Market Comment 19th July 2012

Yesterday’s UK unemployment figures are the first piece of good news that the coalition has had regarding the economy for quite some time now, and it's following a few months now of rising employment with the headline rate declining once again. 

This indicates that we may have reached the top of the unemployment cycle but unfortunately for those doom mongerers it’s only a blip in a longer term trend. The economic data out recently has been consistent with a flat lining economy and one where business and consumer confidence is at a low ebb. Businesses are recruiting to some degree but many are still holding back from making larger long term commitments by refraining from investing heavily in new staff. An indication of this was the rise in claimant counts yesterday and once the impetus from the Olympics is over it’s back to reality.

This is why the Bank of England continues to debate other unconventional policy measures that they could employ in order to boost growth, as well as for the second month in a row discussing the possibility of reducing the base rate from its 0.5% to er… 0%?! The major issue with taking further action to boost growth via QE or reducing interest rates is that there’s little more you can do before going into all out aggressive money printing, which would simply cause inflation to spike spectacularly. The tinkering here and tinkering there is not going to resolve the problems in the eurozone and until that situation is fixed and their economies recovery meaningfully, the UK is going to struggle. This bright spot in the employment cycle is unlikely to last and later this year we could be creeping back up towards that 3 million mark. What will be interesting is next weeks first reading of Q2 GDP which is showing a complete disconnect to the employment situation, which reiterates that the private sector might be taking up the slack from the public sector but it isn’t translating into growth.

Whilst we’ve had a few bright spots of news this week and finally we might get some resemblance of a summer in the coming days, the markets have perked up as well. The Dow Jones posted a second day of gains as technology stocks reported strong earnings. Ben Bernanke added to the positive sentiment by stating that he didn’t believe the US economy would slip back into recession although he remained elusive about more quantitative easing. The Dow gained 103 points to close at 12,909 and this has allowed European indices to add to gains from earlier in the week. The FTSE is just in the black by a handful of points and was looking to test 5700 earlier. The index now faces its test of that well know resistance area around 5700/25 and it comes as little surprise to see clients selling around this level.

Today focus will be on UK retail sales which are expected to show another rise of 0.6% month on month and then later there’s the weekly initial jobless claims from the US, more housing data and the day is rounded off by the Phili Fed manufacturing figure.

The euro edged lower yesterday although well off its low. Selling pressure initially came from reports that Angela Merkel was unsure of whether the “European project” would last, sending the euro as low as 1.2215. However, the euro rebounded as the statements were put into correct context and managed to settle at 1.2282, a mere 8 pips lower than the previous day. This morning the single currency has visited above the 1.2300 level which is where it sits at the time of writing.

Gold put in its third day of declines as Ben Bernanke maintains his lack of enthusiasm for another round of quantitative easing. Spot gold shed $10.5 to close at $1573 as traders continue to unwind the inflation hedge trade. The crucial support level of $1521 could soon be on for a test now that further monetary stimulus looks to have been kicked into the long grass.

Crude oil added to its winning streak as EIA oil inventories showed a surprise decline. Analyst’s forecast had expected supplies to have built up an extra 500k barrels on the week but instead declined by 800k barrels. The surprise drop saw September Crude Oil gain $0.63 to settle at $90.17.
comments powered by Disqus

All Market Comment News

Trusted Firms

All Reviews
EUR/USD update (16th April 2014, 14:00) 16 Apr 2014

The euro is higher versus the US dollar, after the level of inflation in the eurozone remained unchanged in March.

GBP/USD update (16th April 2014, 13:00) 16 Apr 2014

UK unemployment has now dipped below 7%, the initial threshold level the Bank of England introduced in August but reneged upon last month, which has s...

EUR/USD update (15th April 2014, 15:00) 15 Apr 2014

Having popped its head above the $1.39 level at the tail end of last week, EUR/USD has found itself pulled back.

Market Comment 15th April 2014 15 Apr 2014

European equities are set to open flat as they’re caught between two competing poles of sentiment. 

AUD/USD update (14th April 2014, 18:00) 14 Apr 2014

The Australian dollar is gaining ground against the US dollar, as traders prepare for the latest minutes release from the Reserve Bank of Australia.

EUR/USD update (14th April 2014, 16:00) 14 Apr 2014

The euro is under pressure against the US dollar as tensions in eastern Ukraine weigh on the currency.

Market Comment 14th April 2014 14 Apr 2014

European equities are set to start on the back foot as last week’s negative sentiment remains firmly intact. 

GBP/USD update (11th April 2014, 16:00) 11 Apr 2014

After touching $1.68 yesterday, sterling has dropped back, hit by weaker UK construction output figures.

EUR/USD update (11th April 2014, 16:00) 11 Apr 2014

If we see the euro close above $1.39 today, then it will be the icing on the cake for the currency, which has enjoyed a remarkable week.

Market Comment 11th April 2014 11 Apr 2014

European equities are set to open lower tracking overnight declines in the US. 

EUR/USD update (10th April 2014, 12:00) 10 Apr 2014

Momentum has taken EUR/USD higher as a steady flow of economic data has been released over the week.

Market Comment 10th April 2014 10 Apr 2014

European equities are set to show modest gains on the open due to a dovish FOMC Meeting minutes overnight. 

AUD/USD update (9th April 2014, 19:00) 9 Apr 2014

The Australian dollar has reached a new high for 2014 prior to tonight's Federal Reserve minutes release.

EUR/USD update (9th April 2014, 18:00) 9 Apr 2014

The EUR/USD has pulled back from the $1.38 mark as traders have taken their profits from two days of gains.

Market Comment 9th April 2014 9 Apr 2014

European equities are set to open mixed as traders continue to tread cautiously. 

GBP/USD update (8th April 2014, 14:00) 8 Apr 2014

Today’s strong UK manufacturing and industrial production data has helped sterling gain ground against the US dollar.

Share this with your friends

Your comments:

Market Comment 19th July 2012

Yesterday’s UK unemployment figures are the first piece of good news that the coalition has had regarding the economy for quite some time now, and it's following a few months now of rising employment with the headline rate declining once again. 

Read more »

Connect to successful traders – join free now

Log In or Sign up

Facebook User?

You can use your facebook account to sign up with Live streaming sport.

Connect with facebook
Remember me.
Did you forget your password?