Compass Global Markets' Blog

Market Update - 24th May 2018 - U.S Fed Reassures Markets That They Will Raise Rates Gradually

Posted by Patrick Downes on May 24, 2018 at 9:21 AM

For me, writing this morning report is a great way to kick start the day as it not only gives me an early accomplishment which typically leads to further accomplishments through the day, but more importantly it is a fantastic way for me to force myself to look at markets and what has happened overnight in the financial universe, which so many of you always want feedback on.

The so called Aussie dollar is continuing to tread water vs. the Greenback, but more recently has started picking up gains against the Euro and GBP after a sustained sell off. The news that AUD/GBP and AUD/GBP is great for the long suffering importers but not so great for those of you who have exposures in GBP and EUR which you need to convert back to Aussie dollars. But as I've mentioned in private conversation AUD/GBP and AUD/EUR still represent great value at current levels.

Minutes from the latest U.S Federal Reserve meeting which were released overnight showed that the Fed were likely to be more accommodating of rising inflation and were therefore less likely to rise interest rates quicker than already priced in which is about 3 rate hikes this year. That was seen as reasonably upbeat news for markets as the Fed has been known in the past to hike rates so hard that they inevitably trigger a recession or equities bear market. It would appear that the new Fed Governor Powell may have learnt from his predecessors to take it slowly and let the market digest rate hikes before heaping on further stress. The good news saw equities move higher, with the Dow and S&P up 0.21% and 0.32% respectively.

AUD EXCHANGE RATES:

AUD/USD – 0.7565

AUD/GBP – 0.5663

AUD/EUR – 0.6462

AUD/NZD – 1.0917

AUD/JPY – 83.212

USD/BTC – $7,541

OTHER MARKETS: 

All Ords (XAO) – 6,140

Gold – A$1709/oz

Silver –  A$21.76/oz

WTI – US$71.86/barrel

DATA RELEASES TODAY:

GBP – Retail Sales m/m at 6.30pm

EUR - ECB Monetary Policy Meeting Accounts at 9.30pm

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Topics: Report, Market

Market Update - 23rd May 2018 - AUD/USD Back To Its Historic Average In The 0.75's

Posted by Patrick Downes on May 23, 2018 at 8:11 AM

I was having a good uninterrupted run publishing my reports each morning, however missed one yesterday which is bound to happen when you work in a service based industry. Thankfully not a great deal happened in the early part of the week as we had public holidays in Canada and throughout Europe. The most important thing - for the vast majority of you - is that AUD/USD has moved higher, which was always bound to happen after such a sustained sell off. 0.75 is the historic average for AUD/USD and that's smack bang where we are right now.

Trump's tariff war is over, so that has certainly helped bolster the Aussie dollars appeal as a result of expectations of improved trade which is of course great for our number 1 export (commodities).

A bit of economic news out today with the MI Leading Index at 10.30am followed by Construction Work Done at 11.30am. The MI Leading Index has been exceptionally flat for the most part since 2014, with the index barely ticking above about 0.3% and spending half the time in negative territory over the same period. More recently though it appears growth is slowly filtering back into the economy with two of the four highest readings posted since late 2013 occurring in Jan and March of this year. Construction numbers are likely to be flat once again as the end of the latest property cycle comes to a close.

AUD EXCHANGE RATES:

AUD/USD – 0.7575

AUD/GBP – 0.5637

AUD/EUR – 0.6430

AUD/NZD – 1.0924

AUD/JPY – 84.004

USD/BTC – $8,066

OTHER MARKETS: 

All Ords (XAO) – 6,150

Gold – A$1704/oz

Silver –  A$21.84/oz

WTI – US$72.09/barrel

DATA RELEASES TODAY:

AUD - Construction Work Done q/q at 11.30am

AUD - RBA Gov Lowe Speaks at 6.00pm

GBP - CPI at 6.30pm

USD - FOMC Meeting Minutes at 4.00am

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Topics: Report, Market

Market Update - 21st May 2018 - Trump/China End Trade War, Stocks Set To Open Higher

Posted by Patrick Downes on May 21, 2018 at 8:28 AM

No economic data out on Friday or Friday evening, as such the Aussie dollar is little changed. Probably the big news over the weekend is that Trump's trade war has come to a sudden end with the big orange man backing down amid China's willingness to shoot back with gusto on any tariffs imposed by the Trump administration. Essentially it turns out that China has "agreed" to significantly increase it's imports from the U.S but no figures or numbers have been agreed to or supplied by either party. As such it's probably business as usual and life goes on.

U.S and European equities performed poorly on Friday evening however the news of Trump's tariffs capitulation has sent stock futures higher, with the Dow and S&P500 set to open nearly 1% higher when markets open later this evening in the U.S.

AUD EXCHANGE RATES:

AUD/USD – 0.7523

AUD/GBP – 0.5579

AUD/EUR – 0.6390

AUD/NZD – 1.0858

AUD/JPY – 83.375

USD/BTC – $8,508

OTHER MARKETS: 

All Ords (XAO) – 6,190

Gold – A$1717/oz

Silver –  A$21.87/oz

WTI – US$71.69/barrel

DATA RELEASES TODAY:

Bank Holidays in France, Germany, Switzerland and Canada

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Topics: Report, Market

Market Update - 18th May 2018 - AUD Stable Despite Higher Unemployment Rate

Posted by Patrick Downes on May 18, 2018 at 8:28 AM

Quiet day ahead and an exceptionally quiet night for markets so I won't bore you with a long winded report about nothing. Rather I'll provide a pretty quick summary.

The Aussie dollar is still range trading with AUD/USD stuck in the 0.74-0.75 range as it has all month, while AUD/GBP and AUD/EUR look comfortable in the 0.55's and 0.63's respectively. No data is due out today but we did have employment numbers out yesterday which showed another 22k jobs were created, but the month previous had a revision lower with jobs actually lost in March, which probably explains the jump in the unemployment rate to 5.6%. Participation remains an issue with the number at about 65%, but that could be related to demographics and and ageing population.

Have a lovely weekend.

AUD EXCHANGE RATES:

AUD/USD – 0.7510

AUD/GBP – 0.5554

AUD/EUR – 0.6365

AUD/NZD – 1.0920

AUD/JPY – 83.252

USD/BTC – $7,993

OTHER MARKETS: 

All Ords (XAO) – 6,197

Gold – A$1718/oz

Silver –  A$21.88/oz

WTI – US$71.63/barrel

DATA RELEASES TODAY:

No data

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Topics: Report, Market

Market Update - 17th May 2018 - Equities, Commodities & AUD Move Higher

Posted by Patrick Downes on May 17, 2018 at 8:26 AM

Equities, commodities and the Aussie dollar have moved higher in unison overnight while the traditional safe haven of Gold has retreated suggesting renewed optimism in global financial markets. The Aussie dollar made gains against all the majors with AUD/USD again finding support in the 0.7400's and pushing back into the safety of the 0.7500 level.

Data released locally here yesterday showed wages growth remains subdued with the index coming in at 0.5% which was lower than the 0.6% forecast. Additionally the previous quarters reading was revised lower showing the downward spiral in wages growth may yet have further to run. Other data out yesterday was Westpac Consumer Sentiment which came in negative once again while providing a great example of the impact weak wages growth is having on the economy and the very subdued retail sales sector.  Commodities, immigration and education however continue to support the Australian economy without which we'd probably be in dire trouble.

Employment numbers are released close to lunch time today and expectations are that we'll see 20K new jobs created but no change to the unemployment rate which stands at 5.5%. In New Zealand, they release their annual budget papers.

AUD EXCHANGE RATES:

AUD/USD – 0.7515

AUD/GBP – 0.5561

AUD/EUR – 0.6361

AUD/NZD – 1.0889

AUD/JPY – 82.895

USD/BTC – $8,266

OTHER MARKETS: 

All Ords (XAO) – 6,208

Gold – A$1717/oz

Silver –  A$21.81/oz

WTI – US$71.59/barrel

DATA RELEASES TODAY:

AUD – Unemployment Rate and Employment Change at 11.30am

NZD - Annual Budget Release at midday

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Topics: Report, Market

Market Update - 16th May 2018 - US Retail Sales Chug Along, Spurring USD Rally & Equities Sell Off

Posted by Patrick Downes on May 16, 2018 at 8:42 AM

Strong retail sales numbers released overnight in the U.S has helped boost bets that the U.S Federal Reserve will hike rates at least three times before the end of the year. The more bullish bets on interest rates helped the USD and Dollar Index surge the most since March the chart now starting to look quite bullish again, after declining for the better part of 2017 and even early 2018. When you look at AUD/USD - we've seen about a 1% drop since this time yesterday, while a more macro view shows us that AUD/USD has fallen from 0.8100 since the 1st February (about the time Trump started Tweeting about trade and trade wars, etc.

0.7500 for AUD/USD is seen as the long term average as such being at these levels is really not at all unusual and so for the bulk of our import and export clients I'd probably suggest simply getting comfortable with these levels as a base case AUD/USD.

More economic data out today with Westpac Consumer Sentiment and the Wages Index out this morning. Westpac Consumer Sentiment doesn't have a forecast figure but consumer sentiment generally hasn't been strong lately, which probably explains the continued weak retail sales environment we are in. Wages are tipped to have grown by 0.6% in the latest quarter which would be the fastest pace since 2015, but the picture isn't pretty for wages growth if you look at it over 10 years+ with wages growth declining since the GFC and quite dramatically.

AUD EXCHANGE RATES:

AUD/USD – 0.7467

AUD/GBP – 0.5529

AUD/EUR – 0.6313

AUD/NZD – 1.0884

AUD/JPY – 82.389

USD/BTC – $8,457

OTHER MARKETS: 

All Ords (XAO) – 6,198

Gold – A$1730/oz

Silver –  A$21.81/oz

WTI – US$71.00/barrel

DATA RELEASES TODAY:

AUD – Westpac Consumer Sentiment at 10.30am

AUD - Wages Index at 11.30am

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Topics: Report, Market

Market Update - 15th May 2018 - AUD/USD Holding In The 0.75's, But Significant Economic Data Due Today

Posted by Patrick Downes on May 15, 2018 at 10:00 AM

The Aussie dollar is marginally lower since yesterday morning, while U.S and European equities finished the overnight session mixed, but little changed. A dearth of economic data reduced volatility more or less across the board over the past 24 hours, however that volatility is set to return over the next 24 hours with local Monetary Policy Minutes from the latest RBA meeting due at 11.30am, followed by Chinese economic data around lunchtime and U.K wages & U.S retail sales this evening.

Interestingly iron ore prices moved higher over the past 24 hours with commodities more broadly (ex Agriculture) performing well. Iron ore as I've mentioned at nauseum in my morning market updates does tend to provide a fair bit of direction for the Aussie dollar as a result of it being our major export and never has it been so clear but in the recent budget numbers released by ScoMo in which higher iron ore prices (and commodities in general) have well and truly supported the local budget via taxes collected off the likes of Rio, BHP, FMG and the other miners.

AUD EXCHANGE RATES:

AUD/USD – 0.7526

AUD/GBP – 0.5548

AUD/EUR – 0.6306

AUD/NZD – 1.0882

AUD/JPY – 82.548

USD/BTC – $8,658

OTHER MARKETS: 

All Ords (XAO) – 6,235

Gold – A$1746/oz

Silver –  A$21.98/oz

WTI – US$71.15/barrel

DATA RELEASES TODAY:

AUD - Monetary Policy Meeting Minutes at 11.30am

CNY - Industrial Prodn & Retail Sales at noon (AEST)

GBP - Wages Index at 6.30pm

USD - Retail Sales at 10.30pm

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Topics: Report, Market

Market Update - 14th May 2018 - AUD Finds Support, While Equity Markets Finish The Week Mixed

Posted by Patrick Downes on May 14, 2018 at 8:34 AM

U.S and European stocks finished the week mixed with the best performers the Dow Jones in the U.S and FTSE in London. The local ASX 200 finished in the red on Friday, while the Aussie Dollar recovered from lows reached on Wednesday when AUD/USD touched 0.7412 and was threatening to take out the 0.73's. I'm pleased to report that the support I was expecting the Aussie dollar to find did eventuate and we're now safely back in the 0.75's for the time being.

Global currency and equity markets more broadly remain volatile thanks to a number of geopolitical events going on, however things generally look positive with global growth and Chinese growth still on track. The Aussie housing market is the real risk for the Australian economy in my view with price's seemingly tanking in both Sydney and Melbourne and clearance rates dropping into the 50% bracket in Sydney. A perfect storm of too much debt, tighter regulation and potentially higher interest rates globally are all creating a real downside risk for house prices.

No economic data is out today, so expect a quiet session with the Aussie likely range trading between in the mid 0.75's.

AUD EXCHANGE RATES:

AUD/USD – 0.7543

AUD/GBP – 0.5568

AUD/EUR – 0.6314

AUD/NZD – 1.0833

AUD/JPY – 82.505

USD/BTC – $8,689

OTHER MARKETS: 

All Ords (XAO) – 6,216

Gold – A$1747/oz

Silver –  A$22.10/oz

WTI – US$70.56/barrel

DATA RELEASES TODAY:

No data

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Topics: Report, Market

Market Update - 10th May 2018 - AUD Stable Despite Stronger Equities & Commodities Prices Overnight

Posted by Patrick Downes on May 10, 2018 at 9:59 AM

Equities both locally and abroad have continued to surge higher this month denying the 'sell in May and go away' trend which typically drags on equities this time of year. Unfortunately the same can't be said for the Aussie dollar as we yet again see a sell off in the Aussie Dollar during May as I suggested could be the case in my Market Update dated "1st May 2018 – Sell In May And Go Away? What’s In Store For the AUD This Month?"

The Aussie dollar is off around 100 points vs. the Greenback since the start of May, while AUD/GBP is lower by around 1%. AUD/EUR has bucked that trend so far with growth in Europe not quite living up to the hype which is dragging on the Euro.

Interestingly Gold and Oil have both continued to push higher during May in line with equities and the USD, which in the scheme of theoretical economics seems rather counter intuitive given that both Gold and Oil are denominated in US Dollars and equities are a barometer for good times and Gold typically a barometer for risk aversion...certainly markets today are not acting in the way the economic textbooks would have you think they should operate.

The U.K decide on interest rates tonight with no expectations of any changes, while U.S CPI is due later this evening.

AUD EXCHANGE RATES:

AUD/USD – 0.7459

AUD/GBP – 0.5504

AUD/EUR – 0.6291

AUD/NZD – 1.0748

AUD/JPY – 81.856

USD/BTC – $9,247

OTHER MARKETS: 

All Ords (XAO) – 6,204

Gold – A$1760/oz

Silver –  A$22.12/oz

WTI – US$71.17/barrel

DATA RELEASES TODAY:

GBP - Manufacturing Production at 6.30pm

GBP - Bank of England Official Bank Rate and Monetary Policy Summary at 9.00pm

USD - CPI at 10.30pm

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Topics: Report, Market

Market Update - 9th May 2018 - AUD Lower As ScoMo Delivers Boring Budget & Trump Withdraws U.S From Nuclear Deal With Iran

Posted by Patrick Downes on May 9, 2018 at 10:41 AM

ScoMo delivered a pretty dull budget overnight, promising only to reduce taxes today for middle income earners while massively reducing taxes for the very wealthy in about 6-7 years time. The trade off for middle income earners is 500AUD today at the expense of tax revenue which could be invested in hospitals, education and other essential services. A bit rich for a Government who when in opposition only spoke about reducing the deficit, now they are throwing around tax cuts like confetti. The only highlights of the budget in my opinion were more funding for aged care and continued funding of further important infrastructure projects across Australia such as a proposed Airport train link to Tullamarine in Melbourne.

The AUD and market more broadly doesn't appear to have liked the budget with the Aussie down around half a percent over night. Also dragging on the Aussie dollar is the fact that Donald Trump has decided to pull out of the Iran Nuclear Deal which had been painstakingly put together by the Obama administration and could now fuel further tensions in the middle east.

Ahead today is US PPI at 10.30pm.

AUD EXCHANGE RATES:

AUD/USD – 0.7445

AUD/GBP – 0.5491

AUD/EUR – 0.6272

AUD/NZD – 1.0685

AUD/JPY – 81.177

USD/BTC – $9,262

OTHER MARKETS: 

All Ords (XAO) – 6,196

Gold – A$1767/oz

Silver –  A$22.15/oz

WTI – US$70.12/barrel

DATA RELEASES TODAY:

USD - PPI at 10.30pm

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Topics: Report, Market

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