Compass Global Markets' Blog

Market Update - 7th January 2019 - AUD Succumbs To Flash Crash During Break & Happy New Year

Posted by Patrick Downes on January 7, 2019 at 8:59 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.

Before I get into the nitty gritty of whats occurred over the past two weeks I'd like to first wish a very happy & prosperous 2019 to all my past and present clients. Compass Markets had it's busiest month on record in December while 2018 was another record year for the business in terms of the number of payments processed and the number of clients who trust us with their foreign currency payments and hedging. So thank you to all of you and please don't forget to mention us to your friends, colleagues and family where appropriate. I'd be grateful for any referrals during the year. 

Given many of you were away over the past two weeks and probably completely switched off from financial markets you may have missed the bucket load of volatility which occurred, which depending on a few factors may have been a good thing for your stress levels. Apart from the usual sea sawing up and down over the past fortnight, the AUD also succumbed last week to what's being termed a 'flash crash'. Essentially we saw AUD/USD and other currencies move by as much as 3-5% in the space of minutes as a combination of low liquidity, fat fingers, algorithmic trading programs and a high number of stop losses caused currencies to fluctuate widely. Thankfully, most majors including the AUD reverted to their pre-flash crash levels within a few hours with market participants like myself left to scratch our heads. The only exception is AUD/JPY which is trading near 10 year lows following the flash crash and general risk aversion --> the Japanese Yen is seen as a safe haven currency similar to the US Dollar, and is bought in times of turmoil and sold when things are rosy.

Looking at AUD levels and believe it or not we are at similar levels to just before Christmas with the exception of AUD/JPY as mentioned above. Oil remains around US$48 a barrel while iron ore prices have continued to move higher over the past month asymmetrically to the rest of metals prices which have been falling as a result of ongoing trade tensions. Gold has soared over the past month suggesting some market participants are shifting into the precious metals in anticipation of rougher times ahead. I generally remain bullish on the global economy and prospects for growth. I particularly like base metals and think we could be set for a much better year for metals following a terrible year - I think it's likely China and the U.S will come to some trade terms, while I think India, China and S.E Asia will continue to drive global economic growth.

No economic data out today, however U.S ISM Non-Manufacturing PMI is out tonight at 2.00am. A solid number here could provide another boost to U.S equities following Friday nights bumper jobs number which beat all estimates and left the economic bears puzzled.

AUD EXCHANGE RATES:

AUD/USD – 0.7081

AUD/GBP – 0.5548

AUD/EUR – 0.6206

AUD/NZD – 1.0510

AUD/JPY – 76.840

USD/BTC – $4,008

OTHER MARKETS:

All Ords (XAO) – 5,677

Gold – A$1,805/oz

Silver –  A$22.07/oz

WTI – US$48.45/barrel

DATA RELEASES TODAY:

USD - ISM Non-Manufacturing PMI at 2.00am (tomorrow morning)


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Patrick Downes

Senior Corporate FX Dealer

Phone Patrick - 0431 278 632 

  Email Patrick: patrick@compassmarkets.com

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The information provided in this report has been prepared without taking into account your particular objectives, financial situation or needs. You should consider whether our products are appropriate for you and read the FSG and PDS which are available on this website.
This report and must not be copied, either in whole or in part, or distributed to any other person.
All references to prices, amounts and currency are in Australian dollars unless otherwise noted.
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