A Broker's Eyes : Economy

Thursday, 1 October 2015

A new month, a new quarter and the first event risk is upon us - NFP!

Ladies and Gentlemen,

A new month, a new quarter and the first event risk is upon us.

Tomorrow at 13:30 BST we get the US Non-Farm Payrolls.

At the Philip Gamble Memorial Lecture at the University of Massachusetts on 24^th September Janet Yellen said “Most of my colleagues and I anticipate that it will likely be appropriate to raise the target range for the federal funds rate sometime later this year”. There are only 2 meeting left, the next FOMC decision is 28th October and then the final meeting of year for the open markets committee takes place on 16^th December.

It is well known that the Federal Reserve do not like to surprise the market, Larry Summers former Secretary of Treasury, stated in his blog that in the last 20 years the Fed has never tightened without guiding the futures market to at least a 70 percent chance of a tightening, presently there is an 84% expectation of a December hike. Will tomorrows’ data change the market view?

Bloomberg have surveyed 93 economists and the estimates vary from a lowest approximation of 149,000 and a highest evaluation of 255,000

The average is 202,000 whilst the median is 200,000.

In August 173,000 jobs were added, down from 245,000 in July, whilst the unemployment rate fell to 5.1%

A strong number and I assume that we will see further confidence in the $ trade and whilst the commodity markets are under pressure, prefer to express this view against the commodity currencies.

Good Luck

Anish S. Lal @anish8fx

FX & Precious Metals, Atom8 Financial Services LLP

2nd Floor, Centenary House, Palliser Road, London W14 9EQ, UK

T: +44(0)20 3405 3910 | M: +44 (0)7983701816 | anish.lal@atom8.com | www.atom8.com

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Monday, 3 August 2015

Is the Australian Economy losing its shine?

Is the Australian economy losing its shine? The flippant answer is look at their cricket team, not the dominant force they once were J

However the more considered answer is that the economic slide is partly due to circumstances beyond the government’s control.

Commodity prices have fallen, the Australian economy has been based around mining and commodities so a period of adjustment is to be expected.

Event Risk - RBA Announcement (4th August 05:30)

What impact will lower interest rates have and is this tool the answer?

Lower interest rates are fuelling ‘Asset Bubbles’.

This is a global story but the Sydney Housing market is the extreme, up a staggering 18.4% (yoy) whilst economic growth has not reached over 3%

So why reduce rates further?

The currency is 35% lower over 4 years surely this should help exporters however the jobless rate is still stuck around 6% and business confidence surveys are not at the level the government would like. A cut is the short term fix but there is a longer term issue.

The cash rate is at 2% and very few expect a cut to 1.75% (25 out of 28 economists polled by Bloomberg have rates on hold.)

We get the quarterly monetary policy statement on Friday the last two times the Reserve Bank Board members meet before this statement they cut 25 basis points

As the proverb goes being forewarned is forearmed.