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Will the Euro Rebound if the FOMC Remains ‘Patient’?

With the FOMC meeting fast approaching, Michael Hewson strikes a cautious tone over the likelihood that the Fed will signal higher rates and points to a possible euro rebound.

  • The US dollar index has rallied by 25% in the last 7-8 months, so will the Fed want to indicate that higher rates are on the horizon?
  • The S&P 500 and the FTSE 100 may see a resurgence if the FOMC statement is more dovish than expected, particularly is the word ‘patience’ remains
  • The EUR/USD pair may be set for a short squeeze towards $1.10 if it can break above $1.0685
  • EUR/GBP has seen a much greater rebound after dovish comments from Mark Carney but wage data may support sterling

 

Spread Betting & CFD trading carry a high level of risk to your capital and you can lose more than your initial deposit. Only speculate with money that you can afford to lose. These trading products may not be suitable for all investors so seek independent advice.

Video content by Michael Hewson of CMC Markets.

The contents on CleanFinancial.com including any articles or videos are for information purposes only and are not intended as a recommendation to trade. Nothing on this website should be construed as investment advice or form the basis of an of investment decision.

Neither CleanFinancial.com nor any contributing company/author accept any responsibility for any use that may be made of the above or for the correctness or accuracy of the information provided.

Content provided by CMC Markets. CMC Markets UK plc and CMC Spreadbet plc are authorised and regulated by the Financial Conduct Authority in the UK, registered offices, 133 Houndsditch, London, EC3A 7BX.

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How Will the Budget Impact Sterling and the UK Economy?

Over the past few months the performance of the pound has been somewhat mixed after a bit of a nosedive in the lead up to the Scottish referendum.

Having circumnavigated that particular hurdle, investors would have been forgiven for thinking that this particular question had been finally settled.

Unfortunately having seen passions stirred up in the lead-up to the vote, it was never likely that the question was going to go away quickly, even though the sharp drop in the oil price has blown an even bigger gaping hole in the nationalists spending plans.

The evaporation in the Scottish Labour vote in the aftermath has made the voting arithmetic that much more tricky in the lead-up this May’s general election.

This could well make overseas investors a little twitchy in the likelihood the SNP might get into a position of holding the balance of power.

Help for the Energy Sector and Crackdown on Tax Evasion/Avoidance

For now that debate will have to wait for another day as we look ahead to Chancellor George Osborne’s final budget of this electoral term.UK Political Spread Betting

This looks set to fire the starting gun on seven weeks of electioneering, mud-slinging, scare mongering and name-calling until the vote on the 7 May.

One thing the fall in the oil price has done is deliver a fiscal boost to the UK economy at probably the most fortuitous time for the incumbent government as consumers start to feel the benefits of a trifecta of improving economic data.

Falling unemployment, combined with falling prices and rising incomes after five years of an income squeeze could just be what the Chancellor ordered.

However, the fall in oil prices brings with it its own problems in the form of reduced revenues from North Sea oil.

This has raised the prospect that the Chancellor might look to lighten the tax load on the incredibly price sensitive environment that is the North Sea, after the sharp falls in oil prices, which have eroded the already slim margins in the industry.

We could also see further measures to tackle tax evasion and tax avoidance in the wake of the events surrounding HSBC and the Swiss tax story.

Small businesses will also be looking for additional help in the form of making the tax environment less onerous for a part of the economy that has outperformed Germany over the past five years.

Given the amount of publicity the Labour opposition has received about being anti-business over the last few months, the Chancellor would be foolish to pass up an opportunity to put clear blue water between him and the opposition’s policies.

Pensions and Tax Thresholds Under Scrutiny

Pensions are also likely to be a hot topic given the recently announced policy by the Labour party to cut tax relief on higher rate tax payers on their pension contributions.

Will the Chancellor announce an alternative plan to shoot that particular fox?

The Chancellor’s focus will inevitably be on voter’s pockets and their finances so the usual suspects will no doubt come under scrutiny including income tax thresholds, as well as savings products.Spread Betting on the British Pound

With the polls looking increasingly tight and the distinct possibility that the Scottish Nationalists will hold the balance of power, this week’s budget could well be the last chance the Chancellor has to highlight the risks of undermining the current stable fiscal governance.

He could well talk about plans that the government intends to implement on a much longer term basis, which would then be at risk in the event of an opposition win, or hung parliament.

Whatever the outcome of the upcoming budget, the government will be anxious to avoid anything that could be construed as damaging to their re-election prospects, though the prospect of an EU referendum in the event of a Conservative majority is likely to be a cause for concern for big business.

Sterling Remains Strong Against Everything but the Dollar

Despite the uncertainty, the pound has been remarkably resilient on the currency markets.

Still, it has come under pressure against the US dollar, trading at five year lows, levels last seen in the aftermath of the last election in 2010, as fears rise of political paralysis in the aftermath of the May vote.

The key level on the downside currently sits at $1.4225 which was the May 2010 low seen in the aftermath of the horse trading between the Liberal Democrats and the Conservative party which gave us that historic image in the Downing Street garden that heralded five years of coalition government.

We can only hope that the next five years will be as stable, but given the state of the polls that is by no means certain.

Spread Betting & CFD trading carry a high level of risk to your capital and you can lose more than your initial deposit. Only speculate with money that you can afford to lose. These trading products may not be suitable for all investors so seek independent advice.

Content by Michael Hewson of CMC Markets

The contents on CleanFinancial.com including any articles or videos are for information purposes only and are not intended as a recommendation to trade. Nothing on this website should be construed as investment advice or form the basis of an of investment decision.

Neither CleanFinancial.com nor any contributing company/author accept any responsibility for any use that may be made of the above or for the correctness or accuracy of the information provided.

Content provided by CMC Markets. CMC Markets UK plc and CMC Spreadbet plc are authorised and regulated by the Financial Conduct Authority in the UK, registered offices, 133 Houndsditch, London, EC3A 7BX.

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Rampant Dollar Strength Weighs Heavily on US and UK Stocks

Following better than expected US payrolls and the start of ECB QE, Michael Hewson takes a look at the impact on stock indices, the euro/dollar and major bonds.

  • The S&P 500 has fallen back from its highs as dollar strength weighs, with all eyes on whether the word ‘patience’ will be included in next week’s FOMC press release
  • The FTSE 100 has seen a sharp tumble below support at 6860 and may target 6750 as investors fear the impact of currency appreciation on corporate earnings
  • EUR/USD has continued to slide, with some traders calling for parity on the divergence in monetary policy
  • The gap between German and US bond yields is at a record high and continues to add additional pressure

 

Spread Betting & CFD trading carry a high level of risk to your capital and you can lose more than your initial deposit. Only speculate with money that you can afford to lose. These trading products may not be suitable for all investors so seek independent advice.

Video content by Michael Hewson of CMC Markets

The contents on CleanFinancial.com including any articles or videos are for information purposes only and are not intended as a recommendation to trade. Nothing on this website should be construed as investment advice or form the basis of an of investment decision.

Neither CleanFinancial.com nor any contributing company/author accept any responsibility for any use that may be made of the above or for the correctness or accuracy of the information provided.

Content provided by CMC Markets. CMC Markets UK plc and CMC Spreadbet plc are authorised and regulated by the Financial Conduct Authority in the UK, registered offices, 133 Houndsditch, London, EC3A 7BX.

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Will the Apple Watch Live Up to the Hype?

Since the launch of the iPhone 6 in September last year, Apple’s share price has risen by nearly 30%.

The number of handsets sold has continued to break records, after a bit of a slowdown just prior to the iPhone 6′s launch, as consumers held back in anticipation of the new product release.

In its Q1 results announced at the end of January, the company sold a record 74.5m iPhones while the App Store also recorded a stellar performance.

Revenues for the first quarter came in at $74.6bn, over double the number of handsets sold in Q3 2014, while profits came in at $18bn.

Margins also showed improvement as the iPhone continued to sweep away its nearest opposition, overtaking Samsung earlier this month as the biggest global smart phone seller, for the first time since 2011.Trading on US Technology Firms

Samsung has hit back in this particular battle announcing the launch of its new Galaxy S6 phone, earlier this month.

Apple Watch Set to be Announced

Having set the bar so high, Apple’s ability to innovate is likely to continue to be challenged over the course of the next few months, starting on Monday as it looks to announce the launch of its eagerly awaited Apple Watch product, which is expected to go on sale in April.

Speculation has continued about how many types of the watch will be made available, from an entry level model, to a very expensive luxury edition model.

The biggest problem Apple is likely to have is the cost structure, particularly at the upper end where luxury timepieces tend to be more bespoke and branded.

For example why would someone sport an Apple watch in preference to a Rolex, or other luxury brand wrist watch?

That being said, the top end of the market is not likely to be where Apple makes its money, but in the mid-tier section or the ‘Sport’ version, where prices are likely to be set at similar levels to an iPhone.

While Apple aficionados are likely to be first in line, the fact remains it is still a watch, and most people like their watches to tell the time, and not much else.

We already know that the watch will need recharging on a daily basis, and while that’s more or less an accepted convention for a phone, do I really want to charge my watch on a daily basis as well?

What Unique Apps Will it Have?

Apple Watch fans will point to the number of new health apps that are likely to be made available as a result of this launch, but a lot of these apps could well be available on the iPhone as well.

Quite honestly I don’t really want my watch telling me that I have to get up and walk around, when I’ve been sat at my desk more than an hour.

Don’t get me wrong, like a lot of people I’m a big Apple fan, but I already have a wrist watch, as well as a BlackBerry, and an iPad, all of which I use every day, and the last thing I need is an extra device that runs out of charge at an inopportune moment.

If I’m honest the time line of the next iPad release is of more interest, in terms of whether we get a bigger screen, a faster chipset, and a better battery life, along with the probability that we the addition of USB ports.

This is more likely to make me more productive than an expensive wrist trinket.

In short, Apple has a lot of convincing to do to get this fan on board, with the idea of a watch.

Spread Betting & CFD trading carry a high level of risk to your capital and you can lose more than your initial deposit. Only speculate with money that you can afford to lose. These trading products may not be suitable for all investors so seek independent advice.

Content by Michael Hewson of CMC Markets

The contents on CleanFinancial.com including any articles or videos are for information purposes only and are not intended as a recommendation to trade. Nothing on this website should be construed as investment advice or form the basis of an of investment decision.

Neither CleanFinancial.com nor any contributing company/author accept any responsibility for any use that may be made of the above or for the correctness or accuracy of the information provided.

Content provided by CMC Markets. CMC Markets UK plc and CMC Spreadbet plc are authorised and regulated by the Financial Conduct Authority in the UK, registered offices, 133 Houndsditch, London, EC3A 7BX.

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Is Lloyds Bank About to Re-Instate Its Dividend?

Over the last 7 years Lloyds Banking Group has had a tortuous time since swallowing up the poison pill that turned out to be HBOS, and having to endure the indignity of a government bailout.

In all that time, the firm has been at the epicentre of a number of banking sector scandals including PPI mis-selling, forex and Libor rigging.

At its six month trading update last year, the bank announced another £1.1bn provision for legacy issues, PPI, Libor and other potential fines for FX price rigging, bringing the total set aside over the past few years to in excess of £10bn.

The bank also announced another 9,000 job losses and the closure of 200 branches as it sought to streamline the business along a more digital model as customers adopt a more on line approach to their banking requirements, bringing the number of job losses over the past seven years to over 50,000.

With the advent of the internet and the increasing use of mobile devices, the requirement for customers to go into an actual branch has made modern banking an increasingly faceless process, as customers pay for goods and services using credit or debit cards, mobile applications or use contactless payment.Spread Betting on the UK Banking Sector

Profits Expected to Rise after Staff Cuts

It is hoped that this week’s full year results will mark a significant milestone in the banks recovery story with the hope that the Prudential Regulation Authority will allow the resumption of a dividend, with subsequent dividends thereafter.

We’ve already seen the UK government further pare down its stake in the bailed out lender this week from 25% to 24%, and markets are also likely to be looking for further signs that Lloyds will reduce its stake in the recently spun off TSB.

In 2013, the bank reported a small pre-tax profit of £415m, for the first time in three years, while this week’s numbers are expected to be much better, with the hope that we could get a resumption of the dividend.

Expectations are for a decline in revenues from £37.9bn to £18.7bn, but pre-tax profits are expected to rise to £6.6bn, which if they come in as expected should signal a dividend of 1p per share.

If this is approved it is likely to rise quite quickly in the coming years and the recent rise in the share price over the last two weeks appears to suggest that the market thinks the dividend approval is coming.

The bank still needs to do more given that it remains one of the most complained about banks in terms of customer service.

However, as long as the UK economy remains on an even keel and there is no further political interference, then the prognosis remains positive while we remain above the 70p level which has acted as a floor for the share price for the last 18 months.

Spread Betting & CFD trading carry a high level of risk to your capital and you can lose more than your initial deposit. Only speculate with money that you can afford to lose. These trading products may not be suitable for all investors so seek independent advice.

Content by Michael Hewson of CMC Markets

The contents on CleanFinancial.com including any articles or videos are for information purposes only and are not intended as a recommendation to trade. Nothing on this website should be construed as investment advice or form the basis of an of investment decision.

Neither CleanFinancial.com nor any contributing company/author accept any responsibility for any use that may be made of the above or for the correctness or accuracy of the information provided.

Content provided by CMC Markets. CMC Markets UK plc and CMC Spreadbet plc are authorised and regulated by the Financial Conduct Authority in the UK, registered offices, 133 Houndsditch, London, EC3A 7BX.

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