By Emily Fowler
The expert analysts at City Index have once again cast their practiced eyes over the current financial markets. Their authority forecasts are a beneficial insight into the current markets, and predict what we might need to know for an effective trading strategy in the coming months. Read on for a snapshot of their predictions for April 2015.
Ashraf Laidi, GBP/JPY, Bearish
The sharp sell-off of the British pound was largely caused by concern over references to deflationary risks made by the Bank of England Monetary Policy Committee members, as Ashraf Laidi discusses this month. With UK inflation hitting an all-time low of zero% in February 2015, the lowest comparable rate ever on record since 1989, will the market expectation that inflation will enter negative ground be correct?
With May bringing the UK general election, it seems likely that another coalition government will be the result, and this uncertainty can only be of detriment to the pound. The possible strength of the JPY seems to stem from a stronger Japanese economy caused by factors that include more competitiveness in the export arena, but how will re-emerging instability in the field of global equities affect the JPY?
Joshua Raymond, EUR/JPY, Bearish
Moving away from the EUR/GBP because of concerns over what effect the UK general election will have, Joshua Raymond looks at the EUR/JPY. Agreeing with Ashraf Laidi when it comes to Japan’s strengthened economy, partly due to an increasing export competitiveness, he is confident in the strength of the JPY, but if an upside break of the Y131.50 barrier happens, could the outcome be different?
James Chen, EUR/USD, Bearish
James Chen correctly predicted the sharp decline of the EUR/USD pair for March, and this month he examines whether this entrenched free fall will continue into April. March brought a new 12-year low for the pair, when the target of 1.0500 was reached mid-month. The dropping of the USD in mid-March following the March 18 US FED meeting gave a high of 1.1037, but this soon retreated and we’re still seeing a weak EUR and signs of the USD ending the recent pullback. So, will we still have a bearish forecast for April?
James looks at the results of the EUR/USD trading under a major resistance area, and shares his views on the next major downside objective.
Kara Ordway, AUD/USD, Bearish
With the RBA rate decision due in April, Kara Ordway examines how much of a risk factor this is to AUD/USD this month. Although iron ore futures are still falling, will the speculative positioning and instability that the RBA decision brings pre-meeting be enough to enable a clear view on the currency pair?
Previous views on the pair were rethought following the recent reversal in the USD following the FOMC, and Kate looks at both the short-term positions, as well as longer-term predictions surrounding end of year forecasts.
Ken Odeluga, FTSE 100, Bullish
With a recent all-time high of 6930.2, Ken Odeluga predicts a continuation of momentum for the FTSE 100, with potential landings of 6837 and 6804-6809 suggesting regained support lying between 6702 and 6740. His simple studies of momentum make it clear whether or not the FTSE will be able to recoup recent losses in the month of April.
Despite the expectation of bearish views in the run up to the UK general election, is the expectation of a coalition government really still able to affect the market that much? Although the FTSE is likely to slow coming up to election date, the index may still hit at least 7065 before then.
Kelvin Wong, Nikkei 225, Bullish
Kelvin Wong looks at the market that has shown a terrible decline of 80% between a high of 39260 in January 1990 and a low of 7606 in April 2003. Since 2008, the Nikkei 225 has risen by an amazing 177%, and February 2015 saw a record high of 18865. But can this great improvement really be sustained?
Kelvin examines the possible outcomes, depending on whether the 19100 monthly pivotal support holds or not, and offers a bullish view as long as technical elements stay positive.
The monthly predictions for each of these markets in full can be found here.
Shares and commodities keep climbing, so do bond yields
By Marc Jones
LONDON (Reuters) – World stocks headed back towards record highs with a third day of gains and the dollar dropped to a three-year low on Thursday, after top Federal Reserve and European Central Bank officials took aim at rising bond market yields.
There was a lot to keep tabs on. A renewed retail frenzy re-ignited the likes of GameStop, bets on $70 a barrel oil and a decade high in copper prices drove a commodity currency rally [/FRX] and bond yields were still rising too. [GVD/EUR]
A near 1.9% jump in oil and gas shares ensured European markets followed Asia’s overnight gains [.T][.SS]. MSCI’s main world index, which spans 50 countries, was up 0.5%.
“There are two clear stories now” said CMC Markets senior analyst Michael Hewson. “You have the concerns about rising yields and they are continuing to move higher today, and then you have got an economic recovery story, which is helping lift the more moderately-valued parts of the market.”
Federal Reserve Chair Jerome Powell said on Wednesday that U.S. rates could remain low for years, while ECB board member Isabel Schnabel was out early on Thursday saying it would fight any big increases in inflation-adjusted market rates.
“A too-abrupt increase in real interest rates on the back of improving global growth prospects could jeopardise the economic recovery,” she said. “Therefore, we are monitoring financial market developments closely.”
But bond markets are still not playing ball. Ten-year German Bund yields climbed 3 basis points in early trading. U.S. 10-year Treasury yields were near one-year highs at 1.42% and on course for the biggest monthly rise since Donald Trump’s 2016 U.S. election victory jolted markets.
In the FX markets, the safe-haven U.S. dollar slumped near three-year lows as the Fed’s stance, ongoing progress with COVID vaccination programmes and commodity market uplift boosted riskier currencies.
The Australian and Canadian dollars both hit three-year highs of $0.7978 and C$1.2503 per U.S. dollar respectively.
The euro touched a one-month high of $1.2183. The safe-haven yen and Swiss franc both weakened.
“It is pretty clear that there is a pretty strong concentration in the commodity currencies,” said Saxo Bank’s John Hardy. “Even with emerging markets you are seeing it to a degree,” he added, pointing to how big energy importers like Turkey’s lira had faded.
MARATHON NOT A SPRINT
Crude oil climbed to 13-month highs after U.S. government data on Wednesday showed a drop in crude output as a deep freeze in Texas disrupted production last week. [O/R]
Copper prices steadied near $9,500 a tonne in London. It’s now at its highest level in almost a decade and could log its biggest monthly gains in 15 years this month.
In a possible sign of a renewed retail-driven frenzy in equity markets, GameStop’s Frankfurt-listed shares trebled as they opened on Thursday, overshooting the videogame retailer’s 100% surge on Wall Street overnight.
Other so-called “stonks” – an intentional misspelling of “stocks” – favoured by retail traders on sites such as Reddit’s WallStreetBets had also leapt again, although explanations for the moves were tenuous.
Some online stocks watchers had even pointed to a picture posted by an activist GameStop investor of a McDonald’s ice cream cone with a frog emoji as a cryptic sign.
“It’s a marathon, not a sprint. Whatever happens resist the urge to sell. The longer we hold the higher it goes,” said @catchme1fyoucan, one user in Italy of the retail trading platform eToro, in a discussion on GameStop.
(Reporting by Marc Jones, editing by Larry King)
Sterling steadies above $1.41 as risk currencies gain
By Ritvik Carvalho
LONDON (Reuters) – A rally in risk currencies on Thursday helped Britain’s pound steady near $1.41, a day after it hit its highest levels in nearly three years.
Sterling surged to $1.4295 on Wednesday, as analysts maintained a positive outlook on the currency.
Bets that Britain’s vaccine rollout will enable a quicker reopening of its economy and relief over a Brexit trade deal have pushed the pound up 3.5% against the dollar, making it the best-performing G10 currency this year.
U.S. Federal Reserve Chair Jerome Powell on Wednesday calmed fears that higher inflation would also lead to a tapering of monetary stimulus, saying the central bank would not change policy until the economy was clearly improving.
On Thursday, a broad risk-on tone in markets after Powell’s assurances spurred a rally in commodity-linked currencies such as the Canadian, Australian and New Zealand dollars and the Norwegian crown, pushing the dollar and other safe haven’s lower. [FRX/]
“Classical FX havens are weakening (CHF, JPY) and risk currencies such as GBP and NOK are performing well as U.S. rates are now rising in tandem with equities and commodities,” said Lars Sparresø Merklin, senior analyst at Danske Bank.
The pound is correlated with risk and growth and tends to gain along with risk-on plays in markets. It traded 0.1% higher at $1.4163 by 0911 GMT. It was 0.1% lower to the euro at 86.22 pence.
Issues over Brexit still simmer, although analysts maintain they won’t hurt the pound in the short to medium-term.
Northern Ireland’s first minister upped the ante on Wednesday in a dispute between the UK and the European Union over trade with the province, calling on Prime Minister Boris Johnson to “step up and protect the United Kingdom”.
Earlier, the UK and the EU held talks and agreed to press on with work to resolve the difficulties that have impeded deliveries of goods, notably food, from other parts of the United Kingdom to Northern Ireland and caused some shortages in supermarkets.
The dispute, which was heightened when the EU involved Northern Ireland in a COVID-19 vaccine ban, has cast a shadow over a post-Brexit trade deal agreed late last year and threatens to further sour future ties between the neighbours.
(Reporting by Ritvik Carvalho; editing by Larry King)
FTSE 100 climbs as recovery bets boost mining, energy stocks
(Reuters) – London’s FTSE 100 rose on Thursday, helped by mining and energy stocks that tracked higher commodity prices, while Standard Chartered dropped after its annual profit more than halved due to the impact of the COVID-19 pandemic.
The commodity-heavy FTSE 100 index was up 0.3% by 0808 GMT, with mining stocks, including Rio Tinto, Anglo American, and BHP, gaining between 1.5% and 3.6% on higher metal prices. [MET/L]
Oil heavyweights BP and Royal Dutch Shell also provided the biggest boosts, with gains of 1.2% and 0.8%, respectively. [O/R]
The domestically focused mid-cap FTSE 250 index rose 0.2%, led by industrials and consumer discretionary stocks.
Standard Chartered PLC fell 3.3% despite restoring its dividend and reaffirming its long-term profit goals.
Anglo American gained 3% as it boosted dividends after strong commodity prices helped the diversified miner recover from coronavirus disruptions suffered in its first half.
Outsourcer Serco Group Plc rose 8.3% as it reinstated dividends and raised 2021 forecasts, after posting a 20% jump in annual revenue.
(Reporting by Shivani Kumaresan in Bengaluru; editing by Uttaresh.V)
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