Industry News



AUD/USD Forecast: Wait-and-See RBA to Give Way to Bear Flag Formation
Tuesday 07th April, 2020

AUSTRALIAN DOLLAR TALKING POINTS
AUD/USD snaps a four day losing streak ahead of the Reserve Bank of Australia (RBA) meeting, but the interest rate decision may do little to alter the near-term outlook for the Australian Dollar as the central bank is expected to retain the current policy in April. 

AUD/USD FORECAST: WAIT-AND-SEE RBA TO GIVE WAY TO BEAR FLAG FORMATION AUD/USD attempts to retrace the decline from the previous week, with the exchange rate clearing the series of lower highs and lows, and the RBA meeting may help to prop up the Australian Dollar as the central bank appears to be on track to keep the official cash rate (OCR) at the record low of 0.25%.
Euro, Crude Oil May Suffer From OPEC & Eurozone Political Rifts
Tuesday 07th April, 2020

EURO MAY FALL ON EU FINANCE MINISTER MEETING AMID CORONAVIRUS PANDEMIC
The Euro will be closely scrutinizing another round of talks between Eurozone finance ministers this week after the prior meeting failed to achieve anything of substance. The ongoing deliberations reflect an internal conflict that has been a source of tension for over a decade. Specifically, between the Northern, fiscally conservative states – like Germany – and their more liberal counterparts – the Mediterranean members.
NZD/USD Rate Outlook Mired by Dovish RBNZ Forward Guidance
Monday 06th April, 2020

NEW ZEALAND DOLLAR TALKING POINTS
NZD/USD attempts to retrace the decline from the previous week following the limited reaction to the 701K contraction in US Non-Farm Payrolls (NFP), but the exchange rate may continue to give back the rebound from the yearly low (0.5469) as a bear flag formation unfolds.

NZD/USD RATE OUTLOOK MIRED BY DOVISH RBNZ FORWARD GUIDANCE
NZD/USD trades on a firmer footing as the Reserve Bank of New Zealand (RBNZ) tames speculation for a negative interest rate policy (NIRP), with Chief Economist Yuong Ha arguing that the central bank would need to “assess the effectiveness, efficiency and an impact on financial system soundness of doing so.” However, recent remarks from Governor Adrian Orr suggest the RBNZ stands ready to deploy more unconventional tools to support the economy as the central bank head pledges to “keep monetary support going for as long as necessary through QE and other tools.”
US Dollar Back on the Offensive? USD/SGD, USD/PHP, USD/MYR, USD/IDR
Monday 06th April, 2020

SINGAPORE DOLLAR, PHILIPPINE PESO, INDONESIAN RUPIAH, MALAYSIAN RINGGIT – TALKING POINTS
The US Dollar was generally back on the offensive against ASEAN currencies such as the Singapore Dollar, Indonesian Rupiah and Malaysian Ringgit last week. Meanwhile the Philippine Peso held its ground, cautiously rising – see chart below. Elsewhere in emerging markets, the Greenback also outperformed against the Indian Rupee as coronavirus cases picked up pace locally.

US DOLLAR ASEAN WEEKLY RECAP
Additional fiscal stimulus from Singapore as the MAS eased policy has thus far not bode well for SGD. Rather the focus for developing economy currencies remained on the flow of capital. The United States – the world’s largest economy – revealed worrying trends in the labor market last week as the nation lost the most jobs since 2009. This is as the country took the spot as the nation with the most confirmed cases of the coronavirus.
Indian Rupee May Fall as US Dollar, USD/INR Rise on Virus Cases
Friday 03rd April, 2020

INDIAN RUPEE DECLINES AS US DOLLAR GAINS, WHERE TO?
Indian Rupee selling pressure was reignited against the US Dollar in the aftermath of last week’s emergency rate cut from the RBI. In addition to cutting benchmark lending rates, the Reserve Bank of India dialed up long-term repurchasing operations in an effort to boost liquidity conditions amid the coronavirus outbreak. Earlier this week, the RBI also increased short-term funding limits by 30% across the country. These measures are certainly welcome. Moody’s – a credit ratings agency – downgraded the outlook for Indian banks to negative from stable. Prior to the virus pandemic, the country was attempting to overcome from a troubled banking sector. Meanwhile the latest Markit manufacturing PMI print showed local growth at its weakest since November after making a sharp U-turn following January – see chart below.
Bitcoin Price: How Will Halving, Coronavirus Affect BTC?
Friday 03rd April, 2020

WHAT IS BITCOIN HALVING?
Bitcoin halving is the process in which so-called “miners” – covered in the section below – are rewarded 50% fewer BTC for verifying transactions in the blockchain network. This is scheduled to occur every 210,000 blocks and is designed to help preserve Bitcoin’s allure as a store of value. The cap for Bitcoin is set at 21 million, thereby keeping the supply finite. There is no Bitcoin central bank that can simply print more BTC.
In fact, the guiding purpose of the cryptocurrency and the very thing underpinning its broad appeal is that it operates on a decentralized network that cannot be controlled by a single person or institution. Halving is written into the Bitcoin algorithmic protocol, designed by the enigmatic person or group known only as Satoshi Nakamoto during the 2008 global financial crisis.

Palladium Decline May Be Offset by Virus-Induced Supply Shock
Thursday 02nd April, 2020

HOW HAS CORONAVIRUS IMPACT PALLADIUM PRICES?
As a cycle-sensitive commodity, palladium has been a victim of the market-wide liquidation in risk-oriented assets as the coronavirus undermines global growth prospects. In 2019, XPD was the best-performing precious metal; year-to-date it is up only 14% after recently recovering from seven-month lows. Having said that, the disruptive nature of Covid-19 may in fact be a hidden source of support for palladium prices.
South Africa – the second-largest producer of the precious metal after Russia – recently announced a strictly-enforced 21-day lockdown and extended these measures to its mining operations. Following the government’s decree, XPD/USD registered its largest one-day increase since 1997 and rose almost 25 percent. This disruption to production amplified the precious metal’s structural undersupply and helped buoy prices. Palladium is typically extracted as a secondary product from mining operations targeted at other metals like nickel. The lag time between extraction and distribution consequently drove XPD/USD to record-breaking highs as demand for its use in catalytic converters surged in 2019. With the lockdown in place, global supply will likely be tightened and could help offset the downward pressure of weaker global growth.
EUR/USD Levels to Watch as Rebound from 2020 Low Unravels
Thursday 02nd April, 2020

EUR/USD RATE TALKING POINTS
EUR/USD continues to give back the advance from the yearly low (1.0636) as there appears to be a rift within the European Central Bank (ECB), and the exchange rate may exhibit a more bearish behavior over the coming days as it extends the series of lower highs and lows from earlier this week.

EUR/USD LEVELS TO WATCH AS REBOUND FROM 2020 LOW UNRAVELS
EUR/USD remains under pressure as ECB board member Yannis Stournaras insist that “now is the time for common action and solidarity,” with the official going onto say that “common issuance of debt is common action against the common enemy”during an interview with Bloomberg News. The comments suggest there’s a split within ECB as “there are proposals to use the European Stability Mechanism or the European Investment Bank,” and the Governing Council may merely buy time at its next meeting on April 30 as the central bank carries out the Pandemic Emergency Purchase Programme (PEPP).
Dow Jones, S&P 500, DAX 30 Outlook: Will the Bounce Last?
Wednesday 01st April, 2020

WHAT DOES TRADER POSITIONING SAY ABOUT GLOBAL STOCK MARKET TRENDS?
Global stocks have bounced after appearing to find a bottom towards the end of March. The Dow Jones, S&P 500 and DAX 30 are attempting to recover lost ground as they struggle to push above key resistance. Can upside momentum last? These topics are discussed in this week’s session on IG Client Sentiment (IGCS) where I discussed trader positioning, fundamental and technical analysis to uncover the prevailing trends.
DOW JONES SENTIMENT OUTLOOK
According to IGCS, 30.88% of traders are net long the Dow Jones Industrial Average at the time of this writing. Those net short have increased by 2.06% and 51.64% over a daily and weekly basis respectively. The combination of current sentiment and recent changes gives us a stronger bullish contrarian trading bias. That may speak to an increasing share of traders attempting to pick the top in the Dow Jones.
AUD Steadies As China Caixin Manufacturing PMI Returns to Expansion
Wednesday 01st April, 2020

AUSTRALIAN DOLLAR, CHINA CAIXIN MANUFACTURING PURCHASING MANAGERS INDEX TALKING POINTS:
The Australian Dollar found only a brief respite in its trek lower Tuesday on news that China’s private manufacturing sector returned to expansion territory in March after a massive, coronavirus linked hit in February. The March Purchasing Managers Index from media company Caixin came in at 50.1, well ahead of both the 45.0 print expected and the previous month’s 40.3. In the logic of PMIs any reading above the 50 line signified expansion for the sector in question. The Caixin version covers smaller Chinese firms, usually those in private hands. The outcome mirrors the astonishing turnaround already seen this week in the official version of this indicator which tracks the progress of larger, state-linked enterprises. It certainly seems that the Chinese economy is emerging from its virus-induced lockdown but, with so many of its erstwhile customers still paralysed by the contagion, end demand for much of this manufacturing production must remain in severe doubt.
EUR/USD Rate Recovery Stalls as ECB Warns of Looming Recession
Tuesday 31th March, 2020

EUR/USD Rate Talking Points
EUR/USD pares the advance from the yearly low (1.0636) as the European Central Bank (ECB) warns of a looming recession, and the exchange rate may consolidate over the coming days as it snaps the series of higher highs and lows from the previous week. EUR/USD Rate Recovery Stalls as ECB Warns of Looming Recession EUR/USD struggles to hold its ground as the ECB Vice President Luis de Guindos states that incoming data “indicate that a recession will take hold,” with the official going onto say that “each month will see a fall of approximately two percentage points in GDP” amid the lockdown in Europe. In turn, Mr. Guindos insists that the ECB “will do everything possible to keep the euro together and to provide the best funding possible,” and it seems as though the Governing Council will keep the door open to implement more non-standard measures as the central bank remains reluctant to remains reluctant to push the main refinance rate, the benchmark for borrowing costs, into negative territory.
Canadian Dollar Sank with Crude Oil as Health Care Steered Wall Street
Tuesday 31th March, 2020

Canadian Dollar, USD/CAD, Crude Oil, AUD/USD, Wall Street – Asia Pacific Market Open
  • Canadian Dollar sank with crude oil prices despite rally on
  • Health care securities helped drive the “risk-on” tone, Yen still climbed
  • USD/CAD bounced but key resistance maintains the downward outlook
Canadian Dollar Sinks with Crude Oil Prices Despite Stock Market Rally on Wall Street
The Canadian Dollar was one of the worst-performing major currencies to start the week, depreciating alongside crude oil prices. WTI declined -7.27% to an 18-year low amid ongoing bearish fundamental themes, the coronavirus outbreak and a global supply glut. The commodity is a key source of revenue in Canada, making the Loonie often sensitive to swings in oil depending on the latter’s impact on monetary policy bets. Sentiment-linked WTI was unable to capitalize on a “risk-on” tilt in equities towards the end of the day. The S&P 500 closed 3.35% to the upside, fueled by outperformance in health care securities. This is despite US President Donald Trump announcing an extension of virus guidelines until the end of April, backing down on hopes of starting to open the economy by the Easter holiday in about 2 weeks.
Gold Price Levels to Watch Following US Fiscal Stimulus Program
Monday 30th March, 2020

Gold Price Talking Points The price of gold consolidates as US lawmakers pass a $2T fiscal stimulus package, but the flight to safety may push the precious metal towards the yearly high ($1704) as market participants look for an alternative to fiat currencies. Gold Price Levels to Watch Following US Fiscal Stimulus Program The price of gold appears to be stuck in a narrow range amid the wave of monetary and fiscal support, and it seems as though major central banks will continue to push monetary policy into uncharted territory as the Reserve Bank of New Zealand (RBNZ) unveils a new credit facility that “will provide liquidity in exchange for eligible Corporate and Asset-Backed securities.” At the same time, the Federal Reserve appears to be on track to implement more non-standard measures as the central bank prepares a“Main Street Business Lending Program to support lending to eligible small-and-medium sized businesses,” and the Federal Open Market Committee (FOMC) along with its major counterparts may continue to push the limits of monetary policy as their benchmark interest rate sit near zero. It seems as though the non-standard measures have helped to shore up trader sentiment as US equities temporarily moved into ‘bull market’ status, but the unconventional tools may ultimately lead to unintended consequences as major central banks utilize their balance sheets to combat the weakening outlook for global growth.
Euro May Rise on ESM, Crude Oil Selloff Deepens on OPEC Price War
Monday 30th March, 2020

EURO, ESM, CRUDE OIL, OPEC PRICE WAR, SOUTH AFRICA CREDIT DOWNGRADE – TALKING POINTS
  • Euro may rise if EU finance ministers choose to use market-stabilizing ESM policies
  • Crude oil prices continue to suffer from OPEC price war and coronavirus outbreak
  • USD/ZAR reaches new high, South Africa credit downgrade sends chilling message
Euro Eyes Eurozone Finance Minister Meeting: ESM in Focus The Euro may rise following a meeting between Eurozone finance ministers on Monday where they are expected to discuss the possible use of the Emergency Stability Mechanism (ESM). The European-based agency was developed following the Eurozone debt crisis in 2012 as the shock from the 2008 financial meltdown asymmetrically hit the regional economy and pushed the Euro to the precipice of collapse.
The fund has a little over 400 billion euros at its disposable and includes a number different levers policymakers can use to stabilize financial markets and restore confidence. Some of these include purchasing sovereign debt in order to help distressed member states get access to credit markets. However, seeing that interest rates remain low despite the considerably darker outlook, officials may advocate to use other policies.
Stock Market: now a days is Apple, Microsoft and Alphabet against everyone else.
Monday 20th January, 2020

"The stock market travels on the currents of supply and demand. That’s uncontroversial.
Yet as the indexes have sped to new highs, plenty of observers have argued that a relative shortage of stocks combined with somewhat mechanical sources of demand explain everything from Dow 29,000 to the trio of trillion-dollar market-cap giants that tower above the rest of the market.
The idea of an equity shortage usually hinges on the decline in the total number of U.S. public companies in recent decades, the relative dearth of initial public offerings and the consistent flow of share buybacks meant to reduce companies’ equity base. These are all features of this bull market, for sure. But it’s an oversimplification to focus on the absolute number of stocks or the background hum of stock buybacks as key drivers of the market’s historic run. There are plenty of stocks to go around and buybacks aren’t wagging the indexes – it’s just that everyone wants the same kind of stocks. What’s truly scarce are big, reliable cash flows that investors believe will endure economic wobbles and constant technological disruption. And this perceived scarcity of safe sources of profit and income is animating voracious demand for corporate debt and propelling the elite class of dominant secular-growth stocks to ever-richer valuations. That’s not to deny there are literally fewer stocks on the market’s shelves than there used to be. The comprehensive Dow Jones Wilshire 5000 index now has about 3,500 domestic stocks, down from more than 7,000 in the late 1990s. But most of the stocks that went away were tiny, marginal companies. And the total number of issues has been about steady since 2012, and since then the Wilshire 5000 has more than doubled. If the reduced number of stocks were an issue, then why would one-sixth of the names in the S&P 500 be languishing at 12-times forecast earnings or less? And if public investors didn’t have enough names to choose from, why did the market fail to embrace the likes of Uber, Lyft and Pinterest last year? Share buybacks are now a constant of corporate finance, and at the current pace amount to perhaps 2% to 3% of total stock market value per year. But a good portion of that purchasing is simply soaking up the stealth equity issuance through employee stock compensation. So, as a swing factor in a $30 trillion stock market, its potency has diminished from a couple years ago. The true issue is a scarcity of stability and growth — or a perceived scarcity of them, at least. We live now in a world where triple-B-rated corporate bonds, the lowest-grade and largest segment of the investment-grade universe, yield 3%. Junk bonds — an asset class with a long-term annualized default rate of 3.5% — now yield 5%. Clearly, the Federal Reserve’s three rate cuts and promise to stay on hold for a while is part of this backdrop, as are the stirrings of a global economic pickup following an inflation scare. But the massive demand for cash flows by an aging global investor base and return-starved institutions are the proximate actors on these markets"
Elite tier of stocks "A winner-take-most dynamic in multiple industries transformed by technology has also created an elite tier of anointed stocks. The acclaimed winners appear entrenched, their platforms self-reinforcing, profit margins sturdy, growth rates near-automatic. This has created a vastly bifurcated market, and an unusually widespread between the valuation of the most expensive 20% of stocks and the cheapest 20%, as this breakdown by KKR & Co.’s head of global macro Henry McVey illustrates. In that upper tier, of course, are the Big Five of tech: Apple, Microsoft, Alphabet, Amazon and Facebook, together worth $5.2 trillion, or nearly 18% of the S&P 500. The first three, now sporting market values above $1 trillion, in aggregate are “worth” $3.7 trillion and will likely have net income exceeding $140 billion this year. So, in aggregate Apple-Microsoft-Alphabet trades at 26-times this year’s profits, with no debt and enormous capacity to invest, buy back stock or fund future dividends. The broad market is below 19-times earnings. The argument in the market right now is not why these stocks are working, but whether their premiums have grown too generous and investors too complacent about possible disturbances to this happy picture. McVey says, “Our analysis does not mean that the ‘winners’ can’t still do well as long-term holdings, but the point is that the consensus has largely caught up to our thinking on the era of low rates and technological change — and what it means for return on capital across business models.” It’s just that this group today is starting from rich enough valuations that returns will likely be less impressive in coming years. And yet, McVey says, “There are just too many broken business models in the value indexes.” So simply buying the cheapest is not a clear winning strategy. He favours scanning the middle of the valuation spectrum for companies combing earnings acceleration and dividend growth." Bet the field? "The exaggerated crowding into those winners has come at the expense of the “average stock,” at least on a relative basis. Here we see the equal-weighted S&P 500 sliding relative to the mega-cap dominated index. Over long stretches of time, equal-weighted indexing has outperformed. So is it time to “bet the field” against the favourites? The forces carrying this rally are rational and understandable. Yet along multiple fronts – technical, valuation, sentiment – the rally seems near a point where it ought to calm down if it’s not going to go fully into unstable blow-off mode. Still, it’s hard to figure what might soon short-circuit the cycle of money motivated by an apparent scarcity of cash-generating assets built to withstand a slower-growth, technologically transformed world"
US-China Deal is on the way
Monday 13th January, 2020

""Final Preparations are being made from Both men US President Donald Trump and Chinese Vise - Premier Liu He in order to sign the “stage 1 bilateral trade deal. Hence both countries warmly welcomed the agreement which it might be more than a brief respite in the US China tensions of Trump’s presidency. The reason the deal was finalised late last year, despite recent bilateral differences on a range of issues including Iran and Hong Kong, is that both sides decided even a truce, however temporary, is in their domestic interests. As Trump enters his re-election year, he is will claim — however far-fetched in reality — to have brought Beijing to heel. Meanwhile, the agreement provides a degree of stability in China’s most important economic bilateral relationship after some recent sub-par national economic data, and continued political unrest in Hong Kong. A further incentive for both sides to move late last year was that the next tariff deadline was due to fall on December 15 after which additional US levies on Chinese exports were scheduled. Yet, while the deal could have a broader, positive effect for international relations, possibly even underpinning a renewed basis for bilateral relations into the 2020s, it is just as likely that it will presage further bilateral tensions in 2020, or beyond. The “great” agreement Trump is now hailing is less substantive than he claimed he would achieve when negotiations began, and this contains the seeds of potential future problems. Is even possible due to recent US tensions with Iran or North Korea, that the stable relations with China will have a positive impact on the above due to the fact Iran and North Korea are both Allies of China"
Johnson hails ‘new dawn’ after historic victory
Tuesday 17th December, 2019

"Boris Johnson has promised to deliver Brexit and repay the trust of voters after he led the Conservatives to an ""historic"" general election win. The PM, who has met the Queen to ask to form a new government, has a majority of 80 in the House of Commons - the party's largest since 1987.
He said he would work ""flat out"" and lead a ""people's government"". Jeremy Corbyn said he would not fight another election as Labour leader, amid recriminations over the party's defeat.
He said he was ""very sad"" about the result, adding that he had received ""more personal abuse"" from the media during the campaign than any previous prime ministerial candidate. Labour was swept aside by the Conservatives in its traditional heartlands in the Midlands and north-eastern England and lost six seats in Wales. The Conservatives' victory in the 650th and final contest of the election - the seat of St Ives, in Cornwall - took their total number of MPs up to 365 MPs. Labour finished on 203, the SNP 48, Liberal Democrats 11 and the DUP eight.
Mr. Johnson in his victory speech earlier, he told activists the election result represented a ""new dawn"" for the country. He thanked Labour voters, many of whom, he said, had backed the Conservatives for the first time, vowing to fulfil the ""sacred trust"" placed in him. ""You may intend to return to Labour next time round, and if that is the case, I am humbled that you have put your trust in me, and I will never take your support for granted,"" he said"
Thursday 25th July, 2019

Boris Johnson was crowned leader of the Conservative party on Tuesday and is set to become prime minister, facing perhaps the most daunting challenge of any British politician in peacetime. Mr Johnson beat Jeremy Hunt in the race to succeed Theresa May as head of the Tory party, securing 92,153 votes to the foreign secretary’s 46,656.
Thursday 25th July, 2019

US Treasury secretary Steven Mnuchin on Thursday said there was “no change” to Washington’s stance on the dollar “as of now”, amid mounting speculation over whether the Trump administration will act to weaken the dollar. Mr Mnuchin said the US “could consider” a change to its dollar policy “in the future” but there was no change at present.
Thursday 25th July, 2019

Deutsche Bank has unveiled one of the most radical banking overhauls since the financial crisis, closing swaths of its trading unit and hiving off €74bn of assets as the struggling German lender calls time on its 20-year attempt to break into the top ranks of Wall Street.
Monday 27th June, 2019

Clearing houses pose new perils for the global financial system. Grimstad, norway, is an unlikely setting for financial-market shenanigans. But the fishing town is home to Einar Aas, a trader who took huge bets on Scandinavian energy markets. His 15 minutes of infamy came in September 2018, when his bets went spectacularly wrong. Unable to cover his losses, he blew a €114m ($133m) hole in the capital buffers of Nasdaq Clearing, which handled his trades......

Monday 27th June, 2019

It is trying to manage expectations. “Most of america thinks the Federal Reserve is a national forest.” That reminder that the general public has little idea what a central banker does was offered by an incumbent governor of the Federal Reserve to Alan Blinder when he joined in 1994. He passed it on 25 years later, on June 4th, to a star-studded group of economists and policymakers gathered at the Federal Reserve Bank of Chicago to discuss the Fed’s first public review of its framework...

Monday 27th June, 2019

What will happen when interest rates eventually start to rise again? At the end of 1989, an American in London received a call from a friend back home. The caller had watched the fall of the Berlin Wall and the toppling of Nicolae Ceausescu in Romania with growing dismay. He was at the end of a four-year course in Russian Studies at an elite university with hefty tuition fees. He had learned all the Kremlinology a would-be cold...

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