Tag Archives: USD

U.S. Dollar Falls After Fed More Dovish Than Expected; NZ Dollar Soars

Here’s today’s ‘Just A Minute’ bringing you a 60 second summary of what’s happening in the financial markets:

Main Trading Event Of The Day: UK Retail Sales @ 08.30 GMT

WHAT WE’RE WATCHING TODAY

U.S. Dollar Falls After Fed More Dovish Than Expected; NZ Dollar Soars

The U.S. dollar fell to its lowest in nearly two weeks against a basket of major currencies after the Federal Reserve hinted at yesterday’s meetings that U.S. interest rates will stay low for a while. The latest economic projections suggested that the Fed sees rates rising more in 2015 and 2016 than it had previously forecast, but officials lowered their long-term rate target. The Fed also sounded comfortable with the inflation outlook despite recent signs of a pick-up in price pressure. After the meetings, the dollar slipped 0.3 percent on the day to 80.378, and fell as far as 80.353, a level not seen since June 9. Against the yen, the greenback was almost flat on the day at 101.91 JPY, down from a one-week high of 102.38 yen hit on Wednesday before the Fed’s announcement, while the euro was slightly lower at $1.3589 after it touched $1.3600 EUR on Wednesday. The Fed cut its monthly bond buying program by a further $10 billion to $35 billion in a widely expected move and expressed confidence that the economic recovery remained on track.

The New Zealand dollar soared to a record high against a basket of currencies after the Fed’s dovish stance, rallying nearly 1 percent to hover around six-week highs of $0.8736 NZD. The outlook for higher New Zealand interest rates was reinforced by data showing the economy grew a solid 1.0 percent in the first quarter from the previous quarter, a result that cemented New Zealand as one of the fastest-growing developed economies. The Australian dollar was steady on the day at $0.9404 AUD, having gained 0.7 percent on Wednesday.

Eurozone: Is Deflation On The Horizon?

Professional services firm EY has warned that although the euro zone economy is set to grow in 2014, the threat of looming deflation in the region persists. The region will grow 1.1 percent this year, according to EY’s forecasts, followed by expansion of 1.5 percent in 2015. Growth is seen picking up pace between 2016 and 2018. Strengthening exports and a pickup in domestic demand will drive a return to modest investment growth but the recovery is likely to be felt more in some countries than others. The threat of deflation has been a key issue in European policymakers’ minds in recent months. The European Central Bank (ECB) announced measures to tackle the issue at its most recent policy meeting, including imposing a negative interest rates on banks for their deposits. Inflation in the euro zone rose by just 0.5 percent in the year in May, significantly below the ECB’s target of 2 percent. The inflation slowdown has been due to lower energy costs and increasing euro strength and there are now real concerns that inflation could turn to deflation, as firms start to bid down prices and wages in order to compete for orders. Deflationary pressures could have a knock on effect on consumer spending, just as confidence was starting to build. Exporters may also be in for another tough year as the euro remains stubbornly strong. The euro is currently trading around $1.35 against the dollar, down from peaks of $1.39 earlier in the year.

Emerging Markets: The Asset Class Of Choice?

Analysts are predicting that increasing comfort with the outlook for China’s economy will make emerging market equities the best performing asset class in the second half of 2014. Recent Chinese economic data indicates a stabilisation in the world’s second-largest economy, assisted by targeted stimulus measures. This is positive for emerging markets, many of which are dependent on exports to the mainland. May retail sales, for example, rose 12.5 percent on year, above analyst expectations for a 12.1 percent increase. While fixed asset investment rose 17.2 percent on year for the January-to-May period, just above expectations for a 17.1 percent rise. Emerging markets equities are up 3.9 percent year to date, slightly underperforming global stocks which have risen 4.1 percent, according to the MSCI Emerging Markets and MSCI World indices. India and Southeast Asian markets have been the biggest beneficiaries. Markets that were battered into 2013 are seeing a revival because of good policy from the central banks and economic momentum is not as poor as initially thought. Strategists at Coutts Investment Office, agree that emerging markets are the place to be.

That sums up today’s highlights! Remember you can keep in touch with us throughout the day via Facebook, Twitter, Google+ and LinkedIn for all the latest trading news. We hope you have a profitable day on the markets.

Will The Fed Jolt The Markets This Week?

Here’s today’s ‘Just A Minute’ bringing you a 60 second summary of what’s happening in the financial markets:

Main Trading Event Of The Day: US Industrial Production @ 13.15 GMT

WHAT WE’RE WATCHING TODAY

Will The Fed Jolt The Markets This Week?

The Federal Reserve is expected to announce another $10 billion monthly reduction in quantitative easing in this week’s FOMC statement with the focus being on the Fed’s economic assessment, which could end up realigning investor expectations about when the Fed is likely to hike rates. In its last statement, the FOMC noted that growth in economic activity had picked up after having slowed sharply during the winter, but added that the labour market indicators were mixed and the unemployment rate remained elevated. However, the outlook has improved with the last two employment reports showing monthly non-farm payrolls growth of 282,000 and 217,000. And after a severely weak first quarter, several economists are looking forward to Q2 GDP growth around 4 percent. While the Fed is unlikely to alter its tapering plans or tweak its forward guidance, its new economic projections could still prompt speculation that the first interest rate hike may come earlier than mid-2015. Analysts are concerned that these new Fed jitters could crop up just as the market is running into geopolitical concerns surrounding the situation in Iraq and its impact on crude oil.

Asia Stocks Lower As Yen Gains On Iraq Conflict

Japanese stocks fell today as concerns over Iraq resulted in a stronger yen. The escalating conflict in Iraq continued to pressure market sentiment, pushing the cost of oil higher and sending investors toward the yen, Asia’s safe-haven currency. The yen edged a touch higher in Asian trade, with the U.S. dollar last at ¥101.84, compared with ¥102.04 on Friday. The stronger yen translated into falls for the Nikkei Average which was last down 0.7%. Australia’s S&P/ASX 200 lost 0.2%, as mining stocks dropped amid declining prices for spot iron ore, which fell 0.7% on Friday to a 21-month low. Concerns over the use of iron to finance deals and allegations of fraud involving commodities stored in China continue to rattle the market. In China, markets were mixed with Hong Kong’s Hang Seng Index down 0.2% and the Shanghai Composite was flat. Trading got off to a quiet start today, ahead of the U.S. Federal Reserve’s upcoming policy meeting. Scheduled to conclude on Wednesday, the meeting will provide a monetary-policy update for the world’s largest economy.

Russia/Ukraine Gas Deadline Passes As Talks Fail

A deadline for Ukraine to pay Russia its gas bill passed today after talks between the two sides failed to reach agreement. Russia will now switch to an advance payment system for supplying its eastern European neighbor, meaning that gas resources which also supply parts of wider Europe could potentially be shut off at any point. Russia has previously said that Kiev owes $1.95 billion for gas that has already been delivered. Under previous President Viktor Yanukovych, Ukraine had been paying a reduced price for the amount of gas that it was buying from Russia. However, after fierce street battles, a change of government in Kiev and the annexation of Crimea by Russia, Moscow ramped up the prices it charged to Ukraine. After several rounds of talks, with a representative from the European Union trying to help both sides reach a compromise, no clear solution has been found.

That sums up today’s highlights! Stay in touch throughout the day via our social media channels for all the latest market updates. We hope you have a profitable day on the markets.

Are Facebook And Unemployment Correlated?

In this industry, correlations are something we are very familiar with. For instance platinum follows the same trend as the CRB (commodities) index which has nothing to do with platinum yet, where it goes, platinum goes and that has been the case for years. In a similar way, there’s an inverse correlation with gold and the USD - when one goes up the other tends to go down.

Step into the internet world and you can find another example of, in this instance, a rather unusual correlation: Facebook and unemployment. You may be surprised to learn that the unemployment rate is more correlated with Google searches for “Facebook” than with any other search term!

It is a well known fact that some companies and industries do especially well in tough times and Facebook is one of them. Google’s Correlate finds search patterns which correspond with real-world trends. If you enter a query into the search box, it will give you search terms that have a similar pattern of activity. The tool also works the other way so that you upload your own data, and see what search terms line up. If you upload actual unemployment rate data to see what search patterns correlate most closely, Facebook searches dominate. Higher unemployment translates to more Facebook searches, and lower unemployment means fewer Facebook searches. They are so closely tied to unemployment, they outnumber searches involving actual unemployment-related topics!

It may seem reasonable to suggest that more unemployed people spend more time surfing the internet, either to pass their time or to connect with people who might help them find a job, but it is still surprising that Facebook is by a long way, the most correlated search. There doesn’t seem to be any other logical explanation for this occurrence and Facebook has not, as yet, provided any hard data as to why this is happening. Our explanation? Don’t ask us - we’re too busy working!

MasterCard Profits Rise As Card Holders Spend, Spend, Spend!

There are nearly 2 billion MasterCards out in the world and card holders are spending. MasterCard reported net income of $879 million up 14% from the same period last year. Earnings per share were $7.27, beating the consensus estimate of $6.94 a share. Sales were up 16% to $2.2 billion as purchase and dollar volume rose 14% and 15% respectively. MasterCard holders completed 10 billion card transactions and spent more than $1 trillion this quarter. Credit card users spent $590 billion in 6.3 billion transactions. Debit card users spend $454 billion in 5.4 billion transactions. The transaction growth is due in part to the companies efforts to make it even easier to use your MasterCard. CEO Ajay Banga explains, “In the quarter, we partnered with technology companies and merchants to develop standards and solutions that ensure safer and more secure transactions and we launched services like Simplify Commerce, our developer-friendly solution which allows merchants to begin accepting mobile and e-Commerce payments, regardless of brand, in a matter of minutes. The quarter was characterised by accelerating volumes across the globe, a notable pickup in U.S. credit metrics and significant acceleration in processed transaction growth. American Express may famously tell their customers “Don’t Leave Home Without It”…quite clearly in Mastercard’s case, none of them do!

Fed Meeting to Boost or Burst the Dollar?

The U.S. dollar has reached a one-week high against many major currencies ahead of the Fed’s official decision regarding the economic stimulus as investors seem to be abandoning their bearish tendencies towards the currency.

Following the the 16-day government shutdown earlier this month that resulted in a decision to raise the nation’s debt ceiling and the anticipated decision that the Fed would therefore extend its quantitative easing programme into at least the first quarter of next year, investors eagerly sold their greenbacks pushing the currency’s value into a deep low.

Although the dollar weakened after every single Fed meeting this year, with the exception of June’s meetings, the market seemed more positive toward the dollar this week. With investors having already reacted to the anticipated continuation of the economic stimulus, no further surprises are expected from this 29-30 October Fed meeting, the result of which will be announced at 6 p.m. GMT today.

Only last Friday the dollar had plunged to a nine-month low with its index recording 78.998, but on Wednesday it shot up to 79.692, its highest point since 22nd October. Yesterday the currency closed at 79.648, recording a 0.1 percent rise from its previous position.

Some analysts, moreover, believe that the rise the dollar experienced the last few days has been driven by investors closing short positions they had opened earlier this month, rather than a real change of sentiment in the market.

Is The Price Of Silver Set To Double?

The current silver price is US$22 per ounce. This is a truly astonishing number for a few reasons. Back in 1980 an ounce of silver reached a high of $49.95. Despite all the money printing and financial chaos in the world in the past 33 years, silver has gone backwards. Unlike gold, silver has many industrial and medical applications. So investors are in direct competition with big industrial companies. In many cases there are no substitutes – if they don’t have silver they can’t produce. Industry needs it because it’s one of the best conductors of electricity, it’s the second best reflector of light behind rhodium (but at a fraction of the cost) and it’s very effective in killing germs. So demand is exploding in electronics, solar panels and numerous medical applications. Back in 1980 when silver was $49.95 total supply had risen 34% in the previous two years. Supply was growing quickly. By contrast, the global silver supply has actually fallen 2% in the past three years. JP Morgan, infamous among silver investors had virtually no silver in its warehouse in May 2011. But now, the bank has accumulated about 37.7 million ounces of silver which in today’s market is worth about $830m. Across the market as a whole, short positions stood at nearly 260 million ounces of silver in February of this year. Now, short positions have fallen to less than 20 million ounces. This is the smallest short position by commercial traders in more than a decade. For gold bullion prices to rise by 100%, gold would need to rise to $2,620 an ounce, however, it’s a price level we have yet to see. But the investible silver market is truly tiny because of all that industrial demand. In dollar terms, it’s only 4.5% of the size of the gold market. So for silver prices to rise 100%, they would only have to move to $44 an ounce—a price level we already saw in 2011. Isn’t that where we are heading?

Gold Lingers At Five-Week High

After the release of U.S. economic data backing the maintenance of the stimulus by the Federal Reserve, gold remained near its highest level in five weeks, before the central bank policy makers meet later today to discuss recovery.

The precious metal rose 0.6 percent to $1,360.76 an ounce, traded at $1,354.12 at 2:46 p.m. in Singapore. Prices climbed to $1,361.93 yesterday, the highest since 20th September. Holdings in the SPDR Gold Trust, the biggest gold-backed exchange-traded product, remained steady at 872.02 metric tons yesterday.

Gold gained in October following the 16-day U.S. government as lawmakers warred over the U.S. budget and debt ceiling, and which may have impeded growth in the nation’s economy.

Gold trading has been low as investors seem to be waiting for the Fed’s official decision regarding quantitative easing and the stimulus reduction plan.

After a 12-year gain, gold dropped 19 percent in 2013 on expectations that the Fed would reduce its $85 billion in monthly body buying as the economy strengthened. The unexpected decision of Fed policy makers to continue providing the economic stimulus at the same levels in their September meeting, has lured investors back to the safe-haven commodity

Yen Gains Against All Major Currencies

With retail sales growing much quicker than economists expected and a falling unemployment, rate the yen climbed against all 16 major currencies before the Central Bank of Japan later this week.

The International Monetary Fund’s mission chief for Japan, Jerry Schiff, stated in an interview in Tokyo that “the consensus is that the yes is somewhat undervalued. Right now we don’t think the BOJ needs to do anything different to what they are doing. They announced a quite enormous monetary accommodation, and although it may not be moving very fast, both inflation and inflation expectations are moving in the right direction.”

The yen rose 0.2 percent to 134.39 per euro at 1:49 p.m. in Tokyo since yesterday. It gained 0.1 percent to 97.57 to the dollar. Moreover, the Japanese currency is forecast to rise 0.7 percent per USD but to decline 1.1 percent against the euro this month.

Loonie Drops as Rates Seem Renegotiable

The Canadian dollar took its hardest hit since June when the Bank of Canada talked about the need for future increases in the interest-rates, an issue that dates to more than a year back, citing greater slack in the economy. The policy unites with the decisions of other central banks to continue rather than retract easy-money policies.

Governor Stephen Poloz kept the rate on overnight loans between commercial banks at 1 percent for the 25th consecutive meeting, as had been earlier forecast by economists, which caused the currency to slip against the majority of its 16 trading peers. Inflation levels are set to remain below 2 percent until the end of 2015, an extension of two quarters since last prediction in July, risking greater importance on further risks.

The CAD fell 0.9 percent to C$1.0382 against the USD at 5 p.m. in Toronto yesterday

They’re Forever Blowing (Asset) Bubbles.

The U.S property industry is booming again, investors large and small are rushing in to snap up properties that had the equity sucked out of them in the wake of the 2008 crash. Prices are being driven up all across the U.S, with many states that suffered massive foreclosures now registering double-digit price increases. In Las Vegas, one of the worst hit states when the last housing bubble burst, prices have gone up by 17.6%. Atlanta’s average home value rose by 16.5%, and in Phoenix properties surged by 23%. All this in the 12 months ending in February of 2013.

The worrying aspect of this otherwise positive data is the exquisite torsion between large and small investors that has been a recipe for disaster time and time again. For several years now hedge funds, foreign investors, and large real estate firms have been snapping up dirt cheap properties all across the U.S, driving prices up. The true nature of this property boom was recently testified to by a U.S Census Bureau report showing that despite rising prices home ownership in the United States has actually declined by 0.4%.

Inevitably the smaller investors are late to the banquet, and must perilously stretch themselves in order to be able to polish off the scraps at inflated prices. Many of these smaller investors are actually cashing-in their 401(k) pension plans or IRAs (individual retirement account) in order to make a last ditch effort to put everything into property. As more rush to invest in bricks and mortar they are paying market value, or even overpaying, rather than getting in cheap. Factor in taxes, fees and maintenance costs and you have an already vulnerable cross-section of the public without any kind of safety net should it all come crashing down again. A non-paying tenant or an unforeseen maintenance bill can be all that’s needed to put some of these amateur property speculators in the red. Many analysts are starting to get a nagging sense of deja vu from this latest boom period in U.S property. And then there’s the tiny matter of $85 billion per month from the Fed that surely can’t go on propping up the U.S economy indefinitely.

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