Daily Commentary

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Daily FX Commentary: (Morning Report)

EUR/USD The Euro maintains positive sentiment, re-established yesterday after bouncing from the lower boundary at 1.2500. Overnight’s consolidation around 1.2600 level and fresh strength that is under way, keeps strong barrier at 1.2626/36 in focus for possible bullish breakout and extension of 5-week rally and expose 1.2680/1.2700. Near-term studies remain supportive, however, as the pair is driven by news and fundamentals, main focus is on today’s ECB’s release, leak of which has already been priced in and more focus seen on tomorrow’s US jobs data. Overnight’s base at 1.2590 offers initial support, along with 20 day EMA, while only loss of 1.2560/50 would signal further congestion. Res: 1.2636, 1.2650, 1.2680, 1.2700 Sup: 1.2600, 1.2590, 1.2560, 1.2550

GBP/USD Cable holds near-term positive tone, following yesterday’s bounce from trendline support at 1.5825 that resulted in break above 1.5900 resistance zone, previous top / Fib 61.8% of 1.6300/1.5267 and posting fresh 3 ½ month high at 1.5933. Yesterday’s close at 1.5900 gives additional support. However, more sideways movements on 1 and 4h chart studies, do not rule out further consolidation, before fresh push higher, as break above yesterday’s high is required to open 1.6000 barrier. Good supports lie at 1.5890/50, ahead of 1.5835, trendline support, loss of which would sideline near-term bulls. Res: 1.5933, 1.5950, 1.5984, 1.6000 Sup: 1.5900, 1.5890, 1.5850, 1.5835 USD/JPY The pair turned into sideways trade, moving within newly established 78.30/46 range. As the downside remains protected for now and recent gains were limited at 78.55, with flat hourly studies, no significant action to be expected in the near-term. Break of range limits at 78.00 or 78.80, is required to signal fresh direction. Res: 78.46, 78.55, 78.60, 78.83 Sup: 78.37, 78.29, 78.20, 78.15 USD/CHF Near-term price action remains entrenched within narrowing range, as yesterday’s upside rejection under important 0.9615/3 barriers and subsequent sharp slide, keep the downside favored. Near-term studies are in negative/neutral mode, while larger picture’s bears remain in play and favor retest of strong 0.9500 support, for possible resumption of larger downtrend from 0.9970. On the upside, break above 0.9615 and 0.9635, previous high / trendline resistance, would revive near-term bulls for possible stronger recovery. Res: 0.9565, 0.9580, 0.9606, 0.9615 Sup: 0.9541, 0.9528, 0.9507, 0.9500

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Daily Market Commentary: (Evening Report)

London Market Report

Markets celebrate ECB bond-buying plan

    Market Movers
    techMARK 2,116.90 +1.44%
    FTSE 100 5,777.34 +2.11%
    FTSE 250 11,676.44 +2.01%

Global stocks markets rocketed higher on Thursday afternoon after European Central Bank (ECB) President Mario Draghi revealed details of the bank’s bond-buying plan.

London’s Footsie jumped over 2%, the CAC in Paris and DAX in Frankfurt both rose 3%, while Madrid’s IBEX and Milan’s FTSE MIB ended the day between 4% and 5% higher.

“On a day that many traders would have been looking towards in their diaries this week it would appear that the detail that was needed in exactly how the ECB would tackle the crisis was finally made available,” said sales trader Matthew Nelson.

Just one month after promising to do “whatever it takes to preserve the euro”, Draghi announced that the ECB would embark on an unlimited bond purchase programme of notes on the secondary market with maturities between one and three years. They would be ‘sterilised’ so as to avoid the inflationary pressures which excessive growth in the money supply is thought to engender in the long-run.

Speaking after the ECB maintained its key interest rate at 0.75%, Draghi said that the purchases, known as Outright Monetary Transactions, will “enable us address severe distortions in government bond markets which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro.”

Economic data from the US also helped to lift markets this afternoon: weekly jobless claims were below expectations; the ISM non-manufacturing index surprised to the upside in August; while the ADP employment report beat forecasts.

In other news today, the UK's Monetary Policy Committee did what was largely expected and maintained its Bank Rate at 0.5% and asset purchase programme at £375bn in its policy announcement at noon. The Bank of England injected £50m of additional quantitative easing in July which is not due to be completed until the end of October.

Europe Market Report 

Industrial production to rebound

Compared to some of its peers in the recruitment sector, SThree had a commendable first half in tough market conditions, but those conditions have shown no signs of improvement in the last two months, so Friday's interim management statement may be one of no more than quiet satisfaction.

France and Germany notched up year-on-year increases in gross profit of 23% and 17% respectively in the first half of 2012.

"The outlook remains bleak, however, and we still expect global macro-economic uncertainty to weigh on candidate and employer confidence – we think it’s unlikely that France and Germany can carry on at those rates of growth," comments Peel Hunt. "The best indicator we have of how the company sees the outlook is the headcount, which was down 2.2% in H1 [the first half]," the broker added.

Switching to the economy, Credit Suisse thinks it likely that UK industrial production rebounded in July, following the collapse caused by the Queen's Diamond Jubilee celebrations in June.

Purchasing Managers' Index data suggest that underlying industrial production could be weak, Credit Suisse avers, "but it seems likely that the noise from the Jubilee will work to override any informational content in this month’s release."

Credit Suisse is predicting a return of the industrial production index to April levels, which would give a monthly growth rate of 1.5% and an annual growth rate of -2.7%.

Charles Stanley is a bit more bullish, predicting a 1.8% rise in July, giving a year-on-year decline of 2.4%.

Charles Stanley forecasts that producer input prices rose 1.5% in August, following July's 1,3% increase. That would take the index to a level 1.0% higher than a year earlier, representing a turnaround from the 2.4% year-on-year decline seen in July.

Core output prices are seen edging up 0.1% in August (+1.3% year-on-year), after holding steady (+1.3% year-on-year) in July.

US Market Report

Stocks Seeing Substantial Strength In Mid-Day Trading Stocks have moved sharply higher over the course of the trading day on Thursday after ending the previous session nearly flat. The markets have benefited from a positive reaction to the latest news out of the European Central Bank along with a batch of upbeat U.S. economic data. The major averages have moved roughly sideways in recent trading, hovering near their best levels of the day. The Dow is up 232.57 points or 1.8 percent at 13,280.05, the Nasdaq is up 60.08 points or 2 percent at 3,129.35 and the S&P 500 is up 26.07 points or 1.9 percent at 1,429.51. The rally on Wall Street is partly due to a positive reaction to comments from European Central Bank President Mario Draghi, who outlined the central bank's highly anticipated bond purchasing program. Draghi said the program would enable the ECB to address severe distortions in government bond markets and called it a "fully effective backstop to avoid destructive scenarios with potentially severe challenges for price stability." The central bank will consider a bond purchase only when there is a request from a country. The size of the purchase is unlimited and sovereign bonds with maturities up to three years would qualify. The markets have also benefited from the release of some upbeat U.S. economic data, including a report showing stronger than expected private sector job growth. ADP said private sector employment increased by 201,000 jobs in August following a revised increase of 173,000 jobs in July. Economists had expected employment to increase by about 149,000 jobs compared to the addition of 163,000 jobs originally reported for the previous month. The Labor Department released a separate report showing a bigger than expected drop in first-time claims for unemployment benefits in the week ended September 1st. The release of the upbeat jobs data has generated some optimism about the outlook for the Labor Department's monthly jobs report, which includes government jobs. The report is expected to show an increase of about 125,000 jobs in August.. Additionally, the Institute for Supply Management released a report showing that the pace of service sector growth accelerated by more than anticipated in August. The ISM said its non-manufacturing index rose to 53.7 in August from 52.6 in July, with a reading above 50 indicating an increase in activity in the service sector. Economists had been expecting the index to show a more modest increase to a reading of 53.0.