Compass Global Markets' Blog

Patrick Downes

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Market Update - 1st April 2020 - AUD Rises As Covid19 Cases Slow In Aus

Posted by Patrick Downes on April 1, 2020 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 Gaining: 

AUD/EUR has been the biggest gainer this week, adding around 1.5% since the beginning of the week as #Covid19 cases continues to surge in and around Europe's largest metropolitan areas. Europe is, at the moment the epicentre of the pandemic along with the U.S, and that probably explains to some degree the AUD's recent gains vs. both the Euro and USD. Gains have been more muted vs. the Pound as they keep infections somewhat contained - currently the U.K has around 25,000 cases.

Doubts About China Data:

Chinese economic data was released yesterday showing a sharp V-shaped recovery in both manufacturing and non-manufacturing PMI for the month of March. However many in the financial press doubt the figures released, given the CCP's history with finessing economic data to sow a sense of stability and growth. The truth is no one knows if the numbers are accurate, they may be, they may be not. But China, along with Japan, Korea, Singapore and a number of other Asian countries are showing that a reasonably quick recovery is possible with the right social distancing and containment measures.

U.S Jobs Numbers:

U.S jobs data is released tonight - it's the preliminary data only, but gives a pretty accurate read on what the official non-farms data will show Friday night. Typically non-farm employment numbers are one of the most crucial pieces of economic data released each month in the U.S and the market is braced for a horrendous print tonight of around -150,000 jobs. Unemployment claims follow tomorrow night.

AUD EXCHANGE RATES:

AUD/USD – 0.6115

AUD/GBP – 0.4912

AUD/EUR – 0.5537

AUD/NZD – 1.0270

AUD/JPY – 65.700

OTHER MARKETS:

All Ords (XAO) – 5,110

Gold – A$2,570/oz

Silver –  A$22.79/oz

WTI – US$21.69 barrel

DATA RELEASES TODAY:

USD - ADP Non-Farm Employment Change at 11.15pm

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Topics: Report, Market

Market Update - 30th March 2020 - AUD Continues Good Run, Pushing Through 0.6100 Vs. Greenback

Posted by Patrick Downes on March 30, 2020 at 8:37 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 Continues Good Run:

The Aussie Dollar has continued it's good run over the weekend. AUD/USD added a cent or so since since Friday afternoon, and extended it's gain to around six cents since we hit lows of 0.5505 on the 19th of March. The Aussie Dollar has form with a really bullish move playing out post GFC, when AUD/USD rallied from a low of 0.6000 in November 2008 to nearly 1.1200 by mid 2011. Whether we see the same pattern emerge remains to be seen, but if we can get through #Covid19 reasonably unscathed then there is cause for optimism. Initial data from our social distancing is positive and shows a slowing/stalling in the number of new infections, i.e. they are no longer growing exponentially. Additionally most cases are still being driven by returning residents from overseas as opposed to community transmission.

Stocks Sell Off:

U.S stocks sold off on Friday, no surprises here as no one wants to hold positions into the weekend at the moment. I cut most of my equity positions around lunchtime Friday as the ASX looked like it was turning negative.

When the stocks that have been on a tear fail to make new highs in a bullish market (which Monday morning was) then that's a good sign that momentum is shifting and it's perhaps worth exiting positions. So in the end the ASX lost around 5% on Friday afternoon, in line with the losses on U.S indexes Friday night. Local stocks are likely to open lower this morning.

AUD EXCHANGE RATES:

AUD/USD – 0.6110

AUD/GBP – 0.4903

AUD/EUR – 0.5487

AUD/NZD – 1.0158

AUD/JPY – 65.755

OTHER MARKETS:

All Ords (XAO) – 4,874

Gold – A$2,653/oz

Silver –  A$23.56/oz

WTI – US$22.82 barrel

DATA RELEASES TODAY:

No data.

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Topics: Report, Market

Market Update - 27th March 2020 - AUD & Stocks Post Third Day Of Gains

Posted by Patrick Downes on March 27, 2020 at 9:30 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 & Stocks Continue Rally:

The Aussie Dollar has continued to bounce off lows posted last week when AUD/USD hit 0.5510 and looks set to make further gains today following another solid session for financial markets in the U.S and Europe overnight. U.S stocks added another 5-6% backing up the gains made earlier in the week.

The AUD is still around 5 to 6 cents off the highs of earlier this month, however any rally is a good rally in my opinion and in this particular market. I tend to think the prudent thing to is to continue to take advantage of ANY strength in the AUD, as there is likely still further pain ahead for financial markets and the AUD. It's quite unlikely that the bear market for the AUD and stocks is over.

G20 Meetings:

G20 meetings take place this evening/today and will no doubt again have a focus on beating #Covid19 at all costs. Meeting likely held via conference call, but perhaps some further positive news likely to flow from this which could further support a bounce in the AUD. Regardless, best risk management is to take advantage of the AUD while it's 5 cents above lows seen 2 weeks ago.

AUD EXCHANGE RATES:

AUD/USD – 0.6009

AUD/GBP – 0.5442

AUD/EUR – 0.4933

AUD/NZD – 1.0127

AUD/JPY – 65.778

OTHER MARKETS:

All Ords (XAO) – 5,135

Gold – A$2,689/oz

Silver –  A$23.75/oz

WTI – US$24.03 barrel

DATA RELEASES TODAY:

All - G20 Meetings

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Topics: Report, Market

Market Update - 25th March 2020 - AUD Makes Gains, U.S Stocks Rally 9 to 11%

Posted by Patrick Downes on March 25, 2020 at 9:46 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.

Stocks Make Big Gains:

Markets have continued to post volatile sessions with last night no exception. U.S stocks rose a whopping 9 to 11% as investors swarmed back into beaten down stocks. Large cap stocks like Apple and Alphabet (Google) added as much as 7-10% as Trump declared he wanted the U.S reopened by Easter - a tough ask and probably a pipe-dream. Our local market is set to have a great session with ASX200 Futures suggesting a gain of as much as 8% today.

AUD Rallies:

The Aussie Dollar which touched decade lows last week has also rebounded strongly, up some 4 cents or so vs. the Greenback and around 3 Yen vs. the JPY since Monday. Whether we hold onto these gains remains to be seen, but the bounce gives Importers an opportunity to make payments at considerably higher levels than this time last week.

AUD EXCHANGE RATES:

AUD/USD – 0.5944

AUD/GBP – 0.5041

AUD/EUR – 0.5502

AUD/NZD – 1.0211

AUD/JPY – 66.223

OTHER MARKETS:

All Ords (XAO) – 4,753

Gold – A$2,731/oz

Silver –  A$24.02/oz

WTI – US$25.18 barrel

DATA RELEASES TODAY:

GBP - CPI y/y at 8.30pm

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Topics: Report, Market

Market Update - 23rd March 2020 - ASX Thumped As All Non-Essential Businesses Shutdown

Posted by Patrick Downes on March 23, 2020 at 9:23 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 Holds/ASX Thumped: 

Volatility in the price of financial assets continued last week and into Friday night's session where U.S stocks lost between 3-5% while in Europe stocks made modest gains. Volatility is typically a hall mark of any bear market, however the kind of volatility we've seen over the past month is unlike anything we've seen the the last 50+ years. In fact as I write this, the ASX200 has just opened and gapped lower 9% as news of a total shutdown of all non-essential businesses filters through financial markets. Things are going to be wild this week and I encourage everyone to take a deep breath and remember, this too shall pass, the the price of financial assets will rebound. Overtime.

RBA Supports The AUD:

The RBA last week announced they would support the value of the AUD following a 10 cent fall since March 10th vs. the Greenback. Perhaps too little too late from the RBA, but it seems we might have a floor in place now of around 0.56/0.57 for AUD/USD. If that's the case then it's fantastic for importers who have copped it the hardest lately, but for exporters perhaps this signals it's time to start looking at hedging some of your USD exposures.

AUD EXCHANGE RATES:

AUD/USD – 0.5721

AUD/GBP – 0.4917

AUD/EUR – 0.5354

AUD/NZD – 1.0180

AUD/JPY – 63.411

OTHER MARKETS:

All Ords (XAO) – 4,854

Gold – A$2,613/oz

Silver –  A$21.65/oz

WTI – US$21.57 barrel

DATA RELEASES TODAY:

No data

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Topics: Report, Market

Market Update - 20th March 2020 - AUD Dives Before RBA Rate Cuts to 0.25%

Posted by Patrick Downes on March 20, 2020 at 8:51 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 Falls: 

The Aussie Dollar had one of those days to forget, losing 300 points in a matter of hours as the RBA went on to cut interest rates to a record low 0.25%. The majority of the falls occurred in the hours before the cut, with the worst fall happening around 12.56pm when the AUD/USD cross fell from 0.5660 to a low of 0.5508 in the space of five minutes. AUD/GBP held up OK yesterday, however similar falls were seen against the Euro and JPY (which is typically classified as a safe haven currency in times of uncertainty).

Many clients have been booking Forward Contracts lately, and I do think that remains the best course of action in this current market and with this increased volatility. AUD/USD while down substantially (10 cents) over the past month may still have further to go. As such prudent risk management for importers means hedging your currency exposures with Forward Contracts.

AUD EXCHANGE RATES:

AUD/USD – 0.5700

AUD/GBP – 0.4957

AUD/EUR – 0.5342

AUD/NZD – 1.0065

AUD/JPY – 63.266

OTHER MARKETS:

All Ords (XAO) – 4,809

Gold – A$2,564/oz

Silver –  A$21.05/oz

WTI – US$25.66 barrel

DATA RELEASES TODAY:

No data

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Topics: Report, Market

Market Update - 18th March 2020 - AUD/USD Dips Below 0.6000 For First Time Since 2003

Posted by Patrick Downes on March 18, 2020 at 8:35 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/USD Hits 0.59: 

What was probably inconceivable two months ago is now playing out in front of our eyes, the AUD has over the past month lost 500 points vs the Greenback in one of the sharpest declines on record. Lower interest rates as a result of Covid19 is the culprit, however with the economy already on unstable footing ahead of the Covid19 pandemic a solid nudge was always going to cause some damage to the Australian economy and by default the AUD. In fact AUD is down right across the board and this includes against the GBP, EURO, JPY and even NZD which threatens to fall below parity for the first time since the NZD was floated back in 1985.

The latest retail sales numbers out of the U.S overnight gives us a glimpse of what to expect down the track, with their latest retail numbers slumping by half a percent in the past month and likely to contract further in the short to medium term. We see prelim retail sales numbers out this morning, however it's probably too early to get a solid indication of the hit to the economy of Covid19.

AUS Government Stimulus:

The Australian Government has announced a number of measures to soften the financial blow of Covid19 including cash handouts and business payments and I would be expecting even more measures should we see the number of cases spike across Australia. Rudd's cash handout after the GFC certainly helped avoid a recession in Australia, however I'm not so sure these same measures will work this time around given the hit to tourism, education, retail sales etc etc. The hits will be across the board and industries which appeared solid going into 2020 may even struggle. These are unprecedented times for sure.

AUD EXCHANGE RATES:

AUD/USD – 0.5990

AUD/GBP – 0.4950

AUD/EUR – 0.5435

AUD/NZD – 1.0064

AUD/JPY – 64.501

OTHER MARKETS:

All Ords (XAO) – 5,332

Gold – A$2,548/oz

Silver –  A$21.05/oz

WTI – US$27.15 barrel

DATA RELEASES TODAY:

AUD - Prelim Retail Sales m/m at 11.30am

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Topics: Report, Market

Market Update - 16th March 2020 - AUD Rises On Fed Interest Rate Cut & QE

Posted by Patrick Downes on March 16, 2020 at 8:54 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/USD Rises On Fed: 

The Aussie Dollar has surged this morning following news that the U.S Fed has made another surprise cut to rates, taking their official benchmark rate to zero percent (below AU interest rates). Additionally the U.S Fed, led by Jerome Powell, launched another round of QE, this time to the tune of US$700 billion; all in an attempt to soften the impacts of Covid-19 on the U.S economy. This was the second interest cut in two weeks, following another unscheduled emergency meeting on the 4th, where interest rates were cut from 1.75% to 1.25%.

Stock Markets: 

U.S weekend stock futures were pointing towards a fall this morning when markets open, however these QE measures and interest rate cut to ZERO, followed by G7 meetings tonight, might actually result in another boost to equities prices over the next 24 hours. U.S stocks finished 9%+ higher on Friday night. Our local market should move higher today, however it's really difficult to read as futures markets are not yet open. 10am we'll see fireworks again - no doubt.

AUD EXCHANGE RATES:

AUD/USD – 0.6233

AUD/GBP – 0.5018

AUD/EUR – 0.5565

AUD/NZD – 1.0170

AUD/JPY – 66.433

OTHER MARKETS:

All Ords (XAO) – 5,590

Gold – A$2,445/oz

Silver –  A$23.52/oz

WTI – US$33.19 barrel

DATA RELEASES TODAY:

CNY - Industrial Production y/y at 1.00pm

ALL - G7 Meetings

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Topics: Report, Market

Market Update - 13th March 2020 - AUD/USD Drops 3 Cents Overnight As Stocks Dive

Posted by Patrick Downes on March 13, 2020 at 8:44 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 Sinks With Stocks:

The Aussie Dollar has had one of its worst sessions on record, losing nearly three hundred points, or 3 cents since yesterday morning. The falls were triggered by the worst capitulation in stocks that we've seen since Black Monday 1987. All in all U.S and European stocks fell by between 9-14%, with the Spanish IBEX35 the worst performer. Aussie stocks look set to break records today with a nearly 10% fall priced in by futures markets.

I really wish I could be more upbeat about things but the truth is this coronavirus has now been deemed a pandemic and probably won't be halted until a vaccine is ready. Of course warmer, more humid weather in the northern hemisphere (where the bulk of cases have occurred) should also provide some respite from the viruses spread. China has shown that even this virus can be contained with the right measures, so there is certainly light at the end of the tunnel.

By the end of the year we'll probably look back on this as a buying opportunity for stocks and the AUD, however it would take a brave man or women to jump into the market right now.

PS - for those importers struggling with the AUD down here, please remember we have been here before. In October 2008 AUD/USD slumped to just under 0.60 before recovering over the next few years to a high around 1.10. The same thing occured after the tech wreck in 2001 when AUD/USD fell to under 0.49 before staging a nearly 8 year rally to around 0.98.

AUD EXCHANGE RATES:

AUD/USD – 0.6241

AUD/GBP – 0.4951

AUD/EUR – 0.5582

AUD/NZD – 1.0216

AUD/JPY – 65.375

OTHER MARKETS:

All Ords (XAO) – 5,370

Gold – A$2,531/oz

Silver –  A$25.36/oz

WTI – US$31.32 barrel

DATA RELEASES TODAY:

None

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Topics: Report, Market

Market Update - 10th March 2020 - Stocks Sink In Worst Sell Off Since GFC

Posted by Patrick Downes on March 10, 2020 at 9:08 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.

Markets Melt:

The Aussie Dollar has held up quite well in comparison to equities markets which yesterday saw their worst falls since the GFC a little over 12 years ago. We all new a severe correction would occur eventually, however I'll have to admit I didn't see that Monday morning sell off coming. All in all, the ASX All Ords had its second worst day on record, falling a whopping 7.33%, in the U.S the Dow fell 7.79%, while the Euro Stoxx 50 fell by an even greater margin losing 8.45% by the close of trade. Our local market is tipped to open another 6.5% lower today in what could be another particualrly savage sell off.

AUD Lower:

The Aussie Dollar has also copped a hiding, falling as much as 200 points vs. the Pound since early Feb, while AUD/USD is off a similar amount. Compared to stock markets our currency has held up pretty well, especially given the likely hit to tourism, education and mining which will all feel some contraction.

Where do we go from here? That's a good question and one I don't have the answer too.

Importers best bet is to continue to hedge FX exposures with Forward Contracts, while for exporters there is no need to hurry as lower interest rates (and therefore a lower AUD) are likely.

As for the stock market, look away for the time being and don't panic sell particularly if you are a long term investor. If you're a bargain hunter you may want to take a nibble on stocks. But I wouldn't be taking any huge bites just yet.

AUD EXCHANGE RATES:

AUD/USD – 0.6555

AUD/GBP – 0.4991

AUD/EUR – 0.5716

AUD/NZD – 1.0333

AUD/JPY – 67.033

OTHER MARKETS:

All Ords (XAO) – 5,822

Gold – A$2,549/oz

Silver –  A$25.82/oz

WTI – US$30.45 barrel

DATA RELEASES TODAY:

None

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Topics: Report, Market

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