Olivia

Europe Having seen a weak lead from Asia markets, European markets have seen another negative session, dragged lower by further weakness in the US, whose losses have been driven by the surprise decision by FedEx to bring forward their Q1 earnings numbers from next week. The company cited a warning over a significant business slowdown, missing on revenues and profits and pulling their guidance for the whole year, prompting investors to take fright that this could be the proverbial “canary in the coalmine” for a raft of downgrades, when US earnings gets underway at the beginning of October. These increasing concerns over a global recession, as well as rising US yields are prompting a flight into the US dollar and not much else, with the DAX set to post its lowest weekly close since November 2020. The FTSE100 has also come under pressure, although the rise in yields this week has helped the likes of Lloyds Banking Group and NatWest Group outperform, although that’s not been enough to stop the UK benchmark from closing at a one week low. Risk sentiment here wasn’t helped by UK retail sales falling off a cliff in August, declining by -1.6% sending the pound… Read More »Sterling slips to 37-year lows as FedEx warns on profits

In today's live stream, David said he was taught, “The white stuff leads.” Although there have been false starts he believes the physical market and backwardation make this different.

We are so far only in a technical recession, but the true recession is coming, or it has already begun. It should be positive for gold prices. After the real GDP declined in the first two quarters of this year, many commentators declared that the economy had fallen into a recession. Such calls are met with a fierce denial from the government’s officials. Both President Joe Biden and Treasury Secretary Janet Yellen insisted that the economy is not in a recession but in a “state of transition”. Recession or Transition? Who is right? Well, in a sense, both sides are right – and both are wrong. Why? Two consecutive quarters of negative economic growth constitute only the so-called technical recession. Which is the popular definition of recession used widely by the financial press and those analysts who don’t want to wait several months for the final verdict of the National Bureau of Economic Research (NBER), the official arbiter of recessions in the U.S. Also, not all people like the idea that recessions are decided by a small committee of Ph.D. economists. However, what’s the official NBER definition of recession? It is “the period between a peak of economic activity and… Read More »What’s a recession, anyway?

Equities have fallen again, thanks to a string of warnings about the global economy. Selling continues across Wall Street “There has been no end to the bearish moves of the past few days, with the final session in the red following a trio of warnings about the global economy. The IMF, the World Bank and FedEx have all given investors reason to worry, and investors have opted to continue their flight from equities. Given that the Fed is expected to renew its pledge of tighter policy next week, and inflation shows no sign of slowing, these warnings may actually be on the optimistic side, suggesting the actual outcome for global markets may be worse.” Pound bounces back above $1.14 “While it touched a fresh two-year low today, the pound is trying hard to finish the day above $1.14. If it does, it might be that we have seen an end to the selling for now. But as with equities, the outlook will struggle to get much brighter, even if the BoE opts for a 75 bps move next week.”

Tuesday's Inflation story wss an anchor pair event as DXY traded 213 pips then EUR/USD and GBP/USD matched DXY at 213, USD/CAD 221 and USD/JPY at 308 pips. NZD/USD traded an extraordinary 175 pips to AUD/USD at 145. Missing in action was cross pairs as EUR/AUD traded 140 pips, GBP/JPY 185, EUR/NZD 94, EUR/CAD 107, EUR/JPY 139 and 148 for GBP/AUD. Cross pairs traded barely above 1/2 DXY ranges as compared to anchor pairs EUR/USD, GBP/USD. GBP/AUD and EUR/JPY were Wednesday's range winners at 172 and 218 pips. Dow Jones The Dow dropped 1000 points. On a 31,000 price, 1000 points lacks classification to a move. The Dow must travel at least 5,000 points to consider meaningful significance. The Dow at 1000 points is a media story rather than a market event. Next week EUR/USD expected close on Friday at 0.9986 then ranges from 1.0110 to 0.9986 and 0.9986 to 0.9863. Next week's long target is 1.0110. Deeply oversold EUR/CHF at 0.9600's lies just below EUR/USD's price and holds as EUR/USD supports. Much higher EUR/USD must clear 1.0233 to target easily 1.0300's. DXY is expected to trade from 110.64 to 107.13. At 110.64 remains below the 110.78 highs from 40… Read More »Currency market: FX next week

Next week is packed with central bank meetings. The Fed is likely to match the European Central Bank in hiking rates by 75bp, while the Bank of England and Norges Bank are expected to make 50bp moves. US: 75bp is our favoured call, however there's a chance for the Fed to go even further All eyes will be on the Federal Reserve meeting next Wednesday. The market was favouring a 75bp hike ahead of the August CPI report, but the much higher-than-expected inflation print has seen the market price in a 20% chance that the Fed will go over and above that by opting for 100bp. A 75bp hike is still our favoured call, but we acknowledge the risk that with inflation proving to be stickier than we had suspected, the subsequent meetings in November and December could see more aggressive action from the Fed than we are currently pencilling in. While the geopolitical backdrop, the China slowdown story, the potential for energy rationing in Europe, the strong dollar and fragile-looking domestic equity and housing markets argue for a more moderate path of tightening in the coming months, if inflation momentum doesn’t slow the bank will hike by a further 75bp… Read More »Key events in developed markets next week

Bank of England rate meeting – 22/09 – put off by a week as a period of national mourning takes place due to the death of Queen Elizabeth II the UK central bank could follow in the footsteps of the ECB two weeks ago by raising interest rates by 75bps, although UK policymakers have been slightly more silent about the need to hike aggressively. Whether this is by accident or design only they know, but with the battle for the UK Prime Minister position putting the central bank right at the forefront of the affray, their competence has never been more scrutinised. It’s been no secret amongst a lot of people in financial markets that the Bank of England has been notably one-dimensional when it comes to dealing with the problems of the UK economy since 2008. The consistent groupthink, and the unwillingness to acknowledge its mistakes mean that it’s inevitable that questions are raised about its competence. These same questions are being directed at its peers overseas as well, and yet these same financial markets who have criticised the central bank approach of the last ten years are now freaking out that these mandates could be changed. The problem… Read More »The week ahead: Bank of England, Fed, BoJ rate decisions, UK mini-budget, Cineworld and Kingfisher results

The University of Michigan is expected to edge up, but all eyes are on inflation expectations.  Three days after the shocking CPI report, investors are closely watching every related figure. Any 0.1% deviation in long-term inflation expectations could trigger major dollar moves.  Early fireworks on Friday – that is what US Consumer Sentiment Index promises traders, and for several good reasons. It is hard to exaggerate the spotlight put on this release.  The University of Michigan's preliminary gauge for September is set to rise to 60, from 58.2 in the final read for August, but the main focus is on long-term inflation expectations, which stood at 2.9% in August.  Why is it so important? It is because Federal Reserve Chair Jerome Powell said so. Back in June, he dwelled upon the surprising increase in that month's measure to justify a last-minute shift in policy. The Fed hiked by 75 bps instead of the 50 bps initially telegraphed.  Will the bank opt for a jumbo 100 bps increase next week? At the time of writing, markets are pricing in a 30% chance of such a move happening – a relatively high chance that leaves room for volatility in both directions. A… Read More »US Consumer Sentiment Preview: Every 0.1% deviation in inflation gauge to trigger wild dollar moves

The Chinese culture says that one picture is worth a thousand words, and the exhibition below from the analysis of Goldman Sachs shows us all the drops in the U.S market, as well as their comebacks. Source: Goldman Sachs First of all, they divide the Bear Markets into Structural, Cyclical, and Event-driven declines. As you can see, the recent Structural ones were in 2000 – 2002 (dot.com crisis) and 2007-2009 (Lehman Brothers crisis). An Event-driven bear market took place in 2020 for only one and a half months. The way they label the corrections of the market is right, because in the first 2 examples, the fault came from the structural policy of the stock exchanges and the supporting money supply through the banking-loan system respectively, and the third example came from the event of the virus COVID-19, which in turn spread fear for the humanity. That said, let’s see if we are supporting the argument they depicted for the nowadays correction as a Cyclical one, with only 8 months duration till now. The most recent Cyclical decline was in 1990 (only 3 months), where after the month of June and the unemployment rate at 5,2%, and the all-time highs… Read More »Why global markets haven’t seen their troughs yet?

EUR/USD – 0.9976 Despite extending erratic rise from last Tuesday's 20-year bottom at 0.9865 to a 3-week high of 1.0197 on Monday, Tuesday's selloff on hot US CPI to 0.9956 (AUS) yesterday suggests correction over, as 1.0023 has capped recovery, weakness to 0.9930/32 is envisaged but 0.9865 should hold. On the upside, only a daily close above 1.0033/43 would risk stronger gain to 1.0071/76. Data to be released on Thursday New Zealand GDP, Japan exports, imports, trade balance, tertiary industry activities, Australia employment change, unemployment rate. Germany wholesale price index, France CPI, EU trade balance, labor costs. Canada housing starts, U.S. NY Fed manufacturing, import prices, export prices, initial jobless claims, continuing jobless claims, Philly Fed manufacturing index, retail sales, industrial production, capacity utilization, manufacturing output and business inventories.