Compass Global Markets' Blog

Market Update – 24th April 2018 – Inflation Figures Due At 11.30AM As AUD Remains On The Backfoot

Posted by Patrick Downes on April 24, 2018 at 8:53 AM

As suggested could happen in my report on Friday the Aussie dollar has continued to sell off across the board and particularly versus the Greenback where it now sits hovering just above 0.7600 after holding above 0.77 for the the best part of March and April. The reason I provided for the more bearish view was the simple fact that interest rates in the U.S are going up far quicker than here in Australia where interest rates remain around 1.5%. Despite rates being artificially low, the RBA at this point seems unwilling to move interest rates until forced by rising inflation because of fears higher interest rates could further intensify a sell off in property prices and raise interest repayments for many indebted property speculators and owners. Having said that exporters would be well served to take advantage of current rates following the 2 cent-odd correction.

No data was released yesterday or overnight, but the latest local Aussie CPI figures are out this morning. Markets are expecting to see quarterly inflation around 0.5%, but anything above that could see a swift rise in the AUD in anticipation of a change in tone from the RBA on interest rates. Inflation is now tracking around 2% annualized which is at the lower end of the RBA’s 2-3% target. Should we see annualized inflation move well into the 2% range we could see a shift in the RBAs thinking and an eventual rate hike start to be penciled in perhaps as early as later this year. Watch this space.

AUD EXCHANGE RATES:

AUD/USD – 0.7604

AUD/GBP – 0.5454

AUD/EUR – 0.6227

AUD/NZD – 1.0627

AUD/JPY – 82.675

USD/BTC – $8,906

OTHER MARKETS: 

All Ords (XAO) – 5,976

Gold – A$1742/oz

Silver –  A$21.88/oz

WTI – US$68.82/barrel

DATA RELEASES TODAY:

AUD – CPI q/q at 11.30am

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Topics: Report, Market

Market Update - 20th April 2018 - AUD/USD Loses Ground Following Surge Higher Yesterday On Strong Commodities Prices

Posted by Patrick Downes on April 20, 2018 at 9:02 AM

No report from me yesterday due to a very busy morning, but looking back commodities had an absolute cracker of a session with zinc, copper and iron ore all up and helping to drive the Aussie dollar higher against all the majors. AUD/USD did breach 0.7800 momentarily yesterday however it has since been sold off back to the low 0.77's as a result of a strengthening US dollar and some profit taking on commodities markets.

Not much data is out today but with Trump potentially meeting with Kim Jong Un and also further discussion with China which could halt an escalation in trade war tensions things are starting to look a little better on the global macro economic front. As is always the case when one thing quietens down another pops up and I guess the main message is that AUD/USD particularly has been quite stable over the past month or so but that is certainly not guaranteed to continue. The bias is still probably lower for AUD/USD as a result of the U.S hiking interest rates, as such taking advantage of current levels is the best bet for importers. Exporters can sit pretty for the time being.

AUD EXCHANGE RATES:

AUD/USD – 0.7727

AUD/GBP – 0.5486

AUD/EUR – 0.6258

AUD/NZD – 1.0632

AUD/JPY – 82.992

USD/BTC – $8,255

OTHER MARKETS: 

All Ords (XAO) – 5,976

Gold – A$1740/oz

Silver –  A$22.31/oz

WTI – US$68.32/barrel

DATA RELEASES TODAY:

No economic data

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Topics: Report, Market

Market Update - 18th April 2018 - AUD Barely Changed, Commodities & Equities Perform Better Overnight

Posted by Patrick Downes on April 18, 2018 at 9:13 AM

The Aussie dollar has barely moved over the past 24 hours managing to stay in a very tight range against all the majors. As such not a great deal of commentary to add to this other than more of the same. Eventually volatility will return to Forex markets and the AUD, just as they did for U.S equities a month or so back, but until that happens there simply isn't a great deal to write about.

Commodities markets and equities performed better with the Nasdaq up nearly 1.8% while the Dow and S&P closed higher by around 0.9% and 1.1% respectively. European and UK equities also posted solid gains of between 0.4% and 1.6%. Zinc posted a third straight day of gains, while iron ore prices edged higher with copper, nickel, lithium and uranium which should bode well for local equities given the ASX's heavy waiting towards metals exploration and mining. For those of you who are interested in the stock market and commodities investing, it may be worthwhile looking at Uranium and the associated pure play stocks on the ASX as a theme for 2018. Nuclear reactor restarts in Japan are driving some enthusiasm that prices may finally appreciate from as well as a global need for clean base-load electricity to power the electric vehicle revolution. I have my eyes on a few Aussie uranium stocks but have yet to pull the trigger. The last Uranium bull market saw prices rise from about US$20 a pound to around US$140 a pound between 2000 and 2007. The associated uranium stocks went ballistic as a result.

AUD EXCHANGE RATES:

AUD/USD – 0.7769

AUD/GBP – 0.5435

AUD/EUR – 0.6279

AUD/NZD – 1.0580

AUD/JPY – 83.157

USD/BTC – $7,856

OTHER MARKETS: 

All Ords (XAO) – 5,934

Gold – A$1733/oz

Silver –  A$21.59/oz

WTI – US$66.57/barrel

DATA RELEASES TODAY:

GBP - CPI y/y at 7.30pm

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Topics: Report, Market

Market Update - 17th April 2018 - AUD/USD Bucks Trend To Move Higher Despite AUD Lower Against All The Majors

Posted by Patrick Downes on April 17, 2018 at 9:12 AM

U.S retail sales surged ahead in the latest reading with automobile sales making up most of the revision higher. A string of tax cuts announced by Trump earlier in the year and generally more bullish consumer sentiment are likely the main drivers.

This strong showing however didn't filter through to the USD with AUD/USD higher overnight bucking the trend which saw the Aussie down against all the majors including the GBP and EUR. AUD/USD which has been range trading between 0.7650 and 0.7800 is again getting exceptionally close to the top of this recent range, which suggests either more of the same or a breakout will occur at some point. With U.S interest rates likely to continue to rise and commodities remaining well and truly off the boil my immediate impulse would be to say to expect lower lows as opposed to higher highs. If this is the case hedging USD exposures with a Forward Contract is your best strategy - but it all comes down to each individual businesses strategy. If you're running a business where you can increase prices if AUD drops then there is absolutely no need to hedge your exposures. However if you're in a competitive industry and particularly one where you cannot move prices if AUD drops then hedging is in my humble opinion a must as hedging would allow you to lock in your profits but also guarantee no losses if AUD moves lower.

DATA RELEASES TODAY:

AUD – Monetary Policy Meeting Minutes at 11.30am

CNY - GDP q/y at 12.00pm

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Topics: Report, Market

Market Update - 16th April 2018 - Financial Markets Shrug Off Syria Strike And Trade Tensions

Posted by Patrick Downes on April 16, 2018 at 9:28 AM

Key macro themes from the weekend and therefore likely to filter through this week are Trump's military strike on Syria along with the ongoing dialogue between China and U.S on international trade. Many would have anticipated that the escalation of events in Syria over the weekend would have a detrimental impact on financial markets but looking at futures markets this morning and we actually see a sea of green with the Aussie Dollar, Bitcoin, commodities and stocks all generally higher or set to open higher. And this may all be as a result of the worlds global growth super power China who according to a front page story on Bloomberg appear to have "tuned out all the background noise and powered ahead in the first quarter. According to the median estimate of economists in a Bloomberg News survey, growth maintained a 6.8 percent pace, well ahead of a target for about 6.5 percent expansion this year." This news and hopefully easing tensions between Trump and China on tariffs could well provide commodities another leg up in 2018 particularly if China keeps powering ahead with its infrastructure plans which include countless new high speed rail lines, ports and roads through the old silk road - a theme many China bears have failed to fully grasp.

U.S retail sales are released tonight at 10.30pm but other than that there is a real vacuum of data announcements until later in the week when we will see Chinese GDP figures and Aussie employment numbers on Thursday.

AUD EXCHANGE RATES:

AUD/USD – 0.7769

AUD/GBP – 0.5456

AUD/EUR – 0.6300

AUD/NZD – 1.0571

AUD/JPY – 83.533

USD/BTC – $8,294

OTHER MARKETS: 

All Ords (XAO) – 5,924

Gold – A$1726/oz

Silver –  A$21.36/oz

WTI – US$67.03/barrel

DATA RELEASES TODAY:

USD - Retail Sales at 10.30pm

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Topics: Report, Market

Market Update - 13th April 2018 - Commodities Get Whacked While AUD Still Holding In 77's

Posted by Patrick Downes on April 13, 2018 at 9:32 AM

Commodity prices got whacked last night with all the major base metals sold off including zinc, copper, nickel and iron ore and all this despite a tempering in the the Trump/China trade debacle. Lithium however bucked the trend managing to post modest gains while the AUD finished very mixed, up vs. the EUR and JPY and down vs. the USD and GBP. Volatility is remaining quite low for the AUD, with the local currency barely moving over the past month, however as is always the case nothing lasts forever and it would certainly be prudent for importers to take advantage of the Aussie dollar with AUD/USD however around 77's on the wholesale market.  Something I read yesterday and is certainly pertinent to this call is that "current levels historically represent good value, and that 0.8000 and above is simply not the norm for the AUD/USD." Call me to discuss hedging solutions for your business, Forward Contracts work brilliantly to lock in margins and guarantee profits for importers and exporters.

No major data out today, but the RBA deliver their Financial Stability Review which is released annually and paints a picture of the stability of our financial system and any risks to that stability. This may impact the Aussie dollar but more so the major banks especially with the ongoing banking royal commission and the fact that they underpin the Australian financial system.

AUD EXCHANGE RATES:

AUD/USD – 0.7753

AUD/GBP – 0.5447

AUD/EUR – 0.6288

AUD/NZD – 1.0509

AUD/JPY – 83.144

USD/BTC – $7,827

OTHER MARKETS: 

All Ords (XAO) – 5,911

Gold – A$1725/oz

Silver –  A$21.27/oz

WTI – US$66.91/barrel

DATA RELEASES TODAY:

AUD - RBA Financial Stability Review at 11.30am

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Topics: Report, Market

Market Update - 12th April 2018 - AUD & Commodities Prices Flat, While Gold Moves Higher In Lackluster Trade

Posted by Patrick Downes on April 12, 2018 at 9:10 AM

The Aussie dollar lost a little ground over the past 24 hours as Westpac Consumer Sentiment declined 0.6% and iron ore prices fell marginally. The AUD was lower by around 10 points vs. USD, EUR and GBP but managed to hold ground vs. the Kiwi.

Bitcoin which has lost some of it's shine since last year remains locked below US$7,000 a coin while Gold has piled on gains over the past month and continued to do so overnight. Gold is now edging towards A$1,750 an ounce which if breached would be the highest levels in nearly 2 years and potentially the start of a new bullish cycle for Gold, Silver and the other precious metals which have been out of favor for some time.

The big macro events driving currency markets at the moment continue to be the Trump tariffs and interest rate movements abroad, particularity in the U.S. The U.S looks set to continue to hike rates over the next year with as many as four rate hikes anticipated while locally it would appear the RBA may continue to sit on their hands for the foreseeable future as fears mount that any significant rate hikes at home could send house prices spiraling lower and potentially trigger a crash of sorts in the housing market.

No significant data out today.

AUD EXCHANGE RATES:

AUD/USD – 0.7758

AUD/GBP – 0.5469

AUD/EUR – 0.6271

AUD/NZD – 1.0537

AUD/JPY – 82.881

USD/BTC – $6,891

OTHER MARKETS: 

All Ords (XAO) – 5,925

Gold – A$1743/oz

Silver –  A$21.49/oz

WTI – US$66.71/barrel

DATA RELEASES TODAY:

None today.

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Topics: Report, Market

Market Update - 11th April 2018 - Away For Three Weeks But AUD Little Changed While Volatility Remains

Posted by Patrick Downes on April 11, 2018 at 9:55 AM

Well, if you hadn't noticed it's been three weeks since my last morning market update and if you had and was wandering where I've been I was in Japan for the annual Cherry Blossom season. As many of you know I've been to Japan many many times to snowboard which is my other passion after financial markets but never during the famed Cherry Blossom period which occurs (depending on where in Japan you are) between late March and early April. The trip was amazing and the Cherry and Plum trees in full bloom was quite simply spectacular and I highly recommend a visit during this time of the year. If you want information simply reply with your questions and I'll happily give you all the tips and info I can.

But...returning to financial markets (and I have to admit I did keep one eye on the markets whilst on holiday) and things appear to be little changed. Markets are still more volatile than ever, Trump is still threatening trade wars with the rest of the world and the Aussie dollar remains tied to commodities prices particularly the iron ore price. Believe it or not in three weeks AUD/USD has barely changed with the currency not far off the 0.7716 quoted in my last report around the 20th - at present we are trading around 0.7764.

Commodities prices and stocks have remained volatile as a result of Trump's trade tariffs on Chinese products but commodities now appear quite oversold and potentially ripe for a move higher which could support the Aussie dollar. But U.S interest rates do continue to move higher whilst local interest rates remain around 1.5% with the RBA petrified of crushing the housing bubble via higher interest rates and preferring a more orderly correction over the next few years. Only time will tell how all this plays out though.

AUD EXCHANGE RATES:

AUD/USD – 0.7763

AUD/GBP – 0.5474

AUD/EUR – 0.6280

AUD/NZD – 1.0532

AUD/JPY – 83.226

USD/BTC – $6,765

OTHER MARKETS: 

All Ords (XAO) – 5,951

Gold – A$1726/oz

Silver –  A$21.36/oz

WTI – US$65.61/barrel

DATA RELEASES TODAY:

AUD – Westpac Consumer Sentiment at 10.30am

AUD - RBA Gov Lowe Speaks at 3.00pm

USD - CPI at 10.30pm

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Topics: Report, Market

3rd April 2018: RBA Announcement Cash Rate unchanged at 1.50 per cent.

Posted by Thomas Su on April 3, 2018 at 2:30 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 has strengthened over the past year. A number of advanced economies are growing at an above-trend rate and unemployment rates are low. The Chinese economy continues to grow solidly, with the authorities paying increased attention to the risks in the financial sector and the sustainability of growth. Globally, inflation remains low, although it has increased in some economies and further increases are expected given the tight labour markets. As conditions have improved in the global economy, a number of central banks have withdrawn some monetary stimulus and further steps in this direction are expected.

Long-term bond yields have risen over the past six months, but are still low. Equity market volatility has increased from the very low levels of last year, partly because of concerns about the direction of international trade policy in the United States. Credit spreads have also widened a little, but remain low. Financial conditions generally remain expansionary. There has, however, been some tightening of conditions in US dollar short-term money markets, with US dollar short-term interest rates increasing for reasons other than the increase in the federal funds rate. This has flowed through to higher short-term interest rates in a few other countries, including Australia.

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ABC TV, Breakfast News with Tony Boyadjian and Michael Rowland.

Posted by Thomas Su on March 23, 2018 at 10:30 AM

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Topics: Business, Currency, Report, Market

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