UK Service PMI - Rumors of Lower Figure prove true, still rebound

This morning on March 5th 2012 at 9:28 GMT (4:28 EST) the PMI figures for UK Services was released. This is the largest sector of the UK economy and as a forward indicator it is an important number to determine GDP for Q1 2012. Recently the Retail Sales numbers have been better and last month this data surprised the market and came out much higher at 56.0 above the 53.3 expected. Expectations were set at 55.0 this month which were perhaps getting ahead of things as we keep being told this recovery will be slow and choppy.

The markets were risk off since the Sunday open. This was mainly due to Chinese Premier Wen saying that growth in China would be less than previously estimated, also an article by the German newspaper the Spiegel saying that Private Sector Involvement (PSI) in the Greek Bond Swap deal would be less that estimated meaning that a CDS might be triggered. This combined with weaker readings for PMI Services from most EuroZone countries other than Germany, kept things risk-off.

About 10-15 minutes before the release there was 'market talk' that the print would be lower than expected and this turned out to be true, however the GBPUSD was already at the lows of the day. This news was very good to trade but recently it has been about the pre-news move, a small spike on the release and then a reversal...Last months quite large deviation was different that this new norm. Today's lower deviation was not as big as last month's positive one, and in the broader context the number is still quite good compared to many other countries. The GBPUSD reversed off its lows.

Here are the figures:

UK PMI Services
Estimates- Median: 55.0 Average: 54.8 Low Estimate: 53.0 High Estimate: 57.0
Actual: 53.8 Prior: 56.00 No Revisions

Here is the 30 second chart of GBPUSD forex pair which shows how despite the weak release the pair reversed higher:

Here is a 5 minute chart of the GBPUSD forex pair which shows the move in price leading into the release. Sometimes many market participants are just waiting for the news to pass before taking trades.

This 1 minute chart of the GBJPY chart shows the pair doing very little, a slight up bias perhaps. The Yen crosses have been reversing major downtrends recently but have given back some of those strong upmoves since the week opened for trading.

On this 1 minute chart of GBPCHF we can see that the British Pound did weaken further. Sometimes using these cross pairs can counteract the general market influences of Risk On/Off=US Dollar Weak/Strong dynamic which affects the majors.

Likewise against the Euro the Pound did eventually weaken some more by moving up in euro strength/pound weakness.

This 1 minute chart of GBPAUD shows how tricky it can be trying to choose the correct cross. Everyone loves the Australian Dollar because it has a great yield-High interest rate, but in a general risk-off environment which is not specifically focused on the EuroZone Debt Crisis, but more because of a China Slowdown or last week's Beranke Comments, the Australian Dollar can actually get hit harder than the Eurusd. Still after a few minutes the GBPAUD did dip some more on Aussie strength/pound weakness.

Just to make the point, here on the 1 minute chart of the GBPCAD we see the Pound would just not weaken against the Canadian Dollar despite the bad news.

Finally a 1 minute chart of the FTSE Future Contract to show how it also moved off its lows after the news.

UK BOE Meeting Minutes & Vote Count - more dovish than expect big move lower

Today February 22nd 2012 at 9:30 the BOE meeting minutes from their last Interest Rate Announcement on February 9th 2012. They also gave their decision on the Asset Purchase Facility or APF and it was raised by 50 Billion to 325 Billion. There were about 15 of the 50 analyst estimates calling for a 75 billion hike in the APF to 350 billion, while 35 out of 50 called for just 50 billion extra. In the end the BOE just did the 50 billion.

Today there was expectation that Posen, the ultradove on the MPC would vote for the full 75 billion, but that there would be 1 member who voted for no additional QE. As it turned out there were 2 members who voted for hiking APF by 75 billion, as MPC member Miles joined Posen in the dovish camp, and all the other remaining members voted for the 50 billion. Thus there were no members who voted for no additional stimulus. So this was more dovish than expected and the British Pound Forex pairs all fell in Pound weakness.

Here are the charts. First the 30 second GBPUSD pair:

next the GBPJPY pair 30 second chart...the yen has been weak but this still fell:

and finally the GBPCHF pair 30 second chart:

UK Retail Sales - Much Higher good spike higher into resistance

This morning of February 17th at 9:30 GMT (4:30 EST) the monthly Retail Sales figures were released from the UK. They were much higher than expected by a good amount and there was a nice rally.

Here is the data:


UK Retail Sales Ex Auto Fuel(MoM)
Estimates- Median: -0.3% Average: -0.4% Range: -0.9% to 0.0%
Actual: +1.2% Prior: +0.6% No Revision

UK Retail Sales Ex Auto Fuel(YoY)
Estimates- Median: -0.1% Average: 0.0% Range: -0.6% to +0.6%
Actual: +1.9% Prior: +1.7% Revised: +1.4%

UK Retail Sales w/Auto Fuel(MoM)
Estimates- Median: -0.3% Average: -0.3% Range: -0.9% to +1.1%
Actual: +0.9% Prior: +0.6% No Revision

UK Retail Sales w/Auto Fuel(YoY)
Estimates- Median: +0.5% Average: +0.5% Range: 0.0% to +1.9%
Actual: +2.0% Prior: +2.6% Revised: +2.5%

UK BOE Interest Rates and Asset Purchase Target - BOE adds 50 Billion Quantitative Easing

This Thursday February 9th at 12:00 noon GMT (7:00 EST) the BOE announced their monthly decisions on Interest Rates and Asset Purchase Facility (APF). All Analysts of course predicted that the Bank of England (BOE) would stay on hold and leave interest rates where they are at 0.5%. However there was an interesting split between analysts surveyed by Bloomberg on the amount of extra QE they would add to the APF. Out of 50 analysts, 15 expected the BOE to add an additional 75 Billion to the APF to bring the total to 350 billion, 34 expected the BOE to only add 50 billion for a total of 325 billion, and 1 analysts expected them not to add anything. The estimates had come down since CPI appears to be confirming that inflation is finally turning around.

Last time the BOE raised the APF was on October 6th 2011 and the GBPUSD British Pound Sterling versus US Dollar Forex Pair dropped about 2 and a quarter cents from 1.5485 to 1.5270. However several hours after hovering and consolidating near those new lows, the pair lifted up and began an amazing rally which lasted until October 27th and brought the pair back up to 1.6150. The EURUSD, AUDUSD and other pairs bottomed out on October 4th and started their way back up. This was all in the midst of lots of negative sentiment..

Here is the 10 second chart of GBPUSD on the reaction. The BOE only hike 50 Billion instead of 75 Billion, so after a tiny dip the pair rallied:

There was always the risk that they could do the full 75 Billion, this would have been more bearish, as it was on October 6th 2011. As we can see from this chart the 1 minute chart of the 2.5 hours between the Trade Balance & Industrial Production at 9:30 GMT to the Interest Rates and Asset Purchase Target at 12:00. Adding any QE is bearish for a Currency and the initial reaction should be down, but longer term the QE can stimulate the economy and help support GDP which is bullish. Of course for this release, it was pretty much priced in that the BOE would do some QE.

This is the 10 second chart of GBPCHF & EURGBP

and the 30 second chart of the GBPCHF to show more of the move:

and the 30 second chart of the GBPJPY and EURGBP:

It was a choppy day, up and down, up and down...little resolution one way or the other...

UK Industrial Production & Trade Balance - Better Data leads to brief rally

This Thrusday morning, February 9th 2012 at 9:30 GMT (4:30 EST) the Industrial Production and Manufacturing Production figures were released from the UK. This release also coincided with the release of the Trade Balance figures. Most of the data was good with the exception of one of the Year-on-Year figures. However the UK Interest rates were due about 2 and a half hours after this release so many were cautious as the BOE was expected to raise the APF. More in that in the next post.

Here is the data:


UK Industrial Production (MoM)
Estimates- Median: +0.2% Average: +0.2% Range: -0.3% to +0.4%
Actual: +0.5% Prior: -0.6% Revised: -0.5%

UK Industrial Production (YoY)
Estimates- Median: -3.1% Average: -3.1% Range: -3.6% to -2.8%
Actual: -3.3% Prior: -3.1% Revised: -3.6%

UK Manufacturing Production (MoM)
Estimates- Median: +0.2% Average: +0.2% Range: -0.8% to +0.5%
Actual: +1.0% Prior: -0.2% Revised: -0.1%

UK Mnaufacturing Production (YoY)
Estimates- Median: +0.3% Average: +0.3% Range: -0.7% to +0.6%
Actual: +0.8% Prior: -0.6% Revised: -1.0%

UK Visible Trade Balance GBP/Mn
Estimates- Median: -£8600 Average: -£8606 Range: -£9000 to -£8000
Actual: -£7111 Prior: -£8644 Revised: -£8908

UK Trade Balance Non EU GBP/Mn
Estimates- Median: -£5000 Average: -£5047 Range: -£5300 to -£4900
Actual: -£3748 Prior: -£5021 Revised: -£5037

UK Total Trade Balance (GBP/Mln)
Estimates- Median: -£2700 Average: -£3172 Range: -£9230 to -£2000
Actual: -£1109 Prior: -£2566 Revised: -£2830

Here is the 10 second chart of the GBPUSD:

Also included are the 30 second charts of GBPJPY, GBPCHF & EURGBP

UK Services PMI - Good Deviation higher but delayed spike

This Friday morning of February 3rd 2012 at 9:28 GMT (4:28 EST) the Services PMI figures were released out of the UK. This figure is a forward looking indicator for the UK economy because it measures the Purchasing Manager Index, and if the companies are buying more that usually means that they expect to sell more to the customers. Anyway these figures were quite bad in Q4 2011 getting quite close to the 50 level. The 50 level is key because below it signifies contraction and anything above it is considered growth. The PMI is for the Services sector which is the largest sector in the UK and so is quite important. There were prints below 50 in PMI for manufacturing last year but Services just managed to avoid it.

Last year this was probably the best economic news indicator to trade. It is quite simple for news trading as there is only 1 number and its revision, unlike other news which comes with Core and Headline, Month-on-Month, Year-on-year and so on. However in the past 3-4 releases there has been a move heading into the release, then despite what in the past have been good sized deviations capable of moving the British Pound pairs alot of pips has just seen a small 10-15 spike extension of the pre-news move, followed by a complete reversal below the pre-release price. This is dangerous as it can trap any traders who may have had some slippage or experience delay in getting their orders filled by their brokers. The pre-news move is often difficult to distinguish because it occurs in tandem with moves in other key major pairs such as the EURUSD, so whether it is a rumor or leak of a bullish UK data release or just general risk appetite or aversion is not distinguisable. Just when it nearly became reliable enough to fade the spike reversal on this number, today there was a tiny whipsaw but a few minute later the GBPUSD pair did rally. It is important to remember that although the news comes out at 28 minutes past the hour, some do not see the data until half past. This actually is when the pair did start to rally. It was a good sized positive deviation so it did do what it was suppose to do even with the move up heading into the release.

Here the figures:
UK PMI Services
Estimates- Average: 53.3 Average: 53.3 Range: 52.0 to 55.0
Actual: 56.0 Prior: 54.0 No Revision

First the 30 second chart of the GBPUSD pair, the release is marked with the red arrow:

next is the 5 minute chart which shows the run up in the GBPUSD heading into the news. The pair had another move higher and then started to top out. There was the US Non-Farm Payrole later in the day, so it was unlikely for the markets to move alot one way or the other before this:

Also here is the 30 second chart of the GBPJPY, it also moved up after 2 minutes like the GBPUSD:

For total coverage 30 second charts for GBPCHF, GBPAUD, GBPCAD, GBPNZD and EURGBP. Some moved with the news trading deviation, others did not so well. Spreads on some of these pairs can be a problem. Some have less liquidity than the major pairs, however some have less 'attention' which can help depending on your trading platform.

UK Jobless Claims Change & Claimant Count Rate - Lower than Expected by a little bit

This morning of January 18th 2012 at 9:30 GMT (4:30 EST) the Claimant Count Change or Jobless Claims Change (not sure if they changed the name of this report) came out. Basically it is the employment data for the UK. We have seen this figure cause only a brief move and then reverse in November and December, and also in November there appeared to be some leak of the data, or at least a rumor that brought strong flow of buying of Pound Sterling before the official release by a UK clearer on the bid, moving the GBPUSD forex pair up 50-60 pips heading into the release. So we were on the look-out for any strong flows in cable today, but were looking for at least a deviation of +/- 15k above or below the expected number of 7k to take a trade. The Pound did appear to be weakening into the release, so we did widen out our sell trigger and tighten the buy trigger, but still the deviation was not enough. A lower number is better because it means lower number of unemployed and the GBPUSD (Pound Sterling versus US Dollar Forex Pair) will usually rally.

Here is the data:



UK Jobless Claims Change
Estimates- Median: +7.0k Average: +6.7k Range: +0.4k to +11.0k
Actual: +1.2k Prior: +3.0k Revision: +0.2k

UK Claimant Count Rate
Estimates- Median: 5.0% Average: 5.0% Range: 4.9% to 5.1%
Actual: 5.0% Prior: 5.0% No Revision

UK ILO Unemployment Rate 3mnts
Estimates- Median: 8.3% Average: 8.3% Range: 8.2% to 8.4%
Actual: 8.4% Prior: 8.3% No Revision

UK Avg Weekly Earnings 3mnths
Estimates- Median: +2.0% Average: +1.9% Range: +1.7% to +2.1%
Actual: +1.9% Prior: +2.0% Revision: +2.1%

UK Weekly Earnings exBonus 3mths
Estimates- Median: +1.9% Average: +1.9% Range: +1.7% to +2.0%
Actual: +1.9% Prior: +1.8% No Revision

Here is a 30 second chart of the GBPUSD forex pair which shows the half hour leading into the news and the pair retraced some of the gains achieved earlier in the session. This was while EURUSD and AUDUSD were still at their highs for the day. Also the EURGBP was making new highs for the day at 0.8330 and GBPCHF was at its lows.

Nothing particularily fundamental was driving the rally in EURUSD, GBPUSD, AUDUSD etc into the 8am GMT European Cash Equity Open, other than talk of Russian & Mid-Eastern on the Bid but the Bank of India on the offer at the highs into the open, and then things did soon sold off after the top of the hour, with talk of a 2 notch downgrade for Italy from Fitch...clever Indians. But then Russian and Asian names came back in buying indeed a crazy old day, and this continued after the UK news, helping the GBPUSD rally as well as the EURUSD...first Fitch came back and clarified despite their earlier comment of a 2-notch downgrade Italy would not default but then more importantly the IMF would be getting more Money, which of course means more to bail out debt burdened countries. Is this good? Well the EURUSD liked it and regained its earlier highs.

Included below is a 5 minute chart of the GBPUSD with some important levels on it. As we can see where the thin Red arrow is where the UK Jobless Claims Change and Claimant Count Rate were released. The GBPUSD forex pair was sitting right on the 38% fibonacci of last week's 1.5500 to 1.5233 range. So it did move up off this, but it was a crazy day with lots of ups and downs, in fact during the european session the EURUSD was making an expanding triangle pattern but eventually the gains started to stick, even with the USA open (they have been selling the EURUSD on queue as soon as their session starts until it ends for weeks now). Also very interesting is after maybe 2 weeks of GBPUSD being the laggard, today it actually lead the gains, reaching new highs before the AUDUSD or EURUSD and having shallower pullbacks.

UK Construction PMI - This Big Move on this Deviation?

Wow massive move after the UK Construction PMI. Amazing what these small reports out of the UK can do. Based on the deviation a 15-25 pips move was all that a trader would normally expect. However the British Pound just kept depreciating against all major pairs, and this continued for over an hour, causing a 100 pip move. Then the rumor hit that there was dealer chatter that the German Bundesbank was a buyer of the EURGBP pair, this added fuel to the fire, not to mention Construction PMI at 51.6 was the lowest reading in 8 months, headlines like this tend to exaggerated the moves. The European PMI data earlier was mostly strong with Italian, French and German numbers coming out as expected or better. Technical factors also played a part as cable was seen to have failed to reach the 1.61 handle again. Anyhow this goes to show why it is always good to leave a bit of a news trade on in case you get a further move, as even a small deviation when combined with technical factors and market flow will cause the pips to flow into your account. Here's the numbers:

*(UK) OCT PMI CONSTRUCTION: 51.6 V 53.0E (lowest reading in 8 months)

Everyone get fired up about an 100 pip move when Australia raises rates, but then on this small UK report there is a 120 pip move, spread out over an hour with plenty of opportunity to get in. Personally I don't mind waiting an hour for decent pips, and I don't need to earn them all in 5 seconds. Sure it can be exciting. What I don't like is waiting hours and hours, even days for a trade to produce those pips