Today European Central Bank (ECB) is to provide further guidance in policy
meet. Result to be announced at 11:45 GMT, followed by press conference at 12:30
GMT. Meeting is to be held in Frankfurt.
Current policy measures-
Euro is currently trading at 1.093, key support stands at 1.085 area and resistance around 1.12-1.123.
Current policy measures-
- Deposit facility rate at -0.20 percent
- Refinancing rate 0.05 percent
- Marginal lending facility rate at 0.30 percent
- ECB started its asset purchase program of € 60 billion from March.
- ECB has indicated front loading the purchase, which means more bond buying in summer and adjust later on.
- No change in monetary policy is expected today, however press conference is very vital, since it is the first after Greek deal is reached.
- Changes in growth and inflation forecast as hard data are improving across board. Most pivotal would be ECB's view on inflation. Higher forecast might strengthen yields further and might provide support to Euro.
- How concerned ECB is over Greek situation and if it's have an impact on policy decisions.
- ECB's take on latest deal offered to Greece.
- How unanimous ECB board over current policy.
- What tools ECB might have if Greek situation worsens.
- ECB's view on Euro.
- How ECB plans to manage the risk of ELA.
- Major focus will be on ECB's take on Greece and inflation. Other aspects of monetary policy is expected to remain unchanged.
- Euro would be bearish if Draghi once again shrugs off all recent bond rout and inflation and assures ECB's commitment to the program and talks of more tools.
- However, Euro might turn bullish, if ECB suggests current level of Euro remains satisfactory.
Euro is currently trading at 1.093, key support stands at 1.085 area and resistance around 1.12-1.123.
16 July 2015, 10:11
ECB SAYS 519 MLN EUROS BORROWED USING OVERNIGHT LOAN FACILITY, 128.004 BLN
EUROS DEPOSITED
16 July 2015, 10:08
EUR-USD is trading at slightly lower levels this morning at just above 1.09.
The fact that the euro was unable to benefit might well have been due to the
fact that a yes vote could have been expected as the opposition had already
signalled that it would accept the demands.
Moreover it is obvious that the vote of the Greek parliament was no more than a first step towards the solution and that there are still many obstacles to overcome.
One example is the bridge financing, these measures are urgently required as otherwise Greece would default on ECB bonds on Monday which would result in the ECB completely withdrawing the emergency loans from the Greek banks via the ELA. In that case a Grexit would be unavoidable.
Vladis Dombrovskis, Vice President of the EU Commission, announced yesterday at the official EU press conference that the EFSM was to provide the required funds.
"That is problematical for two reasons. First of all many non-Eurozone countries are opposed to this step, but all EU countries are involved in the EFSM, as the bonds are secured by the EU budget. Secondly, the EFSM should not be activated again", says Commerzbank.
Moreover it is obvious that the vote of the Greek parliament was no more than a first step towards the solution and that there are still many obstacles to overcome.
One example is the bridge financing, these measures are urgently required as otherwise Greece would default on ECB bonds on Monday which would result in the ECB completely withdrawing the emergency loans from the Greek banks via the ELA. In that case a Grexit would be unavoidable.
Vladis Dombrovskis, Vice President of the EU Commission, announced yesterday at the official EU press conference that the EFSM was to provide the required funds.
"That is problematical for two reasons. First of all many non-Eurozone countries are opposed to this step, but all EU countries are involved in the EFSM, as the bonds are secured by the EU budget. Secondly, the EFSM should not be activated again", says Commerzbank.
16 July 2015, 10:04
The statutory minimum wage, tighter labour market regulation and the new wage
agreements will cause labour costs to rise further for German businesses. But
thses may not affect immediately. The rising labour costs of German businesses
will erode their international price competitiveness.
According tyo Commerzbank, "In the run-up to these legal changes and the wage bargaining round of 2015, we had expected a notable upsurge in labour costs. First experiences with the new labour market provisions and this year's collective wage agreements in several important sectors (e.g., metal and electrical industries; chemical industry; public service of the federal states) have prompted us to review our assessment. Paid wages or salaries in German is expected to be around 3% in 2015 and 2¾% in 2016."
According tyo Commerzbank, "In the run-up to these legal changes and the wage bargaining round of 2015, we had expected a notable upsurge in labour costs. First experiences with the new labour market provisions and this year's collective wage agreements in several important sectors (e.g., metal and electrical industries; chemical industry; public service of the federal states) have prompted us to review our assessment. Paid wages or salaries in German is expected to be around 3% in 2015 and 2¾% in 2016."
16 July 2015, 10:00
SOCIETE GENERALE: US FED AND GREECE TO KEEP A LID ON GBP/USD AND GBP/CHF
16 July 2015, 10:00
SOCIETE GENERALE: US FED AND GREECE TO KEEP A LID ON GBP/USD AND GBP/CHF
16 July 2015, 09:57
Since January 2015, it has been much easier for the German government to
declare wage agreements generally binding, compelling even businesses that are
not covered by collective agreements to apply them. The government was expected
that it would use this tool quite often because it has long viewed the declining
collective bargaining coverage of businesses with some concern. But there have
as yet been next to no new declarations of general applicability of collective
agreements.
At this point, cyclical risks, which have recently increased, could play a role. Also, the government may want to wait for the employment effects of the minimum wage to unfold before obliging more businesses to adhere to collectively negotiated pay rates through declarations of general applicability.
"In any case, the combined effect of increasing declarations of general applicability on labour costs of +1.7% (2015 and 2016 taken together), appears much too high from today's vantage point, as it would require around 30% of all collective agreements in Germany to become generally applicable. For this reason cost increases estimate is reduced to 0.3% (from 1.7%). By the end of 2016 around 5% of all collective agreements could be generally applicable", says Commerzbank.
This would increase labour costs by around 0.3%. But this should only be the case in 2016, and so declarations of general applicability could only drive labour costs upwards from next year onwards.
Another potential driver of German labour costs is that at the start of the year it has become easier for the government to declare collective wage agreements generally binding and thereby expand the collective bargaining coverage of businesses.
"The government has so far made practically no use of this tool, nor does it seem to intend to use it in the foreseeable future. Moreover, this effect is no longer expected to set in during 2015 and only see it coming to bear in 2016", added Commerzbank.
At this point, cyclical risks, which have recently increased, could play a role. Also, the government may want to wait for the employment effects of the minimum wage to unfold before obliging more businesses to adhere to collectively negotiated pay rates through declarations of general applicability.
"In any case, the combined effect of increasing declarations of general applicability on labour costs of +1.7% (2015 and 2016 taken together), appears much too high from today's vantage point, as it would require around 30% of all collective agreements in Germany to become generally applicable. For this reason cost increases estimate is reduced to 0.3% (from 1.7%). By the end of 2016 around 5% of all collective agreements could be generally applicable", says Commerzbank.
This would increase labour costs by around 0.3%. But this should only be the case in 2016, and so declarations of general applicability could only drive labour costs upwards from next year onwards.
Another potential driver of German labour costs is that at the start of the year it has become easier for the government to declare collective wage agreements generally binding and thereby expand the collective bargaining coverage of businesses.
"The government has so far made practically no use of this tool, nor does it seem to intend to use it in the foreseeable future. Moreover, this effect is no longer expected to set in during 2015 and only see it coming to bear in 2016", added Commerzbank.
16 July 2015, 09:53
BY THE END OF 2016, AROUND 5% OF ALL GERMAN COLLECTIVE AGREEMENTS COULD BE
GENERALLY APPLICABLE– COMMERZBANK
16 July 2015, 09:45
- EUR volumes under pressure all week until Yellen lifted USD
Wednesday
- Spot 1.10 to low 1.09's - 1week volume slide stalled 12.0 vs 15.0
Monday
- 1month in to 10.85 from 12.2 Monday and trades 11.25-11.2 today
- 3month is 11.0 vs 10.7, 1year 10.1 vs 10.05. 1month RR 1.0 from 0.9 EUR
puts
- 1month atm off from 4year high 15.25 June 29. 1month 25D RR peaked 2.25 that
day
- Focus now on ECB. If range holds thereafter then volumes will remain heavy
16 July 2015, 09:40
The situation in Germany has changed least where the general statutory
minimum wage is concerned. At the start of the year, the introduction of the
minimum wage would mean additional.
"Based on a new analysis of the Institute for Employment Research (IAB), costs for businesses should rise by 1% due to the minimum wage", says Commerzbank.
In the run-up to these legal changes and the wage bargaining round of 2015, a notable upsurge had been expected in labour costs. First experiences with the new labour market provisions and this year's collective wage agreements in several important sectors like metal and electrical industries, chemical industry, public service of the federal states have prompted a rise.
"Over the last year, labour costs of German businesses rose gradually, and this process will continue. But at around 3% (2015) and 3¼% (2016)", added Commerzbank.
"Based on a new analysis of the Institute for Employment Research (IAB), costs for businesses should rise by 1% due to the minimum wage", says Commerzbank.
In the run-up to these legal changes and the wage bargaining round of 2015, a notable upsurge had been expected in labour costs. First experiences with the new labour market provisions and this year's collective wage agreements in several important sectors like metal and electrical industries, chemical industry, public service of the federal states have prompted a rise.
"Over the last year, labour costs of German businesses rose gradually, and this process will continue. But at around 3% (2015) and 3¼% (2016)", added Commerzbank.
16 July 2015, 09:39
UK SHORT STERLING FUTURES PRICE EVEN FEWER RATE HIKES BETWEEN NOW AND THE END
OF 2016 THAN US EURODOLLARS DO
16 July 2015, 09:38
- USD/CAD: 1.2900 (410M), 128.00 (386M), 1.2750-55 (1.3BLN)
- EUR/USD: 1.0900 (364M), 1.0925 (421M), 1.1000 (1.1BLN)
- USD/CHF: 0.9425 (285M). GBP/USD: 1.5550 (456M)
- AUD/USD: 0.7500 (6.5BLN), 0.7400 (1.8BLN), 0.7300 (3.8BLN)
- USD/JPY: 123.00 (500M), 123.50 (722M), 124.00 (1.3BLN)
16 July 2015, 09:37
OVER TO LONDON - EUR/USD -0.32%, NZD/USD -1.2%, AUD/NZD -0.34%, USD/SGD
+0.23%, NIKKEI +0.64%, SSEC +0.51%, MSCI AXJ +0.05%, UST 2.3666%, BRENT +0.65%
16 July 2015, 09:33
COMMERZBANK: WAGE RATE IN GERMANY IS LIKELY TO RISE AROUND 3% IN 2015 AND 2¾%
IN 2016
16 July 2015, 09:32
Federal Reserve chair Janet Yellen presented an upbeat estimate for US
economy in her semiannual testimony to congress. Yesterday was first day of the
event and today would be the concluding day. She is scheduled to speak at 14:00
GMT.
According to her, FED is on its course to rate hike this year as economy remains favorable for such action in spite of risks like Greece exit, China's high debt, weak property markets and volatility. She added that such normalization would officially indicate the country's recovery from 2008 trauma.
Key highlights from the testimony -
According to her, FED is on its course to rate hike this year as economy remains favorable for such action in spite of risks like Greece exit, China's high debt, weak property markets and volatility. She added that such normalization would officially indicate the country's recovery from 2008 trauma.
Key highlights from the testimony -
- Wage growth remains a concern for FED, which is pointing at continued labor market slack. However it may not be enough to prevent first hike this year, since according to her labor market conditions have improved substantially.
- Consumer spending has picked up including pick up in car sales and according to FED consumers might be ready to purchase big ticket items.
- FED notes that home building has picked up but demand is being constrained by availability of mortgage loans to potential buyers.
- FED sees further improvement in the economy in second and third quarter.
16 July 2015, 09:26
Market Roundup
EUR/USD is supported below 1.1000 levels and currently trading at 1.0931 levels. It has made intraday high at 1.0961 and low at 1.0911 levels. Pair breaks 50% Fibonacci retracement level at $1.0962 as Greek leaders voting in favour of bailout reforms overnight as broad based US dollar strength backed by Yellen's comments remained the underlying theme weighing on EURUSD. A busy European session ahead, with European Central Bank (ECB) monetary policy meeting followed by ECB Chief Draghi's press conference expected to be the main highlight. Most interesting will be to see what Draghi speaks on ELA and how to handle bridge financing for Greece. Initial support is seen around at 1.0914 and resistance at 1.1243 levels.
USD/JPY is supported above 123.00 levels and posted a high of 123.95 levels. It has made intraday low at 123.68 and currently trading at 123.83 levels. The Bank of Japan made no changes to its current policy settings on Wednesday, but the bank downgraded its economic growth outlook for fiscal 2015. A low-key affair in Asia as markets continue to digest the latest Greece Parliament 'Yes' vote on the bailout deal and Fed Yellen's hawkish comments in her testimony at the Capitol Hill last New York session. Near term resistance is seen at 124.57 and support is seen at 120.63 levels.
GBP/USD is supported around $1.5600 levels. It made an intraday high at 1.5639 and low at 1.5609 levels. Pair is currently trading at 1.5611 levels. Sterling fell after the data showed UK unemployment unexpectedly rose for the first time since 2013 in the three months to May, while wage growth came in slightly weaker than expected. Today is data thin calendar for the UK, market will eye on ECB rate decision as well as macro economic data from the US. Initial support is seen at 1.5413 and resistance is seen around 1.5734 levels.
NZDUSD is supported around 0.6500 levels and trading at 0.6515 levels and made intraday low at 0.9497 and high at 0.6601 levels. The kiwi hit its lowest in 6 years as downbeat domestic inflation figures add to speculation that the RBNZ will cut rates next week. Moreover, global dairy prices tumbled over 10% at the GDT auction, also causing negative drag on the NZD/USD. The CPI rose 0.4% in the June quarter, according to Statistics New Zealand, coming in slightly lower than the 0.5% rate forecast by markets. Initial support is seen at 0.6465 and resistance at 0.6600 levels.
AUD/USD is supported below 0.7400 levels and trading at 0.7360 levels. It has made intraday high at 0.7388 levels and low at 0.7348 levels. The overnight session put the Aussie under pressure from various sides, but it was the stronger greenback that weighed the most. Moreover, weak NZ CPI data also contributed to the downside. There are no Australian data due for release today while good-looking Chinese data yesterday failed to spark a sustainable rally in AUD. Tonight's US session will remain again in focus with Fed Chair Janet Yellen's round two and more US data. Initial support is seen at 0.7325 and resistance at 0.7647 levels.
- NZ July ANZ/RM consumer confidence index 113.9, three-year low, June
119.9.
- NZ Q2 CPI +0.4% q/q, +0.3% y/y, +0.6% and +0.4% eyed.
- NZ June PMI 55.2, May revised up to 52.0.
- NZ Fonterra GDT price index -10.7%, volumes off, to shed staff.
- Greek parliament approves bailout prior measures package.
- Japan MoF flow data week-ended July 11 - Japanese buy net Y188.2 bln foreign
stocks, Y163.1 bln bonds, Y87.9 bln bills; foreign investors sell Y851.2 bln
Japan stocks, buy Y974.2 bln bonds, sell trln bills.
- CDC launches Y20 bln 2-tranche samurais vis Daiwa, Nomura.
- US demand Japanese assurance on tariff-free rice import quota.
- SF Fed Williams - USD incredibly important globally, cites US economy,
Treasury market, September plausible timing for first rate hike.
- Brazil currency probe may grow, trading ban unlikely.
- (0400 ET/0800 GMT) IT May trade balance global/EU; last bln, bln
surpluses.
- (0500 ET/0900 GMT) Euro zone May trade balance; last E24.9 bln surplus.
- (0500 ET/0900 GMT) Euro zone June inflation final, unchanged m/m, +0.2% y/y
eyed; flash +0.2%, +0.2%.
- (0500 ET/0900 GMT) Euro zone June ex/food, energy, unchanged m/m, +0.8% y/y
eyed; flash +0.1%, +0.9%.
- (0830 ET/1230 GMT) US weekly initial jobless claims, 285k eyed; last
297k.
- (1000 ET/1400 GMT) US July Philly Fed business sentiment index, 12.0 eyed;
last 15.2.
- (1000 ET/1400 GMT) US July NAHB housing market index, 60.0 eyed; last 59.0.
- (0315 ET/0715 GMT) Japan CEFP meets on policies/next year's budget, Amari
presser to follow.
- (0400 ET/0800 GMT) Euro Group press conference on Greek
bailout.
- (0430 ET/0830 GMT) Spain E5.5-6.5 bln 0.25/2.15/1.95/4.7% 2018/25/30/41 Bono
auctions.
- (0450 ET/0850 GMT) France E7-8 bln zero/zero/3.75% 2018/20/21 OAT
auctions.
- (0550 ET/0950 GMT) France E1-1.5 bln 0.1/1.85/0.7% index-linked OAT
auctions.
- (0745 ET/1145 GMT) ECB policy announcement, no change in 0.05% refinance,
-0.2% deposit rates eyed.
- N/A ECB Pres Draghi press conference.
- (0830 ET/1230 GMT) Canada May international securities transactions
data.
- (1000 ET/1400 GMT) FOMC Chair Yellen semi-annual Senate Humphrey-Hawkins
testimony.
- (1400 ET/1800 GMT) BoE Gov Carney speech in Lincoln, England.
- (1600 ET/2000 GMT) US Treasury May international capital flows data (TIC report).
EUR/USD is supported below 1.1000 levels and currently trading at 1.0931 levels. It has made intraday high at 1.0961 and low at 1.0911 levels. Pair breaks 50% Fibonacci retracement level at $1.0962 as Greek leaders voting in favour of bailout reforms overnight as broad based US dollar strength backed by Yellen's comments remained the underlying theme weighing on EURUSD. A busy European session ahead, with European Central Bank (ECB) monetary policy meeting followed by ECB Chief Draghi's press conference expected to be the main highlight. Most interesting will be to see what Draghi speaks on ELA and how to handle bridge financing for Greece. Initial support is seen around at 1.0914 and resistance at 1.1243 levels.
USD/JPY is supported above 123.00 levels and posted a high of 123.95 levels. It has made intraday low at 123.68 and currently trading at 123.83 levels. The Bank of Japan made no changes to its current policy settings on Wednesday, but the bank downgraded its economic growth outlook for fiscal 2015. A low-key affair in Asia as markets continue to digest the latest Greece Parliament 'Yes' vote on the bailout deal and Fed Yellen's hawkish comments in her testimony at the Capitol Hill last New York session. Near term resistance is seen at 124.57 and support is seen at 120.63 levels.
GBP/USD is supported around $1.5600 levels. It made an intraday high at 1.5639 and low at 1.5609 levels. Pair is currently trading at 1.5611 levels. Sterling fell after the data showed UK unemployment unexpectedly rose for the first time since 2013 in the three months to May, while wage growth came in slightly weaker than expected. Today is data thin calendar for the UK, market will eye on ECB rate decision as well as macro economic data from the US. Initial support is seen at 1.5413 and resistance is seen around 1.5734 levels.
NZDUSD is supported around 0.6500 levels and trading at 0.6515 levels and made intraday low at 0.9497 and high at 0.6601 levels. The kiwi hit its lowest in 6 years as downbeat domestic inflation figures add to speculation that the RBNZ will cut rates next week. Moreover, global dairy prices tumbled over 10% at the GDT auction, also causing negative drag on the NZD/USD. The CPI rose 0.4% in the June quarter, according to Statistics New Zealand, coming in slightly lower than the 0.5% rate forecast by markets. Initial support is seen at 0.6465 and resistance at 0.6600 levels.
AUD/USD is supported below 0.7400 levels and trading at 0.7360 levels. It has made intraday high at 0.7388 levels and low at 0.7348 levels. The overnight session put the Aussie under pressure from various sides, but it was the stronger greenback that weighed the most. Moreover, weak NZ CPI data also contributed to the downside. There are no Australian data due for release today while good-looking Chinese data yesterday failed to spark a sustainable rally in AUD. Tonight's US session will remain again in focus with Fed Chair Janet Yellen's round two and more US data. Initial support is seen at 0.7325 and resistance at 0.7647 levels.
16 July 2015, 09:22
June seems historically a softer quarter for the Australian CPI, in part due
to the Pharmaceutical Benefit Scheme resetting, the discounting of domestic
holiday travel and falling fruit & vegetable prices.
The core measures, which are seasonally adjusted, are forecast to rise 0.5%qtr/2.2%yr (on average) and the 6mth annualised pulse moderates to 2.3%yr from 2.6%yr. These key policy sensitive rates are not presenting a threat to the RBA's inflation target.
"A 1.2%qtr rise is estimated in the seasonally adjusted CPI", says Westpac.
Behind the stronger headline CPI print are, the rebound in petrol from late Q1 through Q2 and into early Q3, a solid bounce in fruit & vegetable prices (4.5%qtr), and solid gains in medical & hospital services. Housing costs continue to rise (0.5%qtr) and this quarter household contents & services also gained (1.1%qtr).
The offsets this quarter were relatively modest outside of pharmaceuticals and domestic holiday travel, with audio visual & computers continuing to fall as did communication costs.
The core measures, which are seasonally adjusted, are forecast to rise 0.5%qtr/2.2%yr (on average) and the 6mth annualised pulse moderates to 2.3%yr from 2.6%yr. These key policy sensitive rates are not presenting a threat to the RBA's inflation target.
"A 1.2%qtr rise is estimated in the seasonally adjusted CPI", says Westpac.
Behind the stronger headline CPI print are, the rebound in petrol from late Q1 through Q2 and into early Q3, a solid bounce in fruit & vegetable prices (4.5%qtr), and solid gains in medical & hospital services. Housing costs continue to rise (0.5%qtr) and this quarter household contents & services also gained (1.1%qtr).
The offsets this quarter were relatively modest outside of pharmaceuticals and domestic holiday travel, with audio visual & computers continuing to fall as did communication costs.
16 July 2015, 09:18
As the risk appetite varies from different investors to different traders,
we've customized our formulation of strategies for such varied
circumstances.
Technical Purview: (EUR/JPY)
This has always been extremely tough & risky to have opened naked position on non-directional trend. EUR/JPY is now alike a non directional pattern as this pair is boiling up with lots of bearish candles, such as spinning top and candle resembling a shooting star occurred at 135.802 and 135.793 resepctively.
Currently, RSI (14) trending near 46.0360 levels with downward convergence, on closing basis movement should be closely watched if it suggests reversal signals.
Although the there is no trace of either overbought or oversold situation, it alarms bears trying to take over the rallies as the slow stochastic noises with %D line cross over around 40 levels (current %D line flashes at 42.6134).
Option trade recommendation: Naked Straddle Sale
As we foresee non-directional trend is puzzling this pair on EOD charts we like to remain in safe zone and recommend shorting a straddle, thereby, one can benefit from certain returns by shorting both calls and puts.
Short ATM put and ATM call (strikes at 135.363) simultaneously of the same expiry (preferably short term for maturity is desired).
Maximum returns for the short straddle is achieved when the EUR/JPY price on expiry is trading at around 135 levels only as both the instruments have to wipe off worthless. So that the options trader gets to keep the entire initial credit taken as profit.
However, on a long term hedging perspective, debit put spreads are advocated as the selling indications are piling up on weekly graph. So buying In-The-Money Puts and to reduce the cost of hedging by financing this long position, selling an Out-Of-The-Money put option is recommended.
But on intraday front, we suggest going for long in binary calls for a targets at 135.415, this would provide best speculating opportunity as in swing trade rallies buying interests are intensifying.
Technical Purview: (EUR/JPY)
This has always been extremely tough & risky to have opened naked position on non-directional trend. EUR/JPY is now alike a non directional pattern as this pair is boiling up with lots of bearish candles, such as spinning top and candle resembling a shooting star occurred at 135.802 and 135.793 resepctively.
Currently, RSI (14) trending near 46.0360 levels with downward convergence, on closing basis movement should be closely watched if it suggests reversal signals.
Although the there is no trace of either overbought or oversold situation, it alarms bears trying to take over the rallies as the slow stochastic noises with %D line cross over around 40 levels (current %D line flashes at 42.6134).
Option trade recommendation: Naked Straddle Sale
As we foresee non-directional trend is puzzling this pair on EOD charts we like to remain in safe zone and recommend shorting a straddle, thereby, one can benefit from certain returns by shorting both calls and puts.
Short ATM put and ATM call (strikes at 135.363) simultaneously of the same expiry (preferably short term for maturity is desired).
Maximum returns for the short straddle is achieved when the EUR/JPY price on expiry is trading at around 135 levels only as both the instruments have to wipe off worthless. So that the options trader gets to keep the entire initial credit taken as profit.
However, on a long term hedging perspective, debit put spreads are advocated as the selling indications are piling up on weekly graph. So buying In-The-Money Puts and to reduce the cost of hedging by financing this long position, selling an Out-Of-The-Money put option is recommended.
But on intraday front, we suggest going for long in binary calls for a targets at 135.415, this would provide best speculating opportunity as in swing trade rallies buying interests are intensifying.
16 July 2015, 09:10
China is running a current account deficit, indicates China buys more from
the rest of the world than the world buys from it.
China, which built its success as a mercantilist export engine, would need to morph into being a global consumer like the US. That would require a huge shift in the structure of the whole economy away from investment and exports and towards consumption. As we know, that is much easier said than done; and such as shift is also hampered by China's relatively low GDP per capita, says Rabobank.
More specifically today, would anyone want to hold CNY government bonds knowing how the government intervenes in markets? Consider that local Chinese government bond issues have just been forcibly rolled over at new artificially low interest rates; even Chinese banks did not want to buy them without a PBOC pledge of support to immediately repo them for new cash loans, states Rabobank. Of course, central government bonds might be a different story (and they were yielding an attractive 3.55% at the 10-year maturity at the time of writing).
"However, another key fundamental question is: would China allow foreigners leverage over its state finances? That seems politically very unlikely, especially as it would also mean China would have to liberalize its capital account to allow money to enter and leave the country freely: as we have explored in past specials, that would run the risk of serious financial instability, with more capital likely opting to leave China than would come in at present", added Rabobank.
China, which built its success as a mercantilist export engine, would need to morph into being a global consumer like the US. That would require a huge shift in the structure of the whole economy away from investment and exports and towards consumption. As we know, that is much easier said than done; and such as shift is also hampered by China's relatively low GDP per capita, says Rabobank.
More specifically today, would anyone want to hold CNY government bonds knowing how the government intervenes in markets? Consider that local Chinese government bond issues have just been forcibly rolled over at new artificially low interest rates; even Chinese banks did not want to buy them without a PBOC pledge of support to immediately repo them for new cash loans, states Rabobank. Of course, central government bonds might be a different story (and they were yielding an attractive 3.55% at the 10-year maturity at the time of writing).
"However, another key fundamental question is: would China allow foreigners leverage over its state finances? That seems politically very unlikely, especially as it would also mean China would have to liberalize its capital account to allow money to enter and leave the country freely: as we have explored in past specials, that would run the risk of serious financial instability, with more capital likely opting to leave China than would come in at present", added Rabobank.
16 July 2015, 09:04
ITALIAN BOND FUTURES OPEN 53 TICKS HIGHER AT 134.20
16 July 2015, 09:01
SOUTH KOREAN WON UNOFFICIALLY CLOSES ONSHORE TRADE AT 1,149.2 PER DOLLAR VS
1,143.6 AT PREVIOUS CLOSE
CCI (50) - Buy
Ichimoku- Neutral
It is good to sell on rallies around 1.5620 with SL around 1.5650 for the TP of 1.555/1.5520
16 July 2015, 08:59
- GBP/USD made a high of 1.56737 and has declined from that level. It has
formed temporary top around 1.5675 and so decline till 1.5550 cannot be ruled
out.
- On the higher minor resistance is around 1.5650 and any indicative break
above targets 1.5680/1.5750.
- The minor support is at 1.5600 and break below targets 1.5570/1.5525
level.
- Short term bullish invalidation if it closes below 1.5550.
CCI (50) - Buy
Ichimoku- Neutral
It is good to sell on rallies around 1.5620 with SL around 1.5650 for the TP of 1.555/1.5520
16 July 2015, 08:51
CREDIT AGRICOLE: A TIGHTENING US LABOR MARKET AND THE FED'S DESIRE TO BEGIN
THE NORMALIZATION PROCESS SUGGEST THE FED WILL HIKE IN Q315
16 July 2015, 08:48
The Greek parliament passed a sweeping package of austerity measures demanded
by European partners as the price for opening talks on a multi-billion euro
bailout package needed to keep the near-bankrupt country in the euro
zone.
The vote followed a fiery debate in which many lawmakers on the left of the ruling Syriza party revolted against Prime Minister Alexis Tsipras and denied the package which passed with the support of opposition parties.
EUR/USD fell significantly widening yesterday's losses as blistering dissents erupted in Athens yesterday outside Syntagma Square while Parliament debated decisive measures that could seal a comprehensive 3rd bailout from euro zone creditors. While EUR/JPY slipped to 135.204 from precious close 135.456.
EUR/USD closed between lows of 1.0930 on the session and a peak of 1.1036, before settling at 1.0949, down 0.55% or 0.0060. The currency pair, which has closed lower in three of the last four sessions, fell to its lowest level in more than a week. At the midway point of July, the Euro is down more than 1.65% against its American counterpart for the month.
We look at buying opportunities in EURJPY ATM binary put options for target at 135.175 and in EURUSD ATM binary puts for targets of 30 pips.
The vote followed a fiery debate in which many lawmakers on the left of the ruling Syriza party revolted against Prime Minister Alexis Tsipras and denied the package which passed with the support of opposition parties.
EUR/USD fell significantly widening yesterday's losses as blistering dissents erupted in Athens yesterday outside Syntagma Square while Parliament debated decisive measures that could seal a comprehensive 3rd bailout from euro zone creditors. While EUR/JPY slipped to 135.204 from precious close 135.456.
EUR/USD closed between lows of 1.0930 on the session and a peak of 1.1036, before settling at 1.0949, down 0.55% or 0.0060. The currency pair, which has closed lower in three of the last four sessions, fell to its lowest level in more than a week. At the midway point of July, the Euro is down more than 1.65% against its American counterpart for the month.
We look at buying opportunities in EURJPY ATM binary put options for target at 135.175 and in EURUSD ATM binary puts for targets of 30 pips.
16 July 2015, 08:42
MOODY'S- MAIN DRIVER OF OUTLOOK CHANGE TO STABLE ARE REVISED GOVERNMENT
SUPPORT ASSUMPTIONS, WHICH NOW FULLY REFLECT IN SWISS BANKS' RATINGS
16 July 2015, 08:42
Moody's Investors Service has raised the outlook on the Swiss banking system
to stable from negative, reflecting the rating agency's expectation that
government support assumptions for senior creditors will not diminish further
over the next 12-18 months.
The main driver of the Swiss banking system's outlook change to stable are the revised government support assumptions, which are now fully reflected in Swiss banks' ratings.
"The stable outlook also reflects our view of a resilient operating environment for Swiss banks with Swiss GDP forecasted to grow 0.8% in 2015 and 1.5% in 2016. However, sustained property-price inflation, persistently low interest rates and potential negative effects from the stronger Swiss franc form key challenges for Swiss banks over the next 12-18 months," says Michael Rohr, a Senior Credit Officer at Moody's.
Swiss banks solid financial profiles display very low problem loan ratios, strong and rising capital ratios, limited reliance on wholesale funding in most cases, and substantial loss absorption capacity through earnings and loan-loss reserves.
In Moody's view, the stronger Swiss Franc will only have limited effects on Swiss banks' operating conditions. However, the low-interest rate environment will continue to exert pressure on Swiss banks' revenue bases. At the same time, rising asset margins coupled with effective hedging policies at most banks will help sustain sound earnings generation capacity, stabilising Swiss bank's capital ratios at high levels.
Negative interest rates and the country's role as a safe haven for investment led to increased demand for domestic real-estate assets during the first half of 2015 that has refuelled property price inflation. The imbalance between mortgage-loan growth and GDP growth is therefore likely to persist during Moody's outlook horizon and may start to exert pressure on banks' asset quality and -- ultimately -- credit profiles in the case of a larger-than-anticipated housing-market downturn.
The main driver of the Swiss banking system's outlook change to stable are the revised government support assumptions, which are now fully reflected in Swiss banks' ratings.
"The stable outlook also reflects our view of a resilient operating environment for Swiss banks with Swiss GDP forecasted to grow 0.8% in 2015 and 1.5% in 2016. However, sustained property-price inflation, persistently low interest rates and potential negative effects from the stronger Swiss franc form key challenges for Swiss banks over the next 12-18 months," says Michael Rohr, a Senior Credit Officer at Moody's.
Swiss banks solid financial profiles display very low problem loan ratios, strong and rising capital ratios, limited reliance on wholesale funding in most cases, and substantial loss absorption capacity through earnings and loan-loss reserves.
In Moody's view, the stronger Swiss Franc will only have limited effects on Swiss banks' operating conditions. However, the low-interest rate environment will continue to exert pressure on Swiss banks' revenue bases. At the same time, rising asset margins coupled with effective hedging policies at most banks will help sustain sound earnings generation capacity, stabilising Swiss bank's capital ratios at high levels.
Negative interest rates and the country's role as a safe haven for investment led to increased demand for domestic real-estate assets during the first half of 2015 that has refuelled property price inflation. The imbalance between mortgage-loan growth and GDP growth is therefore likely to persist during Moody's outlook horizon and may start to exert pressure on banks' asset quality and -- ultimately -- credit profiles in the case of a larger-than-anticipated housing-market downturn.
16 July 2015, 08:37
Saudi Arabia in June increased oil production by 200,000 barrels per day to
10.6 million barrels per day as it continues to pursue its strategy to flood the
oil market in a bid to push high cost producers out of the market.
Saudi Arabia notably has lowest production cost per barrel in the world around $20/barrel.
This strategy has seen some success as it toughened the situation for North African producers. However, when it comes to US, the strategy has seen very limited or no success. So far, lower oil price has helped to push down number of oil rigs operating in US and small shale oil companies to bankruptcies. However to prevent US's ever rising production it has failed monumentally so far.
WTI is down sharply, currently trading at $51.8/barrel. WTI has found support around $51 area, whereas resistance lies close to $54. A downside break as of now seems likely.
Saudi Arabia notably has lowest production cost per barrel in the world around $20/barrel.
This strategy has seen some success as it toughened the situation for North African producers. However, when it comes to US, the strategy has seen very limited or no success. So far, lower oil price has helped to push down number of oil rigs operating in US and small shale oil companies to bankruptcies. However to prevent US's ever rising production it has failed monumentally so far.
- Low cost of switching on and off, any shale oil rigs makes US producers the swing producers. Companies can easily start the production or close it down relatively fast, efficiently and at a very minimal cost.
- After long seven months of consecutive decline, last week number of operating rigs in US rose by 12. This week another 5 become operative, which brings total active rigs at 645, still down by 918 rigs from a year ago.
WTI is down sharply, currently trading at $51.8/barrel. WTI has found support around $51 area, whereas resistance lies close to $54. A downside break as of now seems likely.