FTSE unable to move past 6900
The morning had started well, but once again the 6900 level has worked its malevolent magic, sending the index lower. Data from the US came in almost universally below expectations, while the early euphoria surrounding Greece’s apparent shift in mood has dissipated.
The US government has now begun to apply gentle pressure on Athens, having last week turned up the heat on the broader eurozone to come to a deal. In the main, however, markets are more confident about a deal than they were yesterday.
Thoughts now turn to the Federal Open Market Committee minutes tonight, which always loom large. It seems likely the Fed will restate its cautiously optimistic appraisal of the general situation; Greece will not feature in these minutes, and in any case it is hardly becoming for the Fed to concern itself too much with the eurozone. Instead, they can point to rising wages and faster job growth, reasons that make a June move on rates more likely.
US data disappoints
Yet another drop in oil prices and today’s deeply unsatisfying roundup of US data have meant that US markets are struggling to build on the positive atmosphere of last night’s close.
Fed minutes are acting to curb any major moves within equity indices, although we can expect a more qualified assessment of the US economy than that seen in the statement from the meeting itself. The market interpreted the statement as hawkish, but the minutes will be more nuanced. A particularly dovish reading will bring out the dip buyers, who, even now, lurk in the wings.
Oil hit by profit-taking
Neither Brent nor WTI have found much reason to push beyond recent highs, and nervousness surrounding Greece and the Ukraine situation provide an ideal opportunity for some handy profit-taking.
Oil bulls can be pleased with their work in February, but the market has begun to doubt whether the foundations of the rally are as firm as they first appear. Production levels remain relatively unchanged and inventory data points towards rising stocks, putting a firm drag on any attempts to move higher.
GBP/USD above $1.54
The pound has held on to gains made following this morning’s UK data storm. Wage growth and a decrease in unemployment have done their bit, but it was the sighting of hawks on the Monetary Policy Committee that provoked GBP/USD to rally above $1.54.
The unanimity that has predominated for two months seems to have only a limited lifespan, as rumblings of discontent are heard on both the tightening and easing sides of the equation. For now, two potential hawks trump one potential dove, giving a decent uplift to the pound thanks to interest rate expectations.