Summary:

• Boerse Stuttgart, the second largest German stock exchange, is exploring cryptocurrency potency
• UBS, a Swiss bank, doubts Bitcoin could serve as a viable means of payment
• Think-tank claims the value of blockchain to achieve $2 trillion to 2030

The Friday’s trading on cryptocurrencies has not been rosy so far as a majority of them is extending losses. Ethereum (ETHEREUM on xStation5) is fluctuating a notch above the key $400 level whereas Bitcoin (BITCOIN on xStation5) has broken below $7300 for a while. The capitalization of the whole market stands above the $260 billion mark while the Bitcoin market cap sits a notch below $130 billion. Today’s analysis abounds in many brief news from the cryptocurrency world.

Firstly, Boerse Stuttgart, the second largest German stock exchange, has expressed willingness to explore cryptocurrencies in a bid to reach possible benefits.. The company is planning to create new solutions for crypto world, including a multilateral regulated trading venue and solutions for safe custody. The stock exchange is also developing an ICO platform.

BITCOIN has broken the possible short term support area localized around $7500, and it has stuck within another consolidation since then. At press time, BITCOIN is moving around the $7300 handle which could be another significant technical obstacle. The mentioned level coincides with the 50.0% Fibo retracement of the increase started around mid-July. Source: xStation5

Secondly, UBS, a Switzerland-based investment bank, voiced its opinion about Bitcoin. According to the UBS strategists’ publication, Bitcoin is too volatile (due to fixed supply and unusual demand dynamics) to function as a money or a viable new asset class. However, the Swiss bank does not exclude that Bitcoin could fulfill this role in the future.

Thirdly, the think-tank IHS Market thinks blockchain-based business activity could hit $2 trillion by 2030. Is this reasonable? Some crypto pundits even claim that $2 trillion is a very conservative number given that the 2030 year is a long way off and a lot could change till this time.

ETHEREUM is still going down. The cryptocurrency has not visited around these levels for a long time. The coin is trading around the $400 handle at the press time. As one may suppose, Ether bears seem to be exceptionally determined to push the price even lower. Source: xStation5

At the end, it is worth noticing that the Japanese tech company Sony wants to patent two blockchain-related ideas. The Japan’s technology behemoth is not the first one coming up with such ideas. We wrote about similar topics in the past, including Walmart or American Express.

LITECOIN has left the potential consolidation area (the red area on the chart). Upward movements are limited by the 8-period moving average on the H4 interval (the yellow line). The early-July’s low could be another possible roadblock for bears. Source: xStation5

Summary:

• The EMU retail sales print expected to show another decent advance

• NFP once again expected to show wage growth remain at 2.7% YoY

• Berkshire Hathaway (BRKB.US) among companies reporting earnings today

Economic calendar on the final trading day of the week looks quite full. The final services PMI readings for June from the EMU economies will be released throughout the morning yet such advanced prints rarely move the market. Later on, the EMU retail sales print is scheduled for release followed by the NFP report in the early afternoon. Last but not least, the non-manufacturing ISM gauge will see daylight some time after the opening of the US session. Do notice that Berkshire Hathaway, a holding company owned by the legendary Warren Buffett, is scheduled to submit its earnings report today.

9:30 am BST – UK, Services PMI for July. While the other European countries have already released preliminary PMI readings for July the UK does not publish early prints. Therefore, today’s UK services PMI reading may be the sole one to move the market. So far we have got a mixed picture of the UK economy in July as manufacturing PMI missed expectations slightly and construction gauge provided a strong beat. Today’s reading for services sector is expected to show a slide from 55.2 pts to 54.7 pts and any bigger deterioration may put righteousness of yesterday’s BoE hike under question.

10:00 am BST – Eurozone, Retail Sales for June. The retail sales readings from the EMU suggest that the demand within the bloc remains strong. Let us recall that we have not seen a negative reading in YoY terms since early-2014. However, it should be noted that all four latest readings have missed the expectations therefore the picture of the eurozone may be not as rosy as economists think. According to the market consensus provided by Bloomberg today’s reading should show a 1.4% advance in YoY terms (1.4% previously) and 0.4% increase in MoM terms (0% previously).

1:30 pm BST – US, NFP Report for July. Third major event of the week after FOMC and BoE decisions. It is unquestionable that the US labour market is strong and we will most likely get another employment change reading close to 200k (193k expected). However, what concerns economists is the fact that the US economy still failed to produce a pick-up in the wage growth dynamics. Market consensus points for another 2.7% YoY reading what can be seen as somewhat disappointing given in how advanced stage of the economic cycle the US is in. Apart from that, the unemployment rate is expected to fall back to 3.9%.

3:00 pm BST – US, Non-Manufacturing ISM for July. The manufacturing ISM reading released on Wednesday saw a bigger-than-expected drop suggesting that the Trade War theme is taking its toll on the American business. Nevertheless, the services sector accounts for a far bigger share of the GDP and therefore data for this sector may be more relevant. Economists surveyed by Bloomberg point for a minor slide from 59.1 pts in June to 58.6 pts in July.

Notable US companies reporting earnings today:

• Berkshire Hathaway (BRKB.US)

• Kraft Heinz (KHC.US)

EURUSD has failed to break above the resistance zone ranging 1.1717-1.1747 again. The trade tensions pulled the pair back towards the lower bound of the consolidation range at 1.1575. In case bears manage to overcome this hurdle the support level at 1.1510 may prove to be the last chance for buyers. Source: xStation5

 

Summary:

• Australian dollar catches a bid in the morning trying to resist the US dollar strength
• Australian retail sales surprise to the upside, services PMI slightly sub-par
• US indices make a U-turn on Thursday, Apple cross the trillion-dollar market valuation

The last trading day in Europe is beginning with the continued strength of the greenback, albeit taking into account the employment report scheduled for the afternoon one may suppose that USD bulls might decide to cash in on their recent positions at least to some extent. In early European trading the NZ dollar is losing the most ground being down 0.3% which seems to be related to risk-off. At the same time the Australian dollar is gaining the most against the buck being underpinned by solid retail sales numbers for June. Notice that we were offered a decent net exports reading earlier this week which combined with the encouraging data on retail sales implies quite robust economic growth during the second quarter (the data will be released at the beginning of September).

Australian retail sales beat expectations in June providing support for Q2 GDP growth. Source: Macrobond, XTB Research

Cutting to the chase, retail sales increased 0.4% in monthly terms exceeding the consensus placed at 0.3%. Looking at the whole quarter one may notice that Australian retailers enjoyed the best three months in a year suggesting that consumer spending could have managed to maintain decent growth momentum. It’s worth also mentioning that in real terms retail sales picked up 1.2% over the entire June quarter being the best outcome in a year too. The market consensus had assumed a 0.8% rise showing that expectations were easily beaten by a large margin. According to some calculations consumption may have added 0.6 percentage points to growth compared with a disappointing 0.2 percentage points during the first three months of the year. Even so, the market-implied probability of a rate hike in Australia does not need to impress market participant as it assigns sub-10% till the end of this year, and then 42% by June next year. While retail sales acted in favour of the Aussie one cannot say the same about services PMI which slipped in July to 52.3 from 52.7 bringing down the composite gauge to 52.3 from 52.9, but still in the expansion territory. On top of that, it needs to be added that Chinese services PMI made even a larger retreat coming in at 52.8 compared to 53.9 seen in June. As a consequence, the composite indicator slid to 52.3 from 53.

The Aussie is trying to bounce off its notable short-term support localized nearby 0.7360. A possible increase could reach as high as 0.7445. Source: xStation5

On the equity front one may spot that while European equities ended yesterday’s trading bleeding their US counterparts managed to resist bears’ strength. As a result the NASDAQ (US100 on xStation5) bounced substantially ending the day with a 1.25% gain. The SP500 (US500) added 0.5% while the Dow Jones (US30) stayed at its flat line. In turn, Chinese indices extended their declines on Friday illustrating that when it comes to capital markets the trade spat between the US and China is hurting much more the latter. At the end let us note that Apple’s market capitalization crossed $1 trillion yesterday being the first stock in history doing so.

Technically the SP500 (US500) drew a bullish candlestick on Thursday, and as a result the index managed to bounce back meaningfully. If this rally turns out to be sustained one may count on an increase toward 2880 points over the next days. Having said that, the July’s jobs report might give investors food for thought influencing their investment decisions. Source: xStation5

Summary:

• Bank of England raise rates to 0.75% as expected
• Carney press conference sees initial rise in GBP reverse
• Turkish Lira extends loss on US sanctions
• Commodity snapshot
• Crypto mixed as Russian mining sector continues to boom
• Traders look to tomorrow’s NFP release

The Bank of England chose to lift interest rates by 25 basis points at its meeting in August as widely expected ensuring market participants that more hikes would be needed. In effect, the pound jumped slightly but the pair is unlikely to leave its descending channel. 

While the initial reaction saw a pop higher in sterling the gains were erased before being reversed during Carney’s press conference. There wasn’t a standout remark that caused the drop, with it appearing to be more a case of a gradual realisation that the bank remains unlikely to embark on a sustained hiking cycle in the current environment. 

There is no doubt that the Turkish lira has been among the most beleaguered currencies in the world over the recent months, and this trend seems to be unlikely to reverse any time soon. Yesterday we saw another fresh record low on the TRY after the US imposed sanctions against two Turkish ministers over the continued detention of an American pastor (there had been a warning the US might do so if Turkey did not release him). 

Crypto markets a mixed on the day with the most notable move coming in Dash, which has fallen almost 5%. Low electricity prices in Russia have served as an incentive for the crypto mining operations for some time already. The Russian cryptocurrency sector becomes bigger and bigger as it was presented by the recent Russian Association of Cryptocurrencies and Blockchain (RACIB) data.

Our latest commodity snapshot can be found here. 

The Fed refrained from changing interest rates in August but an upbeat view on the economy seems to suggest a third interest rates increase this year at the September meeting. This has pushed the EURUSD pair slightly down but the pair remains within a range. Can the NFP report provide a long awaited impulse?

A short video previewing the event can be found here. 

 

The US jobs report is one of the most hotly anticipated events of the month, and tomorrow’s data could carry an even greater than usual significance given where markets are at present. The US500, EURUSD and Gold all sit close to potentially key levels and Friday’s release could provide the catalyst for some significant moves. 

Watch our short video below:

 

 

Summary:

• Trade tensions weigh on the global equity markets

• Bank of England delivers a 25 bp rate hike

• Antipodean currencies dive along with commodities

• Japanese yen benefits from the risk-off mode

The early trading on Thursday was marked by declines across the global equity markets as trade tensions seem to weigh down stocks once again. Steep declines can be observed especially on the German, Italian and UK stock markets. Moving to the FX market one can notice that JPY is outperforming other majors, what is not surprising given renewed uncertainty over US-China trade dispute. On the other hand, Antipodean currencies are the biggest laggards among majors reflecting sell-off on the commodity market. Speaking of commodities, zinc and lead are the only metals to produce gains today while corn is the only grain to do so. As BoE and Fed have already made their interest rates decisions markets’ attention shifts to the NFP report scheduled for tomorrow.

Signs of easing downward pressure on the cryptocurrency market could be spotted recently. Over the past 24 hours a majority of cryptocurrencies did not produce any major moves. Bitcoin is testing the area marking the upper limit of the previous consolidation range while Ethereum is trading near its previous month’s low.

There is no doubt that the Turkish lira has been among the most beleaguered currencies in the world over the recent months, and this trend seems to be unlikely to reverse any time soon. Yesterday we saw another fresh record low on the TRY after the US imposed sanctions against two Turkish ministers over the continued detention of an American pastor.

The Fed refrained from changing interest rates in August but an upbeat view on the economy seems to suggest a third interest rates increase this year at the September meeting. This has pushed the EURUSD pair slightly down but the pair remains within a range. Can the NFP report provide a long awaited impulse?

Chinese companies expand into new technologies often by acquiring enterprises from the other countries. Such approach was criticized by the US and called stealing intellectual property that poses a national security risks. Germany seems to be adopting similar approach as Angela Merkel’s government vetoed the takeover by Chinese company for the first time yesterday.

In line with expectations the Federal Reserve kept settings of its monetary policy untouched exerting just a little impact on the greenback. The statement was really short and succinct and compared to the previous one not many changes could have been noticed.

 

Summary:

• The number of the Russian cryptocurrency mining companies increased by 15% in first half of 2018

• Northern Trust, an American custody bank, will help hedge funds enter the cryptocurrency market

• Ethereum (ETHEREUM on xStation5) trades a notch below $410 handle after two weeks of heavy sell-off

Signs of easing downward pressure on the cryptocurrency market could be spotted recently. Over the past 24 hours a majority of cryptocurrencies did not produce any major moves. Bitcoin is testing the area marking the upper limit of the previous consolidation range while Ethereum is trading near its previous month’s low. The capitalization of the cryptocurrency market stands slightly above the $270 billion handle whereas the capitalization of altcoins (coins other than Bitcoin) sits subtly above the $140 billion mark. Today’s major topics cover a still increasing popularity of the cryptocurrency mining in Russia as well as the American custody bank helping hedge funds step into the cryptocurrency market. 

BITCOIN is trading in the vicinity of the upper limit of the mid-July’s consolidation range at press time. Namely, the cryptocurrency sits below the $7550 handle and is trading way below the 33-period moving average on the H4 interval (a purple line). Source: xStation5

Low electricity prices in Russia have served as an incentive for the crypto mining operations for some time already. The Russian cryptocurrency sector becomes bigger and bigger as it was presented by the recent Russian Association of Cryptocurrencies and Blockchain (RACIB) data. Quoted by the Prime news agency, Yuri Pripachkin, the President of the RACIB, stated that the number of the Russian cryptocurrency mining companies has increased to 75,000 at the end of first half of the year, marking a 15% increase in the first six months of 2018. According to the RACIB data, the Russian cryptocurrency sector employs 350,000 people. Russia amounts to around 6% of the global digital currency mining. 

ETHEREUM has experienced significant declines since mid-July. The coin is trading around July’s low which seems to be a relevant technical obstacle for bears. ETHEREUM’s upside potential also seems to be limited by the 8-period moving average on the H4 interval (a yellow line). Source: xStation5

Let’s move to America, where Northern Trust, an American custody bank, is helping hedge funds step into the cryptocurrency market. As Forbes reported, Pete Cherecwich, the President of Northern Trust,  claimed that his company cooperates with three “mainstream” hedge funds already. The company is said to help these funds diversify their portfolios with cryptocurrency investments. Apart from that, Cherecwich expressed that in his opinion governments will digitize traditional currencies in the future. 

RIPPLE saw a significant bounce higher yesterday. Nevertheless, bears returned to the market today pushing the cryptocurrency price back to the $0,43-$0,44 area. What’s interesting, RIPPLE is the coin that has diverged the most from the other major digital assets when it comes to the recent performance. Source: xStation5

 

Summary:

• EMU PPI inflation anticipated to accelerate in June

• Markets expect Bank of England to lift interest rates

• DowDuPont (DWDP.US) heralded to report over $23.5 billion revenue

After Fed decided to stay on hold yesterday attention shifts to the Bank of England. The UK monetary authorities are expected to finally deliver a rate hike but one should remember that this central bank likes to surprise the markets. Apart from that, investors will be served European producers’ inflation reading as well as July’s construction PMI from the UK. A weekly piece of data from the US labour market may come in handy ahead of tomorrow’s NFP report.

9:30 am BST – UK, Construction PMI for July. Data stream coming from the UK has been lacklustre as of late. The manufacturing PMI reading for July that was released yesterday missed the expectations showing bigger-than-expected drop. According to the economists surveyed by Bloomberg agency this downward tendency is to be confirmed by the construction PMI reading today. If this is so it should not impact today’s decision of the Bank of England but it may put any further tightening under question.

10:00 am BST – Eurozone, PPI Inflation for June. After few years of PPI deflation the gauge left the negative territory at the turn of 2016 and 2017. After peaking at 4.5% YoY in early-2017 the price growth began to decelerate. Nevertheless, the inflationary pressures seem to be mounting as we have seen a decent pick-up recently. Market consensus suggest that in June the eurozone PPI inflation should accelerate to 3.5% YoY from previous 3% YoY. Do note that an extended period of rising PPI may boost CPI inflation and therefore prompt ECB bankers to consider rising interest rates.

12:00 pm BST – Bank of England interest rate decision. The interest rate hike has been announced by BoE to take place in spring. However, Brexit uncertainty as well as mixed economy picture painted by macroeconomic data forced BoE members to postpone such move. Market odds for hike during today’s meeting stand close to 90% therefore it seems like a done deal. The question remains whether it will be just a single hike or will BoE call a period of monetary tightening.

3:00 pm BST – US, Initial Jobless Claims. The weekly piece of data from the US labour market. The significance of this reading has shrinked greatly over the past years. Nevertheless, today’s reading may attract more attention than usual as it comes in between ADP employment change data released yesterday and NFP report scheduled for tomorrow. Having said that, investors may try to use this data as a hint ahead of tomorrow’s labour market report. A reading of 200k is expected.

Notable US companies reporting earnings today:

• Activision Blizzard (ATVI.US)

• DowDuPont (DWDP.US)

GBPUSD has been trading in a downtrend since mid-April. The pair has reached mid term support zone ranging 1.3050-1.3130. A bounce or break will be dependant on the outcome of today’s BoE meeting and bankers’ plans for the future. Source: xStation5 

Summary:

• Federal Reserve keeps interest rates unchanged, a rate hike next month virtually a done deal
• Chinese stocks plummet as a trade war comes back to the fore while liquidity conditions in Hong Kong tighten
• US dollar reinvigorates as risk-off spreads over markets again

In line with expectations the Federal Reserve kept settings of its monetary policy untouched exerting just a little impact on the greenback. The statement was really short and succinct and compared to the previous one no many changes might have been noticed. Anyway, there was an alteration regarding household spending as the Fed described that it had “grown strongly” instead had “picked up” in a statement published six weeks earlier. In August the Fed said that economic activity had been rising at a “strong” rather than “solid” rate. In turn, when it comes to the unemployment rate the US monetary authorities said yesterday that it had “stayed low” compared to “declined” previously. As far as risks to the economy are concerned the central bank kept its rhetoric arguing that they had remained roughly balanced.

What conclusions can we draw? The meeting in August turned out to be a non-event as it had been broadly expected. The Federal Reserve is equally widely expected to lift interest rates in September which will be the third move this year. Notice that the probability of such a move next month hovers around 93% this morning based on OIS rates. Moreover, market participant are now pricing in the fourth rate hike in December in 55%. The initial move on the greenback following the decision was slightly to the downside albeit a reaction was really tepid to say the least. Shortly after the Fed’s communique markets’ attention was again paid to the trade war thread when we were given a confirmation that Donald Trump had ordered Lighthizer to consider a tariff increase on Chinese imported goods ($200 billion) to 25% from initially proposed 10%. That said, it is just a proposal and there is quite a long way to go through to have this change implemented.

The EURUSD keeps moving within its broad consolidation. Once trade-related risks mount again, it could be USD supportive that is why we are seeing the stronger buck this morning (do not think that it was sparked by the Fed itself). Source: xStation5

Meanwhile, Chinese stocks are experiencing a truly gloomy day plunging across the board. A quarter before 7:00 am BST the Shanghai Composite is falling as much as 3% while the Hang Seng (CHNComp on xStation5) is declining 2.5%. These heavy falls might be, at leas in part, ascribed to the trade spat between the US and China which has come to the fore lately (neither country wants to back down). On top of that, this is the highly unpredictable risk factor, and it was acknowledged by the monetary authorities in Hong Kong. Another possible reason standing behind relative underperformance in stocks in Hong Kong could stem from the shrinking money stock as depicted at the chart below.

Shrinking liquidity in Hong Kong could have weighed on local equities. Source: Bloomberg

As one may spot, the relationship between money supply growth and the Hang Seng is quite striking. Hence one may suppose that the latest leg lower might have been exacerbated by lowering money supply growth as it could have put upward pressure on interest rates and therefore reduced stocks’ appeal to some extent. Either way, the latest rebound seen in the Hang Seng seems to have been just a dead cat bounce rather than the beginning of a long-lasting upward leg. Currently the price is heading toward its crucial support which might be tested again before long.

The Hang Seng continues dropping following a possible dead cat bounce. Source: xStation5

Summary:

• DOE inventories: +3.8M vs -2.6M expected
• OPEC production rises by 300k bpd in July
• Oil remains lower on the day after outside bearish signal yesterday

The weekly inventory data from the US has offered little support for crude bulls, with oil remaining under pressure after a large outside day on Tuesday. The DOE crude oil inventories showed a build of 3.8M, marking a marked increase from the -6.1M last time out. The consensus forecast of -2.6M also called for another drawdown, but the immediate reaction has been a bit mixed – possibly because the build was smaller than last night’s API print of +5.6M.

 Oil initially rose from near its lowest levels of the day on the inventory release, but the market has subsequently come back under pressure and made a new low at 72.31. Source: xStation

Looking at the components more closely the gasoline did show a sizable drop, while a decrease in US production could also be seen as positive for the price of crude. The most noteworthy are as follows in the format of actual vs expected unless otherwise stated:

• Gasoline: -2.5M vs -2.0M 
• Distillates: +3.0M vs +0.5M
• Production: 10.9M bpd vs 11.0 M bpd prior

More bad news for longs came from the latest OPEC report, with the groups production shown to have increased of late. For July the group’s output rose by 300k bpd to 32.6M bpd with traders and analysts now closely watching the situation in Iran. With sanctions on Iran expected to come into effect imminently there are some concerns that the fall in production wont be offset by other members of the organisation – namely Saudi Arabia. 

The longer term picture for Oil turned more negative yesterday when a bearish engulfing candle marked a reversal to the latest move higher. Price has been making a steady push higher and recouping some of the losses seen at the end of last month, but now it looks like we could be inf or another retest of the 71.25 level. This could now be seen to be key support with a break below there opening up the possibility of a larger decline towards 66.90 and maybe even 61.80. 

 Oil has broken below a recent rising trendline and may now be set for another push lower. Source: xStation