Compass Global Markets' Blog

Market Update - 27th September 2018 - U.S Fed Lift Rates By 25 Basis Points, Markets Little Changed

Posted by Patrick Downes on September 27, 2018 at 8:29 AM

Not a great deal to report this morning. The AUD and commodities prices remains around levels seen this time yesterday.

Overnight news flow was dedicated towards the U.S Federal Reserve Interest Rate decision with Jerome Powell and his team upping interest rates by 25 basis points as expected while reiterating that the slow and steady pace of interest rate hikes will continue until inflation becomes an issue - at this point in time it is not.

Forecasts suggest the U.S Fed will raise rates one more time in December, three more times in 2019 and once in 2020 and given the obvious telegraphing of these moves from the Fed, it's not surprising that AUD/USD is down around 10 cents in the past 8 months. Any movement away from this steady pace of increases could be seen as USD bearish and therefore positive for AUD/USD.

More U.S data out tonight in Durable Goods Orders and Final GDP which are expected to come in slightly ahead and flat respectively compares to the previous reading.

AUD EXCHANGE RATES:

AUD/USD – 0.7237

AUD/GBP – 0.5480

AUD/EUR – 0.6148

AUD/NZD – 1.0859

AUD/JPY – 81.463

USD/BTC – $6,429

OTHER MARKETS: 

All Ords (XAO) – 6,307

Gold – A$1,645/oz

Silver –  A$19.74/oz

WTI – US$71.97/barrel

DATA RELEASES TODAY:

USD – Core Durable Goods Orders m/m at 10.30pm

USD - Final GDP q/q at 10.30pm

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Topics: Market, Report

Market Update - 26th September 2018 - Markets Mixed Ahead Of U.S Fed Funds Rate Tomorrow Morning

Posted by Patrick Downes on September 26, 2018 at 8:38 AM

European and U.S stock markets finished the overnight session mixed with the tech heavy NASDAQ up around 0.2% while the S&P 500 and Dow Jones fell and European equities gained. Markets have over the past week been broadly more buoyant following the implementation of Trump's tariffs on China and continue to look reasonably well supported. The AUD which has had a good week in terms of gains, has come off a little from yesterday but remains a good bit higher than where we were trading earlier in the month.

The U.S Federal Reserve meet early tomorrow morning (Australian time) to discuss and set interest rates with the market expecting another 25 basis point increase to their benchmark rate up to 2.25%.  However given that the rate hike is entirely factored in and expected then we don't expect to see any significant move in AUD/USD following the rate hike. We will however expect to see a fair bit of volatility as the market digests the FOMC's statement on monetary policy which should give some indication of Jerome Powell's next chess moves with respect to interest rates. Talk has been ratcheting up that Powell might slow the pace of rate hikes in the U.S amid fears of causing a market crash similar to what happened in 2007 when the Federal Reserve raised rates until the market broke. Powell will want to avoid this which could see him insert comments into his statement to telegraph a slowing pace of rate increases. This will see the USD come off the boil a bit further and therefore also see AUD/USD potentially make further gains.

AUD EXCHANGE RATES:

AUD/USD – 0.7217

AUD/GBP – 0.5467

AUD/EUR – 0.6138

AUD/NZD – 1.0873

AUD/JPY – 81.571

USD/BTC – $6,354

OTHER MARKETS: 

All Ords (XAO) – 6,299

Gold – A$1,657/oz

Silver –  A$19.97/oz

WTI – US$71.88/barrel

DATA RELEASES TODAY:

USD - Federal Funds Rate & FOMC Meeting at 4.00am (tomorrow morning)

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Topics: Market, Report

Market Update - 25th September 2018 - AUD Supported By Stronger Commodities Prices

Posted by Patrick Downes on September 25, 2018 at 8:24 AM

Oil prices are the big mover overnight with WTI rising to over US$72 a barrel which is the highest level since early July. Higher oil prices are typically seen as deflationary or constraining growth as it's a large input/expense for many businesses as such it's not unusual to see Donald Trump trying to talk down the oil price and persuade the Arab nations and Opec to think about increasing supply. Interestingly higher oil prices are in some ways a Trump made problem as he's all but switched off oil production in one of the world biggest oil producers Iran with new sanctions.

The AUD has maintained ground picked up last week with AUD/USD holding above 0.7200, while AUD/GBP is back in the 0.5500's after a dip below for the better part of this month. 0.5400 might be a base for AUD/GBP, while AUD/USD is still constrained by trend line resistance around current levels. Please see the chart below for details:

No economic data out today however we do see US CB Consumer Confidence figures around midnight tonight. Equities markets in the U.S and Europe performed poorly overnight, however commodities prices have continued to rebound which is supporting the Aussie Dollar.

AUD EXCHANGE RATES:

AUD/USD – 0.7231

AUD/GBP – 0.5500

AUD/EUR – 0.6141

AUD/NZD – 1.0899

AUD/JPY – 81.471

USD/BTC – $6,593

OTHER MARKETS: 

All Ords (XAO) – 6,299

Gold – A$1,653/oz

Silver –  A$19.66/oz

WTI – US$72.18/barrel

DATA RELEASES TODAY:

USD - CB Consumer Confidence at midnight

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Topics: Market, Report

Market Update - 21st September 2018 - AUD Continues To Climb On Positive Market Sentiment

Posted by Patrick Downes on September 21, 2018 at 8:15 AM

Just a quick one from me this morning. The Aussie dollar has continued to move higher amid improved market sentiment as a result of some sort of short term finality to trade tensions between Trump and China. However it's pretty obvious we haven't seen the end of trade war tensions so importers would be wise to take advantage of the higher Aussie Dollar at current levels.

We don't have any economic data out today - however U.S and European equities have a good night so our local share market looks like opening half a percent higher if futures markets are anything to go by. Additionally commodities specifically metals prices held up nicely so it should be a good day across the board for most assets.

AUD EXCHANGE RATES:

AUD/USD – 0.7259

AUD/GBP – 0.5460

AUD/EUR – 0.6157

AUD/NZD – 1.0866

AUD/JPY – 81.671

USD/BTC – $6,468

OTHER MARKETS: 

All Ords (XAO) – 6,276

Gold – A$1,655/oz

Silver –  A$19.64/oz

WTI – US$70.18/barrel

DATA RELEASES TODAY:

None

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Topics: Market, Report

Market Update - 19th September 2018 - Markets Rebound After Trade Tariffs In Classic "Sell The Rumour, Buy The News" Scenario

Posted by Patrick Downes on September 19, 2018 at 8:48 AM

Yesterday I noted that when Donald Trump eventually drops tariffs on US$200 billion of Chinese exports it could be a "sell the rumour, BUY the news" type event. And that appears to be precisely what has happened overnight with equities, commodities and the AUD all rallying on robust market sentiment following the CONFIRMATION of new trade tariffs on China.

But what exactly does "sell the rumour, BUY the news" mean?

Basically it means markets hate risk and tend to sell off on any whif of bad news (the rumour); quite often that selling is overly zealous and overdone. In this case rumours of Trump's trade tariffs on Chinese exports over the past six months has seen commodities, equities and the AUD sell off quite substantially as a result of fears about global growth being impacted by these tariffs. That heavy selling over the past 6 months created opportunities which has seen savvy investors BUY undervalued assets when that bad news was eventually delivered yesterday. However we're certainly not yet out of the woods. 

Nonetheless the strong rebound in commodities prices overnight has seen commodities currencies like the Aussie dollar and Canadian dollar to move higher overnight. AUD/USD is looking like moving well into the 0.72's today, while AUD/EUR is back in mid 0.61's. 

Monetary policy minutes released from the RBA yesterday suggest the next move in interest rates will be up rather than down as growth starts to pick up once again, which was highlight by strong GDP figures in the latest quarter. This more hawkish tone from the RBA is also bullish for the AUD and probably suggests we may have seen the worst of the AUD's declines. 

AUD EXCHANGE RATES:

AUD/USD – 0.7199

AUD/GBP – 0.5459

AUD/EUR – 0.6158

AUD/NZD – 1.0930

AUD/JPY – 81.041

USD/BTC – $6,323

OTHER MARKETS: 

All Ords (XAO) – 6,269

Gold – A$1,658/oz

Silver –  A$19.60/oz

WTI – US$69.49/barrel

DATA RELEASES TODAY:

GBP - CPI at 6.30pm

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Topics: Market, Report

Market Update - 18th September 2018 - Trump Could Pull Trigger On Next Round Of China Tariffs

Posted by Patrick Downes on September 18, 2018 at 8:17 AM

No morning market update from me yesterday as there wasn't a great deal to report on other than the same old Trump/China merry go round we've been on since February. Speculation was that Trump's latest round of tariffs on US$200 billion of exports to the U.S could come into effect overnight, however as yet there has been no confirmation that any additional tariffs have gone ahead. The resulting effect of this trade with China since it's debut in February has seen a strengthening in the U.S Dollar (as a safe haven) while crushing commodities prices, emerging markets currencies and the currencies of countries which export commodities such as Canada and Australia. Conceivably the AUD and commodities prices will recover once some finality and end to the trade war occurs. At this stage though, it remains murky at best to determine what if any the end game might look like, however you'd have to think for Trump that end game would be tariffs on ALL of China's exports to the U.S.

The Aussie dollar has held on to gains made late last week but remains at 21 month lows vs. the Greenback and 30 month lows vs. the Euro which is certainly not ideal for importers but is perhaps a new normal that we all need to get used to. While I understand the want and perhaps also the need to chase higher levels before making payments, the reality is that while we might see the mid 0.70's vs. the U.S in the short term don't expect to catch 0.80 any time soon. The same goes with AUD/EUR and AUD/GBP which are both well off recent highs.

Monetary Policy Meeting Minutes from the latest RBA meeting are due out this morning at 11.30am and these will be picked through in detail by market participants looking for a read on the RBA's likely next move in interest rates. Booming GDP figures in the latest quarter is probably what most people will be looking for some RBA feedback on. Other than that, not much else is due this afternoon or overnight.

AUD EXCHANGE RATES:

AUD/USD – 0.7149

AUD/GBP – 0.5425

AUD/EUR – 0.6113

AUD/NZD – 1.0871

AUD/JPY – 80.000

USD/BTC – $6,226

OTHER MARKETS: 

All Ords (XAO) – 6,293

Gold – A$1,673/oz

Silver –  A$19.74/oz

WTI – US$68.51/barrel

DATA RELEASES TODAY:

AUD - Monetary Policy Meeting Minutes

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Topics: Market, Report

Market Update - 14th September 2018 - AUD/USD Makes Further Gains As Commodities & Stocks Rebound

Posted by Patrick Downes on September 14, 2018 at 8:30 AM

U.S and European stock markets rebounded for the most part during overnight trade with the only drag being the FTSE which bucked the trend and finished around 0.4% lower. The best performing stock markets were the NASDAQ in the U.S and Spanish IBEX which finished up 0.75% and 0.24% respectively. Commodities prices also broadly edged higher with Copper and Iron Ore posting good gains as general market sentiment improved on the faint prospects of Trump doing a trade deal with China.

AUD/USD starts the day higher again thanks to the aforementioned bullish run in commodities overnight but also much better than expected jobs numbers which were released yesterday morning at 11.30am. Officially we added 44,000 new jobs which was well above the consensus forecast of 16,500. The ABS however saw no change in the official unemployment rate which for the time being appears anchored to 5.3% - the lowest level in 6 years.

U.S retail sales data is out tonight while we have a bunch of Chinese economic data due around midday. Given China and trade is in the spotlight at this moment you'd probably think the markets will be watching this data closely for any signs of weakness in the Chinese data, which so far has remained unchanged despite all the doom and gloom scenarios from some market participants.

AUD EXCHANGE RATES:

AUD/USD – 0.7161

AUD/GBP – 0.5453

AUD/EUR – 0.6119

AUD/NZD – 1.0903

AUD/JPY – 80.188

USD/BTC – $6,449

OTHER MARKETS: 

All Ords (XAO) – 6,239

Gold – A$1,671/oz

Silver –  A$19.72/oz

WTI – US$68.58/barrel

DATA RELEASES TODAY:

USD - Retail Sales

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Topics: Market, Report

Market Update - 13th September 2018 - U.S Invites China To New Round Of Trade Talks Boosting Markets & The AUD

Posted by Patrick Downes on September 13, 2018 at 9:06 AM

In some positive signs overnight the U.S has invited China to a new round of trade talks aimed at ending any further escalation in their ongoing trade dispute and perhaps also putting to bed the threatened US$200b in tariffs on Chinese exports to the U.S. Suffice to say the world and financial markets more broadly are watching and listening very closely, so much so that even the hint of the new trade talks sent metals prices soaring overnight and with them also commodities currencies including the Canadian Dollar and our own AUD.

AUD was higher against all the majors while AUD/USD had its best session in about a month, managing to add about 100 points or 1 cent since yesterday. Iron ore and copper prices which are perhaps the best barometers of risk sentiment both made solid gains with iron ore and copper up 2.6% and 2.3% respectively.

The AUD is certainly not out of the woods just yet, however the 1 cent surge certainly provides some relief to long suffering importers but also an opportunity to make USD payments today if required.

Ahead today we have Aussie employment data at 11.30am followed by the Bank of England's decision on interest rates around 9.00pm tonight AEST. Employment data out this morning is probably the biggest catalyst for any move in AUD today.

AUD EXCHANGE RATES:

AUD/USD – 0.7143

AUD/GBP – 0.5465

AUD/EUR – 0.6136

AUD/NZD – 1.0900

AUD/JPY – 79.471

USD/BTC – $6,298

OTHER MARKETS: 

All Ords (XAO) – 6,283

Gold – A$1,681/oz

Silver –  A$19.88/oz

WTI – US$70.00/barrel

DATA RELEASES TODAY:

AUD – Employment Change & Unemployment Rate at 11.30am

GBP - Official Bank Rate & Monetary Policy Summary at 9.00pm

USD - CPI at 10.30pm

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Topics: Market, Report

Market Update - 11th September 2018 - AUD/USD Grinds Higher With Equities, Commodities Still Battling

Posted by Patrick Downes on September 11, 2018 at 8:45 AM

AUD/USD starts the trading day marginally higher than yesterday, while AUD/GBP and AUD/EUR fell as better economic data out of the U.K supported the Pound and by association also the Euro. U.S & European equities were also buoyed by the generally better sentiment across markets overnight managing to finish Monday mostly in the green. The tech-heavy Nasdaq was the best performer in the U.S while the Euro Stoxx 50 was up by nearly 0.5% at the close.

Base metal prices remain somewhat on the nose with Zinc, Copper, Nickel and Iron Ore all back at late 2016 levels having wiped out all the gains made during 2017 in the early part of this year. However looking at demand and supply fundamentals for these base metals and you see a common thread - tightening supply (as a result of low incentive prices) and still growing demand as coordinated growth across the globe continues. Hard to think of this recent commodities and AUD sell-off as anything but a knee jerk reaction to trade fears. China interestingly still posted higher than expected CPI numbers yesterday while last week their trade balance figures showed "exports and imports grew faster than expected in yuan terms last month, showing both domestic and international demand continue to rise despite worsening relations with the U.S. Exports rose 7.9 percent in August in yuan terms."

NAB business confidence numbers out this morning followed by UK earnings at 6.30pm this evening. NAB business confidence will be the most interesting here given business confidence is a leading indicator of future economic expansion. Business confidence has been rising since early 2016 but more recently that confidence has plateaued. Interesting to see what/if any the impact of a new PM has had on business confidence and the recent escalation of trade tensions between Trump and China.

AUD EXCHANGE RATES:

AUD/USD – 0.7082

AUD/GBP – 0.5430

AUD/EUR – 0.6100

AUD/NZD – 1.0874

AUD/JPY – 78.756

USD/BTC – $6,261

OTHER MARKETS: 

All Ords (XAO) – 6,249

Gold – A$1,680/oz

Silver –  A$19.93/oz

WTI – US$67.47/barrel

DATA RELEASES TODAY:

AUD - NAB Business Confidence at 11.30am

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

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Market Update - 10th September 2018 - Sell Off Continues As Trump Threatens All Chinese Imports With Tariffs

Posted by Patrick Downes on September 10, 2018 at 8:40 AM

Another poor finish to the week for almost all assets classes as commodities, equities and the AUD all fell. The only bright spot being the German and French stock markets which managed to buck the trend and finish marginally higher at the close on Friday evening. Trump doubled down on his threats to impose tariffs on ALL Chinese imports which has only created further instability in markets and resulted in further risk off selling almost across the board.

The AUD is back below 0.7100 for the first time since early 2016 and may head lower still if Trump goes through with further U.S tariffs on Chinese goods. Forecasts and opinions on where the AUD will be in 12 months remain very much divided with some forecasters expecting the AUD to be higher in 12 months, while others think  the high 0.60's to low 0.70's more likely. The truth as they say is probably somewhere in-between.

On a bright note the Australian economy released GDP figures on Wednesday and the data was good with the economy growing at 0.9% or 3.6% annualised. The GDP figures were certainly a surprise but do show that low interest rates and government fiscal policy is helping to stimulate growth. Should we see continued GDP growth in the vicinity of 3-3.5% then you'd have to expect interest rates will go higher at some point in 2019.

Ahead tonight is U.K GDP and Manufacturing Production numbers. Both are out around 6.30pm this evening and expected to come in pretty flat at 0.2% month on month. Given the low forecast we could see a bounce in the GDP and fall in AUD/GBP if the estimates are well beaten.

AUD EXCHANGE RATES:

AUD/USD – 0.7079

AUD/GBP – 0.5470

AUD/EUR – 0.6121

AUD/NZD – 1.0847

AUD/JPY – 78.643

USD/BTC – $6,255

OTHER MARKETS: 

All Ords (XAO) – 6,252

Gold – A$1,682/oz

Silver –  A$19.93/oz

WTI – US$67.71/barrel

DATA RELEASES TODAY:

GBP - GDP & Manufacturing Production at 6.30pm

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