Draghi's Sentiment Booster / The Day Ahead

With sentiment boosted following Draghi’s comments on more possible Eurozone monetary stimulus (the third time in a year), an overnight report from the Nikkei stated The Bank of Japan were also taking a serious look at expanding its monetary easing measures. "If falling consumer prices resulting from crude's plunge are making more people feel that prices are less likely to rise, then we should consider additional easing," said a senior BOJ official. 

Japan also decided to lift sanctions on Iran today following last Saturdays UN statements. A Japan-Iran investment agreement will be signed "soon" and "Japan would like to further develop its traditionally friendly ties with Iran." Oil prices at both sides of the Atlantic have rallied. 

Asian stock markets and traders liked what they heard with indices rebounding, tracking the positive close on Wall Street with Australian stocks following suit, boosted by resource and energy stocks. The Nikkei is the standout performer closing up 5.88%.

The FX market adopted a positive risk sentiment as the feel good factor kicked in, albeit in a rather sedate way.  

This could be brought to a sharp halt as we have an eventful day to close another volatile week; with a raft of flash manufacturing and services PMIs from across the Eurozone. While retail sales and public sector borrowing data from the UK will also keep the GBP traders busy.  Apart from data, we have speeches from ECB President Mario Draghi and Board member Benoît Cœuré at the World Economic Forum in Davos, Switzerland. While BOE MPC Member Cunliffe is due to speak at the Bruegel Research Institute, in Brussels.

Looking towards the North American session, there are also plenty of risk events, with the CPI and retail sales data from Canada, while from the US, flash manufacturing PMI and existing home sales data will be reported. 

Good luck and have a great weekend.

Bank Of Canada / Risk

Ladies and Gentlemen,

 

As the Davos Economic Forum commences, with 40 Heads of State attending and a ticket cost of $27,000, away from listening to speeches and headline watching the main event will be in Canada.

At 15:00 GMT the Bank Of Canada make their rate announcement, followed by the quarterly Monetary Policy Report and Economic Forecast update at 16:15 delivered by Governor Poloz.

 

Why is this significant? The first full rate cut is priced for April 2016, however the Canadian $ is a currency strongly correlated to the price of Oil. Areas such as ‘Alberta Oil Sands’ have been heavily affected by the oil price hitting a 12 year low. The weaker price has heavily impact the economy, will the BOC take action?

 

Highlighting the strong correlation, this year the Canadian $ has been in freefall with 10 consecutive negative days, however yesterday when the Relative Strength Index (RSI) reached 87 we had a corrective move but has made fresh highs again today 1.4655, this area acts as a level of resistance.

 

Toronto Dominion Bank have gone for an ‘off consensus call’ for today’ event and expect the overnight rate to be cut by 25 basis points from 0.5% to 0.25%.

They state that ‘the currency weakness plays an important role in facilitating the rotation in the drivers of economic growth at the core of the BOC growth narrative’

 

Today Oil and Canada might grab the headlines, whilst the world leaders gather in the Swiss snowy peaks.

 

Good Luck

The SNB Crash... One Year On..

Good morning

 

Risk-sentiment turned negative once again this Friday, following a rebound during yesterday’s US session. Safe-havens are back in demand reducing the appetite for risk amid negative equities and falling oil prices. As a result, the dollar-yen pair continues to benefit from risk-averse conditions, now breaking lower near 117.70, after failing to sustain above 118 handle. EUR/USD also extended its post-ECB minutes recovery and now looks to test 1.09 handle as the demand for low-yielding currencies rise to fund the investments in higher-yielding/ risk assets.

 

Gold price dropped below 1080 today despite the Feds comments on slowing inflation that might affect rate rises. Oil benchmarks on both sides of Atlantic fell back in the red and resumed their dominant bear trend in Asia, reversing the bounce seen on Thursday.

 

A very light data session is first up so the focus today is likely to remain on a host of US macro data due to be released during the NY session (13:30 GMT). The US retail sales, PPI and consumer sentiment data will remain the main highlight, with the retail trade volumes expected to decline 0.1% m/m, deteriorating from still marginal growth of 0.2% in November. While the flash University of Michigan (UoM) confidence survey (15:00 GMT) might marginally improve to 93.0 points, from 92.6 in December.  

 

A quick reminder, the US observe Martin Luther King Day on Monday 18 January. FX markets remain open, although less liquid, with precious metals closing early (12:30 NYC).

 

Good luck and have a great weekend.

This Amazing Week So Far...

Good morning

The rout returned on the global stock markets, with the Asian equities mirroring the sharp declines seen on the Wall Street overnight. A classic risk-off sentiment prevailed in Asia this Thursday amid falling equities and oil prices, despite another neutral Chinese yuan fix today failing to calm markets. Safe-havens benefited the most, with the Japanese yen emerging the top performer, while the CHF, EUR and gold posted modest gains. The dollar-yen pair now attempts recovery around 117.50 levels, having found strong support near 117.30 region. While the upside in EUR/USD remains capped by 1.09 handle, and gold prices gains for the second day in a row and trades around $ 1093, unable to extend beyond 1095 levels. The Australian Dollar showed a tepid response against the US Dollar after December’s employment report crossed the wires. Australia lost 1k employees compared to the -10k forecast. This was the most amount of jobs lost over the course of one month since April 2015.

Multiple bomb and gun attacks in the Indonesian capital of Jakarta sent the rupiah and the Indonesian stock market lower.

A quiet start to the day data wise with the BOE’s ‘Super Thursday’ likely to grab a lot of attention. The BOE will publish its minutes and the asset purchase target, although no major surprises are expected from the British central bank. The policy makers are expected to vote 8-1 in favour of keeping rate unadjusted at record low of 0.50% as also the asset purchases program unchanged. While the ECB monetary policy account of the Dec 3 meeting will be also published. Moving on towards this afternoons session, Canada’s housing prices index will be on tap while from the US, unemployment claims and import prices index will be published. Initial jobless claims are expected to remain largely unchanged at 275,000 during the week ending January 9, following a figure of 277,000 booked previously. 

12:00 GMT  UK BOE Official Bank rate and minutes

13:30 GMT US Unemployment claims

Good luck

What To Expect At $20 Oil?

Ladies and Gentlemen

As we saw Oil dip below $30 per barrel yesterday, we have seen somewhat of an overnight reprieve in the Oil trading sessions of Asia and Europe. However,  it is very hard to find reasons to be optimistic in current conditions, especially with the over-supply and concerns about China growth. The pain low Oil prices has so far caused for Oil investors and Oil producing countries may just be a taste of things to come as we head to $20 per barrel. 

We are now confronting $20 Oil and the likelihood is fairly great. Clearly Oil markets cannot maintain these prices (below $30) for very long and the question is for how much longer?  The Gulf Economies as well as other Oil producing countries are suffering immensely, such as Malaysia - who are losing $68 million for every $1 decline in the price of Oil. Oil producers too.. EconocoPhillips - losing $2 billion for ever $10 decline and yesterday Petrobras announcing it is lopping $30 billion of it's 5-year spending plan... Hours late, BP announces that they would slash 4,000 jobs. 

If there is some sort of optimistic note to leave you on and that was last year China (2nd largest consumer of Oil) imported a record amount of Crude, but that was simply taking advantage of low prices... and if/when prices go up they can start taking advantage of their huge stockpiles. 

$20 oil just acts to dig an even deeper hole from where you need to be before the markets look to open up again! 

Best of luck guys! 

Anish8FX @Atom8.com

Oil Crisis? Should We Now Buy Gold?

Ladies and Gentlemen

With a 17% fall in Oil since the start of 2016, the possibility of $20 oil becomes a real target for Investors, as we see major Hedge Funds exit the commodity.

Gold since August has been swung around in a tug of war, with Chinese equities on one side and a strong USD on the other. This pendulum has been relentless in the recent months, however with new lows in Oil prices, Gold continues to hold well in retaining it's safe haven status.

Gold has climbed 3.4% already in 2016 and investors risk aversion does not seem to be letting up. Geopolitical tensions persist in the Middle East and North Korea, as well as concerns about China's growth forecasts.  However, with a persistent strength in the USD forecasted for 2016, some analysts still call for sub $1,000 (per oz) Gold... as a "Competition for Gold" increases.

With Oil prices reeling from oversupply and Gold getting a small boost, Brent crude is now at the cheapest relative price in almost a generation.

Gold Vs Oil

But what is a "Safe-Haven"?   By Economic definition (as pointed out by James Steel, of HSBC) The Safe-haven inspired demand for Gold (and other precious metals) rests on the interconnection between  the state of the Gold Market and the Financial Markets of countries with long-term structural arguments for Gold accumulation (i.e. China and India) - and with this being said, HSBC forecast average Gold prices of $1,205 this year.

Mr Steel is looking more with a long-term view, as accumulations continue to rise. We always tend to think about Gold being a hedge on safety, however recently Gold has been more about uncertainty and a reflection of anxiety. Gold in a deflationary environment, may actually be likely to continue it's slide down.  2016 could well be the story of Central Bank delivery, especially as we are now risk-off as we strength in the Yen for example... but we hear nothing about the BOJ pushing back.

So Is Gold still a mark of uncertainty? Well the recent shocks coming from China did Send Gold immediately higher, which is reassuring to see.

I personally am long Gold, as I think it's safe-haven status will be the trend for 2016 but in the short-term we may remain bearish. I wish you all the best of luck with your Metals trading and as we all stay tuned to this theater of events in the World markets, I wish you safer trading.

Anish8Fx @ Atom8.com

The Day Ahead...

Good morning

The safe-havens were back in demand as the sentiment on the Asian markets remained soured, despite stabilizing China stock markets (currently holding small gains across the board). While lower oil prices and persistent Chinese economic slowdown worries continued to weigh on the commodities-currencies. The People's Bank of China continued to act on its intention to calm the yuan market today, squeezing offshore yuan shorts and keeping a steady fix, confounding those looking for further Yuan devaluation. Overnight Yuan HIBOR (Hong Kong Interbank Offered Rate - Offshore yuan borrowing rates) has jumped to a new record high of 66.82% from 13.4%.

The Japanese Yen has again benefited with USD/JPY despite a brief move towards 118.00 it has since reversed and is pushing towards 117.30 as I type. The Nikkei has been trading heavy as Japan return to work from their extended weekend, currently down -2.70% on the day.

Oil has been hit hard again as Asia sends Brent to a 12 year low and sees Hedge Funds starting to exit the commodity. Morgan Stanley warn that a strong US Dollar may send Brent down to as low as $20 a barrel.

The day ahead brings risk events for the British Pound. We have MoM Manufacturing and industrial production at 09:30 GMT followed by BOE’s Carney speaking this afternoon, although whether he can add any gems is to be seen. BoJ Governor Kuroda is also speaking at 10:30 GMT. But as ever this year the main focus will be all things China and the subsequent fallout.

Good luck.

First NFP of 2016.... "Risk On"!

Ladies and Gentlemen,

It has been a very busy start to the financial year, the stock markets have had a rough ride, the DAX is down 7% YTD and the S&P is below the pivotal 1990 level.

Risk off has been the theme in the FX market, until the correction overnight, has the sentiment turned ahead of the Non-Farm Payrolls?

The Non-Farm Payroll number will be announced at 13:30 GMT the consensus is for a 200k number following on from 211k in December, keep a keen eye out for the unemployment rate which is currently 5% and the average earnings increase, which is released at the same time. Reference to wage inflation and levels of employment where mentioned at the ‘Lift off’ press conference.

Why is this number so important? The market is trying to work out the pace of rate hikes in 2016, it is important to remember that the FED only has 8 meeting in a year. Will the hiking cycle be gradual or more aggressive? Fed Chair Yellen mentioned at her press conference that ‘future policy actions will obviously depend on how the economy evolves’ stressing that unemployment and inflation figures are factors that guide the Fed in arriving at rate hike decisions.

The Federal Reserve official publish their forecasts for the central bank’s key interest rate on a chart known as the ‘dot plot’. The dots has 4 hikes whereas Fed funds only has 3 who will be correct?

This year has already been touted as the year of ‘Doom Gloom and lack of Boom’, and i am looking forward to more positive 2016.

Good Luck