Arbuthnot Latham - Treasury Market Commentary 3 November 2014 CURRENCY UPDATE • EUR/USD 1.2500 The Fed ended their asset purchase program last week as expected, however they surprised the market with a slightly more upbeat assessment of the economy. The dollar quickly strengthened on the back of this and we’ve hit our 1.2500, reaching a low of 1.2440 so far, levels not seen since 2012. We continue to look to sell rallies as we expect continuing dollar strength as the US economy continues to outperform. The closely watched US payrolls data is released on Friday. Support 1.2320 1.2385 1.2440 Resistance 1.2550 1.2620 1.2660 • GBP/EUR 1.2800 As expected GBP/EUR has pushed higher, reaching a high of 1.2820 this morning. Despite the growing headwinds facing the UK economy, it is still performing very strongly relative to the Eurozone economy, and the growing rate differentials going forward are likely to add support to sterling. We continue to prefer buying dips, but the upside is expected to be slow, with decent offers around the recent highs of 1.2880. Support 1.2660 1.2700 1.2720 Resistance 1.2830 1.2880 1.2900 • GBP/USD 1.6000 Once again sterling stalled ahead of the 1.6200 resistance last week, as the more hawkish Fed statement saw a strong dollar rally. The support at 1.5950 has held firm on an initial test, but we still prefer to sell rallies and expect 1.6200/50 to continue to provide decent selling opportunities. We have the BOE meeting on Thursday this week where we expect no change, with the market now focussing on the Inflation Report due for release next week. Support 1.5850 1.5880 1.5950 Resistance 1.6050 1.6100 1.6150 • USD/CHF 0.9630 A decent dollar rally following last weeks Fed statement saw us break through our 0.9550 resistance level, reaching a high of 0.9650. We would expect to see some profit taking from here, however whilst 0.9455 holds we still prefer to buy dips with 0.9840 remaining our medium term target. Support 0.9375 0.9455 0.9550 Resistance 0.9650 0.9690 0.9750 • USD/JPY 113.40 The BOJ surprised the markets last week by announcing a further easing of credit by increasing its QE program, in a further bid to stimulate the economy and boost inflation. The market obviously sold JPY quite aggressively on the back of this and we easily broke through our 110.00 target, to currently trade around 7-‐year highs above 113.50. Despite the very aggressive move, dollar demand looks set to continue the market looks set to continue buying dips. Support 111.15 112.00 112.70 Resistance 113.60 114.20 114.50 • AUD/USD 0.8720 AUD/USD touched a recent high of 0.8910 last week before the more hawkish Fed announcement brought us lower again. We would prefer to sell rallies from here and expect downside pressure to gain momentum, with this year’s low of 0.8660 the initial target. Support 0.8585 0.8660 0.8710 Resistance 0.8785 0.8885 0.8920 COMMODITIES UPDATE • • XAU/USD $1175 The recent rally ran out of steam with the more hawkish Fed statement last week prompting a strong sell-‐off. Needs to break back above $1200 to alleviate immediate downside pressure. BRENT/$85.95 Oil remains under pressure with supply expected to remain plentiful. A number of forecasters have recently revised down the Oil price forecasts for next year. Indices Close Current FTSE 6546 6514 DOW 17390 2018 S&P Fixed Deposit Rates* GBP USD EUR 3 Months 6 Months Upon Request 1.25% 0.75% 0.05% 9 Months 1.60% 1.15% 0.15% 12 Months 2.00% 1.50% 0.25% *Rates are for private individuals only and are subject to restrictions • UK INTEREST RATE SWAPS – MID PRICE 2YR –1.12% 3YR – 1.40% GBP 3 month LIBOR – 0.55475% ECONOMIC EVENTS 4YR – 1.62% 5YR – 1.80% 10YR – 2.34% UK Industrial Production YoY Data UK Manufacturing Production YoY Date Last 6/11 2.5% 1.6% 6/11 3.9% 2.8% BOE meeting 6/11 0.50% 0.50% US Non-‐Farm Payrolls 7/11 248k 230k Ashley King Ian Taylor 020 7012 2599 020 7012 2598 Gordon Anderson 020 7012 2540 Expected [email protected] [email protected] [email protected] [email protected] IMPORTANT INFORMATION This document is provided for information & discussion only and does not constitute investment, legal, accounting or tax advice, or a representation that any investment or service is suitable or appropriate to your individual circumstances. 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