Press review - page 16
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We are going to have few high impacted news events for GBP (affected on GBPUSD pair only) ar 08:30 GMT (or 10:30 MQ MT5 time) so I am just uploading this small article about this pair before 08:30 am for example.
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GBP/USD: Pound trading tad lower this morning; BoE minutes awaited :
For the 24 hours to 23:00 GMT, GBP rose 0.23% against the USD and closed at 1.5129.
In the UK, consumer prices rose 2.9% annually in June, slightly lower than expectations for a 3.0% rise. Meanwhile, monthly producer prices rose more than market forecasts in June, while the retail price index rose less than expected by 3.3% (YoY) in June.
In the Asian session, at GMT0300, the pair is trading at 1.5118, with the GBP trading marginally lower from yesterday’s close, ahead of the Bank of England (BoE) minutes to be released later today, with major attention would be to see whether new Governor, Mark Carney voted in favour of increasing the size of the £375 billion of asset purchases. The central bank kept its stimulus programme on hold at its last meeting.
Also, data on average earnings, claimant count rate and unemployment rate from the UK are also likely to generate some market interest.
The pair is expected to find support at 1.5052, and a fall through could take it to the next support level of 1.4986. The pair is expected to find its first resistance at 1.5177, and a rise through could take it to the next resistance level of 1.5236.
The currency pair is showing convergence with its 20 Hr and its 50 Hr moving averages.
2013-07-17 08:30 GMT (or 10:30 MQ MT5 time) | [USD - Bank of England Minutes]
If actual > forecast = good for currency (for USD in our case)
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U.K. Policymakers Unite On QE Under New Chief :
At the first rate-setting meeting of Mark Carney as Governor, Bank of England policymakers united on both quantitative easing and interest rate, the minutes showed Wednesday.
Carney got the support of members on issuing forward guidance as well as consensus on stimulus after Paul Fisher and David Miles dropped their call for more stimulus.
The Monetary Policy Committee voted 9-0 to maintain the asset purchase programme at GBP 375 billion. Also, the MPC unanimously decided to retain the bank rate at 0.50 percent.
"For most members, the current policy setting was appropriate and the onus on policy at this juncture was to reinforce the recovery by ensuring that stimulus was not withdrawn prematurely, subject to keeping inflation on track to hit the 2 percent," the minutes said.
They made it clear that any tightening of monetary policy is long way off. A minority assessed the merit in pursuing a "mixed strategy" with regards to the different policy instruments at the MPC's disposal.
The committee's August response to the requirement in its remit to assess the merits of forward guidance and intermediate thresholds would shed light on both the quantum of additional stimulus required and the form it should take, the minutes said.
Although asset purchases remained an effective tool with which to inject more stimulus, some members said an expansion in the purchase programme was not warranted at this meeting. They pointed out that benefits of further asset purchases were likely to be small relative to their potential costs.
"Further purchases could complicate the transition to a more normal monetary policy stance at some point in the future," the minutes said.
More QE will occur should the economy suffer a marked relapse over the coming months, IHS Global Insight's Chief U.K. Economist Howard Archer said. More stimulus could also occur if gilt yields rise further, he added.
The bank said any announcement regarding the implementation of thresholds and forward guidance will be made on August 7 alongside the release of the Inflation Report, rather than immediately after the next policy meeting on August 1.
So it looks as though next month's MPC meeting will be another non-event, with any excitement coming the week after, said Vicky Redwood, an economist at Capital Economics. She expects the MPC to commit to keep interest rates low until some sort of unemployment threshold is reached.
Data released by the Office for National Statistics today showed that the number of Britons claiming the job seekers' allowance recorded the steepest decline in three years in June, in a sign that the economic recovery is gaining strength.
The claimant count fell 21,200 from May to 1.48 million in June. The International Labor Organization's measure of unemployment was 7.8 percent in the March to May period.
According to the Agents' summary of business conditions, employment intentions had edged higher in recent months, but were flat for consumer services. Further, investment intentions continued to be largely aimed at raising efficiency, it showed.
2013-07-17 12:30 GMT | [USD - Building Permits]
If actual > forecast = good for currency (for USD in our case)
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2013-07-17 12:30 GMT | [USD - Housing Starts]
If actual > forecast = good for currency (for USD in our case)
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U.S. Housing Starts Unexpectedly Show Steep Drop In June :
Housing starts in the U.S. unexpectedly showed a notable decrease in the month of June, according to a report released by the Commerce Department on Wednesday.
The report showed that housing starts tumbled 9.9 percent to an annual rate of 836,000 in June from the revised May estimate of 928,000.
The steep drop came as a surprise to economists, who had expected housing starts to climb to an annual rate of 951,000 from the 914,000 originally reported for the previous month.
The Commerce Department also said building permits fell 7.5 percent to an annual rate of 911,000 in June from the revised May rate of 985,000.
Building permits, an indicator of future housing demand, had been expected to rise to an annual rate of 990,000 from the 974,000 originally reported for May.
2013-07-17 14:00 GMT (or 16:00 MQ MT5 time) | [CAD - BOC Interest Rate Decision]
If actual > forecast = good for currency (for CAD in our case)
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Bank of Canada keeps interest rate at 1 percent :
Canada's central bank is maintaining its trendsetting policy rate at the low level of one percent and declaring the monetary stimulus will remain until conditions improve.
The Bank of Canada's new governor, Stephen Poloz, said Wednesday that while real gross domestic product growth in the first quarter of 2013 was stronger than expected, the bank foresees a somewhat more challenging external environment over the projection horizon than previously anticipated.
The bank sees some hope for a pickup in Canadian growth starting in the second half of this year as the U.S. economic recovery firms and helps boost Canadian exports.
The bank expects economy to expand at a rate of 2.7 percent in 2014 and 2015, little change from the April forecast of 2.8 and 2.7 growth in the two years.
Crude-oil futures settled lower Tuesday, while gasoline futures rallied to a four-month high due to refinery outages.
Light, sweet crude for August delivery settled 32 cents, or 0.3%, lower at $106 a barrel on the New York Mercantile Exchange. ICE North Sea Brent crude oil for August delivery, which expired at the close of trading, settled 31 cents higher at $109.40 a barrel.
While oil prices snapped a two-session gain, edging lower along with broader markets, gasoline futures rose Tuesday. Analysts attributed the move to a series of refinery outages, which tightened gasoline supplies during the peak summer driving season.
Traders and brokers doing business with Irving Oil on Monday said Canada's largest independent refinery was forced to buy RBOB in the New York Harbor spot market for more than a week due to gasoline production problems. Meanwhile, planned maintenance continued at Phillips 66's Bayway refinery in Linden, N.J., spokesman Rich Johnson said.
The outages sent front-month August gasoline futures to their highest level since March 15, settling 3.14 cents higher at $3.1343 a gallon. The gains come on the heels of a sharp rally in gasoline last week, which was also driven by refinery glitches.
Later this week, oil traders will turn to the U.S. Energy Information Administration's weekly report on domestic oil inventories, with analysts expecting a third consecutive week of declines.
U.S. crude-oil inventories will show a decline of 2.2 million barrels in the week ended July 12, according to a survey of analysts by Dow Jones Newswires. Gasoline stocks are expected to fall by 400,000 barrels and distillate stocks, which include heating oil and diesel fuel, are forecast to rise by 1.7 million barrels. The survey estimated that refiners cut operations by 0.4 percentage point to 92% of capacity.
Traders will also look to a report on U.S. oil inventories by The American Petroleum Institute, an industry group, later Tuesday.
Additionally, the market is closely watching Federal Reserve Chairman Ben Bernanke's congressional testimony on the state of the U.S. economy. They will look for indications of a clearer timeline on when the Fed will begin curtailing its stimulus efforts that have so far boosted economic growth in the U.S., the world's largest oil consumer.
"Broader markets are drifting a little lower. Crude is also having a quiet trading day with a couple of tumultuous days ahead," said Matt Smith, commodity analyst at energy-consulting firm Schneider Electric.
August heating oil settled 2.08 cents higher at $3.0469 a gallon.
More information on settlements and highs and lows for futures on Nymex and ICE platforms can be found by searching for the following headlines:
Nymex Light Crude Oil Close
Nymex Harbor RBOB Gasoline Close
Nymex Heating Oil Close
ICE Brent Crude Oil Close
ICE Gas Oil Close
Bernanke Admits To Congress: We Are Printing Money, Just 'Not Literally' :
In his semi-annual testimony before the House Committee on Financial Services, Fed Chairman Ben Bernanke was very clear about how the central bank engages in quantitative easing. We are printing money, just not literally, the Chairman told policymakers, while contradicting himself regarding recent record highs in stock markets, first attributing them both to the strength of the economy and the impacts of monetary policy. The market didn’t seem to care, rallying tepidly upon the release of the prepared remarks and remaining range-bound through most of the session.
“Where does the Fed get the money to buy [assets],” Congressman Keith Rothfus asked the Chairman. “Do you create the reserves,” he queried in a follow up, receiving a simple “yes” from Bernanke. And finally, the money shot: are you printing money? “Not literally,” the Fed Chairman surprisingly responded.
Bernanke had a relatively calm day on Capitol Hill after several weeks of increased volatility in the aftermath of his comments. While most policymakers appeared concerned with regulation, Fannie and Freddie, and too big to fail, a few ventured to ask the Chairman about the current state of monetary policy, its effects on the economy, and its future path.
Reiterating his recent statements, which were ambiguously read by investors, Ben Bernanke made it clear that tapering is still on track this year, given the FOMC’s forecast hasn’t changed, and that asset purchases are set to end at some point in mid-2014. He once again gave a nod to billionaire hedge fund manager David Tepper, acknowledging that financial markets were getting excessively leveraged, prompting his detailing of the probable path of QE in coming months, and the FOMC’s intention to begin to draw it down.
Where Bernanke completely flip-flopped, and did so constantly, was with the recent rise in interest rates. Asked by Colorado Congressman Ed Perlmutter why rates had surged from April to June, Bernanke pointed to improving economic conditions, along with the unwinding of risky speculative positions.
A few minutes later, retorting to Stephen Fincher of Tennessee, Bernanke said the reason rates are low is “that the economy is weak and inflation is low.”
Bernanke engaged in the same sort of contradictions when asked to explain recent strength in equity markets, as stocks have once again hit and remained at or near record highs since the Chairman’s previous public appearance. Shown a chart of the growth in the Fed’s balance sheet and its correlation with the S&P 500 by South Carolina’s Mick Mulvaney who called the market “addicted,” Bernanke first rejected that notion (“I don’t know what it means that markets are addicted”), only to add that stock market highs reflected the strength of the underlying economy.
Why do we still need easy money if the economy is improving, Mulvany then asked, to which Bernanke first explained that profits had gotten ahead of jobs, only to add that if the Fed reduces its accommodation, the economy would tank.
Bernanke also spoke of Wall Street, which he said isn’t reaping greater benefits from QE and lower rates than Main Street, and said major institutions appear prepared for a sharp rise in interest rates. In the past, commentators like Peter Schiff have warned that major financial institutions like Bank of America BAC +2.8%, JPMorgan Chase JPM +0.47%, and Citigroup C -0.08% could suffer tremendous losses on their Treasury holdings if rates surge.
Having had lost control of the markets, Bernanke did a good job on Wednesday at waiting for Godot (i.e. saying a lot without saying much). While he did reveal some interesting things as to how he conceives monetary policy and the state of the economy, the Chairman managed to minimize the impact of his Congressional testimony to the point where market watchers essentially stopped paying attention. The yield on 10-year Treasuries, which dropped sharply into the open, very slowly trended up through the trading session, while gold remained range-bound after the initial remarks.
IMF Warns On Rising Downside Risks For China, Calls For Urgent Economic Reforms :
The International Monetary Fund said Wednesday that the downside risks to its growth projections for China have increased and that the country must expedite transition to a new growth model, which is more consumption-based and inclusive.
The IMF forecasts the economy to grow 7.8 percent this year and by 7.7 percent in 2014, lower than its projections in April. "Downside risks to staff's 2013 growth projection have increased," the IMF staff said in an annual report on the economy.
"Time is running out on the current model which has relied on extensive growth—factor accumulation and relocation of labor from the countryside to factories," the lender said. Continuing the current growth model will lead to a further build-up of excess capacity and misallocation of resources, it added.
Without necessary reforms, the convergence process would stall, with the economy slowing to around 4 percent, and GDP per capita would remain about a quarter of that of the United States through 2030, the report warned.
"The challenge for China now is to accelerate its transition to a more balanced and sustainable growth path with a decisive new round of reforms that address the growing risks in various parts of the economy and unleash new sources of growth," said Markus Rodlauer, the IMF's mission chief for China.
China's growth outlook is clouded by mounting domestic vulnerabilities in the financial, fiscal, and real estate sectors, the IMF staff noted. Potential spillovers from developments in the euro area and major advanced economies continue to pose external risks, they added.
Though China has the capacity to withstand shocks, IMF Directors felt that a further strengthening of policy buffers over time would be desirable.
2013-07-18 08:30 GMT (or 10:300 MQ MT5 time) | [GBP - Retail Sales]
If actual > forecast = good for currency (for GBP in our case)
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U.K. Retail Sales Increase as Discounts Spur Consumer Demand :
U.K. retail sales rose for a second month in June as discounts at department stores drove demand for clothes and electrical products.
Sales including fuel rose 0.2 percent from May, when they surged 2.1 percent, the Office for National Statistics said today in London. That’s the first consecutive increase since July 2012. The median forecast of 20 economists in a Bloomberg News survey was for a 0.3 percent gain. From a year earlier, sales increased 2.2 percent.
The report adds to signs that Britain’s economy is recovering after surveys of services, manufacturing and construction all strengthened last month. At the same time, consumer confidence is rising and unemployment data yesterday showed jobless claims fell the most in three years in June.
“This rise in retail sales probably has some legs,” said David Tinsley, an economist at BNP Paribas SA in London and a former central bank official. “Consumer spending broadly can help the current run-rate of GDP growth move higher.”
The pound pared its decline against the dollar after the data and was trading at $1.5198 as of 10:30 a.m. London time, down 0.1 percent from yesterday. The yield on the 10-year U.K. government bond fell 3 basis points to 2.26 percent.
2013-07-18 14:00 GMT | [USD - Philadelphia Fed Index]
If actual > forecast = good for currency (for USD in our case)
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Philly Fed Index Shows Unexpected Increase In July :
Philadelphia-area manufacturers reported increased business activity in the month of July, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday, with the index of regional manufacturing activity reaching a two-year high.
The Philly Fed said its diffusion index of current activity surged up to 19.8 in July from 12.5 in June, with a positive reading indicating an increase in regional manufacturing activity. The increase came as a surprise to economists, who had expected the index to drop to a reading of 9.0.
With the unexpected increase, the Philly Fed index reached its highest level since jumping to 36.1 in March of 2011.
Hedge Fund Vs. Index Fund: A Comparison :
Hedge fund investing promises a very simple outcome: Give your money to a manager and he or she will do whatever it takes to make your assets rise in all markets.
Hedge fund investing promises a very simple outcome: Give your money to a manager and he or she will do whatever it takes to make your assets rise in all markets.
Stocks down? Covered. Bond crash? Covered. Neither? No problem. Hedge fund managers attempt to do this by being very active with your money. The general theme is to use leverage to ensure that extreme outcomes don’t sink the ship while asset picking provides a solid gain, what the marketing departments of such firms call “absolute” return.
So goes the pitch. It’s more illuminating, however, to consider how they operate legally, rather than what a hedge fund does or doesn’t buy.
Goodbye prudence
First of all, forget completely about basic “prudent investor” rules. The point of hedge fund management is to take risks. For that reason, hedge funds above a certain size in the United States are regulated by the Securities and Exchange Commission, unless they work with accredited investors, that is, wealthy people who in theory understand investment risk.
Second, hedge funds operate under what’s known as the “2 and 20″ format. That is, it cost 2% of your assets per year to be in the fund, and the managers keep 20% of any profits. (Obviously, any losses are 100% yours.)
Let’s do some quick math on the cost, then. If you had, say, $1 million to invest, then your annual cost of just placing the money is $20,000. If the fund posts a 10% gain, you don’t get $100,000. Instead, you get $80,000 and the managers keep $20,000.
Then the fee comes out. The “split” comes to a net $60,000 for you and $40,000 for the managers. Nice work if you can get it.
Risk-managed return
Consider a portfolio of index funds or ETFs. There’s no promise of absolute anything. However, a thoughtful collection of index funds will provide a balanced, risk-managed return similar to what you’ll find under the hood at a university endowment or corporate pension fund.
The cost of a typical collection of, say, ETFs, might average 0.2%. By rebalancing these funds over time, you realize the power of prudent management and take advantage of distortions in the market, sometimes caused by the galloping elephants we know as hedge funds.
That $1 million is now being managed for just $2,000. There is no fat 20% deduction on gains. At the end of the year, a 10% increase means $98,000 to you, compared to just $60,000 in a hedge fund. The extra cash then grows by compounding for you, not them.
Buffett’s bet
Warren Buffett, the billionaire investor, made a bet five years ago in Fortune that an S&P index fund over 10 years would beat a selection of hedge funds picked by a New York money manager. Five years have passed, including the declines of 2008 and 2009, a time when one might expect hedge fund strategies to reign supreme.
The score? Hedge funds 0.13% and index funds 8.69%.