Compass Global Markets' Blog

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

Market Update - 11th February 2020 - AUD Gains Alongside U.S Equities, NAB Business Confidence Due

Posted by Patrick Downes on February 11, 2020 at 9:39 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 Gains:

The AUD has made modest gains of around half a percent since this time yesterday morning, following the lead of U.S equities which added between 0.3% and 1.1%. We didn't have any data out yesterday or any real change in the coronavirus story so I guess the move could be simply down to regular market gyrations. Unfortunately though AUD/USD still remains at 10 year lows while AUD/GBP and AUD/EUR are closer to 5 year lows.

It's a tough time for importers at the moment, so the best bet is still to hedge longer dated imports particularly where margins are tight.

Example:

If you've agreed to an import, but payment is not due for three months and your costing rate is set at 0.6400 then you could essentially book a Forward Contract in today above 0.6400, locking in your margins and you do not need to pay a cent until payment is due in 3 months.

The alternative is you do nothing and spot in 3 months could be below 0.6400 and you're now importing at a loss.

NAB Business Confidence Due:

NAB Business confidence numbers are due out today along with UK GDP figures tonight. Today's business confidence reading will be the first reading since coronavirus and also the first to take in the full impact of the bush fires. There is no forecast for business confidence, however it's been in decline since the start of 2018 and actually went negative in January for the first time since 2013. I'd be expecting a negative reading again today which could be a drag on the AUD.

As such, payments due this week, may be best made before 11.30am.

AUD EXCHANGE RATES:

AUD/USD – 0.6654

AUD/GBP – 0.5143

AUD/EUR – 0.6095

AUD/NZD – 1.0440

AUD/JPY – 73.071

OTHER MARKETS:

All Ords (XAO) – 7,108

Gold – A$2,350/oz

Silver –  A$26.57/oz

WTI – US$49.79 barrel

DATA RELEASES TODAY:

AUD - NAB Business Confidence at 11.30am

GBP - Prelim GDP q/q at 8.30pm

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Topics: Report, Market

Market Update - 10th February 2020 - AUD/USD Struggling, Equities/Commodities Remain Volatile

Posted by Patrick Downes on February 10, 2020 at 9:14 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 & AUD Rally:

AUD Struggling:

The Aussie Dollar made inroads vs. most of the majors last week, however AUD/USD continued to struggle with the local currency losing around half a percent vs. the Greenback since last Monday. In all the AUD is down 360 points or 5% vs the USD since January 1st which is it's worst start to the year since 2016. The optimist in me would suggest it bodes well for February, however Chinese coronavirus containment measures are likely to be a drag on global economic activity while recent bush fires across Australia could also hinder growth and economic activity at home, particularly tourism.

Equities & Commodities:

Stocks and commodities have been volatile since the coronavirus first hit mainstream media and Copper which is the bellwether metal has seen its value fall by 10% over the month of March. Other metals have also taken a hit as economists and investors try to quantify the impact of whole cities shut down in Mainland China, particularly those manufacturing hubs right across the country. U.S equities lost around 0.5-1% on Friday night, while European equities fell as much as half a percent. ASX Futures are suggesting a flat start to the week.

No economic data released today, so all eyes will be on China again and any stimulus they may pump into their domestic economy amid current containment measures.

AUD EXCHANGE RATES:

AUD/USD – 0.6638

AUD/GBP – 0.5139

AUD/EUR – 0.6063

AUD/NZD – 1.0381

AUD/JPY – 72.845

OTHER MARKETS:

All Ords (XAO) – 7,121

Gold – A$2,354/oz

Silver –  A$26.53/oz

WTI – US$50.49 barrel

DATA RELEASES TODAY:

No Data

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Topics: Report, Market

Market Update - 5th Feb 2020 - AUD Rallies With Equities As Coronavirus Fears Ease

Posted by Patrick Downes on February 5, 2020 at 10:20 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 & AUD Rally:

The Aussie Dollar has rallied with equities overnight following a sell off which lasted most of last week and saw the AUD/USD wholesale exchange drop from 0.6850 down to a low of 0.6677. Today we're in better shape around the 0.6700 figure and if coronavirus fears ease then we may see a sustained rally through the week. Equities across Europe and the U.S performed particularly well bouncing back around 1.5-2% with stock futures trading suggesting perhaps another good night ahead. Our local market is tipped to open nearly 1% higher.

Other than that there is not a great deal further to add. So just a short one from me today. Expect more consistent morning market updates from me as I'm back from a longish hiatus overseas.

AUD EXCHANGE RATES:

AUD/USD – 0.6708

AUD/GBP – 0.5140

AUD/EUR – 0.6069

AUD/NZD – 1.0340

AUD/JPY – 73.464

OTHER MARKETS:

All Ords (XAO) – 7,047

Gold – A$2,304/oz

Silver –  A$26.13/oz

WTI – US$49.66 barrel

DATA RELEASES TODAY:

AUD - RBA Gov. Lowe speaks at 12.30pm

USD – ADP Prelim Jobs Number at 12.15am

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Topics: Report, Market

Market Update - 6th December 2019 - AUD Declines, Stocks Mixed As Markets Enter Weekend

Posted by Patrick Downes on December 6, 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.

AUD Declines:

The Aussie Dollar has declined over night, losing ground against all the majors but particularly against the Pound where we're off close to 2% since my last market update on Wednesday. AUD/USD has not broken out of the 6670-6920 range within which we've been hovering for the better part of 4 months and it's looking likely we will stay here for longer.

Stocks Mixed:

U.S stocks edged higher overnight while European equities lost ground to the tune of between 0.3-0.7%. Stock markets continue to be most at risk to risk aversion and sell off's as trade negotiations look likely to enter a third year. I still remember Donald Trump's words all the way back in March 2018 - "Trade wars are good and easy to win" - if only he was right....

Non-Farms Due:

U.S non-farm employment numbers are due tonight - 12.30am to be more specific. Expectations are for another strong jobs number in the realm of around 181K new jobs created, while U.S unemployment is tipped to stay tied to 3.6% with wages growth around 0.3% for the month. Wages growth have been improving over the past few years but remain weak compared to pre-GFC levels.

AUD EXCHANGE RATES:

AUD/USD – 0.6800

AUD/GBP – 0.5160

AUD/EUR – 0.6121

AUD/NZD – 1.0402

AUD/JPY – 74.000

OTHER MARKETS:

All Ords (XAO) – 6,791

Gold – A$2,160/oz

Silver –  A$24.82/oz

WTI – US$58.27 barrel

DATA RELEASES TODAY:

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

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Topics: Report, Market

Market Update - 4th December 2019 - AUD Rally's Against Backdrop Of Declining Equities

Posted by Patrick Downes on December 4, 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.

Something Unusual:

Something interesting has happened the past two days and it's not easily explainable. What we've seen over the past 48 hours is the Aussie Dollar rally along with Gold just as equity markets and commodities have sold off following a re-emergence of trade concerns and anxious investors. The reason it's unusual and not easily explained is because typically during an equity sell off, we'll see the AUD also fall, given it's moniker as a 'risk asset'. In fact AUD/USD is up some 100 points or 1.5% while equity markets have fallen over 3% the last couple of days.

Equities Lower: 

The local market is set to fall again today by around 1%, following declines of between half and 1 percent in the U.S and Europe overnight. The rally yesterday in the AUD may be as a result of the RBA cash rate decision yesterday afternoon to hold rates, however comments like "the Board is prepared to ease monetary policy further if needed" perhaps goes against this. Anyhow, markets are trading quite unusually at the moment and risks and volatility have certainly not dissipated - I don't think they ever really do.

GDP Due: 

Local GDP figures are due out at 11.30am and the market is tipping quarterly GDP around half a percent or two percent annualised. It's been well documented that GDP growth is flat/stagnant hence the recent cuts to interest rates, but we may well see a further catalyst for an AUD rally if GDP surprises to the upside.

AUD EXCHANGE RATES:

AUD/USD – 0.6815

AUD/GBP – 0.5236

AUD/EUR – 0.6146

AUD/NZD – 1.0469

AUD/JPY – 74.057

OTHER MARKETS:

All Ords (XAO) – 6,818

Gold – A$2,157/oz

Silver –  A$25.08/oz

WTI – US$56.25 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

Market Update - 28th November 2019 - Stocks Surge To Record Highs, AUD Stable

Posted by Patrick Downes on November 28, 2019 at 8:24 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 Surge:

U.S stocks continued to make gains overnight on trade optimism with the Dow Jones surging pass 28,100 to a fresh record high. At the same time the local ASX has performed well with ASX200 futures suggesting we'll finally surpass the highs of November 2007.

AUD Stable:

The Aussie Dollar hasn't really moved since my last report on Tuesday and in the absence of economic data this week is likely to move much at all until the RBA cash rate decision next Tuesday. Expectations are that the RBA will hold rates steady at 0.75%.

It's Thanksgiving in the U.S tonight, meaning a Bank Holiday and no USD payments will be processed. Payments will go out Friday evening.

AUD EXCHANGE RATES:

AUD/USD – 0.6745

AUD/GBP – 0.5218

AUD/EUR – 0.6128

AUD/NZD – 1.0521

AUD/JPY – 73.925

OTHER MARKETS:

All Ords (XAO) – 6,950

Gold – A$2,147/oz

Silver –  A$25.02/oz

WTI – US$58.05 barrel

DATA RELEASES TODAY:

AUD - Private Capital Expenditure q/q at 11.30am

USD - Bank Holiday overnight

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Topics: Report, Market

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