The modern era of social media has had a profound impact on the way in which we all lead
our lives. The pros and cons of this more interconnected world are yet to be fully
understood by many, but the integrity of one’s identity and data should never be taken for
granted- just ask anyone who’s had that stolen from them!
The same issues apply to markets in general too, and for the purposes of this article, more
especially in the Forex space. Having too many people know which way you are exposed in
the currency market is more often a source of disappointment than it is a reward. I have
written here previously, and not that long ago, that quite often leading protagonists like to
publish the details of their trading ideas. This invariably includes the levels at which they
would place a loss limit on any risk they take- or to be more exact; where exactly they
advise others to.
Only yesterday we saw a number of stop losses driven out on some trades previously
advertised only a few days back. I shall not go into detail here on what those were, but I
would again remind the reader about the importance of balancing the desire for media
exposure against the value of retaining a degree of anonymity, be that personal or
otherwise. Point made I will move on.
On Wednesday evening the US Fed, it would seem, has put a hold on further monetary
tightening for the time being. The immediate impact sent US yields and the dollar lower,
further underpinning January’s equity market rebound, making it the best month for US
equities in seven years. The combination of lower interest rates and a lower dollar also
helped gold to lift further, through $1320 an ounce.
However, since then month end demand for the US currency yesterday has seen it rebound
over the past 24hours as the EURUSD fails again to lift convincingly past 1.15 and the
GBPUSD has continued to shy away from breaking above resistance, now at 1.3225, falling
back below 1.3100 in Asian trading overnight.
When it comes to the EUR I have already mentioned the importance of not forgetting the
potential negative impacts of Brexit on the currency- something that often seems to get
overlooked, but more importantly perhaps; the data releases this week from the Eurozone
have not been at all positive either.
Italy is technically in recession having posted another quarter of negative growth which is
perhaps not that much of a surprise as it was widely expected. However, another set of
alarmingly weak German data yesterday is also portending a wider slow down on the
continent. German December retail sales fell by a whopping 4.3% - a number that makes the
UK data for the same period look good!
Eurozone inflation doesn’t seem to be a problem either. A fact that may be endorsed this
morning with the release of the most recent Pan-European CPI data due out at 10am,
details of which will most likely be revealed before you read this article. However, and as
far as further fed policy action is concerned, the latest US unemployment report may
provide more direction for the markets ahead of the weekend when at 1.30pm we will see
their numbers for January.
One element of this report which could be more important than the headline jobs numbers;
is the level of wage inflation, currently running at an annualised rate of 3.2%. This is
expected to be unchanged in January, but anything markedly higher or lower will either add
or detract from the Fed’s policy shift earlier this week. Consequently, US equity and bond
markets and the dollar could take their lead into the weekend from this too, but as usual
the devil may also be hidden in revisions to any of the detail.
Talking of ‘hidden detail’-a parting anecdotal thought for today- If you do not want your
name on the list then, “Don’t tell him Pike!”
Important Economic releases due today
10am- Eurozone January CPI inflation report
1.30pm- US January non farm payrolls and monthly job report
(non farm payroll estimate vary between + 150k-210k- median 170k)
3pm- US January ISM manufacturing index