Compass Global Markets' Blog

Market Update - 22nd August 2018 - USD Index Extends Losses, Supporting Commodities Prices & The AUD

Posted by Patrick Downes on August 22, 2018 at 10:00 AM

The AUD continued it's slow grind higher overnight thanks to stronger metals prices and a weaker U.S Dollar. The Dollar Index (a trade weighted average of the USD vs. a basket of currencies) has now fallen for five of the past six trading days after rallying to a high of 96.60. The Dollar strength began around Feb/March coinciding with Trump's trade war with China, the EU and Canada and is probably the main reason why we've seen so much weakness in metals prices and the Aussie dollar. If we see a reversal in USD fortunes we would expect to see stronger metals prices and a stronger AUD and we could see yet further gains if the U.S Federal Reserves tapers it's interest rate hikes later in the year as some are now speculating could be the case. Previously the market was expecting the U.S Federal Reserve to continue to raise rates over the foreseeable future.

All stock markets in the U.S and Europe bar the London FTSE moved higher but the strong showing in equities markets and for commodities prices overnight isn't expected to support the ASX - which looks likely to open about half a percent lower this morning.

We have some local data out this morning in Construction work while we'll also hear from RBA Assistant Governor Debelle around 1pm this arvo. The FOMC also delivers it's meeting minutes tomorrow morning.

AUD EXCHANGE RATES:

AUD/USD – 0.7326

AUD/GBP – 0.5680

AUD/EUR – 0.6337

AUD/NZD – 1.0965

AUD/JPY – 80.79

USD/BTC – $6,456

OTHER MARKETS: 

All Ords (XAO) – 6,383

Gold – A$1,625/oz

Silver –  A$20.08/oz

WTI – US$66.00/barrel

DATA RELEASES TODAY:

Construction Work Done q/q at 11.30am

RBA Assist Gov Debelle Speaks at 1.10pm

FOMC Meeting Minutes at 4.00am (tomorrow morning)

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Topics: Market, Report

Market Update - 20th August 2018 - AUD Makes Gains As Markets Settle

Posted by Patrick Downes on August 20, 2018 at 8:28 AM

I haven't posted a Morning Market Update since Thursday, however the good news for the vast majority of you importers is that the Aussie Dollar has finally found a bit of support around the 0.7200 level - the official low was 0.7202 and we've since bounced back to be trading just under 0.7300 as I write this report. Commodities and Equities also look better with Trump in fresh talks with China about settling the current trade dispute and things settling on the global macro economic front. We would hope to see further AUD gains over the course of the week...however in the FX market nothing is certain so the best thing is to remain vigilant and hedge your foreign currency exposures where appropriate. If you need to discuss how to reduce risk with a falling AUD please contact me.

No economic data is released today and not much locally through the week. U.S Federal Reserve Bank minutes will be released Thursday morning which should give us some further insights into the next rate move from the U.S Fed, however it's likely to be higher interest rates for the foreseeable future.

AUD EXCHANGE RATES:

AUD/USD – 0.7293

AUD/GBP – 0.5716

AUD/EUR – 0.6373

AUD/NZD – 1.1002

AUD/JPY – 80.629

USD/BTC – $6,483

OTHER MARKETS: 

All Ords (XAO) – 6,426

Gold – A$1,618/oz

Silver –  A$20.19/oz

WTI – US$65.14/barrel

DATA RELEASES TODAY:

No data.

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Topics: Market, Report

Market Update - 16th August 2018 - AUD Remains On Back-foot As Commodities & Stocks Take A Pummelling

Posted by Patrick Downes on August 16, 2018 at 9:05 AM

Turkish contagion fears roiled markets again overnight with commodities and stocks the biggest losers. Zinc used to galvanise steel took the brunt of the losses falling a mind bending 6.6% overnight while Copper the second most used metal after Iron lost 4% in manic trade and increased fears that the global economy may unravel years of good work. U.S and European stocks fell as much as 1.8%, while Asian indicies fared worse yesterday with the Shenzhen 300 down 2.5%.

The Aussie dollar and commodities have not fared well against a resurgent USD and is now loitering in the low 0.72's with fears a break below 0.7200 could see us test December 2016 lows around 0.7160 on the wholesale market. If we failed to hold 0.7160 the next level of support would be 0.6828 reached in Jan 2016 at the depths of the commodities bear market.

Ahead today is employment data at 11.30am; the market is expecting no change in the unemployment rate from 5.4% however about 15K new jobs are anticipated to have been created during July.

AUD EXCHANGE RATES:

AUD/USD – 0.7219

AUD/GBP – 0.5680

AUD/EUR – 0.6359

AUD/NZD – 1.1009

AUD/JPY – 79.918

USD/BTC – $6,344

OTHER MARKETS: 

All Ords (XAO) – 6,415

Gold – A$1,624/oz

Silver –  A$19.98/oz

WTI – US$64.36/barrel

DATA RELEASES TODAY:

AUD – Employment Change & Unemployment Rate at 11.30am

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Topics: Market, Report

Market Update - 14th August 2018 - Markets Still Roiling As A Result Of Trump's Turkey Slap

Posted by Patrick Downes on August 14, 2018 at 8:38 AM

No economic data was released yesterday or overnight which means markets turned to global macro news for their cues. As a result, Turkey and its slip towards default led markets and led them quite substantially lower. With their proximity to Turkey and given Turkey is a reasonably sized economic power in the region European equities lost as much as 0.75% - with Spain the worst performer and the DAX losing about half a percent. U.S stocks and commodities didn't fare much better with the DOW down 0.5% while commodities prices copped a further beating - Zinc, Copper and Lead all continued to move lower amid risk aversion.

The Aussie dollar hasn't avoided the markets wrath down a whopping two cents in a little over two trading days but is conceivably looking a little over sold at current levels. I'm generally optimist when it comes to these kind of things and with global growth and inflation still growing - I'd like to think this is simply a short term aberration and commodities, the Aussie and equities will continue to perform quite well into the near future once we get past all the trade wars, tariffs and sanctions which Trump dishes out like he's the matre d at a soup kitchen.

NAB Business Confidence is at 11.30am followed by Chinese data around lunch time which should give us some colour on the health of the Chinese economy.

AUD EXCHANGE RATES:

AUD/USD – 0.7252

AUD/GBP – 0.5676

AUD/EUR – 0.6355

AUD/NZD – 1.1035

AUD/JPY – 80.311

USD/BTC – $6,221

OTHER MARKETS: 

All Ords (XAO) – 6,341

Gold – A$1,641/oz

Silver –  A$20.62/oz

WTI – US$66.81/barrel

DATA RELEASES TODAY:

AUD - NAB Business Confidence at 11.30am

CNY - Retail Sales & Industrial Production at midday

GBP - Average Earnings Index 3m/y at 6.30pm

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Topics: Market, Report

Market Update - 13th August 2018 - AUD Heads Lower As Trump Crushes The Turkish Lira & Equities

Posted by Patrick Downes on August 13, 2018 at 8:47 AM

Donald Trump caused more turmoil in markets late last week when he slapped/forecast further tariffs on both China and Turkey. The tariffs on some Turkish imports caused the Turkish Lira to go into a meltdown losing as much as 25% which bred a level of contagion fear which has seen the Aussie dollar and other currencies pummelled along with both U.S and European equities. In summary markets are a see of red this morning, with the only beneficiary being Gold which is up around 1% and foreign travellers picking up substantial bargains in Turkey.

AUD/USD in the mid-0.72's is the lowest level we've been since Jan 2017 and for our export clients presents one hell of an opportunity to convert your surplus USD back into AUD. More broadly and commenting on current levels, my personal opinion would be that this is a short term aberration which at the moment benefits exporters but as the majority of you are importers I wouldn't be too concerned - keep an eye out for the inevitable bounce.

No economic data is released today however a bit of economic data out later in the week in employment change on Thursday.

AUD EXCHANGE RATES:

AUD/USD – 0.7258

AUD/GBP – 0.5684

AUD/EUR – 0.6373

AUD/NZD – 1.1048

AUD/JPY – 80.301

USD/BTC – $6,316

OTHER MARKETS: 

All Ords (XAO) – 6,366

Gold – A$1,663/oz

Silver –  A$21.03/oz

WTI – US$67.03/barrel

DATA RELEASES TODAY:

No economic data today

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Topics: Market, Report

Market Update - 8th August 2018 - RBA Maintains Rates At 1.5%, But Inflation Is Coming In 2019-2020

Posted by Patrick Downes on August 8, 2018 at 8:29 AM

A weaker US dollar, stronger commodities markets and a positive finish for European and U.S equities has helped the Aussie move higher against most of the majors and back above 0.7400 vs. the Greenback. The U.S Dollar Index came off around 20-30 points, while commodities and equities moved higher - commodities were well supported by higher prices for base metals Zinc, Copper and Nickel.

The RBA kept rates on hold yesterday at 1.5% while noting that GDP is expected to average a bit above 3% during 2018 and 2019. The concerns though remain the housing market and over indebtedness as a whole - "one continuing source of uncertainty is the outlook for household consumption. Household income has been growing slowly and debt levels are high." On the plus side the RBA noted that business conditions were generally positive in both non-mining industries and the resource sector which has continued to rebound. Overall inflation is likely to come in at a little under 2% but the RBA expected this number to grow through 2019 and 2020 - I would suggest the next rate hike will likely take place sometime in 2019 which at the time should be bullish for the Aussie dollar. In the interim expect more of the same and for AUD/USD to start with a 7 in the front of it.

AUD EXCHANGE RATES:

AUD/USD – 0.7402

AUD/GBP – 0.5711

AUD/EUR – 0.6374

AUD/NZD – 1.1013

AUD/JPY – 82.43

USD/BTC – $6,718

OTHER MARKETS: 

All Ords (XAO) – 6,340

Gold – A$1,631/oz

Silver –  A$20.71/oz

WTI – US$68.57/barrel

DATA RELEASES TODAY:

AUD – Home Loans m/m at 11.30am

AUD - RBA Governor Lowe Speaks at 1.05pm

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Topics: Market, Report

7th August 2018: RBA Announcement Cash Rate unchanged at 1.50 per cent.

Posted by Thomas Su on August 7, 2018 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.

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Market Update - 7th August 2018 - Cash Rate Likely To Be Held Steady Again At 1.5%

Posted by Patrick Downes on August 7, 2018 at 8:30 AM

We finished last week with local retail sales figures which beat expectations and provided a bit of bullish momentum for the Aussie dollar and retail outlets through Friday, however as has become the case recently that bullish momentum couldn't be maintained and AUD ended up about where it started the day.

Yesterday was the annual Bank Holiday in Australia - as such AUD payments would have been delayed until today. The holiday was traditionally for bank employees to take a break but more recently related finance companies which rely on the banks have also taken holidays on this day.

The monthly (except January) RBA Cash Rate and Rate Statement is due out at 2.30pm this afternoon with no change in rates from 1.5% expected. The reason for the likely no change is that the housing market is struggling too much for the RBA to lump potential further repayments on investors and owners at this stage in the cycle. Additionally, as we saw a few weeks back, inflation isn't quite deep enough into the 2-3% range that the RBA desires.

As a side note AUD/GBP and AUD/EUR have rallied quite nicely lately and so clients wishing to purchase GBP or EURO might be well served to do this while rates are good.

AUD EXCHANGE RATES:

AUD/USD – 0.7365

AUD/GBP – 0.5684

AUD/EUR – 0.6370

AUD/NZD – 1.0973

AUD/JPY – 82.051

USD/BTC – $7,432

OTHER MARKETS: 

All Ords (XAO) – 6,359

Gold – A$1,634/oz

Silver –  A$20.71/oz

WTI – US$68.29/barrel

DATA RELEASES TODAY:

AUD – RBA Rate Statement and Cash Rate at 2.30pm

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Topics: Market, Report

Market Update - 3rd August 2018 - AUD/EUR and AUD/USD Stuck In A Tight Range, While Markets More Broadly Remain Volatile

Posted by Patrick Downes on August 3, 2018 at 8:58 AM

I've been off the past few days as a result of the common cold, but back into the swing of things today with a morning market update. Markets over the past two days have been anything but stable with equities, commodities and the Aussie all whipsawing back and forth amid fears we're in for a further escalation in the Trump/China trade war. Trump has more recently been threatening to place tariffs as high as 25% on ALL Chinese imports, which is just plain ridiculous but knowing Trump it's unlikely to come to fruition and is more likely simply a 'negotiation' tool to bring China to the trade talks table.

European stocks fell overnight, while in the U.S the NASDAQ and S&P finished higher thanks to some bullish momentum as a result of Apple shares which surged around 3% and took the company past a market cap valuation of US$1 trillion dollars, that's 12 zero's... In other markets commodities finished the overnight session mixed with Copper flat, Zinc up marginally and all important Iron ore up around 1%. The Aussie dollar didn't follow Iron Ore higher but is holding in a trading range between 0.73 and 0.74. AUD/EUR has been trending ever slightly higher since around the middle of July but does also appear to be stuck in a very tight range between 0.6290 and 0.6350.

Ahead today is local retail sales at 11.30am and then U.S Non-Farm payrolls at 10.30pm AEST this evening. Retail sales are tipped to come in around 0.3% while U.S economy is expected to have added around 200K new jobs in the latest month. Have a fantastic weekend.

AUD EXCHANGE RATES:

AUD/USD – 0.7344

AUD/GBP – 0.5634

AUD/EUR – 0.6333

AUD/NZD – 1.0903

AUD/JPY – 82.000

USD/BTC – $7,511

OTHER MARKETS: 

All Ords (XAO) – 6,327

Gold – A$1,642/oz

Silver –  A$20.81/oz

WTI – US$68.39/barrel

DATA RELEASES TODAY:

AUD – Retail Sales at 11.30am

USD - Non-Farm Employment Change at 10.30pm

USD - Average Hourly Earnings m/m at 10.30pm

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Topics: Market, Report

Market Update - 31st July 2018 - AUD Pretty Flat While Overpriced U.S Tech Stocks Cop A Beating

Posted by Patrick Downes on July 31, 2018 at 8:40 AM

The Aussie dollar was mixed overnight, moving marginally higher vs. the Japanese Yen and U.S Dollar but falling vs. the Euro and Pound as volatility remains a hall mark of financial markets in 2018. Equities and commodities fared worse with losses occurring pretty much across the board – the tech heavy NASDAQ continued it’s poor form over the past week down 1.5% overnight as massively overpriced tech stocks led by the so called “FAANG’s” copped a beating. Some of these tech stocks are as one value investor put it ‘priced to perfection’ meaning even the slightest hint of a guidance miss or marginally slower growth will see the stock price belted – it’s also important to note that many of the FAANG stocks and other associated tech stocks are priced at exceptionally/historically/insanely high price to sales ratio’s…so my very general advice would be to act with caution if you’re keen on investing in the tech space, particularly in the U.S.

Iron ore which is our number 1 commodity export is holding up quite nicely and it’s correlation with the AUD remains in tact helping to support the local currency.

Ahead today is local Building Approvals number and Private Sector Credit. Whilst both are not classified as traditional tier 1 type data they do provide some impetus for the future direction of the Aussie dollar in that falling building approvals and slower private sector credit may mean interest rates are held lower for longer.

AUD EXCHANGE RATES:

AUD/USD – 0.7388

AUD/GBP – 0.5611

AUD/EUR – 0.6307

AUD/NZD – 1.0832

AUD/JPY – 82.05

USD/BTC – $8,159

OTHER MARKETS: 

All Ords (XAO) – 6,368

Gold – A$1,649/oz

Silver –  A$20.91/oz

WTI – US$69.57/barrel

DATA RELEASES TODAY:

AUD – Building Approvals at 11.30am

AUD – Private Sector Credit at 11.30am

USD – CB Consumer Confidence at midnight

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Topics: Market, Report

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