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Patrick Downes

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Market Update - 22nd January 2019 - Chinese Economy 'Slowing'? Not Really, It's All In The Numbers

Posted by Patrick Downes on January 22, 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.

No report from me yesterday, however to quickly recap; not a great deal happened over the weekend or for that matter overnight. AUD/USD and AUD/EUR are the decliners down around half a percent since Friday morning, while AUD/GBP moved higher as continued Brexit shenanigans keep U.K traders on their toes. The AUD is unchanged vs. the Kiwi and Japanese Yen.

Equities and Commodities prices, namely metal prices continued to perform well through last week as signs U.S/China trade tensions are slowly dissolving, however growth headwinds within the Chinese economy persist and this was highlighted by yesterday's slowest pace of GDP growth since 2009.

But as they say 'it's all in the numbers', and percentages can deceive. GDP growth in China in 2009 was around 9% and GDP was at 5T USD, so in nominal terms China grew GDP by 500B USD in 2009. Today China's GDP stands at around 12.5T USD with GDP growth at 6.5%. Nominally that means China grew GDP by a little over 800B USD in the past 12 months. The bigger China's economy gets naturally the slower they'll grow. However consider China is a country of nearly 1.4b people, there is still decades of pent up demand within the economy.

AUD EXCHANGE RATES:

AUD/USD – 0.7128

AUD/GBP – 0.5521

AUD/EUR – 0.6265

AUD/NZD – 1.0606

AUD/JPY – 78.202

USD/BTC – $3,520

OTHER MARKETS:

All Ords (XAO) – 5,953

Gold – A$1,786/oz

Silver –  A$21.28/oz

WTI – US$54.20/barrel

DATA RELEASES TODAY:

USD - Bank Holiday - MLK Day

GBP - Average Earnings Index at 8.30pm

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Topics: Market, Report

Market Update - 18th January 2019 - Easing Trade Tensions See AUD, Metals & Commodities Rise

Posted by Patrick Downes on January 18, 2019 at 8:26 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 Movements:

The only detractor overnight was AUD/GBP, with the other AUD crosses moving higher in unison with U.S stocks and metals prices. AUD/USD and AUD/JPY surged around half a percent, while AUD/EUR and AUD/NZD were up a little less, at 0.3%. U.S stocks along with Zinc and Iron ore both gained as a new report suggested Trump insiders were pushing hard for a resolution to trade tensions with China which have persisted for nearly one year. U.S stocks were up on average 0.7% at the close.

2nd Brexit Referendum Discussed:

The Pound rose overnight as deliberations in Parliament suggested a second referendum could be on the cards and held within a year. With all the toing and froing and change of hard of many past Brexit voters it would seem that any second vote would result in a no Brexit conclusion and a return to some normalcy for the U.K after two and a half years in the wilderness. If you're a budding currency trader a long GBP trade could be quite a good trade during 2019.

U.K retail sales data is out tonight, while Day 2 of G20 meetings continue.

AUD EXCHANGE RATES:

AUD/USD – 0.7160

AUD/GBP – 0.5505

AUD/EUR – 0.6281

AUD/NZD – 1.0603

AUD/JPY – 78.205

USD/BTC – $3,617

OTHER MARKETS:

All Ords (XAO) – 5,909

Gold – A$1,797/oz

Silver –  A$21.59/oz

WTI – US$52.48/barrel

DATA RELEASES TODAY:

All - G20 Meetings

GBP - Retail Sales at 8.30pm

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Topics: Market, Report

Market Update - 17th January 2019 - Metals, Energy Prices & Equities Move Higher, AUD/USD Retreats 0.5%

Posted by Patrick Downes on January 17, 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.

Despite a solid session overnight in which both metals & energy prices and overseas equities moved higher, the AUD starts the day around half a percent lower (than this time yesterday) vs. the Greenback and Pound and around a third of a percent lower vs. the Euro. Metals were led higher higher by copper and zinc, while the Dow was the best performing major index overnight, finishing up around 0.6%.

Brexit Latest: 

In the U.K Theresa May survived a no confidence vote which means U.K parliament will head back into cross-bench Brexit talks in a bid to come up with a deal that will satisfy both U.K politicians and their European counterparts. This story keeps twisting and turning and so its prudent to expect increased volatility in all the GBP crosses including AUD/GBP. As a rough guide AUD/GBP has traded between 0.5450 and 0.5680 just this month, expect more of the same until a definite conclusion to this saga transpires.

G20 Rumblings: 

G20 meetings happening in Tokyo today - these meetings can provide positive news but it's all about substance rather than quantity. Perhaps G20 nations will discuss some coordinated effort to reinvigorate global growth? Watch this space.

AUD EXCHANGE RATES:

AUD/USD – 0.7133

AUD/GBP – 0.5534

AUD/EUR – 0.6261

AUD/NZD – 1.0544

AUD/JPY – 77.936

USD/BTC – $3,578

OTHER MARKETS:

All Ords (XAO) – 5,893

Gold – A$1,804/oz

Silver –  A$21.75/oz

WTI – US$52.61/barrel

DATA RELEASES TODAY:

All - G20 Meetings

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Topics: Market, Report

Market Update - 16th January 2019 - AUD Stable & Brexit No Deal Vote Could See Fresh Referendum

Posted by Patrick Downes on January 16, 2019 at 8:45 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.

Brexit No Deal:

The U.K Parliament last night voted against the Brexit deal brokered by Theresa May and Europe which could trigger new national elections and a fresh Brexit referendum within the next few weeks. AUD/GBP surprisingly is little changed this morning with the market perhaps seeing the failed vote as a new opportunity for the U.K to remain a part of Europe and avoid the potential pitfalls and headwinds of a life not conjoined to Europe's hip.

Other News: 

U.S and European equities moved higher overnight managing to add as much as 1.71% on the NASDAQ in the U.S and nearly 0.6% on the London FTSE following the no deal Brexit vote. AUD/USD is little changed like AUD/GBP however AUD/EUR has rallied around half a percent overnight. U.S PPI aka the producer prices index failed to meet expectations as producer prices fell by -0.2% during December. The decline in U.S producer prices was the sharpest in two and a half years and perhaps stems from the ongoing trade dispute with China and lower oil prices with WTI prices down around 20% during December.

In the U.K we will hear from Bank of England Governor Carney - no doubt there will be comments about the recent no deal Brexit vote and any support the Bank of England will provide.

AUD EXCHANGE RATES:

AUD/USD – 0.7170

AUD/GBP – 0.5561

AUD/EUR – 0.6280

AUD/NZD – 1.0530

AUD/JPY – 78.001

USD/BTC – $3,547

OTHER MARKETS:

All Ords (XAO) – 5,871

Gold – A$1,790/oz

Silver –  A$21.64/oz

WTI – US$50.93/barrel

DATA RELEASES TODAY:

EUR – BOE Gov Carney Speaks at 8.15pm

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Topics: Market, Report

Market Update - 15th January 2019 - AUD Hits Turbulence As Global Growth Concerns Re-Emerge

Posted by Patrick Downes on January 15, 2019 at 9:06 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.

What Happened Overnight?

The AUD has pared some of it's 2019 gains overnight as U.S and European stocks turned negative and global growth concerns once again start to agitate investors. The NASDAQ finished lower by around 1% while in Europe the FTSE was the worst performer down by 0.91%. Local inflation data released by the Melbourne Institute yesterday surprised to the upside coming in at 0.4%, which was the highest reading since April of last year and comes on the back of pretty weak inflation data throughout most of 2018. The data however had little impact on the AUD which really was traded more on global macro trends rather than the local economic data.

AUD Still Near One Months Highs:

Overall the AUD was off around 0.3% across the board, but remains near one month highs vs. the US Dollar and Euro. The Aussie Dollar could hit a bit more turbulence tonight with U.S producer prices data due out just after midnight.

AUD EXCHANGE RATES:

AUD/USD – 0.7167

AUD/GBP – 0.5561

AUD/EUR – 0.6245

AUD/NZD – 1.0520

AUD/JPY – 77.568

USD/BTC – $3,639

OTHER MARKETS:

All Ords (XAO) – 5,833

Gold – A$1,795/oz

Silver –  A$21.75/oz

WTI – US$50.93/barrel

DATA RELEASES TODAY:

USD - PPI m/m at 12.30am

EUR - ECB President Draghi Speaks at 2.00am

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Topics: Market, Report

Market Update - 14th January 2019 - AUD Continues Good Start To 2019

Posted by Patrick Downes on January 14, 2019 at 8:00 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.

Welcome back to the second wave of clients returning to work today after a long and deserved break. A quick recap, in case you missed it, a 'flash crash' occurred just after New Years which essentially wiped 3-4 cents off the AUD across the board in a matter of minutes, thankfully though it was short lived and the New Year has actually heralded a far better than expected start for the AUD. In fact AUD/USD is now trading close to 0.7200, while AUD/GBP is back near 0.5600 following fears of a no deal Brexit with Europe. Commodities prices and equities have also been performing better in the early part of the year with the ASX up over 200 points since January 2nd.

Latest From The U.S Fed & AU Housing:

The latest gyrations and musings from the U.S Federal Reserve suggest 2019 could see rates on hold, which would certainly be bullish for AUD/USD, however strong employment data out a week or so back may force the Feds hand with a further rate hike towards a more normal level of interest rates around 2.75-3.00%. The RBA will likely also keep rates on hold throughout 2019 as housing prices continue to deteriorate and lending dries up with the off chance of a rate cut to stimulate some inflation in the Australian economy.

Upcoming Data:

No economic data out today or tonight other than a little bit of Aussie inflation metrics. Inflation as suggested above has been near enough to non-existent recently and so the previous months reading of 0.00% is probably a good estimate on what to expect today. A number above say 0.2% inflation would be a surprise and perhaps a cause for a rally in AUD.

AUD EXCHANGE RATES:

AUD/USD – 0.7183

AUD/GBP – 0.5588

AUD/EUR – 0.6259

AUD/NZD – 1.0523

AUD/JPY – 78.013

USD/BTC – $3,487

OTHER MARKETS:

All Ords (XAO) – 5,834

Gold – A$1,784/oz

Silver –  A$21.61/oz

WTI – US$52.39/barrel

DATA RELEASES TODAY:

AUD - MI Inflation Gauge m/m at 11.00am

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Topics: Market, Report

Market Update - 10th January 2019 - U.S Fed Minutes Show Further Rate Hikes No Certainty, AUD Bounces

Posted by Patrick Downes on January 10, 2019 at 8:55 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.

What Happened Overnight?:

The AUD is down against the Pound, Kiwi and Yen, but has moved more than half a percent higher vs. the U.S Dollar as the so called Greenback succumbed to a sell-off amid improved risk sentiment and minutes this morning from the U.S Federal Reserve that suggest further rate hikes are no certainty this year in the worlds largest economy. Markets are taking this as a sigh of a relief given the Fed's history of raising rates til the U.S economic bubble bursts; it happened in the '87 crash, the dot.com bubble and more recently during the GFC.

Upcoming Economic Data:

More economic data is due out this morning in Chinese CPI and PPI with both consumer and producer prices expected to contract as a result of a broad slowdown in the pace of economic growth in China. Commodities prices and equities were sold off all last year amid weaker Chinese economic data and trade tensions so any surprise to the upside here could see a solid bounce in commodities prices, the AUD and equities.

The local equities market looks set to open flat.

AUD EXCHANGE RATES:

AUD/USD – 0.7144

AUD/GBP – 0.5576

AUD/EUR – 0.6182

AUD/NZD – 1.0531

AUD/JPY – 77.221

USD/BTC – $3,986

OTHER MARKETS:

All Ords (XAO) – 5,838

Gold – A$1,802/oz

Silver –  A$21.95/oz

WTI – US$52.39/barrel

DATA RELEASES TODAY:

CNY – CPI & PPI at 12.30pm

USD - Fed Chair Powell Speaks at 4.00am (tomorrow morning)

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Topics: Market, Report

Market Update - 9th January 2019 - AUD Holds On To Ground As Oil & Equities Advance

Posted by Patrick Downes on January 9, 2019 at 8:26 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 strung a third session of gains together which has helped AUD to hold onto gains made through the week. In fact both U.S and European stocks moved higher with the best performers being the French CAC which was up 1.15%, while in the U.S the Dow Jones Industrial Average led the way, up 1.09% at the close. Oil prices also rose moving close to US$50 a barrel as Saudi Arabia talked up export cuts and a WTI target of US$80 a barrel.

Data Releases:

Economic data released locally yesterday showed that seasonally adjusted the trade balance figure shrunk marginally as imports grew quicker than exports, which is a head scratcher given the low AUD that would normally boost exports of tourism, education and commodities and shrink imports in favour of local products. Overall a low AUD is actually a form of stimulation for the Australian economy and will be welcomed by the RBA and exporters across Australia.

Where to from here: 

So where is the AUD headed this year? That's the million dollar question and the trust is no one really knows. Its been well documented in books like Future Bubble that expert predictions usually fail, however that certainly hasn't stopped the media asking economists and traders for their expert opinions on 'where the market is heading this year?' The best answer is 'I don't know' but if you really need an answer then the mean forecast of where AUD will be at the end of the year is around 0.7150 - this comes directly from an article which asked something like 30 economists to give their predictions, if you take the average of all of these you end up around 0.7150.

AUD EXCHANGE RATES:

AUD/USD – 0.7108

AUD/GBP – 0.5582

AUD/EUR – 0.6209

AUD/NZD – 1.0588

AUD/JPY – 77.342

USD/BTC – $3,985

OTHER MARKETS:

All Ords (XAO) – 5,783

Gold – A$1,800/oz

Silver –  A$21.94/oz

WTI – US$49.91/barrel

DATA RELEASES TODAY:

AUD – Building Approvals m/m at 11.30am

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Topics: Market, Report

Market Update - 8th January 2018 - AUD Moves Higher With Wall Street

Posted by Patrick Downes on January 8, 2019 at 8:32 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.

The AUD was up across the board overnight, with the exception of AUD/EUR as risk assets followed the bullish lead of U.S equities which ended the session higher. The Nasdaq was the best performer up 1.26% even though U.S ISM Non-Manufacturing PMI expanded at a slower pace than anticipated - it would appear trade tensions remain the key determinant factor for traders at this point in time; and while progress is slow it appears we're heading in the right direction.

Local Aussie Trade Balance figures and ANZ Jobs ads numbers are out this morning; how much of an impact this data has on the AUD this morning really depends on how the eventual numbers compare to the forecasts, but it's safe to say jobs growth has been strong and should continue that trend, while our trade balance number (the difference between imported and exported goods) should continue to grow thanks to greater exports as a result of the low AUD. It's important to add that while a low AUD is bad for importers it's fantastic for our major exporters and provides a real boost to GDP, which may be needed this year if the housing market continues to deteriorate.

AUD EXCHANGE RATES:

AUD/USD – 0.7115

AUD/GBP – 0.5564

AUD/EUR – 0.6196

AUD/NZD – 1.0548

AUD/JPY – 77.351

USD/BTC – $3,990

OTHER MARKETS:

All Ords (XAO) – 5,744

Gold – A$1,803/oz

Silver –  A$21.90/oz

WTI – US$48.88/barrel

DATA RELEASES TODAY:

AUD - Trade Balance & ANZ Job Ads at 11.30am

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Topics: Market, Report

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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Topics: Market, Report

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