Compass Global Markets' Blog

Patrick Downes

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Market Update - 26th March 2019 - AUD Falls As Equities Sell-Off, Forward Contracts Can Hedge Exposures

Posted by Patrick Downes on March 26, 2019 at 8:31 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.

Equities Sell-Off:

An equities sell off on Friday night in the U.S and Europe saw the the local market down over 1% yesterday while the AUD and commodities also succumbed to the negative sentiment across markets. AUD/USD which had reached as high as 0.7170 on the wholesale market late last week is now down around 100 points from that level. Thankfully the losses on Friday didn't follow through when U.S and European stocks opened last night with the Dow, Nasdaq and S&P all finishing more or less flat.

Gold & Silver Bid:

Gold and Silver, which typically perform well in times of fear not surprisingly surged through yesterdays trade with Gold up about 30AUD an ounce while Silver was up 1%. Iron ore prices remain robust but are off the highs we saw early last week, while other base metal prices are holding up quite nicely, as expected.

Forward Contracts When AUD Dropping: 

Speaking to import clients recently about the AUD tells me a few things, first is importers appear overly optimistic about the prospects for the AUD and what I mean by that is that many thing we have based out around the low 0.7000's on the wholesale market. However another jolt to financial markets or continued local poor economic data could see the Reserve Bank of Australia forced to cut interest rates to record lows, this would be a negative for the AUD no matter how you look at it. Consensus forecasts, and by that I mean the majority of forecasts have AUD in the 60's over the next 12 months vs the USD, and while that's not what importers want to hear that's unfortunately the reality that we should start to prepare for. Clients wishing to hedge their exposures can do so with a Forward Contract, please call me to discuss as it's probably the best strategy to mitigate foreign currency risk.

AUD EXCHANGE RATES:

AUD/USD – 0.7081

AUD/GBP – 0.5358

AUD/EUR – 0.6255

AUD/NZD – 1.0260

AUD/JPY – 77.958

OTHER MARKETS:

All Ords (XAO) – 6,208

Gold – A$1,859/oz

Silver –  A$21.85/oz

WTI – US$59.10/barrel

DATA RELEASES TODAY:

USD - CB Consumer Confidence at 1.00am

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Topics: Report, Market

Market Update - 22nd March 2019 - Dovish U.S Fed Helps Boost Stocks

Posted by Patrick Downes on March 22, 2019 at 7:55 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.

 

U.S Fed Dovish:

Yesterday saw the latest from the U.S Federal Reserve, who in the early hours of yesterday morning decided to keep rates on hold for a third consecutive month at 2.5%, while at the same time ratcheting down inflation expectations and the likelihood we'll see any further significant increases in U.S interest rates. In fact the latest estimates suggest one hike over the next several years. The AUD rallied vs the Greenback on this reduction in interest rate expectations but remains under pressure locally due to the weak housing market and weaker consumer spending.

Aussie Employment Flat: 

Aussie employment data was released yesterday morning and showed only a small increase in the number of employed people, however that increase of about 4,000 jobs helped move the needle and saw the unemployment rate drop to 4.9% in seasonally adjusted terms.

Overnight stocks in the U.S had a very good session thanks to the Federal Reserve stance on interest rates yesterday morning. The reason being that stocks perform better when interest rates are stable or falling as opposed to rising. Our local market should open around half a percent higher this morning.

European economic data out of Germany and France is out later this evening.

AUD EXCHANGE RATES:

AUD/USD – 0.7080

AUD/GBP – 0.5403

AUD/EUR – 0.6220

AUD/NZD – 1.0310

AUD/JPY – 78.487

OTHER MARKETS:

All Ords (XAO) – 6,253

Gold – A$1,841/oz

Silver –  A$21.75/oz

WTI – US$59.87/barrel

DATA RELEASES TODAY:

EUR - French and German Manufacturing & Services PMI at 7.15pm

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Topics: Report, Market

Market Update - 20th March 2019 - AUD Declines With Aussie House Prices, FOMC Decision Tonight

Posted by Patrick Downes on March 20, 2019 at 9:28 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 Declines:

Well that might just be it for the time being for the AUD's good little run with the local currency making a swift retreat from the 0.7100 level vs the Greenback but is also lower against all the other majors. The Home Price Index was released yesterday and showed that in the December quarter prices declined by 2.4% nationally taking the total losses for the full year to around 5.1% nationally with Sydney and Melbourne the worst performers. More recent data for the latest quarter won't be released by the ABS for another 2 months, however CoreLogic's more recent data is showing continued steep declines.

RBA Minutes: 

While the RBA have watched the deteriorating housing market and lending conditions, in their minutes released yesterday they suggested that a lack of dwelling investment was expected to subtract from growth and the decline “could be sharper” than currently expected however “members agreed that there was not a strong case for a near-term adjustment". Strange when you consider that our economy is built on just a few pillars of which housing is a major part. I think a rate cut is still likely at some point this year. As such for Importers Forward Contracts in my opinion are the best way to play the current scenario especially if protecting your costing levels is the main focus.

U.S Interest Rate Decision: 

The FOMC meet to set U.S interest rates early tomorrow morning, however no change is anticipated as the U.S Fed take a wait and see approach to monetary policy. The market may still move on comments from Jerome Powell, so clients wishing to avoid risk should probably book USD payments today.

AUD EXCHANGE RATES:

AUD/USD – 0.7056

AUD/GBP – 0.5310

AUD/EUR – 0.6210

AUD/NZD – 1.0309

AUD/JPY – 78.639

OTHER MARKETS:

All Ords (XAO) – 6,276

Gold – A$1,843/oz

Silver –  A$21.69/oz

WTI – US$59.29/barrel

DATA RELEASES TODAY:

GBP - CPI at 8.30pm

USD - Federal Funds Rate & FOMC Statement at 5.00am (tomorrow morning)

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Topics: Report, Market

Market Update - 19th March 2019 - AUD Bid Overnight, However House Price Index Due At 11.30am

Posted by Patrick Downes on March 19, 2019 at 9:19 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 Bid: 

The AUD is up across the with the majority of those gains made versus the GBP which slid in overnight trade. AUD/USD and AUD/EUR moved only marginally higher. Financial markets more broadly were bid, with both U.S and European stocks gaining along with commodity prices. The biggest gainer in the metals space was iron ore which leapt over 4% as a Brazilian court shuttered a 12 million tonne per annum Vale Iron Ore mine. RIO, FMG, BHP and the soon to be restarted Koolan Island mine owned by MGX all benefited and should continue to do so as iron ore supply remains tight.

House Price Index:

No economic data was released yesterday however Monetary Policy Meeting Minutes from the latest RBA meeting are due out this morning, followed by the ABS's Home Price Index at 11.30am. House prices have been falling and the declines have been accelerating in the early part of 2019. Economists have tipped a 1.9% decline in Aussie house prices this quarter which would be officially the sharpest falls we've seen since the aftermath of the GFC.

AUD EXCHANGE RATES:

AUD/USD – 0.7070

AUD/GBP – 0.5327

AUD/EUR – 0.6230

AUD/NZD – 1.0330

AUD/JPY – 78.806

OTHER MARKETS:

All Ords (XAO) – 6,283

Gold – A$1,835/oz

Silver –  A$21.61/oz

WTI – US$59.26/barrel

DATA RELEASES TODAY:

AUD - House Price Index & RBA Meeting Minutes at 11.30am

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Topics: Report, Market

Market Update - 18th March 2019 - AUD Little Changed During Friday, Brexit Negotiations Continue

Posted by Patrick Downes on March 18, 2019 at 8:33 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.

I can report this morning that there is very little to report in financial markets; of course though the whole Compass team share in sending our condolences to the Christchurch community and Muslim community worldwide.

AUD Little Changed:

The AUD is in much the same position as Thursday morning, with very little movement in any of the majors during Fridays session or over the weekend. AUD/USD continues to meander between 0.7000 and 0.7100, while AUD/GBP could be set to test support again around the 0.5300 level as we hear what's next for Brexit negotiations.

No Economic Data: 

No economic data is due out today, however our local equities market should open higher this morning thanks to a strong finish in the U.S and Europe on Friday evening. Commodities prices remain robust with the low AUD helping to support profit margins for the major miners and exporters as a whole.

AUD EXCHANGE RATES:

AUD/USD – 0.7054

AUD/GBP – 0.5294

AUD/EUR – 0.6225

AUD/NZD – 1.0315

AUD/JPY – 78.688

OTHER MARKETS:

All Ords (XAO) – 6,265

Gold – A$1,884/oz

Silver –  A$21.57/oz

WTI – US$58.57/barrel

DATA RELEASES TODAY:

No economic data

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Topics: Report, Market

Market Update - 14th March 2019 - GBP Rallies 2% As UK Parliament Rule Out No-Deal Brexit

Posted by Patrick Downes on March 14, 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 Plans:

GBP was again the biggest mover overnight up 2% vs. the Aussie Dollar as the U.K Parliament ruled out a no-deal triggering of Article 50 (aka Brexit). The reject result was a sigh of relief for many across the U.K and certainly also a sigh of relief for financial markets who had sold off the Pound on the slim chance that Parliament would go ahead with a no-deal Brexit.

In other news both U.S and European stocks moved higher in unison with gains around 0.6%-0.7% across the board in the U.S, while in Europe the best performer was the French CAC which rallied 0.69%. The solid moves overnight along with a bit of buoyancy from the latest Brexit vote means our local market should open around 0.6% higher this morning. Base metals moved marginally higher overnight.

Chinese Data: 

More Chinese economic data out today in Industrial Production, Retail Sales and the Unemployment Rate. Data out of China recently has been weaker than expected, so there's probably more upside than downside risks for the Aussie Dollar on the back of this data given that the worst is probably priced in.

AUD EXCHANGE RATES:

AUD/USD – 0.7061

AUD/GBP – 0.5290

AUD/EUR – 0.6230

AUD/NZD – 1.0310

AUD/JPY – 78.588

OTHER MARKETS:

All Ords (XAO) – 6,246

Gold – A$1,845/oz

Silver –  A$21.78/oz

WTI – US$58.57/barrel

DATA RELEASES TODAY:

AUD – MI Inflation Expectations at 11.00am

CNY - Industrial Production & Retail Sales at 1.00pm

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Topics: Report, Market

Market Update - 13th March 2019 - AUD/GBP Surges As Brexit Plans Rejected Again

Posted by Patrick Downes on March 13, 2019 at 9:37 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.

Brexit Plans:

The biggest mover overnight was AUD/GBP thanks to another failed Brexit Vote which saw Theresa May's latest plans rejected in emphatic fashion. Where this all leaves the U.K and it's Brexit negotiations remain to be seen but the Pound has been sold off on every rejection in the vote, as a result AUD/GBP is nearly 1% higher overnight. AUD/USD edged higher with commodities prices.

Zinc Prices Surge:

U.S stocks advanced once again with the only detractor being the Dow which fell 0.4%. The Nasdaq and S&P finished 0.44% and 0.3% higher. Metals prices also gained with Zinc leading the pack up $100 a tonne as inventories/stockpiles hit 11 year lows, the other base metals made smaller gains along with oil prices.

Ahead today Westpac Consumer Sentiment numbers, followed by U.K annual budget release and U.S producer prices tonight.

AUD EXCHANGE RATES:

AUD/USD – 0.7047

AUD/GBP – 0.5382

AUD/EUR – 0.6237

AUD/NZD – 1.0283

AUD/JPY – 78.489

OTHER MARKETS:

All Ords (XAO) – 6,260

Gold – A$1,838/oz

Silver –  A$21.81/oz

WTI – US$57.40/barrel

DATA RELEASES TODAY:

AUD - Westpac Consumer Sentiment at 10.30am

GBP - Annual Budget Release

USD - PPI & Core Durable Goods Orders at 11.30pm

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Topics: Report, Market

Market Update - 12th March 2019 - AUD Bounces As U.S Equities Have Best Night Since January

Posted by Patrick Downes on March 12, 2019 at 8:25 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.

A public holiday in Victoria yesterday hence no report from me as I chose lounging around over following financial markets - it's good to take a break sometime.

Overnight AUD Bounces:

The good news this morning is the AUD appears to have bounced back and is trading around half a percent higher versus the USD, GBP and JPY this morning. AUD/NZD has however continued it's decline with the pair now down around 800 points since mid August.

U.S Stocks Surge:

Markets performed well overnight, with U.S equities flying. The best performer was the Nasdaq up over 2%, followed by the S&P 500 up nearly 1.5% and the Dow finishing the session just shy of 0.8% higher. Why the big bounce? As is always the case it's usually several factors which may include momentum, sentiment, news or data. Overnight the release of better than anticipated retail sales showed gave the market something to cheer about while on Friday night the unemployment rates dropped to 3.8% while average earnings rose. All rosy data and not the bleak view that some bears hold.

Ahead today is home loans data and business confidence followed by U.K GDP figures and U.S inflation numbers tonight. We could see some further good moves for the AUD tonight if the data shows the world economy continuing to make progress.

AUD EXCHANGE RATES:

AUD/USD – 0.7035

AUD/GBP – 0.5342

AUD/EUR – 0.6252

AUD/NZD – 1.0298

AUD/JPY – 78.268

OTHER MARKETS:

All Ords (XAO) – 6,263

Gold – A$1,829/oz

Silver –  A$21.67/oz

WTI – US$57.01/barrel

DATA RELEASES TODAY:

AUD - Home Loans & NAB Business Confidence at 11.30am

GBP - GDP & Manufacturing Production at 8.30pm

USD - CPI at 11.30pm

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Topics: Report, Market

Market Update - 8th March 2019 - AUD Continues Declines With Poor Retail Sales

Posted by Patrick Downes on March 8, 2019 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.

Retail Sales Disappoint: 

More poor local economic data released yesterday put further downward pressure on the Aussie Dollar with the latest retail sales figures showing a very lacklustre 0.1% increase in month on month sales. Department stores again fielded the brunt of declines off 0.4%, while food retailing and spending at cafe & restaurants grew 0.3% and 0.2% respectively. AUD/USD is off around 10-15 points since yesterday and is nearly 2 cents lower than in late Feb.

Rate Cut Likely: 

All the data now seem to point to a rate cut from the RBA as opposed to a rate hike, which unfortunately probably also means a lower AUD. How low will we go? Well I'm not a big fan of making long dated forecasts as the book "Future Babble" paints a pretty bleak picture of expert predictions, but I can provide a basic range and suggest something like 0.6500 to the downside and 0.7500 on the upside over the next 12-24 months is certainly possible. Which means for importers, if we get an opportunity to lock something in around 0.72-0.75 then it would be wise to hedge some of your exposures. The key here is not being greedy, greed always ends in tears.

Exporters really can sit back and relax I think given the way the AUD is travelling and the way local data has been performing.

US Non-Farms Due: 

Ahead tonight is U.S non farm employment numbers which is as I say every month a crucial data event. AUD could fall under further pressure tonight if employment numbers are strong and vice versa.

AUD EXCHANGE RATES:

AUD/USD – 0.6979

AUD/GBP – 0.5332

AUD/EUR – 0.6237

AUD/NZD – 1.0357

AUD/JPY – 78.000

OTHER MARKETS:

All Ords (XAO) – 6,344

Gold – A$1,833/oz

Silver –  A$21.43/oz

WTI – US$56.74/barrel

DATA RELEASES TODAY:

CNY - Trade Balance Figures around lunchtime

USD - Non-Farm Employment Change & Unemployment Rate at 12.30am (tomorrow morning)

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Topics: Report, Market

Market Update - 7th March 2019 - AUD Gets Whacked As GDP Per Capita Enters Recession

Posted by Patrick Downes on March 7, 2019 at 8:56 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 Nosedives:

Quite a boil over for the Aussie Dollar overnight with a raft of poor data this week putting the Aussie Dollar well and truly on the back foot once again. AUD vs. the EURO, USD and GBP is down around 0.75% since yesterday while AUD/JPY is off closer to 1% as U.S and European stocks faltered and data yesterday showed we have entered a GDP per capita recession "GDP per person dropped 0.2 per cent, the second consecutive fall in the widely used measure. It was only the third per-capita GDP recession since 1991." Household spending has also been weak, with retail sales struggling while new car sales have continued to decline as a result of the negative wealth effect from lower house prices - all this points to lower interest rates or some stimulus down the track if things continue to worsen. The shining light right now is once again our commodities sector which is benefiting from a low AUD and supply deficits in almost all base metals.

Retails Sales Out:

Ahead this morning is further local economic data in Retail Sales at 11.30am. Retail sales have been poor over the past few years so I wouldn't expect a turnaround just yet for the above-mentioned reasons, however we will be watching the data closely. Growth in retail sales is expected to come in around 0.3%.

The ECB decides on Interest Rates later this evening, forecasts are for no change to their rates which stand at 0.00%.

AUD EXCHANGE RATES:

AUD/USD – 0.6997

AUD/GBP – 0.5303

AUD/EUR – 0.6185

AUD/NZD – 1.0353

AUD/JPY – 78.26

OTHER MARKETS:

All Ords (XAO) – 6,326

Gold – A$1,830/oz

Silver –  A$21.46/oz

WTI – US$56.41/barrel

DATA RELEASES TODAY:

AUD – Retail Sales m/m at 11.30am

AUD - Trade Balance at 11.30am

EUR - Monetary Policy Statement & Main Refinancing Rate at 11.45pm

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Topics: Report, Market

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