Market Review, June 30, 2016

Yestrday we saw the dollar fall against its U.S. counterpart (CAD), despite positive data, as a rebound in risk sentiment and consequently in oil prices lent support to the commodity-related Canadian currency.

The dollar also moved lower against other major currencies eventhough the upbeat U.S. personal spending data as renewed optimism following Britain’s decision to leave the E.U. continued to boost sentiment.

GBP/USD climbed by 0.69%, off the 31-year low.
EUR/USD added 0.17% while EUR/GBP dropped 0.54%.
USD/JPY held steady at 102.74 after falling to lows of 99.15 on Friday.

As investors keep booking their gains from the sharp moves up, gold prices eased yesterday.

Crude oil prices, on the other hand, erased Brexit losses, amid a massive U.S. inventory draw.

U.S. stocks closed another day on a positive note, as gains in the Financials, Oil & Gas and Basic Materials sectors led shares higher.

 

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Market Review, June 29, 2016

Yesterday we finally saw the sterling rebound as much as 1.5% from its 11% plunge after the British referendum.

Richard Benson, a portfolio manager at Millennium Global said sterling was likely to get some support from shifting expectations on U.S. interest rates.
Markets are now pricing in a 7 percent chance the Federal Reserve will cut rates in July and an 18 percent chance of a cut in September.
“Janet Yellen could not bring herself to raise rates when the conditions were perfect for it. She is not going to do it now,” Benson said.

Gold actually took a pause from the massive Brexit-inspired rally, ahead of the EU summit – as investors looked to lock into profits days after the precious metal surged to 27-month highs.

Crude price went up following a Norway strike that offset Brexit concerns, followed by a good API report that showed a 3.9M barrel draw in inventories compared with the expected draw of 2.4M barrles.

U.S. stocks posted strongest rally in 4 months, as investors capitalized on a host of bargain opportunities possible from the Brexit-inspired global market crash.
DOW rose 1.57%.
S&P 500 composite index added 1.78% as all 10 sectors closed in the green. Stocks in Energy, Financials and Health Care industries led, each gaining more than 2% on hte session.
Nasdaq Composite index gained 2.12% – shares in Facebook Inc and Netflix each surged 3%.

 

 
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Market Review, June 28, 2016

Yesterday sterling pound hit a fresh 31-year low on Brexit aftershock.

Fears over UK vote to exit the European Union continued to grip financial markets.

Osborne said the vote to leave the EU will likely lead to further volatility in financial markets but claimed that the economy is as strong as it could be to face the challenges ahead.
The pound has tumbled amid fears that the decision could hit investment in the U.K. economy, threaten London’s role as a global financial capital and trigger months of political uncertainty.

The vote could lead to a breakup of the U.K., with Scotland now highly likely to hold a second independence referendum.
The euro remained under pressure against the dollar and the safe haven yen amid fears that the impact of Brexit would cloud the outlook for the EU and the euro area economy.

The dollar, on the other hand, rallied over 1% to a fresh 3-month highs, as it is now the “safer” currency with all the uncertainty in the Euro zone.

Gold remained near 2-year highs, amid flight to safety in wake of Brexit fears.

Crude prices was near 6-week lows, as the Brexit concerns bolstered the dollar.

Stock markets are still under pressure and have closed another loosing day.

 
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WEEKLY BULLETIN – 27.6.16

THE U.K. HAS SPOKEN: OUT OF EUROPE


U.K.’s vote to leave the European Union kicks off a long period of political, economic and market uncertainty for the U.K. and for the E.U.

We should now expect for European leaders to focus on fending on further uncertainty and market distress following the British exit and on preventing the entire EU from falling apart.

The decision to Brexit could accelerate the retreat from political and economic consensus around the world.

As Britain’s exit from the EU should be messy and costly for both parties, both parties will have to take extreme steps to ensure the affects of the historic event don’t ruin the future of their existence. Economists are slashing their forecast for Britain, with some expecting a recession and next to no growth next year. That is a sharp reverse for an economy that had been among the best-performing in the developed world in recent years.

The Europeam Union is the UK’s most important trade partner, accounting for half of all UK imports and exports. UK exports to the EU correspond to almost 15% of national output (GBP).
EU membership matters to the UK economy primarily because it leads to lower trade barriers. This makes goods and services cheaper for UK consumers and allows UK businesses to export more.

Leaving the EU will lead to lower trade between the UK and the EU because of higher tariff and non-tariff barriers to trade.

The main benefit of leaving the EU would be a lower net contribution to the EU budget. On the long-term, this might actually make the UK economy stronger as it will not suffer because of ‘weaker’ EU members who need funding. Besides the economic regulations being changed once they exit, the immigration regulations will change as well, what has proven to be quite important for the majority of the ‘Leave’ voters, if not the ultimate reason.

Although the chance of an economic crisis following a Brexit was factored in, the backlash against immigration, fueled in part by homegrown Islamic terrorism in Europe and the U.S., overshadowed the ‘short-term’ economic damage. Britains support globalization of goods and capital, but not people and regulations.

The BoE’s first priority is to provide enough liquidity to avoid any funding stresses. The strong plunge and volatility of the pound will likely cause the central bank to cut its 0.5% policy interest rate to zero soon, and lean more towards quantitative easing rather than pushing rates into negative territory.

The largest risks in the foreign-exchange markets involve economies reliant on the U.K., while the biggest beneficiaries are likely to be the traditional safe-havens, the dollar and the yen.

Brexit spurred leaders of far-right populist parties in the Netherlands and France to reiterate demands for referendums on those countries’ membership in the EU, which would revive yet again the threat of a euro breakup. This puts pressure on the EUR as uncertainty takes over, making investors shift to safer assets like Gold.

The drop in stocks is a sign of new risks surrounding the global economic outlook.

Our outlook for the long-term is the following;

As investors sentiment will take a left turn and investors will be less willing to invest in risky assets that push economies up, the growth of global markets and economies will look less promising and therefore keep the Federal Reserve from raising interest rates as planned this year, and even spark a new round of emergancy policy easing from major central banks.

This will put pressure on the USD but not as much pressure as will be put on the EUR, as the EU’s future is being questioned.

Our analysis suggests that EUR/USD should go further down, targeting 1 (currently at 1.1).

Gold and JPY, being the ‘go-to-safe-havens’, should attract more investors and are expected to make nice bullish moves up.

The financial shock of last week’s Brexit vote will eventually fade, but it is unlikely to be the last as the domino effect will cause a wave of shocking events.

 

Market Review, June 27, 2016

On Friday we saw the GBP plunge after the referendum on wether or not the U.K. should or shouldn’t remain in the European Union resulted in the Leave campaign winning the race.

GBP/USD crashed more than 10% to 31-year lows. Following the decision to Brexit, the Bank of England and other top central banks tried to soothe markets in the wake of a hostoric decision.
The pair settled at 1.3683, down 8.03% on the session.

The pound is now down by more than 7% against its American counterpart since the start of the year when it opened above 1.47.

In London, U.K. prime minister David Cameron announced intentions to step down by October after the final tally in the controversial referendum showed that the Leave campaign prevailed by a 52-48% margin. While top global central bankers convened in Basel to execute an emergency contingency plan, Bank of England governor Mark Carney said the Bank has set aside £250 billion of additional liquidity and will act if necessary to help support the British economy.

The precipitous fall in the Pound draws parallels to Black Wednesday on September 16, 1992 when the U.K. opted out of the EU’s Exchange Rate Mechanism (ERM). For the session, GBP/USD plunged 4.5% to 1.76 before falling to 1.69 in the subsequent week, down nearly 10% for the period.

Oil prices plunged by up to 6%. As the dollar appreciated following the Brexit, dollar-denominated commodities such as crude became more expensive for foreign purchasers.
U.S. crude dropped 4.93% settling at $47.64.
Brent dropped 4.97%, settling at $48.38.

Spot gold rose over 4% and the Japanese yen also gained and recoverd the losses from the days before.

As Britain voted for EU exit, global stock markets lost about $2 trillion in value. The blow to investor confidence and the uncertainty the vote has sparked could keep the Federal Reserve from raising interest rates as planned this year, and even spark a new round of emergency policy easing from major central banks.

The move blindsided investors, who had expected Britain to vote to stay in the EU, and sparked sharp repricing across asset classes.

Stocks trumbled in Europe; Frankfurt and Paris each fell 7-8%. Italian and Spanish markets posted their sharpest 1-day drops ever, falling more than 12% led by the dive in European Bank stocks.

FTSE initially dropped 11% and soon recovered most of the drop to 3.2%, with some investors speculating that the plunge in sterling could benefit Britain’s economy.

U.S. stocks crashed as well, as Brexit-inspired volatility pushed Dow down more than 600 points – 3.39%, suffering its worst 1-day sell-off since August when China rattled golbal markets by unexpectedly devaluing the yuan.
S&P 500 Composite index fell 3.690%.
Stocks in 9/10 sectors closed in red.

 

 

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Market Review, June 24, 2016

Yesterday was a day filled with high volatility and expectations about the referendum on Britain’s future as a member of the European Union.

Over the last week, as widespread concerns of a Brexit have faded, the Pound sterling has surged more than 6% against the USD.

Sterling jumped above $1.49 during the trading session as poll showed Brexit ‘Remain’ vote in lead, moving all safe-haven assets (JPY, CHF, GOLD) down, and currencies with high interest for the U.K. to remain in the European Union, up.

At 22:00 GMT, as the voting ballots were closed and the first votes were declared, the jitters creeped in, the volatility in markets went through the roof.
After a survey released after the close of polls nationwide showed that the Remain campaign maintained a slight lead over the Leave vote, GBP/USD extended sharp gains, surging over 1.50 for the first time in 2016.

As time passed and more votes were counted, the pound plunged in Asia as the referendum to stay or leave appeared too close to call with volatile trade across markets.

GBP/USD dropped 4.55% as the results hung in the balance, while the euro fell 1.67%.

The shock came from a crushing victory for Leave in Sunderland in the north-east of England, and only a narrow win for Remain in the neighbouring City of Newcastle.

As the vote count continued and sterling suffered its most volatile session in living memory and hit its lowest level since 1985.

This morning votes count has showed a win for the Leave. 51.9% of the votes were for the Leave and 48.1% wanted to stay. It was a close call but one with great consequences.
Europe is stunned by UK leave vote as the domino effect of Britain’s decision is starting to take its toll.

Dutch and French politicians have already called for referendum on EU.

Scotland and Ireland want to hold a second referendum to stay in the EU and to leave the U.K.

The markets are reacting to the decision really strongly.
EUR/USD is currently at 1.1004.
GBP/USD is at 1.3502.
USD/JPY 102.09.

As Britain voted to Leave, oil prices dive and gold gains.

Stocks suffered from a free fall and Tokyo halted trade as the Nikkei 225 plunged 7.19%, while the S&P/ASX 200 dropped 3.75% and the Shanghai Composite fell 1.19%.

The future of the European Union is now uncertain and in grave jeopardy…

 

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Market Review, June23, 2016

Yesterday the dollar was broadly weaker as risk appetite returned to markets, boosting higer-risk currencies, and sterling and the euro rose on the last day of campaigning before Britain’s referendum on European Union membership.

GBP/USD remains near 5-month high ahead of Brexit referendum, as recent events have caused the markets to be more optimistic and to believe that the U.K. will stay rather than leave.

Gold is suffered for a fifth straight loss on the eve of the historic Brexit vote. The commodity settled at $1,270.25, down 018% on the session.
A Leave vote is regarded as bullish for gold, as investors pile into the safe-haven asset due to increased fears that a British departure from the European Union could trigger a recession in the euro zone.

Crude prices fell 1% as Brexit and oversupply concerns continue to weigh on the commodity.
The inventory report showed suprisingly worse numbers than was expected, pushing the prices down.

U.S. stocks dipped yesterday, as all eyes are on British referendum, after Brexit Leave camp gained steam.

 

 

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Market Review, June 22, 2016

FOREX:

Yesterday we saw the pound back away from five-and-a-half month highs against the dollar after an opinion poll showed that the campaign for the U.K. to stay in the European Union lost some of its leas ahead of tomorrow’s referendum.

GBP/USD was at 1.4701, almost unchanged for the day.

The poll showed that 45% of the voters supported the campaign to remain in the EU, with 44% supporting Brexit. 11% were undecided.

Economist Nouriel Roubini warned that Britain could tip into recession if it decided to leave the EU, particularly given the country’s large current account and fiscal deficits.

EUR/GBP was down 048% and the EUR/USD fell by 0.51%.

European Central Bank President Mario Draghi said Tuesday that the bank is ready for “all contingencies” following the Brexit referendum.

He added that the euro area economy has gained momentum since the start of the year, but noted that uncertainty remains high and downsides risks are still significant.

Federal Reserve Chair Janet Yellen also warned of the risk of a U.K. vote to exit the EU on Tuesday, during her testimony to Congress.

“A U.K. vote to exit the European Union could have significant economic repercussions,” Yellen said.

 

COMMODITIES:

Gold fell sharply due to a stronger dollar. The commodity traded between $1,268 and $1,297 an ounce before settling at $1,272.05, down 1.55% on the session.

Crude prices were higher yesterday as API reports dropped in stockpile, underpinning sentiment ahead of the U.K. vote to remain or leave the European Union.

 

STOCKS:

U.S. stocks ticked up, as investors showed little reaction to testimony from Fed chair Janet Yellen, appearing more focused on poll results.
Oil & Gas, Telecoms and Technology sectors led shares higher.

 

 

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Market Review, June 21, 2016

FOREX:

As Brexit fears continue to diminish, the pound rallied even more yesterday.
GBP/USD was up 2.24% during the session, at a three-week high of 1.4677.

EUR/USD climbed to 1.1348, 0.59% to a one-and-a-half week high.

The dollar, on the other hand, is still under pressure after the Fed left interest rates on hold last week and lowered forecast for how much they expect to hike interest rates in the next few years.

Today investors will be eyeing Fed Chair Janet Yellen’s testimony on monetary policy.

USD/JPY rose to 104.49, 0.30%.

Commodity currencies found support as the boost in risk appetite pushed oil prices higher.

 

COMMODITIES:

Oil prices were up yesterday, as Brexit fears eased and as the dollar weakened.
A weaker dollar underpins demand for oil.

U.S. crude rose 1.09% to $49.28.
Brent gained 1.57% to $49.94 after an intraday high of $50.30.

Gold ticked down amid easing Brexit concerns, as a surge in global equity and crude futures weighed heavily on the safe-haven assets.
The commodity traded between $1,280.50 and $1,295.25 an ounce before settling at $1,290.35, down 0.34% on the day.

 

INDICES STOCKS:

In the euro aream major stock indeces soared as the “Remain” boosted optimism.
FTSE100 surged 3%, Euro Stoxx 600 jumped 3.65%.

The rally among euro area stock spilled over onto Wall Street, where the Dow Jones Industrial Average rose by 250 points.
NASDAQ Composite Index gained 0.77%.
Stocks on Wall Street enjoyed one of their strongest one-day rebound in nearly four months.

 

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Market Review, June 20, 2016

FOREX:

On Friday we saw the GBP/USD rally more than 1%, as momentum surrounding the “leave” campaign slowed for time being after officials suspended Brexit-related activities for a second straight day following the tragic murder of Jo Cox, a labour Party member who was shot and stabbed in North Yorkshire a day earlier.

Cox, who was elected to the House of Commons laast year, had openly campaigned for the “Remain” camp in recent weeks.

The pound enjoyed its strongest one-day move against the dollar in more than a month, settling at 1.4207, up 1.10% on the

On Friday, a series of events ahead of this week’s Brexit referendum were cancelled following the murder  of the British Parliament member.

Following the pound’s sharp gains, bond yield also rose as the traders tried to assess whether the killing of a pro-EU British lawmaker may change the balance of opinions in Britain’s impending referendum.

The dollar showed weakness againt the other major currencies on Friday, after the release of mixed U.S. economic reports did little to boost optimism over the strength of the economy.
USD/JPY was steady at 104.26.

EUR/USD climbed 0.43% to 1.1273.

 

COMMODITIES:

Gold retreated from its 2-year high following the tragic news, settling at $1,293.45, down 0.39% on the session.

Oil prices, on the other hand, managed to halt a six-day losing streak, closing near session-highs.
WTI settled at $47.98, up 3.83%.
Brent settled at $49.19, up 4.24% on the day.

 

U.S. stocks:

U.S. stocks fell on Friday, as Apple patent suit weighed on the major indices. Apple shares fell 2.3%.

 

 

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