What mattered last week:
- It was all about volatility again last week. After global equities rallied strongly on Monday following an agreement between the U.S. and China to declare a 90-day truce in the trade war, investor concerns turned to;
- The inversion of the U.S. yield curve. Specifically, the 2-year yield is higher now than the 5-year yield. An inversion in the yield curve has traditionally been one of the best indicators to forewarn of recession. However, we note the more reliable guide to this is the spread between the Feds Funds rate and the 10-year yield which remains positive.The arrest in Canada of Huawei Technologies Co’s Chief Financial Officer, Wanzhou Meng provided a reminder that the trade dispute is but one aspect of an increasingly complex relationship that also encompasses such issues as Taiwan, the South China Sea, technology theft, and 5G.
- Federal Reserve speakers Bostic and Kaplan both delivered dovish messages, suggesting that lower inflation could potentially allow for greater patience in relation to future rate hikes.
- As a result of the factors mentioned above, the S&P500 tested and rejected both the upper and lower extremities of its roughly 2820 – 2600, 8% range, before closing the week near to the lows, which sets up a critical week ahead.
- The lead up to the Brexit vote this coming week, saw the Government defeated on several votes in parliament. PM Theresa May’s plan looks destined to be rejected.
- OPEC agreed to cut production by 1.2m barrels a day which followed on from Canada’s announcement earlier in the week to also cut production. The bounce in the oil price was less than might have been expected as global growth concerns overshadowed.
- In Australia, Q3 GDP was much lower than expected at 0.3% q/q and this has sparked calls for interest rate cuts in 2019.
- The combination of the weak Australian Q3 GDP data and weak U.S. equities saw the AUDUSD close the week back near .7200c. While the ASX200 etched out a 0.25% gain for the week to close near 5681.
For the week ahead, the key events are:
Australia: Home loans (Monday), NAB business confidence, house price index, Westpac consumer confidence (Tuesday), consumer inflation expectations (Thursday).
New Zealand: Business PMI (Thursday).
China: Industrial production, retail sales, fixed asset investment, new yuan loans (Friday).
Japan: PPI (Tuesday), Tankan survey (Thursday), capacity utilisation, industrial production (Friday).
U.S.: JOLTS job opening, consumer inflation expectations (Monday), PPI(Tuesday), CPI (Wednesday), retails sales, industrial production, Markit manufacturing flash PMI (Friday).
There are no Federal Reserve speakers ahead of the December 19 FOMC meeting.
- CPI (Wednesday): The sharp drop in gasoline prices is expected to result in a flat m/m read on headline CPI. Core CPI is expected to rise by 0.2% for the month resulting in a 2.2% y/y rate.
- Retail Sales (Fri): The fall in gasoline prices is like to result in a modest 0.2% gain in headline retail sales, with retail sales ex-autos expected to also rise 0.2%.
Canada: Housing starts, building permits (Monday), new housing price index (Thursday).
Euro Area: German and EA ZEW sentiment index (Tuesday), EA industrial production (Wednesday) ECB interest rate meeting (Thursday), German and EA Markit flash PMI’s (Friday).
- ECB interest rate meeting (Thurs): The ECB is likely to confirm an end to quantitative easing this month and remind that interest rate hikes remain unlikely for some time.
- EA ‘flash’ PMIs (Fri): Are likely to confirm that Euro area momentum has slowed in line with weakening global demand. Somewhat surprisingly market expectations are for a small rise from last month’s number to 52.8.
UK: GDP and industrial production (Monday), employment and the UK parliament vote on Brexit (Tuesday), PPI and CPI (Wednesday), Bank of England interest rate meeting, consumer confidence (Friday).
- UK parliament vote on Brexit (Tue): On Tuesday the UK parliament votes on whether to accept the Withdrawal Agreement and Framework for the Future Relationship that the UK government has agreed with the EU. The prospects of the bill being approved appears remote which may then result in any number of outcomes including the possibility of revisions to the deal or the more extreme possibilities of a snap election, Theresa Mays ousting or even a second referendum.
About TECHFX TRADERS
The session will be run by Tony Sycamore founder of TECHFX TRADERS. Tony has over 20 years’ experience trading primarily at Goldman Sachs and he also worked in senior Institutional roles at Commonwealth Bank and BNP Paribas. His experience has allowed him to see and work with some of the biggest global traders.
Finalist – Best Bank FX Research & Strategy
Tony was the only Australian finalist nominated for Best Bank FX Research & Strategy at the 2016 Technical Analyst awards.
Finalists: Commonwealth Bank of Australia – Tony Sycamore, Director Institutional FX • Banque Pictet & Cie • Credit Suisse RBC Capital Markets • Royal Bank of Scotland • Scotia Bank
TECH-FX TRADING PTY LTD (ACN 617 797 645) is an Authorised Representative (001255203) of JB Alpha Ltd (ABN 76 131 376 415) which holds an Australian Financial Services Licence (AFSL no. 327075)
Trading foreign exchange, futures and CFDs on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange, futures or CFDs you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss in excess of your deposited funds and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange, futures and CFD trading, and seek advice from an independent financial advisor if you have any doubts. It is important to note that past performance is not a reliable indicator of future performance.
Any advice provided is general advice only. It is important to note that:
- The advice has been prepared without taking into account the client’s objectives, financial situation or needs.
- The client should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation or needs, before following the advice.
- If the advice relates to the acquisition or possible acquisition of a particular financial product, the client should obtain a copy of, and consider, the PDS for that product before making any decision.
From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.
Open a live account in minutes
Latest Analysis and Insights
- Daily Brexit update: Theatre of the absurd keeps sterling in strong focus December 12, 2018 2:34 AM
- Risk appetite Lite with sterling in focus December 11, 2018 11:53 PM
- Brexit Update: GBP/JPY faces further downside pressure December 11, 2018 8:40 PM
- Australian US Equities December 11, 2018 4:08 PM
- Daily FX & Stock Indices Technical Trend Bias/Key Levels (Tues 11 Dec) December 11, 2018 3:15 PM