Compass Global Markets' Blog

Market Update - 8th March 2019 - AUD Continues Declines With Poor Retail Sales

Posted by Patrick Downes on March 8, 2019 at 8:51 AM

Please note that the commentary below is factual information provided to a group of readers as a web blog, and where an opinion is expressed by the author, it is GENERAL ADVICE only.

Retail Sales Disappoint: 

More poor local economic data released yesterday put further downward pressure on the Aussie Dollar with the latest retail sales figures showing a very lacklustre 0.1% increase in month on month sales. Department stores again fielded the brunt of declines off 0.4%, while food retailing and spending at cafe & restaurants grew 0.3% and 0.2% respectively. AUD/USD is off around 10-15 points since yesterday and is nearly 2 cents lower than in late Feb.

Rate Cut Likely: 

All the data now seem to point to a rate cut from the RBA as opposed to a rate hike, which unfortunately probably also means a lower AUD. How low will we go? Well I'm not a big fan of making long dated forecasts as the book "Future Babble" paints a pretty bleak picture of expert predictions, but I can provide a basic range and suggest something like 0.6500 to the downside and 0.7500 on the upside over the next 12-24 months is certainly possible. Which means for importers, if we get an opportunity to lock something in around 0.72-0.75 then it would be wise to hedge some of your exposures. The key here is not being greedy, greed always ends in tears.

Exporters really can sit back and relax I think given the way the AUD is travelling and the way local data has been performing.

US Non-Farms Due: 

Ahead tonight is U.S non farm employment numbers which is as I say every month a crucial data event. AUD could fall under further pressure tonight if employment numbers are strong and vice versa.

AUD EXCHANGE RATES:

AUD/USD – 0.6979

AUD/GBP – 0.5332

AUD/EUR – 0.6237

AUD/NZD – 1.0357

AUD/JPY – 78.000

OTHER MARKETS:

All Ords (XAO) – 6,344

Gold – A$1,833/oz

Silver –  A$21.43/oz

WTI – US$56.74/barrel

DATA RELEASES TODAY:

CNY - Trade Balance Figures around lunchtime

USD - Non-Farm Employment Change & Unemployment Rate at 12.30am (tomorrow morning)

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Topics: Report, Market

Market Update - 7th March 2019 - AUD Gets Whacked As GDP Per Capita Enters Recession

Posted by Patrick Downes on March 7, 2019 at 8:56 AM

Please note that the commentary below is factual information provided to a group of readers as a web blog, and where an opinion is expressed by the author, it is GENERAL ADVICE only.

AUD Nosedives:

Quite a boil over for the Aussie Dollar overnight with a raft of poor data this week putting the Aussie Dollar well and truly on the back foot once again. AUD vs. the EURO, USD and GBP is down around 0.75% since yesterday while AUD/JPY is off closer to 1% as U.S and European stocks faltered and data yesterday showed we have entered a GDP per capita recession "GDP per person dropped 0.2 per cent, the second consecutive fall in the widely used measure. It was only the third per-capita GDP recession since 1991." Household spending has also been weak, with retail sales struggling while new car sales have continued to decline as a result of the negative wealth effect from lower house prices - all this points to lower interest rates or some stimulus down the track if things continue to worsen. The shining light right now is once again our commodities sector which is benefiting from a low AUD and supply deficits in almost all base metals.

Retails Sales Out:

Ahead this morning is further local economic data in Retail Sales at 11.30am. Retail sales have been poor over the past few years so I wouldn't expect a turnaround just yet for the above-mentioned reasons, however we will be watching the data closely. Growth in retail sales is expected to come in around 0.3%.

The ECB decides on Interest Rates later this evening, forecasts are for no change to their rates which stand at 0.00%.

AUD EXCHANGE RATES:

AUD/USD – 0.6997

AUD/GBP – 0.5303

AUD/EUR – 0.6185

AUD/NZD – 1.0353

AUD/JPY – 78.26

OTHER MARKETS:

All Ords (XAO) – 6,326

Gold – A$1,830/oz

Silver –  A$21.46/oz

WTI – US$56.41/barrel

DATA RELEASES TODAY:

AUD – Retail Sales m/m at 11.30am

AUD - Trade Balance at 11.30am

EUR - Monetary Policy Statement & Main Refinancing Rate at 11.45pm

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Topics: Report, Market

5th March 2019: RBA Announcement Cash Rate unchanged at 1.50 per cent.

Posted by Thomas Su on March 5, 2019 at 2:31 PM

Statement by Philip Lowe, Governor: Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

The global economy grew above trend in 2018, although it slowed in the second half of the year. The slower pace of growth has continued into 2019. The outlook for the global economy remains reasonable, although downside risks have increased. The trade tensions remain a source of uncertainty. In China, the authorities have taken further steps to ease financing conditions, partly in response to slower growth in the economy. Globally, headline inflation rates have moved lower following the earlier decline in oil prices, although core inflation has picked up in a number of economies. In most advanced economies, unemployment rates are low and wages growth has picked up.

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Market Update - 5th March 2019 - AUD/USD Falls Marginally Ahead Of RBA Meeting

Posted by Patrick Downes on March 5, 2019 at 8:08 AM

Please note that the commentary below is factual information provided to a group of readers as a web blog, and where an opinion is expressed by the author, it is GENERAL ADVICE only.

Overnight:

U.S equities fell overnight with the Dow the worst performer off 0.85%, while over in Europe stocks finished mostly higher with the French CAC leading the charge up 0.41% at the close. The Aussie Dollar is marginally lower vs. the USD, NZD and JPY but higher versus the Euro and Pound as both retreated in overnight trade.

Big Day Of Data Yesterday:

A big day of data yesterday saw the release of jobs numbers and building approvals with latter firming ever so slightly from the previous month however the trend remains lower and sharply so with total dwellings down over 27% year over year; excluding houses (i.e. Apartments) and you're looking at a decline in excess of 46% year over year. ANZ Job Ads also declined.

Cash Rate Decision At 2.30pm:

Ahead today is the all important cash rate decision at 2.30pm, however rates are likely to remain on hold again at 1.5% with all eyes on the accompanying RBA Rate Statement released at the same time. Housing is the word on everyone's lips right now, so we'd expect to some opinion from the RBA and also some guidance on perhaps their next move. A strong suggestion from the RBA that a rate cut is on the cards soon would likely to see the AUD swiftly sold off, perhaps towards support around 0.6970.

Hedging Strategy: 

Many of you have locked in Forwards in the 0.70's recently but many still have not, if you'd like to look at this as a prudent hedging strategy to protect your profit margins from a decline in the AUD then please don't hesitate to call me for a quick discussion - I'm here to help. Exporters you're sitting pretty.

AUD EXCHANGE RATES:

AUD/USD – 0.7059

AUD/GBP – 0.5350

AUD/EUR – 0.6221

AUD/NZD – 1.0364

AUD/JPY – 78.915

OTHER MARKETS:

All Ords (XAO) – 6,302

Gold – A$1,814/oz

Silver –  A$21.28/oz

WTI – US$56.70/barrel

DATA RELEASES TODAY:

AUD – Current Account at 11.30am

AUD – RBA Rate Statement and Cash Rate at 11.30am

GBP - BOE Gov Carney Speaks at 2.35am (tomorrow morning)

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Topics: Report, Market

Market Update - 4th March 2019 - Trump, China Close To A Deal?

Posted by Patrick Downes on March 4, 2019 at 9:04 AM

Please note that the commentary below is factual information provided to a group of readers as a web blog, and where an opinion is expressed by the author, it is GENERAL ADVICE only.

Bloomberg Leads With U.S, China Close To Trade Deal:

I was off last week, but I didn't miss too much. The AUD is continuing to sea-saw around the 0.7000-0.7200 level vs. the Greenback as negotiations between Trump and China near conclusion and Australia gets ready to elect Bill Shorten as the next Prime Minister...perhaps a little early to call, but it's obvious from a look at the polls and recent departures within the LNP that Shorten will probably be our next Prime Minister and sixth this decade. The GBP has gone on an absolute tear in the past fortnight gaining as much as 3 cents or 6% vs. the Aussie Dollar as Brexit delays continue and a possible new referendum is considered by voters. Watch this space, certainly more to come out of the UK and Brexit this year.

Bunch Of Local Data:

We get a raft of local economic data out this morning, 50% of which relates to the housing market with the rest being Company Operating Profits and ANZ Jobs Ads numbers. The housing market is continuing to falter with losses right across the board and now seeping into regional areas. All up, Melbourne and Sydney are now down 11.5% since their 2017 peaks with most forecasts on consensus that we'll see continued falls through 2019 and 2020. With that said Job's numbers have been robust and the pillar of our economy with mining lately, so the RBA will be hoping to see that trend continue this morning.

AUD EXCHANGE RATES:

AUD/USD – 0.7076

AUD/GBP – 0.5330

AUD/EUR – 0.6214

AUD/NZD – 1.0379

AUD/JPY – 79.205

OTHER MARKETS:

All Ords (XAO) – 6,273

Gold – A$1,821/oz

Silver –  A$21.38/oz

WTI – US$55.91/barrel

DATA RELEASES TODAY:

AUD - Building Approvals m/m & Company Operating Profits at 11.30am

AUD - ANZ Jobs Ads & HIA New Home Sales also at 11.30am

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Topics: Report, Market

Market Update - 22nd February 2019 - AUD Slips Through The Week But Jobs Numbers Still Strong

Posted by Patrick Downes on February 22, 2019 at 9:39 AM

Please note that the commentary below is factual information provided to a group of readers as a web blog, and where an opinion is expressed by the author, it is GENERAL ADVICE only.

Due to travel and work commitments my market reports have been few and far between this week. Apologies about that if you rely on my morning email for your daily FX update.

AUD Slips, Brexit Extension:

The AUD will start the final day of the week around half a percent lower vs. the Greenback and Euro, while the Pound has climbed against the Aussie Dollar as Theresa May is expected to request a three month extension/delay of Brexit. Locally, employment data was released yesterday and showed continued strong employment numbers and an unemployment rate anchored at 5%. Unfortunately though, wages growth remains stagnant for the middle class which continues to drag on the economy and it appears more and more economists are becoming bearish on the Aussie economies prospects to turn things around without the RBA's helping hand via a number of interest rate cuts. Should they proceed with this course of the action then all the AUD/USD forecasts for 0.65 may well come to fruition. Now is certainly a good time to consider hedging your USD exposures, even if you've never done so before.

No Data Out Today:

No economic data is due out today and U.S equities fell by around 0.4% last night. Local stocks are set to open flat this morning.

AUD EXCHANGE RATES:

AUD/USD – 0.7061

AUD/GBP – 0.5407

AUD/EUR – 0.6226

AUD/NZD – 1.0390

AUD/JPY – 78.111

OTHER MARKETS:

All Ords (XAO) – 6,214

Gold – A$1,866/oz

Silver –  A$22.29/oz

WTI – US$56.88/barrel

DATA RELEASES TODAY:

No economic data

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Topics: Report, Market

Market Update - 19th February 2019 - AUD/USD Moves Higher On Positive Sentiment

Posted by Patrick Downes on February 19, 2019 at 10:17 AM

Please note that the commentary below is factual information provided to a group of readers as a web blog, and where an opinion is expressed by the author, it is GENERAL ADVICE only.

AUD/USD Lift:

We've had a nice little uplift in AUD/USD since my last report on Thursday or Friday with a spike above 0.7150 thrown in yesterday, right now we aren't too far off the 0.7100 figure. But murmuring's from bank economists and other places suggest the Aussie Dollar at current level's is an opportunity for importers as opposed to a sign of things to come, with the bias for AUD/USD definitely to the downside. Some forecasts are as low as 0.6500.

RBA Minutes Due: 

The other AUD crosses are also a bit higher than last week, but not by as much. Local Monetary Policy Minutes from the RBAs latest meeting are due out this morning at 11.30am.

In other news, U.S stocks generally moved higher overnight while the UK FTSE was the only detractor amongst European Indices.

AUD EXCHANGE RATES:

AUD/USD – 0.7096

AUD/GBP – 0.5483

AUD/EUR – 0.6270

AUD/NZD – 1.0371

AUD/JPY – 78.516

OTHER MARKETS:

All Ords (XAO) – 6,172

Gold – A$1,860/oz

Silver –  A$22.16/oz

WTI – US$56.39/barrel

DATA RELEASES TODAY:

AUD – Monetary Policy Meeting Minutes at 11.30am

GBP - Average Earnings Index 3m/y at 8.30pm

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Topics: Report, Market

Market Update - 15th February 2019 - AUD Gains Against The GBP & USD Amid Failed Brexit Vote And Weak Data

Posted by Patrick Downes on February 15, 2019 at 9:44 AM

Please note that the commentary below is factual information provided to a group of readers as a web blog, and where an opinion is expressed by the author, it is GENERAL ADVICE only.

AUD Mixed:

The AUD fell versus the EURO but rallied against the USD and GBP as weak U.S economic data and another failed Brexit vote overnight weighed on the Greenback and Pound. The latest failed Brexit vote pushes the U.K closer to a hard Brexit unless Theresa May can somehow negotiate a deal that will curry enough favour with both local MPs and the Euro zone chiefs. In the U.S retail sales fell for the first time since March, but the decline was the worst reading since June 2010 - nearly 9 years ago. Producer prices also fell. The poor retail sales reading along with weaker economic data more broadly likely takes any further rate hikes from the Federal Reserve off the table until later in the year. However, expect Fed Chairman Powell to have some comments on the economic data in his next speech.

Stocks & Commodities: 

U.S and European stocks again finished the session mixed, while our local market is tipped to open around a 1/3 of a percent lower at 10.00am. Commodities prices have also continued to come off the boil, but Iron Ore is holding above 600CNY a tonne, or US$88 for the 62% fines. The high grade 65% fines is fetching just on US$100 a tonne.

AUD EXCHANGE RATES:

AUD/USD – 0.7075

AUD/GBP – 0.5520

AUD/EUR – 0.6260

AUD/NZD – 1.0358

AUD/JPY – 78.201

OTHER MARKETS:

All Ords (XAO) – 6,139

Gold – A$1,847/oz

Silver –  A$21.99/oz

WTI – US$54.79/barrel

DATA RELEASES TODAY:

GBP - Retail Sales m/m at 8.30pm

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Topics: Report, Market

Market Update - 14th February 2019 - AUD Falls Despite Solid Gains For U.S Equities

Posted by Patrick Downes on February 14, 2019 at 8:31 AM

Please note that the commentary below is factual information provided to a group of readers as a web blog, and where an opinion is expressed by the author, it is GENERAL ADVICE only.

AUD Falls, Equities Gain:

The AUD fell overnight despite a bullish finish for global equities and good momentum as Trump declared talks with China are going 'very well' as the March 1 deadline of higher U.S tariffs on Chinese imports approaches. U.S stocks were led higher by the Dow, which finished up 0.46%, while the S&P finished up 0.3%; in Europe the best performer was the UK FTSE up just over 0.8%. The AUD's overnight declines takes it's falls since Tuesday morning to around half a percent evenly spread across the board.

Commodities Off The Boil: 

Commodities prices have continued to come off the boil in the past week with Zinc and Lead lower, while Iron Ore has held above 600CNY per tonne on the Chinese Dalian Futures market. Iron ore may have another significant move higher as Vale exports remain constrained following their tailings dam disaster. Higher iron ore and commodities prices more broadly should boost the bottom line for our miners which should in turn support GDP growth and even the AUD. I continue to watch the interrelationship between the AUD and Iron ore prices pretty closely.

Data Coming Up:

Not a great deal of economic data out today with only local MI Inflation numbers due at 11.00am. The data asks respondents to predict how much they think the price of goods and services will change during the next 12 months. A higher number shows consumers are confident and can manifest into higher real inflation, while a lower number could suggest respondents don't feel rosy about the economy at all and inflation is set to head lower. The number has been declining for the past year and a half.

AUD EXCHANGE RATES:

AUD/USD – 0.7056

AUD/GBP – 0.5484

AUD/EUR – 0.6260

AUD/NZD – 1.0400

AUD/JPY – 78.379

OTHER MARKETS:

All Ords (XAO) – 6,140

Gold – A$1,842/oz

Silver –  A$21.95/oz

WTI – US$54.29/barrel

DATA RELEASES TODAY:

AUD – MI Inflation Expectations at 11.00am

USD - Core Retail Sales m/m & Producer Price Index at 12.30am

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Topics: Report, Market

Market Update - 12th January 2019 - AUD Declines Continue While China/U.S Trade Talks Edge Closer To Deadline

Posted by Patrick Downes on February 12, 2019 at 8:27 AM

Please note that the commentary below is factual information provided to a group of readers as a web blog, and where an opinion is expressed by the author, it is GENERAL ADVICE only.

AUD Declines Gain Momentum:

It would appear comments from RBA Governor Lowe last Wednesday continue to drag on the Aussie Dollar with a clear bias to the downside following comments that he'll watch future data closely and that the next move may be a cut if required. AUD/USD and AUD/EUR both declined around half a percent, while AUD/GBP fell 0.7% despite poorer than anticipated economic data out of the U.K overnight. The market may be seeing the poor data as a sign the next move from the Bank of England will also be a rate cut or some form of stimulus.

Stocks/Commodities Mixed: 

European stocks were the best performers overnight, up around 0.8-1%, while U.S equities excluding the Dow (down 0.21%) eked out very small gains. Commodities prices excluding iron ore have continued to come off the boil as "investors continue to weigh up the prospects for the success of this week’s high-level U.S.-China trade talks -- coming just days before the March 1 deadline for higher tariffs." Iron ore prices capped out at their full allowable gain yesterday at 8% on the Chinese iron ore futures market, with further gains expected today. The big iron ore and commodities stocks on the ASX have all had their earnings forecasts ratcheted up substantially and may be the one bright spot on our market this week with the banks, retail, and now aged care (Royal Commission into Aged Care kicked off yesterday) all under pressure.

Data Out Today:

Home loans numbers and NAB Business confidence are due out at 11.30am. Home loans numbers should decline again, while it's likely also that Business Confidence could be on the nose leading up the election.

AUD EXCHANGE RATES:

AUD/USD – 0.7033

AUD/GBP – 0.5460

AUD/EUR – 0.6230

AUD/NZD – 1.0447

AUD/JPY – 77.658

OTHER MARKETS:

All Ords (XAO) – 6,128

Gold – A$1,852/oz

Silver –  A$22.24/oz

WTI – US$52.65/barrel

DATA RELEASES TODAY:

AUD - Home Loans m/m and NAB Business Confidence at 11.30am

GBP - BOE Gov Carney Speaks at midnight

USD - Fed Chair Powell Speaks at 4.45am (tomorrow morning)

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Topics: Report, Market

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