Compass Global Markets' Blog

Market Update - 4th March 2020 - Stocks Go From Positive To Negative, AUD Rises Despite Rate Cut

Posted by Patrick Downes on March 4, 2020 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.

Stocks Get Whiplash:

The local stock market performed better yesterday following a bumper session in the U.S on Monday night. U.S stocks added as much as 5% marking their best one day performance since early 2018. These gains led our own market higher but only by around 0.7% as U.S futures turned negative once again late yesterday afternoon. Overnight, U.S stocks have lost another another 3%, suggesting our ASX will likely see another sell off today - around 2% is what futures are suggesting.

The AUD & The RBA: 

The Aussie Dollar seems equally unsure of its direction initially falling yesterday in the lead up to the RBA meeting at 2.30pm, however following a 25 basis point rate cut from the RBA the AUD has since rallied across the board. This could in fact suggest markets were pricing in a 50 basis point cut and therefore traders have bought the AUD following the surprise of only 25 basis points. This morning AUD/USD is marginally higher again.

Aussie GDP figures are due out today, while U.S preliminary jobs numbers are due for release around midnight.

Markets and the AUD are still finely tuned to coronavirus news flow and hence direction remains difficult to predict. I remain of the opinion that hedging using Forward Contracts is the best course of action for importers to reduce risk and lock in margins. Exporters should probably consider hedging exposures on any AUD dips - as eventually the tide will turn.

AUD EXCHANGE RATES:

AUD/USD – 0.6566

AUD/GBP – 0.5120

AUD/EUR – 0.5870

AUD/NZD – 1.0460

AUD/JPY – 70.425

OTHER MARKETS:

All Ords (XAO) – 6,511

Gold – A$2,480/oz

Silver –  A$25.99/oz

WTI – US$47.31 barrel

DATA RELEASES TODAY:

AUD – GDP q/q at 11.30am

USD - ADP Non-Farm Employment Change at 12.15am

USD - ISM Non-Manufacturing PMI at 2.00am

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Topics: Report, Market

3rd March 2020: RBA Announcement Cash Rate - down 25 basis points to 0.50%.

Posted by Thomas Su on March 3, 2020 at 2:31 PM

Statement by Philip Lowe, Governor: Monetary Policy Decision

At its meeting today, the Board decided to lower the cash rate by 25 basis points to 0.50 per cent. The Board took this decision to support the economy as it responds to the global coronavirus outbreak.

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Market Update - 2nd March 2020 - AUD Falls Further Following Week To Forget

Posted by Patrick Downes on March 2, 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 Slammed:

Well the AUD has had a week to forget, losing close to 3 cents vs. the Greenback in one of the most savage sell offs we've seen since the global financial crisis around 12 years ago. We all knew a correction would happen again, but never knew what the catalyst might be. Obviously we now know that catalyst was a particularly viral flu like illness, which has caused market closures, supply chain disruptions and general market hysteria. The AUD is down right across the board and the truth to the matter is no one knows where the selling ends and the buying will start again, AUD/USD may well test the 0.50's or it could turn around swiftly with a successful coronavirus vaccine and accompanying central bank stimulus. The best bet though, is to keep hedging your FX exposures via a Forward Contract.

Chinese Data: 

Chinese data released Saturday not surprisingly showed dramatic drops in economic activity due to containment measures. However things appear to be firing up again in the worlds second largest economy following what appears to be successful containment of the virus' spread within mainland China. Locally we have building approvals data due tomorrow morning, followed by the cash rate decision at 2.30pm tomorrow afternoon. Expectations are that we'll see no cut to interest rates, but the RBA statement might telegraph a cut at their next meeting in April.

AUD EXCHANGE RATES:

AUD/USD – 0.6436

AUD/GBP – 0.5032

AUD/EUR – 0.5821

AUD/NZD – 1.0388

AUD/JPY – 69.100

OTHER MARKETS:

All Ords (XAO) – 6,511

Gold – A$2,452/oz

Silver –  A$25.79/oz

WTI – US$45.31 barrel

DATA RELEASES TODAY:

CNY - Caixin Manufacturing PMI at 12.45pm

USD - ISM Manufacturing PMI at 2.00am

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Topics: Report, Market

Market Update - 27th Feb 2020 - AUD Feeling The Heat

Posted by Patrick Downes on February 27, 2020 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.

AUD On The Backfoot:

The Aussie Dollar continues to perform poorly in the midst of this current market wide sell-off and each day it would seem we hit a new post-GFC low. What halts the precarious and perilous drop in the AUD remains to be seen, so my best advice if you're an importer is to do one of two things. 1/ ask your suppliers overseas to consider lowering their prices or 2/ start hedging some of your exposures with a Forward Contract. I feel like I've been suggesting this ad-nauseum over the past year with very little take up, however a few clients have recently started to hedge the AUD rate with Forward Contracts which is the prudent thing to do. U.S equities lost another half a percent overnight, bringing their losses this week to over 8%, the worst weekly decline since the GFC some 11-12 years ago.

The local ASX and by default the AUD should perform a little better today given losses weren't extreme on equity markets overnight, Trump is due to hold a press conference re: the U.S's response to corona virus etc, this may provide a bounce and opportunity to hedge further USD exposures.

Private Capital Expenditure Out:

Local data released today includes private capital expenditure at 11.30am. The market is pricing in half a percent of growth here, however the data has been poor for the better part of 5 years, so can't really see these numbers impacting the AUD at all. All eyes remain on the coronavirus and the global effort to combat it's spread.

On a final note: go out and support your local Chinese restaurant, they are doing it tough at the moment. I can recommend some very good dumplings, hot pot or whatever takes your fancy.

AUD EXCHANGE RATES:

AUD/USD – 0.6522

AUD/GBP – 0.5046

AUD/EUR – 0.5991

AUD/NZD – 1.0370

AUD/JPY – 72.003

OTHER MARKETS:

All Ords (XAO) – 6,790

Gold – A$2,504/oz

Silver –  A$27.35/oz

WTI – US$48.66 barrel

DATA RELEASES TODAY:

AUD - Private Capital Expenditure q/q at 11.30am

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Topics: Report, Market

Market Update - 25th February 2020 - Equities & The AUD Fall As Coronavirus Fears Accelerate Again, Gold Surges

Posted by Patrick Downes on February 25, 2020 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.

Equities Capitulate:

After a brief respite, fear is back and markets are flashing red. The Dow Jones lost 1,000 while the tech heavy NASDAQ closed nearly 4% lower in one of the worst sessions for U.S equities in over a year. European stocks didn't fare better falling around 4% across the board setting up what's likely to be awful day for local stocks on the ASX (tipped to open around 3% lower this morning). Gold is having somewhat of a renaissance, up over 34% in the past year.

AUD Under Pressure:

The Aussie Dollar has not been spared from the selling, falling itself by a further half percent against the majors and over 1% against the Japanese Yen which is seen as a safe haven currency in times of uncertainty. AUD/USD is at fresh decade lows as we get closer to another RBA meeting next week in which rates are likely to be cut once again. Another 25 basis point cut next Tuesday would take the Aussie cash rate to half a percent, lower than all of Canada, U.S, NZD and the U.K.

No economic data due out today, all eyes on markets to see if this red can turn to green. A bit of a worrying sell-off, however I'm also seeing data suggesting volumes on equity markets are apparently still low, suggesting this could be another buy the dip opportunity. It would take a brave person though to buy right now.

AUD EXCHANGE RATES:

AUD/USD – 0.6569

AUD/GBP – 0.5074

AUD/EUR – 0.6051

AUD/NZD – 1.0383

AUD/JPY – 72.766

OTHER MARKETS:

All Ords (XAO) – 7,065

Gold – A$2,513/oz

Silver –  A$28.24/oz

WTI – US$51.28 barrel

DATA RELEASES TODAY:

USD - CB Consumer Confidence at 2.00am

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Topics: Report, Market

Market Update - 21st February 2020 - AUD In Free-Fall As Unemployment Rate Spikes

Posted by Patrick Downes on February 21, 2020 at 9:26 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.

Unemployment Spike:

Despite a reasonably good showing among equity markets this week, the Aussie Dollar has not been able to hold ground, instead succumbing yesterday to further falls as a result of a spike in the unemployment rate and soft jobs number. The poor employment figures suggest another interest rate cut from the RBA is likely, which would boost an already expensive housing market, but add further weight to a sinking AUD. The triple whammy of a slowing economy, weak income growth and now coronavirus virus really have made any solid AUD rally unlikely in the short term. Forward Contracts remain the best bet to hedge any open AUD positions.

Equities & Commodities:

U.S and European stocks mostly fell overnight while commodities prices continue to face headwinds, the Zinc price is down 40% since Trump started his trade war with China, while Lead is down 30% and Copper down 20% in the same period. The metals which have bucked the trend are Gold (no surprised there as its a safety trade) and Iron Ore. Our exporters should be posting massive profits, but low commodities prices are offsetting the boon from a very low AUD.

European, German and U.K Flash Manufacturing and Services PMI are all due this evening, so expect volatility in AUD/EUR and AUD/GBP.

AUD EXCHANGE RATES:

AUD/USD – 0.6584

AUD/GBP – 0.5103

AUD/EUR – 0.6102

AUD/NZD – 1.0411

AUD/JPY – 73.822

OTHER MARKETS:

All Ords (XAO) – 7,255

Gold – A$2,448/oz

Silver –  A$27.76/oz

WTI – US$53.72 barrel

DATA RELEASES TODAY:

EUR - French & German Flash Manufacturing PMI at 7.15pm

EUR - French & German Flash Services PMI at 7.15pm

GBP – UK Flash Manufacturing & Services PMI at 8.30pm

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Topics: Report, Market

Market Update - 19th February 2020 - AUD Declines With Equities As Apple Forecasts Downgrade, Wages Index Due

Posted by Patrick Downes on February 19, 2020 at 8:36 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 Drag AUD Lower:

A poor showing overnight for U.S equities and a profit warning from Apple have resulted in a session of risk off and as a result a lower AUD. The local currency is off around 0.4% against all the majors except EURO where it's managed to hold its ground around the high 0.61's. Apple resuscitated fears surrounding the coronavirus suggesting quarterly revenue could be impacted by supply chain issues and lower sales in China. By the end of the session, the Dow Jones finished down 0.56%, while the S&P500 finished 0.29% lower.  Our local market is tipped to open flat after a bit of a sell off yesterday.

Wages Index:

Local wages data is due out this morning at 11.30am and is tipped to show wages growth of around half a percent for the quarter. More broadly, wages growth have been in a funk for the better part of a decade and have rarely grown much above half a percent on a quarterly basis. A further decline in the pace of wages growth could lock in another rate cut from the RBA at their next meeting and see AUD/USD test fresh post GFC lows - certainly not what importers are after.

Hedge With Forward Contracts: 

Importers concerned about a lower AUD can lock in Forward Contracts at todays rates and by default also lock in their profit margins on future imports. Feel free to call me to discuss. At the moment this remains the best option for importers.

AUD EXCHANGE RATES:

AUD/USD – 0.6656

AUD/GBP – 0.5111

AUD/EUR – 0.6164

AUD/NZD – 1.0438

AUD/JPY – 73.166

OTHER MARKETS:

All Ords (XAO) – 7,208

Gold – A$2,395/oz

Silver –  A$27.18/oz

WTI – US$52.33 barrel

DATA RELEASES TODAY:

AUD - Wage Price Index q/q at 11.30am

GBP - CPI y/y at 8.30pm

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Topics: Report, Market

Market Update - 17th February 2020 - AUD Hovering 0.6700 As We Enter Big Week Of Data

Posted by Patrick Downes on February 17, 2020 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.

Big Week For Local Data:

Morning all - hope you had a relaxing and enjoyable weekend. AUD/USD is hovering around the 0.6700 level, while the other majors continue to gyrate on news flow. AUD/JPY is off some 300 points since pandemic fears were first raised in the middle of January and hasn't really recovered since.

Nothing out today, but we have a bit of economic data due out over the course of the week starting with RBA monetary policy minutes at 11.30am tomorrow morning. The RBA left rates on hold at 0.75% for the third consecutive meeting last month, however economists predict another rate cut could be on the way given the dual impact of the bush-fires and the coronavirus. The RBA is good at telegraphing it's moves, so perhaps this morning some breadcrumbs can be found in the meeting minutes which will give us an idea when the next cut will occur?

Wages & Employment:

Wage prices and employment numbers will be released later in the week; Wednesday and Thursday respectively. These two are what the RBA is watching most closely, to avoid another rate cut we'll need to see significantly higher wages and employment, if not then another rate cut is a lock which in turns me a lower AUD. As a result expect some AUD volatility heading into these two announcements.

AUD EXCHANGE RATES:

AUD/USD – 0.6690

AUD/GBP – 0.5120

AUD/EUR – 0.6165

AUD/NZD – 1.0395

AUD/JPY – 73.526

OTHER MARKETS:

All Ords (XAO) – 7,227

Gold – A$2,356/oz

Silver –  A$26.39/oz

WTI – US$52.45 barrel

DATA RELEASES TODAY:

ALL - No data today

USD - Bank Holiday tonight

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Topics: Report, Market

Market Update - 13th February 2020 - Aussie Climbs With Equities As Coronavirus Fears Continue To Ease

Posted by Patrick Downes on February 13, 2020 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 Momentum Continues:

The AUD has continued to gain ground vs. the majors as coronavirus fears ease and central banks flag a wait and see approach to the global economy. The worse fears had been that the coronavirus would spiral out of control, shut down supply chains for years and cause a mass financial hysteria like that of Black Tuesday in 1929. However, the REALITY is that Chinese containment measures are working (as most with any commonsense would have expected), and while supply chains and international trade may be adversely impacted over the next month, its probably a fair bet things will be more or less back to normal come March.

AUD/USD & RBA Gov Lowe:

AUD/USD which had hit a low around 0.6650 on the wholesale market is now back above 0.6700 and conceivably on it's way back towards 0.6800. However a speech from RBA Governor Lowe this morning at the Australia-Canada Economic Leadership Forum, in Melbourne should give us a bit of clarity on what the RBA's next move might be with respect to interest rates. At their last meeting a week ago the RBA held rates at 0.75% and noted that "the outlook for the global economy remains reasonable" and that "there have been signs that the slowdown in global growth that started in 2018 is coming to an end." Inflation though is still low, perhaps to low for the RBA, so that may be a catalyst for a further rate cut, however it'll take a bit more data before the RBA commits to anything.

AUD EXCHANGE RATES:

AUD/USD – 0.6707

AUD/GBP – 0.5167

AUD/EUR – 0.6164

AUD/NZD – 1.0384

AUD/JPY – 73.855

OTHER MARKETS:

All Ords (XAO) – 7,185

Gold – A$2,324/oz

Silver –  A$25.95/oz

WTI – US$51.84 barrel

DATA RELEASES TODAY:

AUD – RBA Gov Lowe Speaks at 11.00am

USD - Core CPI m/m at 12.30am

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Topics: Report, Market

Compass at Sydney's Day of The Drag 2020

Posted by Thomas Su on February 11, 2020 at 12:35 PM

Compass Global Markets' will be represented by the orange and white Plymouth at this year's Day Of The Drags. Come down to Sydney Dragway at Eastern Creek on March 7th 2020. For all your international payments, call Compass Global Markets on 1300 BEST FX.

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Topics: Market

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