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Jan 19, 2018

MAIN POINTS OF TODAY

 MAIN POINTS OF TODAY

US Government threatened with possible shutdown again  
  • The deadline for the US Congress to pass a bridging bill to fund the government until the 16th of February ends tonight.
  • In the house of Representatives, in a display of strength the conservatives past the bill with their own votes, however the Senate may be a different story altogether. There is a mixture of Democrats and Republicans that oppose the bill for different reasons.
  • Democrats have been demanding protection from deportation for young immigrants known in the US as “Dreamers”.
  • Republicans in response, inserted a long term provision for the Children's Health Insurance Program to lure Democrats.
  • However the voting of the bill hangs in the balance and should it not pass, partial government paralysis is imminent.
  • U.S. Government Agencies have already started warning employees for a government shut down, magnifying the effect.
  • We consider that should the bill not pass, the US Dollar could be weakened and may open with a negative gap on Monday.
  • Also, it should be noted that passing of consecutive monthly bridging funding bills instead of a yearly budget, could be increasing instability and hence weakening the US Dollar in the long run.
Soft Brexit optimism for the GBP
  • Media reports suggested the French Prime minister stated that should the UK want to have a single market in finance, it will have to pay for it and accept EU courts jurisdiction.
  • The offer is considered as beyond Theresa May’s red lines.
  • Media reports also suggested that France may be showing it’s hardest bargaining line, in fear of future Brexit followers.
  • On the other hand, there seems to be increased optimism as analysts point out that the Brexit Bill of 40 billion GBP could be covered by a number of advantages, even at a future “Canada style” relationship between the EU and UK which is considered as the weakest soft Brexit deal.
  • We see the case, for the worries stemming from Macron’s statements to be subdued and that the Soft Brexit optimism will continue to support GBP at least in the short term.
Today’s other highlights:
  • Eurozone: German PPI for December Survey: +0.2%mom Prior: +0.1%mom, 07:00(GMT)
  • Switzerland: PPI for December Survey: N/A Prior: +0.6%mom, 08:15(GMT)
  • UK: Retail sales Survey: -0.6%mom Prior :+1.1% mom 09:30(GMT)
  • Speakers: Boston Fed President Raphael Bostic and San Francisco Fed President John Williams speak

Nov 13, 2017

Gold Prices Inch Down As Stronger Dollar Weighs

Gold prices edged lower early on Monday in the wake of their biggest one-day percentage loss in about two weeks in the previous session, weighed down as the U.S. dollar firmed.
FUNDAMENTALS
* Spot gold was down 0.1 percent at $1,274.90 per ounce at 1254 GMT. On Friday, gold dropped 0.7 percent for its biggest one-day percentage fall since Oct. 26. However, it ended the week about 0.5-percent higher in its first weekly rise in a month.
* U.S. gold futures for December delivery gained 0.1 percent to $1,275.40.
* The dollar received a lift against its major peers as U.S. yields spiked and as the pound stumbled, although the main investor focus was still on how and when the planned U.S. tax overhaul would pan out.
Gold's resilience in the face of soaring equities and a dramatic fall in demand this year points to underlying confidence in the metal among investors unconvinced by this autumn's scorching stock market rally.
* A Federal Reserve official said on Monday he expects to back an interest rate hike next month despite caution over the low-inflation "conundrum," since the U.S. central bank needs to prepare for any future economic shock.
* The head of the House of Representatives' tax-writing committee said on Sunday he would not accept elimination of a federal deduction for state and local taxes, opposing a proposal from Senate Republicans that would hike taxes for some middle class Americans.
* U.S. President Donald Trump on Sunday attempted to clear up confusion over whether he accepts Russian President Vladimir Putin's denials of meddling in the U.S. election last year.
* Leaders from across Asia joined Trump at an extravagant gala dinner in the Philippines' capital on Sunday, a show of amity in a region fraught with tensions that have lurked behind his marathon tour of the continent.
* U.S. Treasury yields rose on Friday, steepening the yield curve, as traders closed out some curve-flattener positions and dealers reduced their holdings of longer-dated debt following this week's auctions.
* Demand for physical gold in Asia remained tepid last week as high prices kept buyers on the sidelines despite the start of the wedding season in India.

Nov 8, 2017

USD/TRY jumps to highest since January as Germany increases pressure on Turkey’s financing

  • Turkish lira resumes slide after a brief pause.
  • German government working to limit financing to Turkey.
  • USD/TRY up 11.5% since September 12.
The Turkish lira tumbled after reports showed that Germany was working on more restrictions on funds to Turkey. TRY hit a multi-month low versus the US dollar and a new all-time low against the euro. 
USD/TRY up again 
The US dollar is rising for the fourth time in a row against the Turkish lira. During the last hours, it accelerated the upside after the reports from Germany. USD/TRY jumped from 3.73 to 3.80. Then it moderated the rally and pulled back toward 3.77. The pair is headed toward the highest close since January. 
Bloomberg reported that “Germany is actively working to cut funding to Turkey from the country’s state-owned KfW bank, the European Investment Bank and the European Bank for Reconstruction and Development, according to more than a dozen government and banking officials, who asked not to be identified discussing the behind-the-scenes efforts. Some German commercial banks are also reviewing their exposure to Turkey, the officials said.”
They added that Merkel’s government is using its influence to restrict financing from international institutions to Turkey over an escalating political dispute, according to people familiar with the matter.
Closer to 2017 highs
The recent rally pushed USD/TRY closer to 2017 highs. Back in January, the pair reached a record high at 3.94. Afterward, it started a recovery that lasted until September, when it turned back to the upside after it bottomed at 3.38. 
From September lows it has risen 11.5%. If it manages to rise back on top of 3.80, the bullish momentum is likely to remain strong. Above, the area around 3.90 protects the pair of the record high and also from the 4.00 psychological level.

Jan 24, 2017

TRY: All eyes on October inflation data and on pending S&P rating review - TDS

Analysts at TDS suggest that today’s highlight is Turkey with both October inflation and a pending rating review from S&P due.
Key Quotes
“The first to be released is Turkey’s CPI. The consensus is expecting headline to quicken to 11.5% Y/Y from 11.2% in September on a 1.7% M/M (NSA) acceleration; core is also expected to deteriorate to 11.2% Y/Y from the prior 11.0%. In both cases, the inflation dynamic remains highly adverse vis-à-vis the 5% target (that will be missed for yet another year). On Wednesday, the CBRT released its October Inflation Report that carried along upside revisions to this year’s inflation projections (+1.1ppt to 9.8%) and next year’s as well (+0.6ppt to 7%). CBRT Governor Cetinkaya also warned against the possibility of upside surprises in today’s data. Whether that refers to the September release or the market consensus, we would cautiously positon for higher CPI than currently expected, which is likely to be conducive to weaker lira and higher front-end rates.”
“Also today, S&P is scheduled to review its BB (outlook negative) rating for Turkey—the same rating as Moody’s, while Fitch has BB+ (stable).  S&P moved the outlook to negative in January when the lira was under intense downwards pressure and there was concern whether the CBRT would tighten policy enough. By the time of S&P’s May review, the CBRT had hiked the WACF by about 370bps and the lira had recovered some of its earlier losses; in the review S&P kept the rating and outlook unchanged. Since May, growth has accelerated, but the fiscal deficit has widened, CPI remains high and USDTRY is around January’s levels. The political picture has also complicated. We expect S&P to keep the rating and outlook unchanged, but see some risk of a downgrade.”