UK CPI rebounds to 2.9% & revives BoE hawks, new iPhone in focus
By Ipek Ozkardeskaya
The GBPUSD rallied after the data showed that the British consumer inflation accelerated to 2.9% year-on-year in August from 2.6% previously. This was faster than analysts’ expectations of 2.8%. The core inflation surged to 2.7% year-on-year from 2.4%.
The solid inflation read revived the Bank of England (BoE) hawks before Wednesday’s jobs data (where, the wages growth will be the key highlight) and Thursday’s BoE decision. The BoE will likely maintain the status quo, yet the Monetary Policy Committee (MPC) members’ approach will be closely monitored. Inability to contain the rising inflationary pressures will certainly keep the BoE hawks in charge of the market and allow the GBPUSD to trade to challenge 1.3267 (August 2 high, year-to-date high).
The pound appreciation weigh on the FTSE gains in London.
Gold, yen weaken on improved risk appetite
The US dollar recovery is underway. The global bond yields edge higher as investors return to risk assets. The UN approved new sanctions against North Korea unanimously, as the US renounced to its key requests, seeking support from Russia and China.
Gold pulled out its 200-hour moving average ($1’330) and traded at $1’323 as investors moved away from the safe-haven assets. The $1’330 could act as a short-term resistance and the improved risk appetite could encourage a deeper correction below $1’322 (minor 23.6% retrace on July – August rally). The key support to the two-month positive trend stands at $1’300 (major 38.2% retrace).
Nikkei (+1.18%) and Topix (+0.94%) surged for the second day, as the USDJPY cleared the 109.00-resistance and advanced to 109.71. The recovery could stretch to 110.05 (50-day moving average & major 38.2% retrace on July – September decline). Above this level, the short-term bullish correction could encourage a further rise to 110.80 (100-day moving average) and 111.56 (200-day moving average). Support is eyed at 119.25/119.00. Large put option expiries could spoil the positive momentum if exercised.
Euro trades under pressure versus the greenback
The EURUSD is giving back gains as the strong US dollar drags the pair lower. Top sellers could take advantage of the ongoing downside correction to price in a part of the European Central Bank’s (ECB) reluctance to move forward with its Quantitative Easing (QE) tapering plans. The euro-bulls could be pushed to the sidelines as the ECB reality meets the market. Light put options stand at 1.1975/1.2000 at today’s expiry.
The single currency continues losing ground against the pound. The EURGBP broke the key Fibonacci support at 0.9090 (major 38.2% retrace on July – September rise). The daily MACD (Moving Average Convergence Divergence) indicator turned negative. Technical indicators suggest that the correction could deepen to 0.9023 (50% level) before challenging the 0.90-psychological support.
The DAX (+0.31%%) and the CAC (+0.29%%) extended gains, however with a slowed positive momentum. The DAX stretched above its 100-day moving average (12’460). The CAC consolidates above the April – September downtrend channel top and could challenge its 100-day moving average (5’223).
US equity futures hint at fresh historical highs
The US equities rallied in New York. The Dow Jones (+1.19%), the S&P500 (+1.08%) and Nasdaq (+1.13%) rebounded, financials gained 1.86% in the Wall Street, insurers pared losses as suspected.
The S&P500 renewed record as it rallied to $2’488.95 on Monday.
The US equity futures point at a firmer session open in New York. The S&P500 futures are up by more than 1.0% in Europe.
Apple unveils the new iPhone
Apple will release the new iPhone today at 6pm UK time. Apple shares recovered 2.87 points on Monday, after having traded lower for five consecutive sessions. We could expect price volatility in Apple shares at the time of the release, as it has been the case in the past. The expectations are high. If the company fails to meet the expectations at its 10th anniversary, the disappointment could shake up its market price in the short-term.
The medium and long-term investors remain confident. According to the latest Bloomberg survey, 79% of analysts have a positive outlook for Apple shares, 20.9% are on hold with an average 12-month target price of $175.46. There are no sell recommendations.
Deutsche Bank suggested to watch ‘Apple-aligned 3D-sensing stocks’ such as AMS, Aixtron, Largan, Sunny Optical and Tons Hsing.
Here is a list of suppliers that investors will be watching across the globe.
Japan – Sharp, Japan Display, TDK, Nissha Printing, Kyocera, Sony, Alp Electric, Minebea, Murata, Taiyo Yuden
South Korea – Samsung Electronics, LG Display, SK Hynix
Taiwan – TSMC, SPK, Simplo, Zhen Ding, Cheng Uei, Catcher, Flexium, Largan, ASE
Hong Kong – AAC Technologies
European – Dialog Semiconductor, AMS, Infineon, STMicroelecctoronics, IQE
US – Skyworks, Broadcom, Cirrus Logic, Analog Devices
Potential competitors, including Garmin, Fossil, Swatch, Fitbit should also be in the spotlight.
The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced. Losses can exceed deposits.
Senior Market Analyst
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