Archive for March 2009

CPI Consumer Price Index – Wednesday 18th March

Wednesday, March 18th, 2009

There are two major pieces of fundamental news on the economic calendar for today in the US, first this afternoon we have the CPI figures, followed in the evening with the FOMC statement and rate announcement.

Although headline US inflation continued to decline in January – easing from -0.1% in December to -0.2% – the consensus had been looking for something even better. The overall price level rose a larger than expected 0.3% on the month, boosted by a 1.7% increase in energy prices (first rise in six months), mainly as a result of a 6.0% rise in gasoline prices. Meanwhile, having been flat in December, food prices rose by 0.1%. As a result, core prices (CPI excluding food and energy) rose a larger than expected 0.2%, mainly due to increases in rents and owners equivalent rent and bounces in new car and clothing prices. With core prices having risen 0.2% in January last year, the annual rate of change was unchanged at 1.7%. From here, with the economy already operating significantly beneath its productive potential and continuing to contract, we expect core inflation to resume its descent. However, the consensus is looking for it to hold steady in February.

In order to provide you with more help with your binary betting and trading we I have recently added many new features to the site including live currency charts, the latest currency news and fundamental analysis on video every morning, live commodity prices, stock charts and index charts, along with a national holidays calendar, and finally if you are looking for a good ECN broker then please just follow the link.

Unemployment Rate UK – 18th March 2009

Wednesday, March 18th, 2009

This morning on the economic calendar we have the unemployment rate in the UK, due for release at 9.30 am, with the shakeout in the labour market continuing apace, with the claimant count climbing a further 63,800 in January, whilst the more reliable LFS measure jumped 146,000 in the final three months of last year. This brought the total number of adults out of work and seeking employment to more than 1.971 million, the highest since August 1997. Meanwhile, the UK economy shed an additional 46,000 jobs during the final quarter. The difference between this
and the rise in unemployment implies that a net 100,000 individuals entered the labour force during the period in search of work but were unable to find any. The 46,000 figure also conceals significant turnover within the jobs market, with the number of full time employee jobs falling by 66,000 (men -51,000, women -15,000) whilst part-time employee working and self-employment rose by 12,000 and 17,000 respectively.

These are typical features of an economic downturn when full time employee jobs become increasingly scarce, as indeed is higher temporary
working, which increased by 22,000 during the period. It was also interesting to note that employment amongst people of working age fell by 63,000 during the period, whilst the number of people in work above the state retirement age increased by 18,000. Although less pronounced than of late, these shifting patterns within the labour market have been discernible for the last couple of years, and help explain why, even when the claimant count had fallen to a 33 year low of 2.5% of the labour force (January 2008), wage inflation remained so subdued. Consequently, now that unemployment has been rising for 12 months (and employment declining for six), it should come as no surprise that headline annual average earnings growth is currently running at just 3.2%, the lowest since February 2003. However, with falling prices pushing the tax and prices index (which measures the increase in pre-tax income required to compensate for changes in taxation and prices) sharply lower in recent
months (-0.3% year-on-year in December), real post tax average earnings are starting to pick up. Indeed, the annual rate accelerated from 0.8% in November to 3.5%, whilst in the last three months it grew at an annualised rate of 7.1%.

Granted, real household disposable incomes remain under pressure from declining employment (and the switch between full time and lower paid part time work), but we are now beginning to see an increasingly powerful offset as a result of falling prices. Consumer demand will continue to contract over the next couple of quarters, but fundamentals will look significantly better in the second half of the year. But for now, financial markets expect a further 85,000 February rise in the claimant count and average annual earnings growth of 3.0% in the three months to January.

MPC Meeting Minutes -18th March 2009

Wednesday, March 18th, 2009

UK fundamental news today on the economic calendar concerns the MPC minutes, released at 9.30 UK time. At its meeting earlier in the month, not only did the MPC slice a further 50 basis points off the Bank Rate paid on commercial banks’ reserves (taking it to yet another record
low of 0.50%), but it also unveiled an initial £75bn programme of asset purchases to be financed by the issuance of new central bank money. The MPC has resorted to such “unconventional measures” (known as quantitative easing) because it believes that with interest rates already close to zero inflation is still likely to be significantly beneath the government’s 2% target in two years’ time. As a result, the Committee is now seeking to stimulate the economy by directly increasing the quantity of money in circulation. To do this, the Bank of England plans to buy a combination of private sector assets and medium-to-long dated conventional gilts over the next three months. Faced with increased reserves earning just 0.5%, the hope is that the commercial banks will respond by stepping up lending to the private sector (non-financial
companies and households) in order to bring their reserves back down to desired levels. Meanwhile, with increased money balances in their bank accounts, spending by private sector companies and individuals should strengthen. The consensus expects the minutes to reveal that both decisions – the rate cut and the £75bn first tranche of QE – to have been taken unanimously.

All the latest information is now avilable live, including the latest currency news, live currency charts, stock charts and commodity prices, along with a live news feed and economic calendar.

FOMC Meeting – Interest Rate Decision 18th March 2009

Wednesday, March 18th, 2009

The big news today on the economic calendar for this evening, following on from the CPI data released earlier today. Having already cut the target for the federal funds rate to a range of zero to 0.25%, there was no surprise at its end of January meeting that the Fed nominally maintained its policy stance. However, in the light of the deterioration in economic conditions since the December meeting it emphasised that the exceptionally low levels of the federal funds rate was likely to be warranted “for some time”. The statement noted that “conditions in some financial markets had improved”, in part reflecting efforts on the part of government to provide liquidity and strengthen financial institutions. But despite this, “credit conditions for households and small businesses remained extremely tight”. At the same time, inflationary pressures were likely to remain subdued, with the primary risk being that “inflation could persist for a time below rates that best foster economic growth and price stability in the longer term”. In other words the Fed is concerned about the risk of deflation.

To combat these downside risks to real economy and inflation the policy statement reiterated the Fed’s determination to “employ all available tools to promote the resumption of sustainable growth and to preserve price stability”. Central here was to “support the functioning of financial markets and stimulate the economy through open market operations”. To this end, the Fed is already engaged in purchasing large quantities of agency debt and mortgage backed securities to support the mortgage and housing markets, but thus far this has been funded by the sale of Treasury bills. As this does not directly lead to an increase in the monetary base, such action constitutes credit rather than quantitative easing. That said, the statement did indicate that the Fed was prepared to extend the programme to buying “longer-term Treasury securities”.

However, with the exception of Jeffrey Lacker, president of the Richmond Federal Reserve, no-one on the Committee as yet wanted to embark on such a policy funded by the creation of new central bank money. Given that apart from the anomaly of the Second World War there has never been a single instance where an increase in government spending (funded by increased borrowing) has succeeded in generating an economic recovery without an increase in the money supply, the sooner it embarks on full QE the better.

The latest news is now available in a live news feed, along with live curency charts, stock charts and commodity prices. In addition the latest currency news and fundamental news is updated on the TV video channel three times a day.

US Housing Starts – 17th March 2009

Tuesday, March 17th, 2009

On the economic calendar this afternoon we have the Housing Starts in the US. The good news was that the previously reported falls in privately owned housing starts of 15.5% in December and 15.1% in November were revised down to 14.5% and 14.6% respectively. The bad news was that housing starts plummeted a further 16.8% in January. This brought the fall over the last 12 months alone to 56.2% and since the cyclical peak in January 2006 to 79.6%. At an annualised 466,000, housing starts are now at their lowest since the data was first compiled in 1959. Even if housing starts were to stabilise around this level, the three-month on three month rate of change, which fell to -31.2% in January, would still be around -30% in March. Were this to be the case, then as the chart suggests, this would point to an even larger decline in residential fixed investment spending in Q1 than the 23.6% at annualised rates seen in Q4. Everything else being equal, this would impart further negative pressure on the headline GDP figure. The consensus is looking for a comparatively modest 3.5% decline in February. For all the latest live news, live currency charts, stock charts, index charts and latest currency news, please just check these in the navigation bar above.

FTSE 100 – Monday 16th March

Sunday, March 15th, 2009
FTSE 100 Daily Index Chart

FTSE 100 Daily Index Chart

Following the hammer reversal signal we saw in the daily FSTE 100 chart on Monday last week, we are now seeing a mirror image of this reversal being repeated on Friday, with a gapped up shooting star showing signs of weakness in the move up, and we are therefore likely to see a fall in the index the early part of this week, offering us opportunities for a binary bet on the index. There are several factors in the chart which suggest we are likely to see a  fall. First, the candle on Friday is gapped up, and should prices fall on Monday then we will have a classic morning star pattern, an excellent signal that a reversal is possible. Secondly, if we look at the volume, we have a move higher but with falling volume, which is a warning signal. For those of you who use volume spread analysis in your analysis, you will know that the professional money ( the market makers in other words) are not joining in the move upwards, and have simply marked the market higher before dropping it further, leaving all the bulls high and dry – a classic market making move! Finally the price move on Friday failed to pierce the resistance level at 3780, falling back lower to close the week at 3753. My suggestion is therefore to place a binary bet this week on the FTSE falling possibly to retest the lows of last week in the 3500 region once again.

For the latest live news or fundamental new on the economic calendar please just follow the links. I have also added commodity prices, stock charts, live currency charts, and the latest currency news on video for you which is updated three times a day.