Markets tread water on MENA developments
Other Forex Stuff

Markets tread water on MENA developments

The dollar opens the last day of the trading month a mere 0.2% off the lows for the year on the main dollar index.   It would be safe to say there is a fragile calm around events in the Middle East. Oil prices are just shy of the $100pb level on the WTI contract and whilst stock markets have recovered slightly in Asia, this is from year lows for emerging Asia stocks towards the end of last week.

Guest post by  FxPro

For early on this week, the Aussie is the one to watch, as it pushes the upper end of the 0.99 to 1.02 range that has held in place for all of the month to date. However, the dollar weakness, during what has been a time of much geo-political uncertainty, is telling and investor flows today and tomorrow (around month end) should give us more clues as to their preferences for dollar alternatives, which were fairly robust in February.


Ireland’s coalition talks begin. The election saw the ruling party (Fine Fail), which has dominated the political land for decades, roundly defeated, with the Fine Fael opposition now looking to secure the support of the Labour Party or selected independents in order to form a government.   What’s crucial here is that it are seeking not only to renegotiate the EU rescue deal, but also pressure senior bond-holders to take some of the pain of the required austerity. As such, we’re likely to hear more noise from Ireland in the coming weeks.

GDP revisions weigh on the pound. UK GDP for the final quarter, which initially revealed a 0.5% decline, has been revised down to a 0.6% fall. What this data shows is that the economy contracted on an underlying basis after four quarters of positive growth. Such a pattern is not necessarily that uncommon in the early stages of recovery. You see it after the early ’90s recession (where there was one dip back into negative territory) and also in the early ’80s. Quite often it’s associated with a rebound in inventories (the most volatile GDP component) coming to an end. There’s an element of this in these numbers, the change in inventories in Q4 very similar to that in Q3, with inventories having added to GDP in the previous four quarters. In summary, sterling is going to be watching every shred of data for clues on Q1 activity, simply because another quarter of negative underlying growth (i.e. snow aside) would bring back the ‘recession’ word, even if it were technically not true.

Eurozone consumers become more circumspect. The latest retail PMI report for the Eurozone confirms what is likely to become the norm over coming months, namely that consumers will become much more circumspect in response to the tightening in financial conditions/spike in oil prices experienced over recent months. The February reading for the Retail PMI of 49.9 was down 6 points from January’s level, with the French outcome dipping particularly sharply. The euro barely responded to the news.

Russia raises rates and reserve requirements. In a surprise move, Bank Rossii (Russia’ central bank) raised its main rate by 25bp on Friday to 8.0%, in response to growing inflation pressures. Separately, the central bank also lifted mandatory reserve requirements for liabilities to 4.5% from 3.5% for non-resident companies in an attempt to stem rising capital inflow on the back of higher oil prices. The Russian rouble has risen by 6.2% against the dollar this year, which makes it the best-performing currency in the world for the year to date.

Looking Ahead

Monday: FR: Producer Prices, January (expect 0.9% MoM and 5.6% YoY, previous 1.0% and 5.4%); EC: Eurozone CPI, January (expect -0.6% MoM and 2.4% YoY, previous 0.6% and 2.4%); US: Personal Income, January (expect 0.4%, previous 0.4%); Personal Spending, January (expect 0.4%, previous 0.4%); Chicago PMI, February (expect 67.9, previous 68.8); Milwaukee NAPM, February (previous 57); Pending Home Sales, January (expect -2.5%, previous 2.0%).

Tuesday: JPN: Jobless Rate, January (expect 4.9%, previous 4.9%); Job-to-applicant ration, January (expect 0.58, previous 0.57); UK: Nationwide House Prices, February (expect -0.2% MoM, previous -0.1%); PMI Manufacturing, February (expect 61.5, previous 62.0); Net Consumer Credit, January (expect £0.2bn, previous £0.2bn); Mortgage Approvals, January (expect 42.9K, previous 42.6K); IT/FR/GER/EC: PMI Manufacturing, February (expect 57.6/55.3/62.6/59.0, previous 56.6/55.3/62.6/59.0); GER: Unemployment Rate, February (expect 7.4%, previous 7.4%); Unemployment Change, February (expect -13K, previous -13K); EC: Eurozone Unemployment Rate, January (expect 10.0%, previous 10.0%: CAN: BOC Rate Meeting (expect unchanged at 1.0%); US: ISM Manufacturing, February (expect 60.5, previous 60.8); Construction Spending, January (expect -0.5%, previous -2.5%); Vehicle Sales, February (expect 12.7m, previous 12.5m).

Wednesday: UK: PMI Construction, February (expect 53.0, previous 53.7); US: MBA Mortgage Applications; ADP Employment Change, February (expect 185K, previous 187K).

Thursday: UK: Hometrack Housing survey, February (previous -0.5% MoM); IT/FR/GER/EC: PMI Services, February (expect 51.2/60.8/59.5/57.2, previous 49.9/60.8/59.5/57.2); EC: Eurozone GDP, Q4 (expect 0.3% QoQ and 2.0% YoY, previous 0.3% and 2.0%); Eurozone Retail Sales, January (expect 0.3% MoM and 0.0% YoY, previous -0.6% and -0.9%); ECB Board Meeting (expect no change); US: Initial Claims (previous 391K); Bloomberg Consumer Comfort, February 27th (previous -39.2); ISM Non-Manufacturing, February (expect 59.7, previous 59.4).

Friday: US: Non-farm payrolls, February (expect 175K, previous 35K); Unemployment Rate, February (expect 9.1%, previous 9.0%); Factory Goods Orders, January (expect 2.2%, previous 0.2%).      

Source: Bloomberg

Simon Smith, Chief Economist

Michael Derks

Disclaimer: This material is considered as a marketing communication and does not contain and should not be construed as containing investment advice or an investment recommendation, or, an offer of or solicitation for any transactions in financial instruments. Past performance does not guarantee or predict future performance. FxPro does not take into account your personal investment objectives or financial situation and makes no representation, and assumes no liability to the accuracy or completeness of the information provided, nor for any loss arising from any investment based on a recommendation, forecast or other information supplied from any employee of FxPro, third party, or otherwise. This material has not been prepared in accordance with legal requirements promoting the independence of investment research, and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and may not reflect the opinions of FxPro. This communication must not be reproduced or further distributed without prior permission of FxPro.

Risk Warning: CFDs, which are leveraged products, incur a high level of risk and can result in the loss of all your invested capital. Therefore, CFDs may not be suitable for all investors. You should not risk more than you are prepared to lose. Before deciding to trade, please ensure you understand the risks involved and take into account your level of experience. Seek independent advice if necessary.

FxPro Financial Services Ltd is authorised and regulated by the CySEC (licence no. 078/07). FxPro Financial Services, Karyatidon 1, Ypsonas, Limassol 4180 Cyprus.

FxPro - Forex Broker

FxPro - Forex Broker

Forex Broker FxPro is an international Forex Broker. FxPro is an award-winning online broker, offering CFDs on forex, futures, indices, shares, spot metals and energies, serving clients in more than 150 countries worldwide. FxPro offers execution with no-dealing-desk intervention and maintains a client-centric business model that puts customer needs at the forefront of our operations. Our acquisition of leading spot FX aggregator, Quotix, enables us to offer access to a deep pool of liquidity, as well as top-class order-matching and some of the most competitive spreads in the market. FxPro is one of only few brokers offering Negative Balance Protection, ensuring that clients cannot lose more than their overall investment. FxPro UK Limited is authorised and regulated by the Financial Conduct Authority (registration number: 509956). FxPro Financial Services Limited is authorised and regulated by the Cyprus Securities and Exchange Commission (licence number: 078/07) and by the South Africa Financial Services Board (authorisation number 45052). Risk Warning: Trading CFDs involves significant risk of loss.