Data Comfort, Brexit Worries

Noam Stiekema

Better than expected UK data boost confidence.  Earlier expected date of invoking Article 50 worries the market.  Where will the pound be heading?


By Wayne Ko, Head of Research & Education at Fullerton Markets

Last week, UK CPI YoY came in at 0.6% versus consensus of 0.5%.  Claimant Count Change dropped 8.6K as opposed to an expected increase of 5.2K.  Average Earnings showed slight improvement at 2.4% compared to the previous month 2.3%.  Retail Sales sealed the game on Thursday, came in at 1.4%, far exceeded the forecast of 0.1%.  As the saying goes, the game is not over until the final bell is rang.  UK Prime Minister, Theresa May was said to be in favour of triggering formal talks to exit European Union earlier in 2017 last Friday.  The comment sent the pound tumbling, wiping off 50% of the gains made since the start of the week.  Should we be looking to buy or sell the sterling?

The only key data UK has for this week is their Second Estimate GDP.  We expect the actual figure to be close to the market’s expectation of 0.6%.  The possibility of invoking Article 50 in the first quarter of 2017 is likely to haunt the sterling in the near term.  However, the sterling weakness may be countered by an equally weak dollar as well.  Market is not seeing any hope of rate hike before November, even though some Fed officials have presented their hawkish views.  The annual Jackson Hole Symposium, attended by central bankers, finance ministers, market participants and academics from around the world, is held this week.  Fed chairperson, Janet Yellen is also scheduled to speak in the symposium.  Investors will be looking for more clues to gauge the possibility of Fed rate hike this year and possible actions from other policy makers.

Both the Aussie and Kiwi maintained their strength even after rounds of rate cut.  Last week, we saw favourable job data from both countries.  The increase in Aussie numbers were mainly contributed by part-time jobs and full-time jobs actually declined.  Kiwi received extra boost from the GDT Index (diary prices), which rose 12.7%, the most in 10 months.  Data are not enough to push the Aussie and Kiwi further, as we saw both of them retreat from the key resistance of 0.77 and 0.73 respectively.  We believe the key underlining reason is both the central banks are still open to further easing.  A persistently strong currency will hinder them to achieve their inflation targets, thus investors are cautious in buying higher.

Speculations of Oil production freeze deal are back, as we see WTI heading towards $50 a barrel.  We do expect such “hopefulness” to continue until next month’s informal discussion.  The downside risk is disappointment, as what we saw in the first quarter of this year.

Our Picks

FM WMR 20160822-AUDUSDH4

AUD/USD – Slightly bearish.  Price has broken the round figure of 0.76.  The bearish momentum may continue.  Upside risk is dovish comments by Fed during Jackson Hole Symposium.

FM WMR 20160822-NASUSDH4

NAS/USD (Nasdaq) – Ranging.  We expect the Nasdaq to be trading sideways this week until Jackson Hole meeting.  The nearest Support is around 4775.

FM WMR 20160822-OILUSDH4

OIL/USD (WTI Oil) – Slightly bearish.  Oil has rallied sharply on production freeze speculations.  We suspect profit taking may kick in soon to take the price towards 47.50.

Top News This Week (GMT+8 time zone)

Europe: German Ifo Business Climate.  Thursday 25th August, 4pm. We expect figures to come in at 108.9 (previous figure was 108.3).

UK: Second Estimate GDP q/q.  Friday 26th August, 4.30pm. We expect figures to come in at 0.6% (previous figure was 0.6%).

US: Prelim GDP q/q.  Friday 26th August, 8.30pm. We expect figures to come in at 1.2% (previous figure was 1.2%).

Read this next

Industry News

The B2Broker B2Core REST API Is Now Live

B2Broker has announced the release of its new REST API, which lets customers use B2Broker’s solutions and services for business purposes.

Executive Moves

CME Group taps Paul Woolman to lead Equity Index, Giovanni Vicioso to lead Crypto

“Our equity and cryptocurrency businesses have experienced tremendous growth in recent years, underpinned by strong customer adoption and continued innovation.”


Sumsub launches document-free KYC for users in India, Brazil, Nigeria and Indonesia

Sumsub has launched one click-KYC for users in India, Brazil, Nigeria and Indonesia in a move that allows businesses to instantly onboard over 2 billion users without requesting their ID documents.

Digital Assets

Cboe becomes first major global exchange operator on DeFi data platform, Pyth Network

“Our participation in the Pyth network will provide another avenue to broaden customer access to our data, and aligns with our strategy to deliver market data to investors around the globe based on how they want to consume their data, whether through direct connectivity methods, the cloud or the blockchain.”

Industry News

FINRA fines Barclays Capital $2 million for best execution failures for 5 years

FINRA has fined Barclays Capital $2 million for failing to comply with its best execution obligations in connection with its customers’ electronic equity orders between January 2014 and February 2019. 

Digital Assets

SETL helps SWIFT, CSDs and custodians develop common framework for tokenisation systems

London-based enterprise DLT and blockchain company SETL has delivered a pilot project for SWIFT which implemented a common framework linking tokenisation systems between central security depositories (CSDs) and global custodians.

Digital Assets

Crypto volumes hit CHF 87.1 million at Switzerland exchange

Switzerland’s principal exchange has experienced a rebound in trading activities for September 2022, with monthly volumes increasing by more than 20 percent MoM.

Digital Assets

Bitcoin Suisse Vault taps Polkadot governance features

Bitcoin Suisse has added support for Polkadot protocol governance on its proprietary, hyper-secure cold storage solution, the Bitcoin Suisse Vault.

Retail FX

Finalto sweetens offering for African traders with localized FX pairs

Finalto, the financial trading division of Gopher Investments, announced today that it has extended its offering with inclusion of a number of African Pairs to its trading platforms.