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Patrick Downes

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Market Update - 23rd May 2019 - RBA Notes Rate Cut Chance, AUD/EUR Near 10 Year Lows

Posted by Patrick Downes on May 23, 2019 at 8:18 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 Struggles: 

After staging a modest comeback earlier in the week, AUD/USD came under pressure again Tuesday as the latest RBA Monetary Policy Minutes showed a bias towards a rate cut in June or July as the Australian economy stubbornly slows. The RBA minutes had an immediate impact on the Aussie Dollar, particularly against the Greenback, sending it lower through Tuesday and Wednesday. AUD/EUR and AUD/GBP while lower have held up far better than AUD/USD which has fallen as a result of a double whammy of weaker Aussie but also stronger USD.

In other markets: U.S stocks dipped around half a percent, while European stocks held their ground overnight. Commodity prices remain mixed with zinc, nickel and copper down, while iron ore continues it's surge on the back of more Vale mine closures in Brazil. Stand out performers have been FMG and MGX who are both up over 100% this year alone.

Upcoming Data: 

Economic data out today includes manufacturing and services PMI locally followed by a similar set of data out of France and Germany tonight. AUD/EUR could be impacted by this data and is teetering on 10 year lows around the mid 0.6100's.

AUD EXCHANGE RATES:

AUD/USD – 0.6850

AUD/GBP – 0.5402

AUD/EUR – 0.6136

AUD/NZD – 1.0561

AUD/JPY – 75.605

OTHER MARKETS:

All Ords (XAO) – 6,598

Gold – A$1,850/oz

Silver –  A$21.00/oz

WTI – US$61.29/barrel

DATA RELEASES TODAY:

AUD – Flash Services PMI at 11.30am

EUR – German & French Flash Manufacturing PMI at 6.30pm

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Topics: Report, Market

Market Update - 21st May 2019 - AUD Edges Higher, RBA Minutes Due At 11.30am

Posted by Patrick Downes on May 21, 2019 at 8:13 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 Edges Higher:

The AUD has edged higher across the board despite a sell off in both U.S and European equities overnight. The Dow Jones was the best performer managing to lose only 0.33%, while the NASDAQ took the brunt of the losses off nearly 1.5%; a similar story in Europe with stocks down between 0.5% and 1.6%. AUD/USD continues to hover around the 0.6900 figure, while AUD/GBP may come under further pressure tonight with the release of UK inflation hearings at 6.30pm.

The Don's trade war with China is persisting as front page news in the financial press with the latest reports suggesting an escalation. China appears completely unwilling to go down without a fight in what it sees as unfair tariffs on its exports to the U.S. Locally, Trump is feeling the hurt too with some of the U.S's largest businesses including Nike and Adidas writing open letters criticising his trade war and tariffs.

RBA Minutes Due:

RBA Monetary Policy Minutes are due out this morning at 11.30am. The RBA left rates on hold at 1.5% earlier in the month citing spare capacity in the economy and improvement in the labour market, however these latest monetary policy minutes should give us a bit more depth and colour around their thought process and perhaps also a hint on the next rate move. The AUD remains entrenched under 0.7000 and it will take quite a reversal in fortunes for this to change.

AUD EXCHANGE RATES:

AUD/USD – 0.6879

AUD/GBP – 0.5401

AUD/EUR – 0.6154

AUD/NZD – 1.0538

AUD/JPY – 75.756

OTHER MARKETS:

All Ords (XAO) – 6,564

Gold – A$1,849/oz

Silver –  A$20.94/oz

WTI – US$63.28/barrel

DATA RELEASES TODAY:

AUD - Monetary Policy Meeting Minutes at 11.30am

GBP - Inflation Report Hearings at 6.30pm

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Topics: Report, Market

Market Update - 20th May 2019 - AUD & Equities Buoyant Following Morrison Win

Posted by Patrick Downes on May 20, 2019 at 10:12 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 looks in better shape this morning following a Liberal party come from behind win and generally more optimistic investor sentiment over the weekend. The AUD, while near 3 year lows vs. the Greenback, does look a bit healthier this morning having climbed around around half a percent in early trade. Equity markets also appear buoyant thanks to surging U.S stock futures - local equities are to open 1% higher.

No economic data out today and not a great deal out later in the week.

AUD EXCHANGE RATES:

AUD/USD – 0.6870

AUD/GBP – 0.5394

AUD/EUR – 0.6151

AUD/NZD – 1.0536

AUD/JPY – 75.705

OTHER MARKETS:

All Ords (XAO) – 6,460

Gold – A$1,851/oz

Silver –  A$20.92/oz

WTI – US$63.53/barrel

DATA RELEASES TODAY:

No data today

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Topics: Report, Market

Market Update - 15th May 2019 - AUD Under Sustained Pressure This Week Following Increase In Tariffs

Posted by Patrick Downes on May 15, 2019 at 9:49 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 Under Pressure:

I was hoping that I could write a report this morning showing a bit of a recovery in the AUD, however that simply isn't the case and the AUD remains under significant selling pressure as a result of Trump's increase in tariffs on Chinese imports to the U.S. Officially the AUD/USD exchange rate is near 2015 lows around the 0.6900 level and it really doesn't look like any recovery is close. A continued Trade War between the U.S and China, a likely rate cut from the RBA along with a change in government could all see sustained pressure on the AUD particularly against the Greenback. AUD/EUR and AUD/GBP have held up OK given that Europe and the U.K have issues of their own.

Wages Growth?

No data released so far this week, however that changes this morning with the release of the latest Wage Price Index. The reading is a quarterly number and shows the 'change in the price businesses and the government pay for labor, excluding bonuses'. It's a good indication of whether wages are actually growing in Australia. Expectations are that wages will have grown by about 0.6% in the latest quarter, up from last quarter but still very low on a historical basis.

AUD EXCHANGE RATES:

AUD/USD – 0.6908

AUD/GBP – 0.5344

AUD/EUR – 0.6161

AUD/NZD – 1.0527

AUD/JPY – 75.799

OTHER MARKETS:

All Ords (XAO) – 6,327

Gold – A$1,869/oz

Silver –  A$21.33/oz

WTI – US$61.44/barrel

DATA RELEASES TODAY:

AUD – Wage Price Index q/q

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Topics: Report, Market

Market Update - 10th May 2019 - AUD Continues Gradual Decline As Trade Talks Deadline Looms

Posted by Patrick Downes on May 10, 2019 at 9:11 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.

Trade Talks:

China/U.S trade talks will hit a crescendo tonight as the deadline for a resolution occurs this evening. Donald Trump has promised to significantly increase tariffs on Chinese exports if a resolution to his liking is not forthcoming. However if there is one thing we've learned about the Don it's that he has mastered the 'art of chest beating' and not so much 'the art of the deal'. My hunch is China will delay again tonight and Donald Trump will have no option but to produce a rubbish tweet or two explaining how negotiations have progressed well and will extend the tariffs deadline to allow further negotiations. This scenario would obviously be bullish for the AUD, Equities and Commodities, because tariffs of the likes of what Donald Trump has suggested (25% on all Chinese exports) could have a dramatic impact on both economies. One estimate suggest dire consequences for U.S growth prospects as a result of retaliatory tariffs from China.

AUD Down Again:

In other news, the AUD slipped marginally again overnight across the board, while U.S equities slipped as much as half a percent. European stocks fared worse, with the French CAC and Euro Stoxx 50 leading declines down as much as 1.9% at the close.

Economic data out today includes minutes from the latest RBA meeting, along with GDP and CPI numbers out of the UK and U.S.

AUD EXCHANGE RATES:

AUD/USD – 0.6955

AUD/GBP – 0.5337

AUD/EUR – 0.6195

AUD/NZD – 1.0570

AUD/JPY – 76.334

OTHER MARKETS:

All Ords (XAO) – 6,377

Gold – A$1,838/oz

Silver –  A$21.13/oz

WTI – US$61.76/barrel

DATA RELEASES TODAY:

AUD - RBA Monetary Policy Statement at 11.30am

GBP - GDP & Manufacturing Production m/m at 6.30pm

USD - CPI m/m at 10.30pm

ALL - U.S/China Trade Talks, Tariffs Deadline

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Topics: Report, Market

Market Update - 9th May 2019 - AUD Remains Under Pressure, Chinese Economic Data Out At 11.30am

Posted by Patrick Downes on May 9, 2019 at 8:42 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.

Trade War:

Trump's trade war is front page news again with the latest whispers suggesting China may hit back at Trump with higher tariffs of their own if the Trump White House follows through with flagged tariff increases on Friday, U.S time. Should that be the case and we see higher tariffs on more goods, then it would be a dramatic escalation to what appeared only last week, a deal close to completion. Not surprisingly, markets remain on edge with equities, the AUD and commodities faring the worse this week amid sustained risk aversion. The USD and JPY are the classic safe haven currencies, and have performed well through the week.

AUD Under Pressure:

The AUD on the whole is down marginally and is trading just under 0.7000 on the wholesale market.

A bit of Chinese economic data is out this morning including CPI and PPI figures. Obviously Chinese data has quite an impact on the AUD and most financial markets, so a good showing here could support the AUD, a bad result could see the opposite occur.

AUD EXCHANGE RATES:

AUD/USD – 0.6960

AUD/GBP – 0.5342

AUD/EUR – 0.6213

AUD/NZD – 1.0596

AUD/JPY – 76.633

OTHER MARKETS:

All Ords (XAO) – 6,351

Gold – A$1,832/oz

Silver –  A$21.23/oz

WTI – US$62.02/barrel

DATA RELEASES TODAY:

CNY - CPI & PPI y/y at 11.30am

USD - Fed Chair Powell Speaks at 10.30pm

USD - PPI m/m at 10.30pm

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Topics: Report, Market

Market Update - 8th May 2019 - AUD Bounces, But Risk Assets Still Under Pressure + How To Use Forward Contracts

Posted by Patrick Downes on May 8, 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.

AUD Bounces Back:

Since yesterday morning the AUD has rebounded around half a percent vs. the majors (excluding the JPY), thanks to a less bearish Reserve Bank of Australia who kept rates on hold and a more robust than expected local retail sales figure, all of which were released through the course of yesterday. U.S & European equities and commodity prices still lost ground overnight though as traders pared positions in risk assets amid the latest trade tensions between Trump and China. All in all, overnight U.S equities had their worst session in 2 months, while commodities prices (excluding Iron Ore) are around their lowest levels since Feb/March.

Where is the AUD Headed? 

Well that IS the million dollar question and it really does depend who you listen to. But having said that, the skew now is clearly towards an interest rate cut (at some point) between now and August. At least that'd what interest rate futures and the bank chief economists are telling us. Should this eventuate then obviously the AUD will remain under significant pressure and a downward bias; that is the harsh reality for Australian importers. A low AUD will assist our export market, but Aussie importers will have to content with finer margins.

How To Combat A Lower AUD? 

Thankfully, there is a way to combat a lower AUD and that's via a simple Forward Contract. Forward Contracts, lock in a rate (say 0.7000) and amount (say US$100,000) today for a future date (say August 31st), and it's put to good effect by many of our clients on a daily basis. The benefit is that Importers lock in their profit margins for known purchases and it means that if in August AUD/USD is trading at 0.6500 then you'll be trading at 0.7000. It really is a fantastic product in a falling market, and I encourage you all to reach out to me to discuss how you can utilise this product to make your business more efficient.

AUD EXCHANGE RATES:

AUD/USD – 0.6981

AUD/GBP – 0.5333

AUD/EUR – 0.6233

AUD/NZD – 1.0601

AUD/JPY – 77.000

OTHER MARKETS:

All Ords (XAO) – 6,383

Gold – A$1,831/oz

Silver –  A$21.25/oz

WTI – US$61.63/barrel

DATA RELEASES TODAY:

No data

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Topics: Report, Market

Market Update - 7th May 2019 - AUD & Equities Rocked By Trump Tariff Tweets, RBA Cash Rate Today

Posted by Patrick Downes on May 7, 2019 at 7:53 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.

Trump Tweets:

Yesterday morning Trump tweeted that he would be raising tariffs on "US$200 billion of Chinese goods to 25 percent from a base of 10 percent because talks on a deal with China were moving too slowly". The result of the surprise comments saw a swift decline in risk assets (namely equities and the AUD) and a swift move towards safe havens like bonds, the USD, Gold and the Japanese Yen. This morning things haven't much improved and markets are still on the back-foot as a result of Donald Trump's tweets formally being backed up by comments overnight from the U.S. Trade Representative Robert Lighthizer.

All in all, we've had a swift change in rhetoric from the Trump White House who were for one minute saying how close they were to a trade deal with China only to seconds later say they aren't any closer and are therefore increasing tariffs. This demonstrates the real susceptibility of the AUD to outside/global factors and reiterates why it is just so important for importers to take advantage of the AUD on any rallies.

RBA Cash Rate: 

Ahead today is a couple of further big data events. Retail sales first this morning and then the RBA meet to discuss the current setting of interest rates. As it stands the official benchmark interest rate is 1.5%, but the market is betting on a 50% chance that we see a cut today to 1.25% as a result of continued sluggish growth. So while it's no certainty that a rate cut is forthcoming this afternoon, it would certainly make sense for importers to book payments ahead of the announcement at 2.30pm. Additionally retail sales figures at 11.30am, could provide some indication as to whether or not the RBA does anything this afternoon. A very weak result will up the likelihood of a cut, while a positive result will reduce that chance. Call me if you'd like to discuss.

AUD EXCHANGE RATES:

AUD/USD – 0.6955

AUD/GBP – 0.5305

AUD/EUR – 0.6209

AUD/NZD – 1.0542

AUD/JPY – 77.003

OTHER MARKETS:

All Ords (XAO) – 6,369

Gold – A$1,831/oz

Silver –  A$21.32/oz

WTI – US$62.56/barrel

DATA RELEASES TODAY:

AUD – Retail Sales m/m & Trade Balance at 11.30am

AUD - Cash Rate & RBA Rate Statement at 2.30pm

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Topics: Report, Market

Market Update - 3rd May 2019 - Risk Assets Under Pressure As 'Sell In May, Go Away' Takes Hold

Posted by Patrick Downes on May 3, 2019 at 9:02 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.

That Old Saying:

"Sell in May and Go Away" is the old adage and it appears to be holding true once again with the early part of the month seeing a sustained sell off right across the board. Risk assets such as the AUD, Equities and Commodities have all come under selling pressure since Wednesday, while safe havens like the Greenback and Yen have seen positive momentum. I'm hoping now that I've written it down, we'll see a change in fortunes and the AUD, Equities and Commodities start performing a bit better. We will see.

Housing:

New home sales came in week again yesterday, with the index slipping 0.1% and continuing a pretty poor showing over the past year. In the U.K the Bank of England held rates steady again at 0.75% with all members 9 of 9 agreeing this was the right course of action. AUD/GBP was little moved overnight.

Building Approvals & Non Farms:

Ahead today is more housing data with local building approvals released around midday. Expectations are for another large correction to the downside and like new home sales the data has been horrendous over the past year. One thing is obvious, a change in sentiment in the housing market is still a ways off. Tonight we'll see the latest employment numbers out of the U.S. The unemployment rate currently stands at 3.8%

An interest rate cut from the RBA, while likely to support equities and to a lesser degree house prices would see the AUD continue to decline. We'll here from the RBA next Tuesday.

AUD EXCHANGE RATES:

AUD/USD – 0.6968

AUD/GBP – 0.5339

AUD/EUR – 0.6232

AUD/NZD – 1.0547

AUD/JPY – 77.778

OTHER MARKETS:

All Ords (XAO) – 6,430

Gold – A$1,815/oz

Silver –  A$20.90/oz

WTI – US$61.64/barrel

DATA RELEASES TODAY:

AUD – Building Approvals m/m at 12.30pm

USD - Non-Farm Employment Change & Unemployment Rate at 11.30pm

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Topics: Report, Market

Market Update - 2nd May 2019 - AUD Under Pressure, U.S Fed Reserve Holds Fire On Rate Move

Posted by Patrick Downes on May 2, 2019 at 8:39 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 Battling:

I was a bit crook last week and away in the early part of this week hence not too many market update's recently. But I'm feeling better and I'm back into the swing of things. The AUD however still looks a bit sick with AUD/USD languishing under 0.7000, while AUD/EUR remains in a trading range between 0.6200 and 0.6400 - it's been hovering between these levels since the start of the year.

U.S Fed On Hold:

In overnight news the U.S Fed hosed down speculation that there'll be any change to interest rates from their current level of 2.5%, citing solid fundamentals and healthy GDP growth as reasons why rates as should remain steady. Equities viewed that as a negative sliding late in the day. US stocks finished lower around half to one percent while European equities closed higher before the US. Fed remarks, the UK FTSE was the exception down 0.44%. Our local market is expected to open half a percent lower, while the AUD looks under real pressure.

Home sales figures out this morning, followed by UK interest rates tonight.

AUD EXCHANGE RATES:

AUD/USD – 0.6986

AUD/GBP – 0.5344

AUD/EUR – 0.6233

AUD/NZD – 1.0558

AUD/JPY – 77.889

OTHER MARKETS:

All Ords (XAO) – 6,466

Gold – A$1,820/oz

Silver –  A$20.95/oz

WTI – US$63.57/barrel

DATA RELEASES TODAY:

AUD - HIA New Home Sales m/m

GBP - BOE Official Bank Rate at 10.00pm

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Topics: Report, Market

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