Analitics
AUD awaits retail sales data and the RBA
The RBA elected to cut the official cash by 25 bps in May, thereby dramatically decreasing the likelihood of a rate cut in June. Economic data since the RBA chose to ease monetary conditions hasn’t been significantly bad enough to suggest that the bank needs to follow-up with another cut on Tuesday, nor has it been good enough to suggest that May’s cut was a one-off for that matter. We are awaiting retail sales data out of Australia later today, but we don’t expect it to significantly influence the RBA’s decision (expected +0.3% m/m, prior -0.4%). Furthermore, a significant devaluation of the Australian dollar last month removed some of the onus on the reserve bank to cut rates, although the dollar is still fairly high. We therefore suspect the RBA will remain on hold for now as it waits to fully assess the impact that prior easing will have on the real economy.
Source: Forex.com
31.05.2013
May month-end signal largest since October 2011
Just wanted to quickly update our month-end model as it indicates the largest signal since October 2011 – Strong USD outflows are anticipated based on this analysis, with the largest directional moves likely in USDJPY and AUDUSD.
Source: Forex.com
30.05.2013
AUD and the RBA
The Australian dollar is a key variable in the RBA’s interest rate equation. The level of AUD has broad implications across the Australian economy and becomes even more significant in light of an anticipated peak in mining investment later this year. Accordingly, the recent slide in AUD, which gathered momentum today after the commodity currency broke through a key support zone around 0.9680 against the US dollar, has taken some pressure off the RBA to cut rates in the near-term (the bank’s next meeting is next week).
Source: Forex.com
29.05.2013
USDJPY and Japanese bond yields
USDJPY has managed to claw back recent losses today as it has followed the Nikkei (the Japanese stock market) higher and been given a boost by a better than expected reading of US consumer confidence, which rose in May to its highest level for 5 years.
Source: Forex.com
28.05.2013
Is the S&P 500 looking expensive?
The S&P 500 is in uncharted territory as a QE binge by the Fed sends investors searching for yield. Since the beginning of the year the index has climbed over 15%, sending it to its highest level ever. The run higher in US equities has been primarily fuelled by a search for yield and the notion that the US economy is on a path to recovery on the back of QE3. Whilst we don’t dispute either of these premises, we do raise an eye at the height at which US equities have been allowed to soar, especially given how expensive they’re looking by some metrics (eps, revenue).
Source: Forex.com
27.05.2013
It was all too much for the Nikkei
Up by the stairs, down by the elevator. Yesterday’s equity sell-off in Japan highlights the somewhat shaky foundations that this year’s equity rally has been built upon. Optimism is contagious, but pessimism is arguably more infectious.
Shortly after hitting a resistance zone around 16,000 the Nikkei 225 lost the most ground in one day since the tragic earthquake of 2011, plummeting over 7.0% in yesterday’s session. But there wasn’t one overriding cause of the sell-off. Instead, a toxic cocktail of negative sentiment, yen strength and multi-year highs poisoned the Nikkei. Yet, is the sell-off the surprise or the fact that it took so long?
Source: Forex.com
24.05.2013
Is this what the end of QE looks like?
There have been some violent moves across asset classes this morning after a perfect storm of central bank chatter, weak Chinese economic data and some large declines in Asian equities knock risk sentiment. European stocks are down 2% or more, and US stock market futures don’t look much better. The yen and CHF are higher in the FX space as risk aversion takes hold.
Source: Forex.com
23.05.2013
Gold/ Silver ratio – not a red flag for stock markets, yet …
When stock markets are at record highs it can be a stressful time as history tells us that bull runs always come to an end. In the past, a lead indicator of market sentiment has been the gold/ silver ratio. This is the gold price divided by the price of silver, when it is moving higher the gold price is outpacing gains in silver, and vice versa.
Since gold is considered a safe haven and silver is an industrial metal, a surge in the gold price relative to the silver price can be interpreted as a sign that market sentiment is turning and investors are getting nervous. Thus, when the gold/ silver ratio is elevated it has historically coincided with declining stock markets, and vice versa
Source: Forex.com
22.05.2013
The RBA is back on the side-line
The RBA released its minutes from this month’s monetary policy meeting, at which the bank elected to cut the official cash rate to a record low of 2.75%, citing subdued consumer prices and growth. The minutes are broadly in line with market expectations of a slightly dovish policy stance, thus the Australian dollar didn’t immediately react heavily to their release.
Source: Forex.com
21.05.2013
Reflection time for dollar traders
It’s been pretty slow-going today as economic data has been thin on the ground. Ranges in FX are fairly tight and stock markets are flat to fairly neutral. Currently US futures are pointing to a slightly lower open. But there are some important fundamental events this week that could impact the medium-term direction of markets.
Source: Forex.com
20.05.2013
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