Asian Session Morning: Pluto, Retail Sales and the BoE to Move Alone

July 15, 2015

Pluto and Retail Sales:
Not exactly markets related but quite a big deal nonetheless with NASA confirming overnight that it’s unmanned New Horizons spacecraft successfully passed by Pluto and delivered some amazing higher resolution photos of the distant planet back to Earth. After a 9 year journey of over 5 million kilometers, to finally see the surface of a new world is pretty amazing!

Something definitely (probably?) unrelated to the planets, was the miss in US retail sales with the -0.3% coming in below the +0.3% reading expected. It wasn’t a huge market mover with all eyes on Janet Yellen who is expected to testify on the Semiannual Monetary Policy Report before the House Financial Services Committee, in Washington DC tonight. This is her first chance to speak following the Greece debt deal and markets are very interested to see the level of uncertainty that still lingers inside the Fed.

BoE to Move Alone on Rates:
In his final speech as a member of the MPC, Miles, a historical dove, indicated that the time to move on rate hikes was sooner rather than later. Miles also warned against the BoE looking to other central banks, most notably the US Federal Reserve, in order to find clues on how they should set monetary policy.

“One thing the monetary policy committee will not do, and never has, is just follow another big central bank.”

“It is a daft idea that we cannot raise rates in the UK before the US and also cannot be long behind them.”

Miles cited low unemployment, a rise in wages, better than expected economic growth and an improving business confidence all as reasons that the BoE should look at to take interest rates back to ‘normal’ levels soon.

GBP/USD 4 Hourly:
Click on chart to see a larger view.

GBP/USD liked the talk of raising rates from the BoE, continuing to move up nicely within the bullish channel we have been watching on the 4 hour chart. Price has broken above short term trend line resistance and buying on any pullbacks and a target of new highs is now the preferred play.

Finally, an IMF study was released overnight which showed Greece will actually need far more debt relief than European governments have been willing to contemplate so far. The markets have interpreted this as old news and the Euro is just biding its time before the weekend’s proposals are pushed through parliament.


On the Calendar Wednesday:
CNY Industrial Production
JPY Monetary Policy Statement
JPY BOJ Press Conference

GBP Average Earnings Index
GBP Claimant Count Change
EUR Eurogroup Meetings

CAD Manufacturing Sales
CAD BOC Monetary Policy Report
CAD BOC Rate Statement
CAD Overnight Rate
USD Fed Chair Yellen Testifies


Chart of the Day:
The most recent agreement between world powers and Iran limits Iranian nuclear activity and lifts the crippling international economic sanctions imposed on them. This deal has a potentially massive impact on the price of oil with sanctions reportedly taking over 1 million barrels of oil supply out of the market.

In an attempt to gain a foothold back in the oil export market, Iran could potentially undercut prices in an attempt to generate cash flow. The 700,000 barrels a day that Iran adds to the market could now have a huge supply side impact on the market.

In reality however, the market is fairly well prepared for this decision, but let’s take a look at what the price of Oil has been doing.

Oil Daily:
Click on chart to see a larger view.

On the Daily chart, you can see that price has come out of its short term range and looked to continue its overall trend lower.

Oil 4 Hourly:
Click on chart to see a larger view.

Zooming into the 4 hourly chart, price has bounced up off the marked area.

This bounce can be put down to the market not actually believing that more supply will be entering the oil market. The reality is that markets have been ready for this news for a long time and I’d more likely say it’s just a simple ‘sell the rumour, buy the fact’.

Do you see an opportunity to take a position in Oil? Let us know by leaving a comment below or mention @VantageFX on Twitter.

Dane Williams – @VantageFX

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