FiboGroup Market Analysis 2018

[fibogroup.com]

The Australian dollar is under pressure in today’s trading session after another poor round of disappointing inflation numbers cast doubt on a rate hike expected by the RBA in the coming months.

Quarterly CPI figures hit the market today at 0.4 percent against analysts’ expectations for a figure of 0.5 percent while the grossed up yearly figure came in at 1.8 percent against a consensus of 1.9 percent.

The figures still remain below the RBA’s target rate of between 2 and 3 percent and creates headache for the central bank as their ability to lift interest rates to cool down the housing market, among other things is in jeopardy.

“The latest inflation report should put to bed any consideration of a near-term interest rate hike by the Reserve Bank. Despite an increase in the tobacco excise and higher fuel and utility prices, annual inflation once again failed to reach the bottom end of the RBA’s inflation target.” Said Callam Pickering, APAC Economist for global job site Indeed.

“We haven’t yet seen any improvement in wage growth and until that materializes inflation will continue its disappointing run. Given the persistent weakness in wage growth we’d prefer to see some evidence of improvement before the RBA considers hiking interest rates.” He added.

The Australian dollar has gained over 5 percent since the start of the year against its US counterpart which many attribute to weakness in the US dollar rather than strength in the local currency.

With interest rates now expected on hold for the rest of the year and commodity prices falling, many see the current level of the Aussie dollar as temporary.

“The move up toward 80 cents has largely been driven by U.S. dollar weakness rather than Aussie dollar strength,” said Simon Doyle, Sydney-based head of fixed income and multi-asset at Schroder.

“We don’t see that as being something which is sustainable.” He added.

 

[fibogroup.com]

Gold has managed to find good support over the last 3 trading sessions at around $1,340 while also making a higher top from the September highs and the chances for a push higher looks promising.

The latest Fed rate decision yesterday was no surprise and rates remained on hold with the following statement pointing to a rate hike in March which was already factored into the gold market long ago.

It was interesting that Fed president Janet Yelen noted in the following statement that she expects inflation in the US to pick up this year and eventually hit the target rate of between 2 and 3 percent.

The Fed has already been quite aggressive with their rate hikes considering inflation remains below their target and it’s possible that after the rate rise in March, they may have to delay any further moves until inflation actually does pick up as they can’t keep raising rates in a low inflationary environment.

At least 3 rate hikes are expected this year by the Fed but when as expected, inflation remains subdued and they find that they have to leave them on hold, gold is set to benefit.

 

[DonCarleone]

I bet the ozzy will grow even further against the dollar, because of these Trump's import-stimulation policies and the overall performance of the Australian national economy

 

[fibogroup.com]

After temporarily breaking through last Septembers high of US81.26c the Australian dollar has reversed sharply and in today’s session has racked up its 5th straight day of losses.

Investors obviously felt uncomfortable with the Aussie dollar well above the US80c due to weak inflation figures released earlier in the week as well as the fall in Iron ore prices, Australia’s biggest commodity.

“The Aussie’s troubles stem both from the mildly weaker than expected Q4 CPI report but also from a large cabal of traders and investors who see it at lofty levels at or above 80 cents given their outlook for the economy,” said Greg McKenna, Chief Market Strategist at AxiTrader.

Another factor that’s bound to pressure the Aussie dollar in the coming months is the realization that interest rates in Australia won’t be going up any time soon.

Some analysts claim the any rate hikes by the RBA at this time would be catastrophic for the Australian economy as the level of Debt held by households is too high.

"The RBA fully appreciates that when they raise rates the currency is going to react strongly so when you raise rates you need to be ready for financial conditions to tighten. Interest rates may have to stay lower for longer in Australia than you would otherwise think in an economy with high exposure to housing and high household leverage." said Mark Farrington a London based currency hedge fund manager.

Mr Farrington also noted the US dollar is in an unusual situation at the moment and there are 2 major reasons why investors will favour the greenback over currencies such as the Australian dollar as the year unfolds.

The increase in US interest rates relative to the rest of the world has created an "unusual phenomenon in which the global reserve currency has become the de facto high yielder at the same time" he added.

 

[fibogroup.com]

The British pound is under further pressure today, following on from last Friday’s losses on the back of disappointing local data and for the time being its seems as if the recent rally in the British currency is coming to a halt.

This is the 2nd time in as many weeks where data out of the UK has failed to meet expectations and many now believe that the Bank of England may hold off on raising rates in fear of derailing the overall recovery of the economy.

At the economic forum in Davos last week, BOE Governor Mark Carney noted that further rate hikes would be dependent on positive economic data as well the success of Brexit negotiations, of which both at this time are looking a little shaky.

Government ministers noted over the weekend that it would be impossible for Britain to remain in the customs union after the UK leaves the EU and instead will pursue its own trade deals on a case by case basis.

The recent strength of the pound has in part being closely connected with future rate hikes so this Thursday’s rate decision from the BOE will be critical for the pound and whether further losses lay ahead.

No changes in rates are expected in the decision on Thursday but the following statement will be closely monitored and if there is no mention of a future rate rise we could investors exit the sterling.


“For the pound to strengthen more notably in the near-term, the BoE would have to deliver a clear signal that it is actively considering an earlier rate hike,” said Lee Hardman, strategist at MUFG.

 

[fibogroup.com]

The Australian dollar has tumbled around 5 percent over the last 5 trading sessions against its US counterpart which gathered speed on Monday after yesterday’s plunge in the US stock market and further falls are expected if the later fails to stabilize.

In what was its biggest one day fall in history, the Dow Jones Industrial Index fell by more than 1000 points which sent shockwaves through the world financial system and left investors jumping out of riskier currencies such as the Australian dollar.

The futures market points to further losses in the Dow Jones when the market opens later today so the Aussie dollar may be in for further pain.

"Investors were dumping out of stocks, they were in free fall, something we've seen very little of during the steady bull market since basically 2009. And now we're seeing nerves in the market — some fear." Noted Uri Berliner from NPR.

Also affecting the Australian dollar was the latest interest rate decision released earlier today as well as a monetary statement from the Reserve Bank of Australia.

Most analysts had been predicting a hawkish stance from the RBA with signs of future rate increases as the year unfolds which was not forthcoming.

The main focus seemed to be on the current level of the Australian dollar and their concerns about the damage it could do to the Australian economy should it push any higher

“On a trade-weighted basis, the Australian dollar remains within the range that it has been in over the past two years. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast” noted RBA Governor Philip Lowe

The lack of enthusiasm from the RBA has led some analysts to call off a potential rate increase in the first half of this year.

“Our base case is for the RBA to begin removing outsized monetary accommodation in May, but we have lost conviction on this call as some data reports have underwhelmed,” says Annette Beacher, chief Asia Pacific macro strategist at TD Securities.

 

[fibogroup.com]

The immediate future of the British pound all points to this Thursday’s Bank of England rate decision followed by a monetary press conference.

No changes are expected this time around but the market has priced in a 50 percent chance that the BOE will lift rates in May so most of the focus will be on the monetary statement.

If indeed the BOE comes out with a hawkish tone and signals that a rate hike is a distinct possibility in the coming months the Sterling should find strong support as long as between now and then the US stock market and in particular the Dow Jones doesn’t tumble again.

The Fear is that the speech may be less than optimistic as so many questions over the status of Brexit remain unanswered and any movement higher in rates will hit the UK economy in a negative way at this delicate time.

“We think the appetite for making a big signal shift at this meeting is low and that the BoE might take a wait - and-see approach. This could send EUR/GBP slightly higher this week,” said Jens Naervig Pedersen, an analyst at Danske Bank.

Data released earlier today from the UK may give reason for the bank of England to keep rates on hold a little longer than anticipated.

The latest housing price index from Halifax in the UK hit the market at -0.6 percent against analysts’ expectations for a figure of 0.2 percent which marks the 2nd straight month of declines and makes it evident that the UK property market is not ready for higher rates.

“The MPC can’t ignore the evidence of a housing market slowdown now in front of them, so we doubt that they will signal to markets tomorrow that interest rates could rise as soon as May,” said Samuel Tombs of Pantheon Macroeconomics.

 

[fibogroup.com]

Gold has once again showed its strong association with the US dollar and has now fallen heavily 4 out of the past 5 trading sessions and further losses seem unavoidable.

In what has become a familiar trading pattern, gold has travelled the opposite way to the greenback as the latter makes a strong recovery as fears grow that the dramatic fall in the US stock market earlier in the week is not done and many expect it to tumble further.

The sudden drop in gold has seen it retreat to a critical support level which was established just after the New Year and a clean break of this today will probably see the precious metal break down through the physiological $1,300 mark before finding its next round of support at $1,295.

The RSI index is currently at 40 and shows that there is still room for gold to fall down to the figure of 30 which will push it into oversold territory.

 

[fibogroup.com]

The gold price has found strong resistance today at the $1,320 mark as it did in yesterday’s trading session and has pulled back and now looks to be heading down towards yesterday’s resistance point of $1,308.

The Dow Jones index tumbled again yesterday by over 1000 points which should have been a boost for gold but this failed to eventuate and instead investors once again chose the US dollar as a safe haven over gold which on the surface looks like a big warning sign.

If we look at past stock market corrections, gold has benefited immensely as a safe haven so something is definitely different this time around and if the stock market suddenly stabilizes there is bound to be even less interest in gold and the potential for further losses is a real possibility.

Should the resistance point of $1,308 be broken over the next few trading sessions there is little support remaining and we may see investors leave the precious metal in droves.

 

[Rizog]

Are there any long-term growth tendencies to rely on for a long period? Because if I put this stake I can earn a pretty penny.