Scottish Independence and GBPUSD rate

I post here an entry in FT's Alphaville by Izabella Kaminska on the thoughts running through the analysts and Financial Journalists these days, concerning the impact the referendum on Scottish Independence might have on the Forex Market, and specifically on the GBPUSD exchange rate. The post is interesting also from an ethical perspective, about the issues that may arise when journalistic stories and headlines can precipitate a run on a Bank or trigger further panic and irrationality in the Markets. Interesting read:

Cataclysm Hyperbole

http://ftalphaville.ft.com/2014/09/09/1963701/cataclysmic-hyperbole/
''So could all the cataclysm be based on off-the-cuff remarks by Rochester to AEP directly? Possibly, but those familiar with his style said that such language would be completely out of character. And there is still no direct Nomura-related attribution to the word cataclysmic.
What’s stranger still… Nomura’s house view on GBPUSD (as of Sept 8.) doesn’t even marry up with the story’s 15 per cent projected “plunge”. From the real Nomura:

Historically, the 1.58-1.62 range has offered a key support or resistance level to break (see Figure 1 below) and we may expect these support levels to hold if GBPUSD moves even lower just before the referendum. If the „YES‟ vote does win the referendum on 18 September, GBPUSD could gap considerably lower (we think a 5-10% sell-off could be possible) and implied vols could be much higher. A “NO‟ vote could mean GBPUSD appreciating back to 1.66-1.68 levels.
A zero-cost break-out ladder in such a scenario could be profitable, as it would gain if spot gaps downwards with a large move, but would not lose anything if spot moves higher in the event the “NO‟ vote wins a majority.
Given that the probability of an exit is still considered less than 50% by most analysts in spite of this recent poll, (see for instance How to trade the Scottish Referendum for a detailed pre-You-Gov poll analysis including timelines), we do not think it makes sense to pay a large premium for this possibility.

To translate…
Nomura thinks the value of the pound could plunge by 5-10 per cent in the event of a ‘Yes’ vote. Furthermore, whilst you could buy an options strategy to profit from such a move in a relatively hedged way, the cost of the options strategy is probably not worth your while since the chances of an actual exit are still less than 50 per cent.
Go figure.''

João Monteiro & Markets:

A recent and very interesting person in the Markets that I made contact with.With this Blog about what is happening in the Financial Markets. I recommend.

''It’s been a relatively quiet session for Asian equity markets with traders struggling to find much meaningful direction. After yesterday’s market holiday in Shanghai, the Hong Kong exchange has been closed today, leaving many traders playing something of a waiting game ahead of fresh data out of Beijing. We’re going to see new Yuan loan numbers out tonight followed by CPI readings later in the week and with concern building that signs of a slowdown may be imminent, anything that serves to exacerbate these fears could result in a bout of selling. The Nikkei is edging higher once again but much of this appears to be driven by ongoing dollar strength – USD/JPY came close to 106.40 overnight.  

Major indices on Wall Street are currently forecast to start the day little changed and again there’s not much in the way of fresh economic data that has the potential to deliver any meaningful direction here. The geopolitical situation seems eerily calm and the point many seem to be focusing on is the launch of the latest iPhone, so ahead of the open we’re calling the DOW down 4 at 17107 and the S&P down 1 at 2001. ''

João Monteiro & Markets: That´s what I´m talking about! ;): Markets | 09/09/2014 | Relatively quiet session fo...: It’s been a relatively quiet session for Asian equity markets with traders struggling to find much meaningful direction. After yesterd...

A comment on ECB's ABS move

Hello again! Today a link to the brilliant economics commentator and Blogger extraordinaire Frances Coppola. A comment on today's move by the ECB to kick start in October a programme of Asset-backed securities purchase, which the Central Bank hopes will be decisive for resuming robust Growth in the Eurozone. Coppola's comment is sceptical. Is she right.....?:



'' So as far as I can see, the SME ABS programme is either going to be too
small to make much difference, or is likely to encounter serious
problems with loan quality at some point, putting the ECB's balance
sheet at risk. I'm particularly worried by the way in which SME ABS
purchases by the ECB is being promoted in some quarters as the primary
means of "fixing" the periphery (though Draghi himself does not make
this mistake). If only we can get credit flowing to periphery SMEs, the
thinking goes, all our troubles will be over. This is simply not true.
SME ABS purchases cannot substitute for flawed institutions and
inadequate fiscal and monetary support. And even more importantly, they
cannot compensate for a lack of creditworthy borrowers.''









Coppola Comment: Don't pin all your hopes on SME asset-backed secur...: Here's a neat chart from JP Morgan (h/t @debtnerd) (larger version here ) What it says, essentially, is that although the total...

Unquote: incisive Adbrain

I would like to post here today an article in the Private Equity and Business Deals Media publication Unquote, which is another Incisive Media Publication. This entry is about Venture Capital funding of Advertising Technology Company Adbrain and its recent rounds of seed funding.

'' London-based advertising technology platform Adbrain has raised a $7.5m series-A funding round led by Octopus Investments.

Existing backer Notion Capital also participated in the round. The VC led the firm's $1.5m seed funding round in June 2013, with support from angel investors.
Adbrain will use the funding to accelerate its expansion in the US and Europe and to boost its recruitment programme.
Company
Founded in 2013 and based in London, Adbrain is an advertising technology company that provides users with customer data. The firm launched its beta platform in February 2014 and counts M&C Saatchi Mobile, Annalect and The Exchange Lab among its client base.
People
Frederic Lardieg is a member of the venture team at Octopus and worked on the deal. Gareth Davies is CEO of Adbrain.''

KEY FACTS

Adbrain
DEAL - Expansion
VALUE - $7.5m
LOCATION - London
SECTOR - Software
FOUNDED - 2013''

http://www.unquote.com/uk/official-record/2333919/octopus-leads-usd75m-series-a-round-for-adbrain.

Phamaceutical Sector: Merck & Company

Summer Investment Case: a post in the promising pharmaceutical sector. About North American Company Merck & Company which is posting an upbeat earnings per share result. It may well turn out to be a good buy opportunity. The following is from the Investing website Investing.com:

'' U.S. pharmaceutical giant Merck & Company (NYSE:MRK) reported better-than-expected second quarter earnings and revenue figures ahead of Tuesday’s opening bell, sending its shares modestly higher in pre-market trade.

Merck reports better than expected Q2 earnings, revenue

Merck said adjusted earnings came in at $0.85 per share in the second quarter, beating expectations for earnings of $0.81 per share.
The company’s second quarter revenue totaled $10.93 billion, above estimates for revenue of $10.61 billion.
The pharmaceutical company reaffirmed its 2014 revenue forecast and said it expected full-year earnings per share in a range between $3.43 to $3.53.
“We delivered a strong first half of the year, making progress in transforming our operating model, fueling innovation and managing costs, while focusing on our best opportunities”, said Kenneth C. Frazier, chairman and chief executive officer, Merck.
Following the release of the report, Merck (NYSE:MRK) saw shares rise 0.1% in pre-market trade.
Meanwhile, the outlook for U.S. equity markets was higher. The Dow indicated a gain of 0.2% at the open, the S&P 500 pointed to an increase of 0.15%, while Nasdaq 100 added 0.2%.''.

Good Investments to all readers of my Case. And if you happen to be on Holiday Break, a great time of enjoyment and refilling energies is what I recommend. To be ready for another certainly busy fall of the year.

If there is a major Breakout

I am posting today in the my suitcase Saxo Bank's John Hardy view about the possible path for the EURUSD exchange rate (currency pair). Hardy's analysis is seamlessly lucid, devoid of nuisance and bias. At the same time he recognises that failure to predict the right direction of the Financial Markets isn't necessarily a disadvantage if proper behaviour is triggered.

'' EURUSD is breaking lower - here are the next targets. EURUSD is breaking what is arguably a head and shoulders area - poking at the last shreds of flat-line support at the 2014 lows just below 1.3480. A break lower begs the question - where next? If we are to take the classic head and shoulders target, the target is close to 1.3000, but if we take a more typical 100% extension from the top of the right shoulder (an extension of the wave from the top of the head to the recent lows), we get a target of around 1.3210.

Other Fibonacci retracement levels are also bunched in this area as well, with the 61.8% retracement of the move from the critical old 1.2750 area coming in around 1.3225 and the 38.2% retracement of EU-crisis lows in July 2012 coming in closer to 1.3250. So we'll call 1.3250/1.3200 the next major target zone lower if this break through 1.3480/1.3500 holds.''

Saxo FX SQUAWK - AUDUSD

John J Hardy at Saxo Bank:

''AUDUSD rally does not sit well with recent development in interest rate spreads. The recent RBA minutes discouraged the notion that the RBA is about to hike rates any time soon, while the US FOMC meeting, while dovish, only saw US rates at the front end of the curve move a few bps lower. Currently, even as AUDUSD is banging on resistance, the 2-year swap spread is near its lowest level since last September at around 226 basis points. The 1,000 day correlation of the spread with AUDUSD is 0.67 while it is a stunning -0.61 for the last 100 days. I doubt if the latter can be sustained for much longer.''