Price Action

FX Week Ahead Preview: Negative USD Sentiment Tamed For Now

We got some encouraging signs from the latest US payrolls report on Friday, with the earnings component edging up to 0.3% on the month, to lift the year on year rate to 2.5%.  Even so, this is one month's set of data, and is unlikely to convince USD bears that the rate path espoused by the Fed is still firmly 'on track', and in the wake of the numbers, the odds of another 25bp hike by end of year remain close to 50/50.

Tech Stumble Drags Global Markets Lower; All Eyes On The BOE

E-mini futures are fractionally lower this morning (0.08%) after Apple's surge helped the DJIA climb above 22,000 for the first time on Wednesday; Global shares declined for the first time in 4 days pressured by tech stocks: Asian shares fell, while Europe pared opening losses to trade unchanged.

Global Stocks Rise On "Growth Optimism", Ignore Political Turmoil; Dollar, Oil Creep Higher

S&P futures rose 0.1% on the last trading day of the month, trailing European and Asian markets boosted by China's July Mfg. PMI, which despite declining from from 51.7 to 51.4, and missing expecations  of 51.5, saw the construction index rise to its highest level since December 13, sending Chinese iron ore futures surging and the European commodity sector broadly higher.

"We May Be Very Close To The Turning Point": Selloff Blamed On This Note From JPM's Marko Kolanovic

"Growth in short volatility strategies in a self-fulfilling manner suppresses both implied and realized volatility. This in turn prompts other investors to increase leverage, and those that hedge with options lose out and eventually throw in the towel. The fact that we had many volatility cycles since 1983, and are now at all-time lows in volatility, indicates that we may be very close to the turning point."

The Fed Remains On Course... To Trouble

"If the Fed were to shed just 64 percent of its current bond holdings, the base money supply in the US banking system would be completely wiped out, making the banking sector effectively illiquid. In this process, US interbank interest rates would presumably spike, sending shock waves through the economic and financial system, not only in the US but worldwide."

S&P Futures Bounce As VIX Hammered, Europe "Euphoric"

After sliding to 3 month lows on "car cartel" concerns yesterday, European stocks have rebounded after three days of declines, while oil extended gains after Saudi export cuts, with Brent rising above $49 and WTI just shy of $47. Asian stocks fell while S&P futures rose 0.2% to 2,473, helped by a tumbling VIX which was hammered early by 3% in early Tuesday trading, down to 9.17.

The FX Week Ahead: The Dollar Crashes Again, Can The Fed Revive The USD At Wednesday's FOMC?

Looking at some of the price action, we have broken out of some key levels and areas, so in this respect, 'end of days' means an end to the uptrend which has seen the EUR rate pushing back through 1.1500, while the commodity currencies also look to have set a longer term low in place. What is doesn't mean - necessarily - is that the USD is going to implode, though the past week has seemed that way! 

Junk Bonds Are Finally Starting To Care About Oil

"The recent price action in the oil market and the stronger response of the HY Energy sector has prompted many market participants to question the ability of the broader HY market to continue to resist lower oil prices. In our view, the bar remains high for oil prices to become the main directional driver of HY spreads but the risk has risen."