Compass Global Markets' Blog

Market Update - 19th September 2019 - Fed Cuts Rates, ABS Employment Numbers Due At 11.30AM

Posted by Patrick Downes on September 19, 2019 at 9:12 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.

Fed Cuts: 

As widely expected the U.S Fed, led by Jerome Powell, chose to cut rates yet again bringing the official federal funds rate back to 2.00%. Fed Chair Powell noted that the reason for the cut in interest rates was to support the growth that is already occurring in the U.S economy and to help offset some of the impacts of Trump's trade war and accompanying investor uncertainty. In a few subtle jabs at Trump's policies, Powell also noted that the slowing growth "in exports and business investment" locally was due almost entirely to Trump's chosen trade policies.

The Aussie Dollar has fallen following the rate cut and is down right across the board. AUD/USD which has been stoic in the 0.68's lately is threatening to break lower, while AUD/EUR and AUD/GBP are also marginally lower.

Local Employment: 

The latest employment numbers and unemployment rate are due out this morning, followed by interest rate decisions in Japan and the U.K. However, the most important data is the ABS employment numbers due at 11.30am. The unemployment rate is tipped to remain unchanged at 5.2% while a little over 15,000 jobs are estimated to have been created last month. A bumper number or poor result could have a meaningful impact on the Aussie Dollar and so clients wishing to avoid risk would be advised to book payments ahead of the result.

AUD EXCHANGE RATES:

AUD/USD – 0.6801

AUD/GBP – 0.5442

AUD/EUR – 0.6159

AUD/NZD – 1.0764

AUD/JPY – 73.704

OTHER MARKETS:

All Ords (XAO) – 6,791

Gold – A$2,186/oz

Silver –  A$25.99/oz

WTI – US$58.06/barrel

DATA RELEASES TODAY:

AUD - Employment Change & Unemployment Rate at 11.30am

GBP - Retail Sales m/m at 6.30pm

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

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Topics: Report, Market

Market Update - 18th September 2019 - AUD Unchanged Ahead Of FOMC Meeting

Posted by Patrick Downes on September 18, 2019 at 9:01 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 Unchanged: 

The AUD had a brief correction yesterday but has managed to claw back those losses overnight bringing most AUD crosses back in line with where they were on Monday morning (my last update). AUD/USD seems to have entrenched itself in the 0.68's despite the drone attacks on Saudi Arabia's oil infrastructure, while AUD/EUR and AUD/GBP are locked in the 0.61's and 0.54's respectively. AUD/JPY was the only currency pair to appreciate notably from earlier in the week and is today trading just on the 74 handle on the wholesale market.

Stocks Mixed: 

In the U.S stocks made modest gains with the tech heavy Nasdaq the best performer up 0.4%, while in Europe stocks finished mix. The UK FTSE and German Dax closed lower, while the French CAC and broad Euro Stoxx 50 index posted gains of a quarter percent and 0.08% respectively.

All Eyes On Fed:

All eyes are back on the Fed again with the market pricing in a 25 basis point cut to U.S interest rates from 2.25% to 2.00%. The cut seems to be pretty well priced in and so hard to see much volatility on the cut itself tonight. However, comments from U.S Fed Chairman Powell is where the action will take place, with many investors still unclear on where exactly Powell stand on interest rates, QE and the U.S economy. We all know Trump wants lower rates leading up to elections next year, but we also know Powell is not one to listen to demands from Trump. The FOMC press conference and statement occur after the interest rate decision and that's potentially where we'll some volatility.

AUD EXCHANGE RATES:

AUD/USD – 0.6834

AUD/GBP – 0.5460

AUD/EUR – 0.6169

AUD/NZD – 1.0762

AUD/JPY – 73.900

OTHER MARKETS:

All Ords (XAO) – 6,801

Gold – A$2,187/oz

Silver –  A$26.24/oz

WTI – US$58.65/barrel

DATA RELEASES TODAY:

GBP - CPI y/y at 6.30pm

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

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Topics: Report, Market

Market Update - 16th September 2019 - Oil On The Move, Markets Volatile As Drones Takes Out Saudi Oil

Posted by Patrick Downes on September 16, 2019 at 8:20 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 Post Gains: 

Positive investor sentiment helped equities and commodities make gains Friday night however those gains could be short lived as drone attacks on Saudi oil infrastructure and subsequent comments from the U.S administration over the weekend could roil markets today when they open shortly. Oil is likely to be the big gainer given the large amount of Saudi production taken off line over the weekend. Equities, commodities and the AUD could also encounter selling pressure as investors choose safe havens like the USD, JPY and Gold.

The AUD was down marginally across the board with most losses against the GBP where we were down around 1% on further Brexit volatility.

No economic data is due today.

AUD EXCHANGE RATES:

AUD/USD – 0.6834

AUD/GBP – 0.5460

AUD/EUR – 0.6168

AUD/NZD – 1.0744

AUD/JPY – 73.588

OTHER MARKETS:

All Ords (XAO) – 6,777

Gold – A$2,164/oz

Silver –  A$25.37/oz

WTI – US$54.76/barrel

DATA RELEASES TODAY:

No data.

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Topics: Report, Market

Market Update - 13th September 2019 - AUD Stable Against Backdrop Of Low Volatility And Cautious Optimism

Posted by Patrick Downes on September 13, 2019 at 8:41 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.

Steady As She Goes: 

The Aussie Dollar remains more or less unchanged since my last market update on Wednesday morning. Unfortunately, yesterday morning was far too hectic to deliver an update, but to be honest, their really wasn't much to write about anyway. AUD/USD seems to have found some consolidation in the mid 0.68's over the past week, while AUD/EUR has traded between 0.6300 and 0.5950 since early May and is almost smack bang in the middle of that range as we speak.

Stocks Gain: 

U.S and European stocks made good gains overnight capping off a solid week. Of course things could go pair shaped in the final session tonight, but the market will be hoping that U.S retail sales numbers due at 10.30pm show a pickup in retail sales and continued positive investor sentiment. Forecasts are for a gain of around 0.1%.

The Chinese celebrate the Mid-Autumn Festival today and so the CNY and China will be taking a day off to eat Mooncakes and spend time with family.

AUD EXCHANGE RATES:

AUD/USD – 0.6833

AUD/GBP – 0.5532

AUD/EUR – 0.6172

AUD/NZD – 1.0681

AUD/JPY – 74.011

OTHER MARKETS:

All Ords (XAO) – 6,765

Gold – A$2,181/oz

Silver –  A$26.30/oz

WTI – US$55.20/barrel

DATA RELEASES TODAY:

USD - Core Retail Sales m/m at 10.30pm

CNY - Bank Holiday (Mid-Autumn Festival)

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Topics: Report, Market

Market Update - 11th September 2019 - AUD Unchanged As Volatility Decreases And Financial Markets Go Dormant

Posted by Patrick Downes on September 11, 2019 at 8:48 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 Flat/Markets Uneventful:

Equity markets, commodities and the AUD barely moved overnight. The AUD is up/down 1 or 2 points vs the major currencies while on the commodities front Gold has retreated (signalling less risk aversion) while Zinc was the best performing metal up around 2% per tonne. U.S equities finished more or less unchanged, while the UK FTSE was buoyed by comments from Boris Johnson who suggested a deal ahead of Brexit on October 30th remains possible.

We have no economic data released today or overnight and can probably expect as a result pretty subdued trading throughout the day.

AUD EXCHANGE RATES:

AUD/USD – 0.6830

AUD/GBP – 0.5521

AUD/EUR – 0.6178

AUD/NZD – 1.0652

AUD/JPY – 73.478

OTHER MARKETS:

All Ords (XAO) – 6,728

Gold – A$2,166/oz

Silver –  A$26.28/oz

WTI – US$57.75/barrel

DATA RELEASES TODAY:

No data today.

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Topics: Report, Market

Market Update - 10th September 2019 - AUD Mixed, Home Loans Data Shows Signs Of Life

Posted by Patrick Downes on September 10, 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 Mixed:

The Aussie Dollar finished the overnight session mixed: AUD/GBP fell, AUD/EUR was flat while AUD/USD & AUD/JPY clawed higher albeit only by around 15-20 points. The lower volatility and generally more positive investor sentiment over the past week has been the major catalyst for the AUD's gains vs. the USD and JPY. U.S and European equities also opened the week mixed with the U.S Dow and German Dax making modest gains, while the S&P500 and the Euro Stoxx 50 were mostly flat.

Home Loans Data:

Local home loans data released yesterday morning showed some signs of life jumping 5.1% in July, however the gains were off quite a low base and were likely driven more by the election of Scott Morrison in May. Looking at the monthly figure versus this time last year and the decline is around 12% - so still a lot of work to be done to get buyers back and interested in the housing market, which remains weak.

A bit of Chinese data due this morning along with NAB Business Confidence at 11.30am. No forecast is given for the business confidence reading however the trend has been positive since June. The Chinese data is expected to show further signs of slowing growth.

AUD EXCHANGE RATES:

AUD/USD – 0.6833

AUD/GBP – 0.5528

AUD/EUR – 0.6180

AUD/NZD – 1.0648

AUD/JPY – 73.271

OTHER MARKETS:

All Ords (XAO) – 6,760

Gold – A$2,183/oz

Silver –  A$26.18/oz

WTI – US$58.04/barrel

DATA RELEASES TODAY:

AUD – NAB Business Confidence at 11.30am

CNY – CPI & PPI y/y at 11.30am

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Topics: Report, Market

Market Update - 9th September 2019 - AUD Makes Gains, But They Could Be Short Lived

Posted by Patrick Downes on September 9, 2019 at 9:22 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 Makes Gains: 

The AUD managed to finish last week with four consecutive days of gains, markedly improving the rate at which importers were dealing at later in the week vs. earlier and showing the volatility of the Aussie Dollar as a currency.  AUD/USD which had tested 0.6690 last Tuesday and seemingly on the back foot is now back in the mid 0.68's, while AUD/EUR has added around 100 points. AUD/JPY has rallied as is customary when we see risk appetite back on the table. How long risk appetite remains on the table is hard to tell, but there remain significant geo-political factors at play which will likely continue to sea-saw markets. My view remains the same, Forward Contract hedging is the best strategy for importers to reduce risk.

US Jobs: 

U.S non-farm payrolls missed the mark on Friday evening while average earnings rose 0.4% in the month of August. The result was a beat, but was offset by the lower jobs numbers. The unemployment rate remained unchanged at 3.7%. The market is still pricing in further Fed rate cuts in the U.S which should support AUD/USD, however that is being offset by our own weak economy and likelihood for further rates cuts from our own RBA later in the year.

Home Loans numbers are out this morning, followed by a bunch of U.K data which could have an impact on the Pound, however the main driver of AUD/GBP right now appears to be the Brexit shenanigans.

AUD EXCHANGE RATES:

AUD/USD – 0.6815

AUD/GBP – 0.5541

AUD/EUR – 0.6179

AUD/NZD – 1.0625

AUD/JPY – 72.910

OTHER MARKETS:

All Ords (XAO) – 6,752

Gold – A$2,199/oz

Silver –  A$26.47/oz

WTI – US$56.78/barrel

DATA RELEASES TODAY:

AUD – Home Loans m/m at 11.30am

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

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Topics: Report, Market

Market Update - 5th September 2019 - GBP Surges As Boris Johnson Meteor Fades, Aussie GDP Still Weak

Posted by Patrick Downes on September 5, 2019 at 8:22 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.

GBP Surges: 

The GBP has rallied overnight thanks to a defeat of Boris Johnson's call for another election on the 15th of October which if he had won would have seen the U.K leave the EU in spectacular fashion on the 31st. Instead another bill, to delay Brexit until January 2020, passed. The Pound immediately rallied as you would expect given the turmoil and uncertainty a hard Brexit would have on the U.K economy. This is a constantly evolving story as such AUD/GBP is expected to remain volatile through the coming months given it is still not out of the realm of a possibility that another Brexit referendum occurs this year. A failed second referendum to leave the EU would probably see a swift surge in GBP and perhaps even see growth metrics pick up in the U.K rather quickly.

Aussie GDP:

Australian GDP figures were released yesterday and what the data showed was growth in GDP of just 1.4% for the financial year just ended. The June quarter showed GDP growth of 0.5%, which is an improvement but still below where the RBA would like GDP to be. Overall, it's looking more and more likely that we see another rate cut in the October quarter of 25 basis points. The Aussie Dollar as such will remain under pressure with a bias to the downside. Those importers holding off making payments at the moment should be aware there is a fair chunk of technical resistance at 0.6800 vs. the USD.

Local trade balance figures and preliminary jobs numbers out of the U.S are due tonight.

AUD EXCHANGE RATES:

AUD/USD – 0.6765

AUD/GBP – 0.5513

AUD/EUR – 0.6127

AUD/NZD – 1.0658

AUD/JPY – 72.012

OTHER MARKETS:

All Ords (XAO) – 6,656

Gold – A$2,283/oz

Silver –  A$28.81/oz

WTI – US$55.87/barrel

DATA RELEASES TODAY:

AUD – Trade Balance at 11.30am

USD – ADP Non-Farm Employment Change at 10.15pm

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Topics: Report, Market

Market Update - 4th September 2019 - RBA Holds Rates Steady, AUD Rises

Posted by Patrick Downes on September 4, 2019 at 8:46 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.

RBA Hold: 

The RBA chose to keep rates on hold yesterday at 1.00% while reiterating that they would continue to "ease monetary policy further if needed to support sustainable growth in the economy". RBA Chief Lowe also cited slower growth in the first half of 2019 than had been anticipated, weighed down by declining house values and stubbornly low to non-existent income growth. The AUD initially dropped 10-15 points following the RBA Statement yesterday afternoon, but has since recovered and is this morning trading around half a percent higher across the board. Hard to understand why the bounce, when conceivably the AUD looks likely to test lower lows over the next 6-12 months, but as Importers it provides an opportunity to trade at a higher level than Monday and Tuesday.

GDP Numbers Due:

Aussie GDP numbers are due out this morning and continue a busy weekend for economic data. Quarterly GDP is tipped to come in around 0.5% or annualised at 2% - which is around what Phillip Lowe anticipates for the duration of 2019 and likely 2020. Obviously the one sector that's being supported by a low AUD is exports and that was evident in the the bumper current account surplus delivered yesterday - in fact it was the first current account surplus in 44 years.

AUD EXCHANGE RATES:

AUD/USD – 0.6726

AUD/GBP – 0.5558

AUD/EUR – 0.6128

AUD/NZD – 1.0647

AUD/JPY – 71.278

OTHER MARKETS:

All Ords (XAO) – 6,673

Gold – A$2,289/oz

Silver –  A$28.56/oz

WTI – US$53.85/barrel

DATA RELEASES TODAY:

AUD – GDP q/q at 11.30am

GBP - Inflation Report Hearings at 11.15pm

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Topics: Report, Market

Market Update - 3rd September 2019 - Big Day Of Data, RBA Cash Rate & Retail Sales Due

Posted by Patrick Downes on September 3, 2019 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.

Big Data: 

It's all about the data today with the latest retail sales numbers and Current Account data due at 11.30am. Retail sales numbers are expected to remain weak at 0.2%, while the Current Account (the difference in value between imported and exported goods) is expected to go positive for the first time in 44 years - yes you heard that right. What a Current Account surplus means is essentially Australia is exporting more commodities, education and travel than importing goods. But all this extra export trade doesn't seem to be supporting the AUD which over the past 18 months has lost around 14 cents vs. the Greenback. In the same period we've lost only 240 points vs. the GBP as they struggle with their own Brexit shenanigans, while vs. the Euro we're down around 400 points. Clearly the biggest winner in the trade war with China has been the USD and Australian exporters, but clearly not the AUD.

Cash Rate: 

The Cash Rate is next cab off the rank at 2.30pm this afternoon. The market is not pricing in any further cut to the cash rate which currently stands at a flat 1.00%, however that doesn't mean we won't see volatility at 2.30pm. The RBA while likely to keep rates steady, may start to telegraph a cut in the accompanying commentary. So those importers wishing to avoid volatility would be encouraged to book ahead of the announcement.

Forward Contracts: 

A lot of clients asking me about Forward Contracts at the moment so I'll give another quick demonstration, but for further details please call me.

A Forward Contract allows both importers and exporters to hedge/book a future FX payment (say three months down the track) at todays rate. A small deposit of 5% is usually required to do this, but the benefit is that if rates move lower (for an importer) or higher (for an exporter) then you'll be hedged at the rate you booked today.

Live example for an importer: 

AUD/USD at 0.6700 today, book 100K USD Forward Contract at 0.6700 for end of November - AUD payable is A$149,253

Come November AUD/USD is trading at 0.6500 - total AUD payable buying at spot would be A$153,846

Client uses Forward Contract at 0.6700 and saves A$4,600. 

AUD EXCHANGE RATES:

AUD/USD – 0.6684

AUD/GBP – 0.5533

AUD/EUR – 0.6090

AUD/NZD – 1.0614

AUD/JPY – 71.000

OTHER MARKETS:

All Ords (XAO) – 6,677

Gold – A$2,273/oz

Silver –  A$27.40/oz

WTI – US$54.60/barrel

DATA RELEASES TODAY:

AUD – Retail Sales m/m at 11.30am

AUD – Cash Rate & RBA Rate Statement at 2.30pm

USD - ISM Manufacturing PMI at midnight

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Topics: Report, Market

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