CFDs

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Equities Rally as Dipping Japanese Inflation Raises Hopes of More BoJ Stimulus 0

Posted on August 29, 2014 by Frankie Lawson

Another busy day of economic releases has provided the catalyst for further gains in equity markets on Friday.

Japanese data opened the door another notch to more quantitative easing, while the Eurozone inflation reading would appear to suggest that the deflation threat is not as serious as previously thought.

Another round of stimulus from the Bank of Japan has widely been expected ever since the central bank announced its initial program of quantitative and qualitative easing in April 2013.

Only in recent months have people seriously started to question whether another round of stimulus would be necessary as the country appeared to be nearing its 2% inflation target, once you remove the 2% that is attributed to the sales tax hike, and was coping better than anticipated with the sales tax hike.

The data released overnight would suggest things aren’t as rosy as initially thought as industrial production fell well short of expectations, unemployment unexpectedly rose and inflation fell to 3.4%, giving an effective rate of 1.4% once the 2% attributed to the sales tax hike is removed.

This is still well below the 2% target, which may prompt discussions within the BoJ about whether more needs to be done.

I don’t expect anything to happen in the next couple of months as they’ll probably want to see further evidence that inflation has hit a ceiling around the 1.4% level, but we could see something later this year.

Eurozone Inflation Stabilises as Euro Drops

This has also been a key talking point in the Eurozone, where the ECB, like its Japanese counterpart, is currently battling with very low inflation and in some areas, even deflation.

This is a slippery slope, as Japan knows all too well, and until now the ECB has played a very dangerous game in allowing it to happen in an attempt to allow the countries to regain competitiveness.

That said, the inflation figures for August would suggest the stimulus package announced by the ECB a few months ago is having an impact.

While the overall inflation reading was 0.3% for the month, core inflation was 0.9% which suggests the inflation problem is abating and the only thing driving the main CPI reading lower is temporary volatile factors such as fuel prices.

Given the number of stimulus measures announced by the ECB a few months ago, it’s difficult to know what exactly is helping lift the inflation number but I imagine the more than eight cent drop in the euro against the dollar in the forex markets, from $1.40 to below $1.32, is contributing.

Staying on the topic of inflation, we’ll get some important data from the US shortly before the open in the form of the core personal consumption expenditure price index.

This is the Fed’s preferred measure of inflation and currently lies at 1.6%, which allows the central bank to remain accommodative for now, but if this number starts to climb as the economic recovery goes from strength to strength, pressure will grow on the Fed to pay attention to the other aspect of its dual mandate, price stability, and raise rates.

We’ll also get some income and spending figures, which is something the Fed is closely monitoring at the moment, as well as the UoM consumer sentiment reading.

With all this data to come, we could be in for a fairly volatile end to the week.

Ahead of the US open, the S&P is seen 4 points higher, the Dow 29 points higher and the NASDAQ 10 points higher.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

Content by Alpari. This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

Dipping Confidence Figures in the US Fails to Limit Stock Market Rally 0

Posted on August 27, 2014 by Frankie Lawson

US futures are pointing marginally higher on Wednesday, on what is expected to be a fairly quiet session.

They’re not getting much direction from Europe, where indices are treading water, which is something we also saw in Asia overnight.

It’s looking a little light on the economic data front, which may explain why we’re not seeing much movement in Europe so far, or US futures as we approach the open.

The only notable release this morning has been the Gfk consumer confidence survey for Germany and even that didn’t really attract much attention.

Given the slightly weaker than expected number, the 20 point rally in EURUSD around the time of the release can probably just be attributed to normal trading early in the European session.

The number itself doesn’t change anything.

Confidence is still clearly dented as a result of the crisis in eastern Ukraine, while the overall slowdown in the euro area is probably itself starting to weigh on consumer and business confidence.

With this fact pretty much priced in, we couldn’t really have expected much from this number unless the decline seen was far more significant.

The US economic calendar isn’t looking much more exciting, with only a couple of pieces of data being released.

Of these, the EIA crude oil stocks figure is probably the most notable as this always has the potential to impact crude prices.

We’ve seen plenty of volatility in oil prices recently, with geopolitical events putting upward pressure on prices and falling global demand driving them in the other direction.

The latter is winning the battle at this stage, despite the occasional spikes, and if we see further evidence today that demand is on the decline, we could see that continue.

Aside from this, we have MBA mortgage applications data.

The problem with this is that the numbers tend to be very volatile and forecasts are less available.

As a result, this tends to be one of those data releases that people listen out for but don’t really respond to.

Ahead of the open, the S&P is seen 1 points higher, the Dow 20 points higher and the NASDAQ 2 points higher.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

Content by Alpari. This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

US Shares See Cautious Recovery after Slipping into Negative Territory for 2014 0

Posted on August 04, 2014 by Frankie Lawson

US indices are expected to open higher on Monday following an awful week that saw the Dow slip into negative territory for the year, while the S&P suffered four consecutive losses to end the week down more than two and a half percent.

Ahead of the open, the S&P is seen 6 points higher, the Dow 40 points higher and the NASDAQ 11 points higher.

Despite this slightly positive start to the week, there does appear to be a little caution in the markets.

Investors are a little concerned that the sell-off which started last week is not offer and could lead to something much bigger.

Given the significant increase in the number of warnings related to the stock markets as of late, this worry of a larger correction every time we see a bad week is hardly surprising.

However, if you look back at the three other times that we’ve had poor weeks, the markets have bounced back pretty quickly so all this worry may be short lived.

Fortunately the week is looking data heavy which could provide plenty of support for the markets, especially when you look at the data we’ve seen recently, with everywhere except the Eurozone enjoying a pretty solid second quarter.

Today is one of the quieter days though, which may just give the markets some time to absorb all of the events from last week.

UK and European Data at Odds

The morning has been pretty quiet in Europe as well, although there has been a couple of noteworthy data releases.

The one that stands out was the UK construction PMI which aside from exceeding expectations with respect to the headline number, contained some very encouraging points in the report.

The rise in residential construction in response to increasing demand along with the record increase in job creation is very positive, with the latter pointing to a sustained improvement expected in the sector.

The other notable release was the Eurozone sentix investor confidence figure which fell to 2.7 in August from 10.1 the month before.

This is the lowest reading since August last year and once again highlights the slowdown being seen in the region, not to mention the value that is no longer seen here.

This could all feed into the euro weakness that many expect going forward, with investment in the region still weak and stocks and bonds now looking far from the cheap alternatives they were a year ago.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

Content by Alpari. This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

Financial Markets Struggle for Volatility Amid Summer Holidays and Caution Ahead of FOMC 0

Posted on July 29, 2014 by Frankie Lawson

It’s been another fairly slow start to the day in Europe and this is unlikely to change as we head into the US session.

A lack of economic data has left traders without any form of catalyst for the next big move in the markets.

We won’t have to wait too long for this though, with the next few days bringing an abundance of tier one economic data and earnings reports, as well as the latest policy decision from the Federal Reserve.

This is probably contributing to the lack of volatility in the markets again this week.

Traders can quite often stay on the side-lines during periods like this when so much can change in such a short period of time.

Fed Hint at Rate Hike Would Stir Things Up

All it would take is a hint at an earlier rate hike in the FOMC statement tomorrow and all of a sudden we could see a significant amount of selling in both equities and bonds, not to mention gold, while we’d probably finally see that dollar strength that so many predicted at the end of last year.

While this may not be much of a bother to intra-day traders, who would aim to be in and out of positions before then, many others may be deterred by this and instead opt to wait until after these announcements to make their move.

This is why we tend to see a little less volume and volatility during such periods and this has probably been exacerbated this week by the fact that we have the FOMC decision, preliminary US GDP reading and the US jobs report all in the same week, which is very rare.

Let’s not also forget that we’re now right in the middle of the summer holidays so a lot of people will now be topping up their tans rather than looking at the charts.

There is Some Data to be Had

While the economic calendar is looking very bare, there are still a couple of pieces of data being released, but based on yesterday’s market reaction to similar figures, I have doubts about the kind of impact these will have.

The one that stands out for me is the consumer confidence figure for July, which is seen rising from 85.2 to 85.3.

The consumer is so important to the US economy right now that I would normally pay far more attention to this but yesterday’s muted reaction to the services PMI suggests to me that this is unlikely to get much of a response either.

One thing about this though is it does tend to be wide of the mark from expectations which could wake up the markets a little.

Another focus for investors today could be earnings season, with another 48 companies from the S&P 500 due to report including Pfizer, Merck & Co and American Express.

We’ll also get an update on the second quarter from Twitter after the closing bell so there’s plenty to keep an eye on in this area today.

Ahead of the opening bell, the S&P is expected to open 2 points lower, the Dow 10 points lower and the NASDAQ 2 points lower.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

Content by Alpari. This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

Equities See Strong Start as Draghi and Yellen Testify to their Respective Governments 0

Posted on July 14, 2014 by Frankie Lawson

This week offers plenty in terms of tier one economic data and some significant events, unfortunately though today is not one of those days.

Despite this, the day has got off to a good start, with European indices posting strong gains and US futures pointing to a similarly positive open.

The last week was pretty grim for the CFD markets as investors opted for a more risk averse approach.

This meant European stocks continuing their recent slide and those in the US faltering at some big psychological levels.

Today’s strong start ahead of a busy week may be a sign that the recent weakness is short-lived and more record highs are in store for the US.

Draghi Faces a Grilling from the European Parliament

As mentioned earlier, today is looking fairly quiet, with the only notable event to come being ECB President Mario Draghi’s speech on monetary policy in front of the Committee on Economic and Monetary Affairs of the European Parliament.

Given that the ECB has only recently announced a large scale monetary stimulus program, this speech is unlikely to offer much in terms of the proximity of future stimulus efforts and what form they’re likely to come in.

Draghi may be questioned heavily on the selection of stimulus measures that the ECB opted for, given that they have come in for quite a lot of criticism by market participants.

The consensus view has been that the ECB took the easy way out and many of the measures announced are going to have very little positive impact.

I can’t imagine this therefore having much of a market impact, but as always with comments from a major central bank, you cannot write it off.

Yellen’s Speech May Inspire the Next Correction

The first big day for the US comes tomorrow, with retail sales figures being released alongside manufacturing data.

More important though is likely to be Fed Chair Janet Yellen’s testimony on the semiannual monetary policy report before the Senate Banking Committee.

Until now the Fed has refused to adopt a more hawkish tone despite the significant improvement in economic performance in the second quarter but that can only go on for so long.

Eventually, I expect Yellen to hint at a first rate hike in the first quarter of next year and when she does, investors may well freak out.

That could well bring the end of these daily records being made and be the start of the next correction.

Ahead of the opening bell, the S&P is expected to open 7 points higher, the Dow 68 points higher and the NASDAQ 18 points higher.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

Content by Alpari. This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

EUR/USD CFDs May be Set to Slide on Strong NFP and Dovish Draghi 0

Posted on July 03, 2014 by Frankie Lawson

A mixed start to the session from an economic data stand point has not taken the shine off risk appetite on Thursday.

In Europe, indices are trading as much as 0.6% higher, while in the US indices are expected to open around 0.1% higher.

Ahead of the opening bell, the S&P is expected to open 1 point higher, the Dow 21 points higher and the NASDAQ 4 points higher.

Will Strong Employment Data Raise Rate Hike Expectations?

A lot of this may be attributed to yesterday’s ADP figure, which smashed expectations with a 281,000 increase in June.

Of course, this is only viewed as an estimate of the official job creation figure, and a pretty poor one at that, but a beat of that magnitude will always raise expectations ahead of the non-farm payrolls release.

As a result, today’s strong start is not necessarily an ongoing reaction to the ADP figure but higher expectations ahead of the jobs report.

With that in mind, a reading in line with analysts’ forecasts of around 212,000 is no longer likely to be good enough for traders.

We need to see something around 250,000 or more in order to fall in line with what is now being priced in.

The next question is how the markets will react to the data.

Of course, a strong jobs report is good for the economy but that is not necessarily good for risk appetite.

When the rally in equity markets is being supported by lower interest rates, the threat of an earlier rate hike as a result of an economy that’s recovering at a faster rate is not going to be conducive with a continuation of that rally.

With that in mind, a figure in line with yesterday’s ADP number is likely to weigh on equity markets today, while US Treasury yields could rise and the US dollar strengthen.

Other aspects of the jobs report are also likely to be of interest, such as the unemployment rate, the participation rate and the average hours worked, due to the Fed’s commitment to base monetary policy decisions on a basket of indicators.

However, based on what we’ve seen in the past, the non-farm payrolls figure, along with revisions to previous releases, still carries the most weight.

Draghi to Try Talking Down the Euro

Another major event today is the ECB rate decision and press conference.

This is not because we’re expecting any further stimulus from the ECB because we’re not.

ECB President Mario Draghi has a tendency to create major swings in the market and always delivers plenty of volatility.

We may see a more dovish Draghi at the press conference today as I imagine the ECB will not be pleased with the strength still being seen in the euro despite all of the stimulus measures announced last month.

It’s no secret that a strong euro is not ideal for the Eurozone and Draghi has used the tactic of talking down the currency in the past.

With it still trading above $1.36 against the dollar, we may see this tactic used again in an attempt to force it through $1.35.

Aside from these two events , there’s also plenty of big economic releases coming from the US today including weekly jobless claims, services PMI, non-manufacturing PMI and trade balance.

Each of these has the potential to move the markets and as a result I expect to see a huge boost in volatility today.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

Content by Alpari. This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

Stock Market CFDs Slide as Kerry Attempts to Form a Coalition in Iraq 0

Posted on June 24, 2014 by Frankie Lawson

US markets are expected to open lower today, giving up some of yesterday’s gains which brought about yet another record high in the S&P 500.

The positive data released in the form of the manufacturing PMI and existing home sales figures yesterday have been counteracted somewhat by negative sentiment driven from Iraq developments as Secretary of State John Kerry offered a potential promise of action from the US military.

As a result, US futures point towards a negative open, with the S&P 500 -5.5, Dow -39 and NASDAQ -10 points.

The European session has already brought about significant volatility in the markets, with the second consecutive data point out of Germany in as many days.

Yesterday’s disappointing PMI release saw the manufacturing sector growth come under some pressure and today was an opportunity to gain a swift redemption with the release of the IFO business survey results.

However, yet again the story wasn’t rosy for the Eurozone’s biggest economy, with current and future expectations of business conditions falling sharply.

It was the forward expectations that suffered the most, falling from 106.2 to 104.8.

This points to increased anxiety regarding Russian ties coupled with weaknesses in major export sectors such as China.

Add to this the effects of a historically strong euro and it is clear that businesses and exporters in particular feel unsure of future economic conditions.

Mark Carney at Parliament

In the UK, the inflation report hearings have been taking place, with Mark Carney and his fellow MPC members facing a grilling from the government regarding last month’s report.

This was expected to be a somewhat hawkish affair given the recent statements from Carney regarding his view that there will be a rate hike earlier than many within the markets are currently factoring into their investment decisions.

However, he took a surprisingly dovish stance, following on from his outlook last month when he likened the UK to a team in the qualifying stages of the World Cup.

The sell-off in GBPUSD followed his insistence that he sees substantial ‘spare capacity’ and ‘slack’ in the economy; jargon which we have become accustomed to in recent months which is so difficult to accurately measure that the BoE today admitted that they may have previously calculated it incorrectly in the past.

Mark Carney did clarify why he made such hawkish statements earlier this month at the Mansion House speech where he saw rates rising earlier than many expected.

Those comments were a measured decision to bring the forex markets back into alignment in relation to expectations going forward, yet for the most part it seems Carney is as dovish as ever.

In doing so, Carney was accused of being ‘an unreliable boyfriend’ who has been blowing hot and cold on the issue of rates which makes it difficult for people to accurately predict when rates will rise.

Will the US Step Back into Iraq?

In the US session, the developments in Iraq continue to persist, with John Kerry spending his time trying to put together a coalition government that avoids the country splitting between the Sunni, Shi’ite and Kurdish factions.

The battle for the Baiji oil refinery has taken an unexpected twist, with government forces taking the strategically key facility back from ISIS forces.

For a rebel force with an estimated $2 billion of funds, ISIS are clearly driven to gain strength by any means possible, be it controlling oil flow or raiding bank vaults as they go.

Thus today’s announcement is certainly welcome and shows that the government forces still retain the will to fight back against the tide of the ISIS.

John Kerry’s comments lead me to believe that the US are likely to step in with a military role should we see a convincing coalition government put together.

This is expected to be addressed on 1 July and thus this could act as a timeline upon when we could see US forces move into the region.

US Consumer Confidence

Looking ahead, the main event of note is likely to be the CB consumer confidence survey released later today.

The importance of the consumer within US growth is undisputed, with 70% of GDP driven by consumer led spending.

This can come in many forms, yet the fact of the matter is that investment activity is influenced heavily by the individual’s confidence in factors such as their employment situation and current economic conditions.

Thus today’s release is likely to provide a leading indicator to both future spending data and ultimately growth within the US.

Recent trends have been relatively encouraging, rising from 78.1 to 83.0 over a 3 month timeframe.

Expectations point towards a further rise towards 83.5, which would represent the highest level since January 2014.

Whilst many may pay little attention to this, I see it as absolutely key to determining the future path of growth in the US.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

Content by Alpari. This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

S&P 500 Hits Record Highs as Yellen Says All the Right Things About Interest Rates 0

Posted on June 19, 2014 by Frankie Lawson

A day after the S&P rallied to new record highs on Janet Yellens dovish comments, US indices are expected to open relatively flat, with the S&P seen unchanged, the Dow down 4 points and the NASDAQ up 3 points.

Mark Carney’s admission last week that interest rates in the UK could rise earlier than financial markets are currently expecting had prompted a lot of speculation about whether the Federal Reserve would drop similar hints in the coming months.

Not only did Yellen not hint at this, she explicitly stated that rates would remain low well after the end of quantitative easing, which is exactly what the markets wanted to hear.

The comments were so well received that traders even overlooked suggestions that the rate of tapering could increase in the coming months.

Clearly, we’ve all moved past quantitative easing now and are far more concerned with interest rates, both the timing of the first hike and the path for future increases.

When it comes to this, Yellen said all the right things.

Over in Europe, as in Asia overnight, traders are also responding positively to Yellen’s dovish tone.

Anything that ensures rates remain low for longer will always be welcomed by investors.

UK Retail Sales Disappoint

Even a disappointing retail sales report from the UK did nothing to knock the positive mood.

As expected, sales fell by 0.5% in May, while the year on year figure was much lower than expected at 3.9%.

The US session is looking a little quieter today, although there are a couple of economic releases that could have an impact on the markets.

The first is the weekly jobless claims figure, which is due to be released before the opening bell on Wall Street.

New claims are expected to have fallen to 314,000 last week from 317,000 the week before.

This is another strong figure and provides further evidence of the ongoing improvement in the labour market.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

Content by Alpari. This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

Sterling Rallies to Resistance as MPC Minutes Agree With Carney’s Hint at 2014 Rate Hike 0

Posted on June 18, 2014 by Frankie Lawson

We’re potentially seeing a little bit of caution from traders ahead of the opening bell on Wednesday, given the FOMC decision and press conference later which always has the potential to create big moves in the markets.

As it stands, the S&P is expected to open unchanged, the Dow down 4 points and the NASDAQ up 3 points.

It’s not necessarily the decision itself that has the potential to shake things up, with the Fed being quite clear in the past that it intends to continue to taper by $10 billion per month unless circumstances drastically change.

While this may be a little predictable, the same can never be said of the press conference, especially one that includes a new set of economic projections that could alter when the Fed expects to bring an end to its quantitative easing program and, more importantly, begins to raise interest rates.

Currently, the markets are pricing in the first rate hike around the middle of next year, with rates potentially hitting 1% by the end of the same year.

The strength of the recovery in the US in the second quarter, combined with yesterday’s jump in CPI inflation to above 2% in May, could prompt some of the more hawkish Fed officials to call for the first hike to come earlier than we’re expecting.

We’ve already seen similar comments from Mark Carney, Governor of the Bank of England, so it wouldn’t be too much of a surprise if the Fed was on the same page.

Aside from this, the rest of the day is looking pretty quiet, which is only likely to feed into the more cautious approach being seen already.

MPC Minutes Point to 2014 Rate Hike

Unsurprisingly this morning, the BoE minutes pointed to a potential rate hike before the end of the year.

This would have been quite a shock for the markets had it not been for Carney intentionally dropping a big hint last week during his speech at the annual Mansion House event.

Clearly, he was just trying to avoid any excessive FX market volatility following the release of the minutes this morning.

Sterling rallied strongly against the dollar immediately following the minutes, before running into resistance again around $1.70.

The pair is now trading back around the level it was at before the minutes were released, around 1.6940, so clearly Carney’s warning worked perfectly.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

Content by Alpari. This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

Crude Oil Spike on Iraq Conflict Could Derail Carney’s Rate Hike Comments 0

Posted on June 13, 2014 by Frankie Lawson

Yesterday’s spike in oil prices along with Mark Carney’s surprising hawkish comments at the annual Mansion House event appear to have condemned European indices to end the week on a negative note.

Meanwhile, US indices are expected to shrug this off much more easily, with the S&P seen opening unchanged, the Dow down 4 points and the NASDAQ up 2 points.

The bulk of the downside resulting from the oil spike was probably largely priced into US stocks yesterday, which would explain why they appear to be showing such resilience ahead of the open.

Oil Surges on Iraq Uncertainty

That said, it’s unlikely that crude oil prices have peaked quite yet, in fact there could be a significant amount of upside to come if previous episodes of disrupted supplies are anything to go by, so I expect there’ll be more suffering to come for stocks.

Given what we’re just recovering from, it would be outrageous to say this has come at the worst possible time, but it is certainly extremely inconvenient.

The recoveries in the UK and US are still fragile, while the Eurozone is only stagnating at best.

We could have really done without another oil price shock that could derail what recoveries we are seeing and extend what has already been one hell of a financial crisis.

With US President Obama not ruling anything out, we have to assume that the situation in Iraq is going to get worse before it gets better.

This will be disruptive to say the least, not just to the consumer who will see disposable income take yet another hit as they are forced to pay higher prices at the pump, but also to companies that rely on oil and gas.

Hence why these stocks could suffer a lot more in the coming weeks and months.

Has Iraq Negated Carney’s Rate Hike Comments?

This could potentially make the comments made by Bank of England Governor Carney a little irrelevant as I can’t imagine that the MPC would look to tighten monetary policy at a time when the economic recovery is under threat.

Clearly the markets don’t see it that way, which is understandable as it’s a little early to start pricing in such assumptions.

Carney’s warning that interest rates could rise earlier than financial markets are currently expecting came as a total surprise to traders, most of whom were not expecting the first hike until the first quarter of 2014 at the earliest.

Sterling rallied aggressively following the comments, just falling short of $1.70 against the dollar for the second time in a little over a month.

Unlike last time though, traders now have a reason to buy at these levels and force the pair through this major resistance.

I expect this will happen in the coming days, potentially following a brief correction given the scale of the rally since yesterday.

A break through $1.7042 would see the pair trading at levels not seen since October 2008, the period when sterling went from trading at more than $2 to the pound to $1.35 in the space of five months.

The end of the week is looking pretty quiet with the only notable economic release being the preliminary UoM consumer sentiment reading for June.

This is an important piece of data as it gives us key insight into consumer attitudes in the coming months.

The consumer is so important to the US economy that this cannot be ignored.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

Content by Alpari. This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.



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