Better than expected mortgage aprovals led to sterling strength before sell off

Market Review

A volatile session for equities yesterday despite being low on news, which ultimately was reflected in the e-mini S&P finishing at the top of the range. The data for the session saw initially a lower than expected flash services PMI, that we look at as a decent number as it is the second largest reading ever recorded for this relatively new data release. Later on in the session the second reading of poor housing data in only two weeks came in the shape of lower than expected Pending Home Sales at -1.1%, down from the staggering +6.1% from last months reading. The move down in equities stopped out the strategy, though the crude worked twice and was taken on both times due to the ranging market conditions. In the FX sector the EURUSD currency pair was extremely lacklustre and had no reaction to any of the data or geo-political risk that continues to linger on the markets we are trading.

Today's Fundamental View

The most significant news this morning; better than expected mortgage approvals; initially led to sterling strength but has over the course of the session sold off and currently trading at session lows. Dollar currency pairs have still not made massive movements, as the market is eagerly anticipating Friday’s Non-Farm Payrolls number and this lack of movement may serve as an indication to the large move we may get at the last trading session of the week should this months number be anywhere near the record number we witnessed last month. Today’s session is likely to be the slowest one this week; at least if one look at the amount of data and the importance of it. We are bullish on the consumer sentiment for what may be considered seasonal effects, that is the consumer being more positive in summer months. Also with the services PMI showing a decent reading we have little doubt that the number will be relatively in line or higher than consensus. We are slightly concerned about the housing index, as we mentioned above the New Home- and Pending Home- Sales were both missing the headline expectation. With talks of increased sanctions on Russia by the European Union, we may see some weakness hit the equity markets should this materialise. We look forward to see some of the movement, as Rosneft has warned of severely performance impact if further sanctions are imposed. It is worth noting that the British Oil giant British Petroleum owns 20% of the shares in this company. With this in mind we head in to the session with a continued bullish view on equities, as we eye 2,000 at the end of this or next week. The EURUSD is likely to continue to see subdued movement, though we remain bearish on the pair. T-Notes has seen a decent move up in the AM hours, though we will continue to short. Should the Russian/Ukrainian crisis escalate we may see some further move upwards and we claim the strategy invalid. The crude strategy for the session will be long.
 

Alternative View

Comments from Russian officials may halt the move up, though this should still lead to USD strength in a risk off move. Please remain aware of all developments coming out of Ukraine, Russian and the Middle East and keep a conservative outlook with regards to risk. Over exposure in markets with such uncertainty is dangerous and should be avoided.