reports
- Greg Gibbs
Big issues holding down AUD/NZD have flipped
AUD/NZD is still languishing around record lows. Pessimism over the AUD increased as the Australian economy stalled in the second half of last year, the Royal Commission into the financial sector unsettled confidence, the housing market downturn accelerated, political uncertainty peaked into the national election in May, and the RBA scurried to cut rates twice at back-to-back monthly meetings in June and July. Now the regulatory, political and economic trends are moving in favour of the AUD an...
- Greg Gibbs
Which currency do you want to hold – gold, crypto or fiat?
It appears central banks have pivoted towards delivering more policy easing to bolster inflation expectations that have plumbed new lows this year. The Fed has the greatest scope to ease policy, and the prospect of deep rate cuts has undermined the USD. However, the Fed is struggling to gain the initiative and appears to be reacting to market pressure and outside criticism rather than setting its own agenda. Gold has broken the range highs over the last six years and may have further to run as...
- Greg Gibbs
Will Powell come to the party?
With a small break in the onslaught of bad news on trade barriers and talk of anti-trust investigations, US equities rebound from their recent sharp falls. US yields are also off the deck, but the market is sending out invitations for a rate cut party, and waiting for the Fed to turn-up. Fed Chair gave just enough hint that he might turn up, but he is still reluctant to acknowledge that risks to growth have increased. Lower US yields and hopes of rate cuts have shifted the tone from a strong d...
- Greg Gibbs
Bond markets displaying fear, equities clinging to the notion of a Fed...
The US equity market slid into the close on Tuesday to sit on key supports. The market is beginning to acknowledge that trade policy actions to date are significant impediments to US, China and global growth and earnings. The bond market has proven more responsive to risks to growth so far this year. Bond yields have fallen to a low since 2017, the US yield curve remains inverted this year, inflation expectations have fallen to new lows in Europe and Australia, and have fallen in recent weeks...
- Greg Gibbs
The global recovery narrative crumbles
The US equity market was running with an optimistic assessment that there is a Trump and Fed put, that a trade deal and Chinese policy stimulus would generate a recovery in the global economy and the US economy was largely immune to a slowdown in activity abroad. However, the tariffs have been increased, trade talks have stalled, and the US has rolled out bans on Chinese tech companies. The evidence grows that there is a structural rift in US-China trade relations. The rebound in Chinese econom...
- Greg Gibbs
High stakes Huawei gamble a weight on US and global equities
The Huawei Entity Listing appears to be a high stakes gamble by the US administration to counter the rise in Chinese economic power in an industry that is critical to the global economy. It is evidence that the broader economic and trade dispute will be hard to resolve, and makes it harder for China and the US to resume trade negotiations. This suggests that punitive tariffs may remain in place for much longer than expected and indeed may be expanded further. Global trade and manufacturing ac...
- Greg Gibbs
Australian labour and wages indicators point lower ahead of key data n...
The RBA essentially made a case to cut rates on Tuesday this week. However, it held back, perhaps influenced by the timing of the election (18 May), to give the labour market data a chance to show that it is on a tightening trend. This places much importance on the labour market data for April (16 May) and wages data for Q1 (15 May) due next week in Australia. One month's data may not be enough to clear the way to cut, especially after solid employment growth in Q1, but the RBA may not need a...
- Greg Gibbs
RBA and RBNZ in the hot seat, Trump’s tirade threatens global risk a...
US and global asset markets appear to have built in a completed US-China trade deal relatively soon. Equities have rebounded this year, despite sluggish global trade and industrial activity since last year. If a trade deal proves elusive, or indeed if the US raises tariffs, it can significantly undermine global asset markets. Trump’s tweets may be tactical, but his administration has demonstrated a willingness to use tariffs to reset trade relations and for broader domestic and geopolitical ...
- Greg Gibbs
A reprieve for the EUR, but not a game changer
Stronger Eurozone Q1 GDP and German CPI suggest that the ECB need not rush to ease policy further. However, these data points appear to be largely payback for weak previous outcomes. More current business surveys suggest that there is no clear path back to above-trend growth. The EUR downtrend may persist if the market continues to seek higher-yielding assets in an environment of stable or falling in global yields and credit spreads. The most-watched measures of US inflation have fallen, bu...
- Greg Gibbs
Dollar tests highs as global risk aversion remains elevated
The USD is testing the top of its range for over a year against the DXY major currency index, and its highs for the year-to-date against the broader Bloomberg dollar index against ten leading currencies. The rebound in the USD is surprising in light of the stronger than expected Chinese economic data. However, other economic reports suggest that global manufacturing and export growth remains weak; including flash April PMIs and export data in Korea and Singapore. Strength in the dollar reflec...
- Greg Gibbs
Bond yields rope-a-dope and fight back
The market absorbed more negative news on the global economy last week, including the IMF forecast downgrade, pessimistic ECB, trade threats by the US towards Mexico and Europe. However, by end week, bond yields, risk assets and the EUR were stronger, suggesting the market has built-in a quite negative scenario and may respond more to positive news in coming weeks. Global bond yields reaffirmed a recent rising trend from a low in late-March. Equities and bond yields may have ended an extended ...
- Greg Gibbs
RBA’s Debelle strikes optimistic tone; remains lazer focused on the ...
We had warned to watch out for dovish noises from the RBA this week after it changed its monetary policy meeting statement earlier in the month to say they are monitoring developments, suggesting they may be willing to consider a rate cut in coming months if downside risks to growth materialize. Watch out for dovish noises from the Fed and RBA; 10 April - AmpGFXcapital.com However, the speech on the “State of the Economy†on Wednesday by Deputy Governor Guy Debelle sounded relatively optim...
- Greg Gibbs
Yield grab supports the USD, Japanification fear weakens EUR
FX markets are meandering with no clear trends, and it seems investors have little market conviction. This appears to be resulting in choppy price action influenced mainly by short term technicals rather than macroeconomic developments. We have noted that in recent years the FX market has appeared to be less pre-emptive, and often responds surprisingly sharply after the event. As such we remain wary of a reversal of recent USD strength if, as it seems increasingly likely, a negotiated trade a...
- Greg Gibbs
May opens a path to unlock the Brexit Jam
PM May calls for a unified government approach to unlock the Brexit jam. Failing a unified plan, she has offered parliament a meaningful vote on a number of plans in a series of votes ahead of the EU summit on 10 April next week. This appears to offer a way to find a timely agreement that would allow Brexit to take place on 22 May; a result that should support the GBP.
- Greg Gibbs
RBA hints at an easing bias
The final ‘policy guidance’ paragraph added that the RBA is now “monitoring developments” suggesting that it is less sure that its current policy setting will remain appropriate. The RBA is typically relatively cautious in tipping its hand in the policy statement, and while subtle compared to the RBNZ statement last week, you might conclude that the change in this final RBA paragraph amounts to a shift from a neutral policy stance to an easing bias. The final paragraph suggests that the RBA is...
- Greg Gibbs
Alternative Brexit vote on Monday may lift GBP
The defeat of May’s deal on Friday was narrower but still emphatic, rendering it almost dead. We see a higher probability, perhaps even a high probability, of a majority of MPs now supporting a customs union Brexit in the indicative votes on Monday. The bigger the vote, especially a majority, for a customs union will make it harder for Brexiteers in the Tory Party taking control and run the clock down to a no deal Brexit.
- Greg Gibbs
The dollar IS the story; Gold confounds, Brexit rabbit hole; EUR punis...
The dollar IS the story EUR punished for negative yields Chasing Brexit down a rabbit hole Gold confounds Bitcoin at an interesting juncture The fact that the dollar has strengthened despite the dovish turn at the Fed this year and the significant fall in US rates and bond yields has confounded many analysts.
- Greg Gibbs
RBNZ pressures the RBA to adopt easing bias
New Zealand rates plunged and the NZD dropped relatively sharply after the RBNZ said the next move in rates was more likely to be a cut. The RBNZ appeared to be significantly influenced by the policy easing abroad and upward pressure on the NZD. The RBA shifted from a mild tightening bias to a neutral bias in February. Since then it should be much less sure that current policy settings will return inflation to its target. We expect them also to acknowledge that the balance of risks to their ...
- Greg Gibbs
Gold May Rise on Lower Real Ylds; Canada Leads Fall in Real Ylds; Aust...
The broad decline in global bond yields and curve flattening suggest that the market has become more concerned about weak global economic growth. The fall in yields is at odds with the rise in equity and commodity prices this year, but the later may have lost upward momentum. Safe haven currencies, gold and JPY, have strengthened this week and are likely to perform well if yields remain low. US real yields have fallen more than nominal yields this year, with a partial recovery in inflation ...
- Greg Gibbs
Labour data may snap RBA policy tension
Lower US rates and yields appear to be fuelling broad weakness in the USD and gains in EM assets over the last two weeks. Global risk appetite is on an improving trend, suggesting hopes are high that easier central bank policies, in the US, China and globally, will stabilise global growth. Gold continues to pay more attention to lower bond yields, strengthening despite less demand for safe havens. The AUD has firmed in line with stronger global risk appetite, despite increasing expectations t...
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