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Commentary & Analysis
GBP/JPY the risk trade?
The chart below shows cross-rate for the British pound versus the Japanese yen (GBP/JPY). Short this pair is our favorite trade should we finally get some risk (aka risk-off) flowing into this market (global stock sell-off).
And in the chart below you can see how GBP/JPY has moved relative to S&P 500 stock and Nikkei 225 stock index. The yen plays a safe-haven role when risk rises. So, if risk flows into the market we would expect the yen to act relatively strong compared to the rest of the currency pack. And if risk rises, the UK economy looks vulnerable. And increasing concern about the UK economy, in this still low inflation world would suggest traders might further push out any BOE rate hike expectations; likely weakening the pound.
The Week Ahead: Is it time to buy the U.S. dollar?Share on Facebook Tweet on Twitter
Posted by Hussein Sayed - Chief Market Strategist (Gulf & MENA)
on Monday, 31 July 2017 06:41
Six months ago it was hard to believe that the Greenback will be plummeting against all of its major peers. Back then the Fed was the only central bank tightening monetary policy, economic data was very supportive and most importantly Trump’s expected policies of cutting taxes as well as spending on infrastructure were meant to push the dollar higher. The USD index peaked on 3rd Jan and since then it was moving in a down trend with declines exceeding 10%.
President Trump blamed himself for the dollar strength. He stated that it is the confidence in him causing the dollar to surge. Six months into his presidency has already passed without any significant legislative achievement and not even the ‘skinny repeal’ of Obamacare. Investors are apparently growing more concerned that his administration will not be able to agree on the rest of his agenda which is a clear sign that markets have lost the claimed confidence.
Although the U.S. GDP growth more than doubled in Q2 compared to Q1, the 2.6% expansion could not support the dollar as it came slightly short of expectations. The Federal reserve also acknowledged that the balance sheet normalization would begin relatively soon, and one more rate hike still on the table this year. Still the USD continued to slide as investors remained skeptical of another rate hike in 2017 with CME’s Fedwatch indicating only a 46.8% chance of a rate hike in December.
Despite my belief that the U.S. dollar will remain weak for the rest of the year, all metric shows that the USD is massively oversold and will likely receive a little bounce from current levels. Friday’s nonfarm payrolls will be crucial for the USD and if data did not disappoint we are likely to see a bounce. However, the headline figure will not be as important as wage growth. Wage growth has been a major factor dragging inflation levels recently and accordingly a print of 0.3% or higher is required for the dollar to come back. Traders will likely position their trades before the NFP release. Thus it is important to monitor ISM manufacturing and non-manufacturing along with the ADP release.
It is also an important week for Sterling with the Bank of England meeting on Thursday. After three MPC members voted for an immediate rate hike in June, followed by Hawkish statements from Carney and Haldane, markets started pricing in a rate hike in August. However, data was not supportive enough and inflation pulled further away from the danger zone of 3% which will most likely keep the BoE on hold for now. The base scenario for the meeting is to keep rates and asset purchase unchanged but the message from Carney and the tone of the quarterly inflation report will play a major role in GBP’s next move. If more than two members voted in favor of a rate hike and Carney continued to deliver hawkish messages, we might see the pound rallying towards 1.33.
Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.
Is There A New Flight To Safety?Share on Facebook Tweet on Twitter
Posted by Chris Vermeulen - The Gold & Oil Guy
on Thursday, 27 July 2017 07:07
The dollar has been taken beating on ‘false promises’ of any major fiscal reform from the Trump administration.
On July 18th, 2017, President Trump lacked the support of the U.S. Senate to pass any new measures on healthcare bill, in the U.S. At least, three Republicans along with the Democrat lawmakers have expressed opposition for any changes to the current “Obamacare”.
Donald Trump is winning the currency cold war: PimcoShare on Facebook Tweet on Twitter
Posted by Robert Zurrer
on Wednesday, 26 July 2017 12:06
‘Trade bullying has killed the dollar bull’: Joachim Fels
Donald Trump can’t point to much in the way of legislative victories over his first six months in office, but he might have something to crow about when it comes to a weaker U.S. dollar.
“Much of the world has been waging a cold currency war since the autumn of 2016, and so far the winner is Donald Trump,” wrote Joachim Fels, global economic adviser for asset manager Pimco, in a Wednesday blog post.
Trump regularly charged during the presidential campaign that other countries were taking advantage of the U.S. by manipulating their currencies, leaving U.S. exporters to suffer from an overvalued dollar. The Trump administration hasn’t followed through on a campaign pledge to declare China a currency manipulator, but has continued to at least talk tough on trade-related issues.
Daily Trading Volume In Bitcoin Surpasses GLDShare on Facebook Tweet on Twitter
Posted by ZeroHedge
on Tuesday, 25 July 2017 07:42
Several weeks after Goldman's chief technician started covering bitcoin, overnight Bank of America has released what some may call an "initiating coverage" report on bitcoin which notes that while the cryptocurrency remains very volatile and risky, bitcoin has experienced a spectacular surge in liquidity in the last six months. However, BofA remains stumped when it comes to making any official forecasts BofA's commodity strategist Francisco Blanch writes that bitcoin is uncorrelated to any financial asset, "so there is no way to explain let alone predict returns."
While we will present some of the more notable findings from the report shortly, one observation caught our attention, namely that in at least one regard, bitcoin has already surpassed gold: the total daily trading bolume for bitcoin has now surpassed that of the biggest gold ETF, the GLD.
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