Commodities still the main driver of the Australian dollar

The Australian dollar has rallied in the last 2 weeks from a low of US75c to around US76.60c against the greenback, defying analysts’ predictions that the currency would tumble if the US Federal Reserve stuck to their plan to hike rates further next year and if new tax legislation in the US was passed.

If the news is correct, the Fed is expected to lift interest rates next year a minimum of 3 times with a fourth hike also a distinct possibility which will put the US dollar interest rate and yield higher than the Australian dollar for the first time in almost 2 decades which you would think would generate huge interest in the US dollar at the expense of the Aussie

Also, A new tax legislation that was introduced by US President Donald Trump which envisions cutting the corporate tax rate to 20 percent among other things is sure to be signed into law this week by the US president after his own Republican party passed the tax bill through both the Senate and the house of representatives.

It is seen as the biggest tax change in a generation and if Republicans are to be believed, will put a rocket under the US economy as companies bring back their profits to the US which will generate significant demand for the US dollar.

So why is the Australian dollar remaining so resilient in the face of such pressure? Surely higher rates in the US, as well as a soaring demand for the greenback on the back of corporate tax cuts, should be negative for the Australian dollar?

Tax legislation and interest rates aside, if we look back over the last decade or so the main driver of the Australian dollar has been commodity prices such as copper, and Iron ore, Australia’s biggest export which has rallied over 25 percent in the last 2 months and further gains are expected.

So if you are listening out there, it may be a good strategy to keep an eye on commodity prices and although some external factors may influence the Aussie dollar the Iron ore price is going to be the one to watch out for.

This article was written by FIBO Group analyst Andrew Masters.

Australian Dollar may hit US90c

One of the reasons the Australian dollar may have strengthened is because the Fed gave no surprises, and kept to their earlier plan to lift rates 3 more times next year. The question is still up in the air whether 3 rate rises is possible as it was shown anything could happen, and after Tuesday’s upset election results where the democratic candidate Doug Jones triumphed over Republican candidate Roy Moore which threatens to derail US President Donald Trump’s tax plans.

If Trump’s tax policy does indeed fall by the wayside the US dollar is expected to take a huge hit as most of its recent gains are connected with the smooth passage of tax reform.

So with a maximum of 3 hikes next year from the Fed (or less as many are predicting) the main driver of the Australian dollar now will be the local economy and more importantly economic data.

Job figures released earlier today from Australia came in well above expectations which caps off a stellar year for the jobs market while consumer inflation figures which were also released came in at 3.7 percent which is well within the Reserve Bank of Australia’s target to begin hiking rates.

If the above figures are anything to go by the RBA will need to join other countries such as the US, Canada and the UK who are currently raising rates or on the verge of doing so which according to some is going to see the Aussie dollar rally next year.

“Looking into 2018, we see the Australia dollar climbing, as we expect it to get support from a lift in global growth, which is expected to support commodity prices, and we expect the RBA to lift the cash rate in 2018,” noted HSBC chief economist Australia and New Zealand Paul Bloxham.

Mr boxom is one of the more bullish analysts on the Australian dollar and predicts the Aussie dollar will jump 20 percent from current levels as the RBA begin to lift rates next year.

“We expect the Australian dollar to head towards 90 US cents,” Mr. Bloxham added.

This article was written by FIBO Group analyst Andrew Masters.

Euro to Benefit on Expected Fed Moves

After slumping recently, the Euro has made a remarkable recovery last week against its US counterpart on the back of strong data from the Eurozone and worries over the number of rate hikes to be delivered from the US Federal Reserve over the coming year.

Markit PMI numbers released on Thursday capped off a wonderful week for the Eurozone coming in at 57.5, well above analysts’ expectations with any number over 50 showing the sector in growth mode. The EUR/USD finished the week at 1.1932.

“We thought we had reached a peak a few months ago, so this is a surprise. This is a very broad-based looking upturn,” said Chris Williamson, a chief business economist at IHS Markit.

An even bigger boost for the Euro against the US dollar this week was the latest Minutes meeting from the US Federal Reserve, where many Fed board members raised concerns on the number of rate hikes that need to be delivered over the next 13 months.

The reason for the concern is persistently low inflation, which has sat under the Feds target rate for quite some time and makes it difficult to lift rates to high.

Although the market has priced in a 90 percent chance the Fed will lift rates next month, some say there will only be one more hike next year which is well down from the 3 predicted just a week ago.

The US dollar has greatly benefited against the Euro and other currencies on the back of expected rate hikes but now that the number has been revised down the greenback is likely to be sold off and the Euro is set to benefit.

This article was written by FIBO Group analyst Andrew Masters.

Pound May See Further Losses

The British pound has steadied in today’s trading session after last week’s plunge following the latest rate decision from the Bank of England and the question on everybody’s mind is where to now for the British currency?

Last week, Markit services PMI figures from the UK which hit the market at 55.3 against analysts’ expectations for a figure of 53.3 seems to have stopped the pound from sliding further. Any number above 50 shows the sector in growth mode.

The BOE rose interest rates by 0.25 basis points to 0.50 percent which was widely predicted by the market but the following statement caught investors off guard as it was one of the most dovish forecasts on record.

BOE board members noted that any further rate hikes would be “gradual and to a limited extent” which left traders fleeing the pound as they expected something different.

Another rate hike was expected in February but that seems all but gone and now the assumption is the next hike at best will come towards the end of next year.

Some analysts are even predicting that the BOE will not have to lift rates any further and when investors start to buy into this rumor the pound may see further losses.

“The sharp deterioration in the Pound has been a classic case of ‘buy the rumor, sell the fact’, coming just a week after we saw a similar thing for the ECB meeting,” said Joshua Mahony at IG in London.

“Despite the fact that 7 of the 9 MPC members decided to raise rates, there is a good chance that this is essential ‘one and done’,” he added.

The British pound is trading at 1.3136, down 0.27% in a bearish momentum.

This article was written by FIBO Group analyst Andrew Masters.

Australian Dollar Needs RBA’s Help

The Australian dollar finished the previous week off strongly against its US counterpart sitting at a 2 year high US8055c, which is making the RBA sit up and take notice, and if the currency goes much higher they may have no choice but to act.

In their latest interest rate decision on Tuesday, the RBA kept rates on hold at 1.5 percent which had been widely anticipated by the market so all ears were on the following statement from RBA governor Philip Lowe.

“The recent data have been consistent with the bank’s expectation that growth in the Australian economy will gradually pick up over the coming year,” Mr Lowe noted in his following monetary speech.

It seems as if the central bank governor is deluding himself because if we look at the statistics, inflation in Australia is currently running at 1.8 percent which is below the central bank’s target rate and a mile away from the upper level of the target inflation level of 3 percent.

At such levels, the Aussie dollar is beginning to have a detrimental effect on the export industry with further damage likely should the currency push any higher.

“Housing prices have been rising briskly in some markets, although there are signs that conditions are easing, especially in Sydney,” Mr Lowe also noted.

At least there was a bit of honesty here, the housing market in Australia is definitely cooling off which is good for the RBA because instead of lifting interest rates, they may, in fact, be able to cut them since the rise of the property market is not such a concern now.

With the Aussie dollar at such a high level supported by better than average interest rates in Australia compared to the rest of the world, as well as surging commodity prices the RBA needs to act.

Whichever way you look at it the only way the RBA is going to stop the rise of the Australian dollar is by cutting interest rates, which just may help push inflation into their target range and help bring the Australia dollar back down to a comfortable level.

This article was written by FIBO Group analyst Andrew Masters.

Is this a Fool’s Gold Rally?

It seems now that everybody is getting in on the gold rush as the price of the precious metal powers ahead and now sits comfortably at $1,343.

So the question is now, has gone run too far too quickly? Are we overestimating the situation on the Korean peninsula and is there really a military conflict in the making?

Gold is up more than $100 in the last 6 weeks as tensions between the US and North Korea reach boiling point over the latter’s actions by conducting missile and nuclear tests, and even going as far as the threaten American territory by striking the US territory of Guam.

For the last 5 years, we have seen the same situation with North Korea threating to nuke South Korea and the US only to eventually come to the negotiating table to settle their differences by peaceful means,

The only difference this time is that they have pushed things a little further which many believe is just a way to get a better negotiating position when the inevitable happens and they engage in talks with their arch enemies.

So where is the danger for gold in all of this? Well firstly, the market has priced in further tensions between North Korea and the international community and when North Korea finally comes to their senses and understands that any war with the US will wipe them off the map and we know Kim Jong Un is crazy but not that crazy.

So the danger for gold is a sharp reversal which could come at any time as the threat subsides and there could be many investors with long positions in gold who are left holding the bag with substantial losses.

So the wise move may be to take some profits now or at the very least, have a good stop loss in place and be ready for when the change of trend comes.

This article was prepared by FIBO Group analyst Andrew Masters.

Gold ready to charge on Geopolitical Tensions

The gold price received a huge boost in the last few days on the back of a terrorist attack in Spain as well as fears that US President Donald trump will be unable to push through any of his planned economic policies.

A terrorist attack in Barcelona earlier today claimed the lives of 13 people and injured one hundred more saw investors piling into gold as a safe haven asset.

Two members of Donald Trump’s business advisory council quit this week over comments the US president made after the protests in Virginia, which left one person dead.

It forced Trump to shut down the project altogether, which caused alarm amongst Republican senators with some of them now refusing to back any future policies. This is bad news for Trump as he now lacks the numbers to push through any tax reforms or increased spending on infrustructure.

“This week’s events may prove to be a defining moment for President Trump, as events in Charlottesville and what seems to be a widening division between the White House and the U.S. business community puts a question mark over the President’s future,” Neil MacKinnon, an economist at VTB Capital in London, said in a report on Friday.

With the threat of a nuclear strike from North Korea, Trumps failed policies and the threat of further terrorist attacks, some are predicting that gold could hit its highest level since 2011 which is around $1,900

“It is the combination of all these factors that is supportive of safe-haven buying of gold .There is always the possibility of a repeat of the inflows of speculative money that drove prices up $500 in just nine months in 2011,”said George Milling-Stanley, head of gold investment strategy at State Street Global Advisors.

“When that happens, it would be possible to see prices approach the highs of 2011, and perhaps even surpass them.” He added.

This article was prepared by FIBO Group analyst Andrew Masters.

Iranian Elections to Impact Oil Prices, OPEC Meeting in Focus

The oil price has jumped higher during the previous week and this should be the start of things to come in the following days, as the market absorb Hassan Rouhani presidential elections victory in Iran.

Oil has made a strong recovery since Saudi Arabia and Russia struck a deal to extend production cuts well into next year, giving a sense of optimism to the markets that the supply glut may finally be coming to an end.

Some say that the deal will be tough to organize as countries such as Libya and Nigeria are ramping up production and might not agree to any new deal.

More rigs are also coming online in the US, which will add further pressure to the price.

“They’re going to struggle,” said Michael Barry, director of research at consultants FGE in London.

“This deal has been remarkable in its implementation. As time goes on, discipline is likely to erode. Almost every country wants their production to go up.” He added.
The main focus this week is the Presidential elections results in Iran and the upcoming OPEC meeting on Thursday.

With the winning of Rouhani, it seems the the status quo will remain unchanged as he was the one who pulled the recent deals concerning oil supply and the 2015 nuclear deal.

Rouhani is in a strong position after he has reelected on May 19, and can achieve increasing Iranian production with US sanction in the shadow.

“We reiterate our call that Iran remains one of the most underappreciated political risks in the oil market. Moreover, we contend that the real risk is not of additional Iranian barrels coming online, but rather of a drop-off due to geopolitical developments,” noted Helima Croft, global head of commodity strategy at RBC Capital Markets.

The review was prepared by FIBO Group analyst Andrew Masters.

Make or Break for the Euro

The Euro closed higher last week against the major currencies ahead of one of the biggest political events of the year and the question is what now for the European currency?

Never has there been such controversy surrounding a French presidential election and with an array of candidates with such different policies, there may be some great opportunities to be had in the Euro and indeed all of the major currencies.

The latest opinion polls predict a close race with 4 candidates in close contention and it’s possible that any one of them could come out a winner on the day. Independent candidate Emmanuel Macron currently leads the pack with around 25 percent of the vote followed by Eurosceptic and, far-right National Front candidate Marine Le Pen with 21.5 percent. The other 2, conservative Francois Fillon and the left-wing Jean-Luc Melenchon are trailing with about 19 percent a piece.

As we get closer to polling day the Euro is likely to experience extreme volatility as more polls are released and the numbers change but here are some of our predictions depending on who goes through to the 2nd round on May seventh as there certainly won’t be a clear winner in the first round,

If Macron and Fillon both make it through on Sunday, the Euro should remain supported as both of these candidates are basically Pro European, and the threat of France ditching the Euro or actually leaving the European union would be gone.

The worst-case scenario for the Euro bulls would be if Le Pen and Melenchon make it through to the second round and most analysts predict the Euro would tumble with some saying by as much as 10 percent like the British pound did after the UK voted to leave the EU (Brexit)

If any other combination of candidates comes through on the day then it’s all bets off and the Euro could go in either direction.

All in all, it is going to be an exciting days in the run up to the election with the first of the results coming in during the Asian trading session and that is when we expect the real volatility and fun to begin.

The review was prepared by FIBO Group analyst Andrew Masters.

Gold to Remain Well Supported

The gold price is treading water today after rising sharply in the previous trading session, on the back of rising tensions between the US and Russia over the fate of Syrian president Bashar Al Assad after last week’s chemical weapons attack.

At 13.34am, (GMT) gold was trading at $1,277 slightly up from $1,274 in yesterday’s trading session.

US secretary of state Rex Tillerson is currently in Moscow trying to broker a deal that would see Russia drop their support for Assad in the civil war, which has claimed thousands of lives and displaced many more.

If no deal is reached, the gold price is likely to continue to climb as the possibility emerges of further military action by the US against Syria, which many believe will destabilize the whole region and lead to full-scale war.

On another front, the US is also piling pressure on China at the moment to reign in North Korea and their nuclear weapons program, with US president Donald Trump threatening to apply trade barriers if China can’t bring their staunch ally under control.

To show that he means business, President Trump ordered the USS Carl Vinson aircraft carrier and its battle group to sit in waters off the Korean Peninsula as a deterrent to North Korea’s nuclear ambitions

“A degree of uncertainty has found its way into previously seemingly bulletproof financial markets,” wrote analysts at ANZ.

“There is clearly some nervousness out there, with tensions around North Korea ratcheting higher and adding to an already heightened geopolitical environment. Global cyclical assets have not yet responded, but that can’t last.” They added.

Gold is likely to remained supported over the next 2 weeks in the run up to the French presidential election with a real possibility that Euro sceptic contender Marine Le Pen may pull of an upset, which will only lead to more tensions in the Eurozone and leave investors flocking to safe haven assets such as gold,

“The presidential election in France is surely the most prominent event for spring and a potential victory for Marine Le Pen, and the Front National, would be perceived as a key geopolitical risk for the Eurozone as a whole,” said Monica Defend, head of global asset allocation research at Pioneer Investments.

The review was prepared by FIBO Group analyst Andrew Masters.

Pound to jump significantly after article 50

The British pound has fallen for the first time in 3 days today after a round of local data missed expectations, but some predict that this is just a temporary bump in the road and the currency is still drastically undervalued.

The British currency was trading at $1,2448 against its US counterpart, down from $1,2587 at close of trading on Monday.

Data released earlier yesterday showed the Markit’s factory Purchasing Managers Index fell to from 54.5 to 54.2 last month, well below analysts’ expectations for a number of 55 and marks the 3rd straight month of declines.

The figures although disappointing, are not that worrying, as they have remained above 50 in recent times which shows the sector is still in expansion mode and business confidence remains high.

“The slight fall in the UK manufacturing PMI in March suggests that the sector saw a modest slowdown in the first quarter. But the bigger picture is that the sector is still performing well by recent standards,” said Paul Hollingsworth at Capital Economics.

Martin Beck, lead economist at Oxford Economics believes now, with article 50 out of the way, the EU and the UK will make a deal which is promising for both parties which will be the catalyst for the British pound to trade significantly higher as the year unfolds,

“We see risks of an overshoot to our forecast in the intervening period, there is more than a reasonable chance that pragmatism will prevail and cliff-edges will be avoided given the potential costs to both sides if no agreement is reached.” Mr Beck said.

The review was prepared by FIBO Group analyst Andrew Masters.

Fed Lifts Rates, US Dollar Weakens

The US Federal Reserve, in their latest board meeting last week raised interest rates for the third time since the global financial crisis bringing the figure to 1.00 percent and in what should have been a boom for the US dollar turned out to be a bust and the question is why?

The dollar had gained significantly against all of the major currencies in the lead up to before the interest rate decision as traders positioned themselves to take advantage of higher rates in the US as well as a higher yielding currency.

The USA is the only economy in the world at the moment in a position to lift interest rates, whereas countries such as Australia will probably need to cut rates to kick start the economy.

Although there was a tightening of monetary policy, what failed to eventuate was a hawkish speech from the Fed President Janet Yellen, which left investors guessing, how many more rate hikes will there be this year?

“The simple message is, the economy is doing well, the unemployment rate has moved way down and many more people are feeling more optimistic about their labor prospects.” Federal Reserve Chair Janet Yellen noted at a news conference following the interest rate decision.

Before the rate hike decision, the market had prices in 3 or maybe 4 rate hikes this year but were left feeling unsure after Janet Yellen’s speech where she noted that although she expected further rate rises this year (maybe 2), the Fed would monitor economic data which and will play heavily in their decisions.

“In the official statement and at chair Janet Yellen’s press conference the Fed stressed continuity with its previous stance, and maintained guidance for two more hikes this year,” noted CMC Markets chief market strategist Michael McCarthy.

“Expectations are that the Fed would lift its economic estimates in light of the new administration were dashed. This confounded those expecting a more hawkish stance, and saw an immediately sell down of the US dollar.” he added.

There may have been an overreaction after the rate decision on the part of  the US dollar, and with uncertainty surrounding in the upcoming European elections as well as Brexit in the UK, the pullback in the greenback may be short lived.

The review was prepared by FIBO Group analyst Andrew Masters.

Pound Headed Near Parity with US dollar

The pound has continued to fall last week, resuming a trend that started over a week ago as Brexit fears amongst other things begin to rattle investors.

The British currency has now lost over 2.5 percent against its US counterpart in the past 5 trading sessions bringing it to a seven week low with analysts predicting there is still more pain to come.

The real problems for the pound began earlier in the week, when the House of Lords overwhelmingly voted to amend the Brexit bill to guarantee the rights of EU citizens, which means it now has to go back to the House of Commons for another vote.

The move caught the market completely off guard, as a new round of Brexit uncertainty swept the financial markets, and had investors exiting the pound in droves.

Analysts from Deutsche bank predict this is only the beginning and say the pound could fall another 16 percent before finding a bottom.

“The UK is one market where we have stronger views in terms of where currencies are going, being negative on the pound is one of our strongest views.” noted George Saravelos Deutsche’s global co-head of FX research,

“Even though intentions are quite positive on both sides, we’re very concerned about the lack of time to complete a deal in two years, and we worry that negotiations will get stuck around this issue of the payment which the UK has to make to leave the EU, and things will stall quite quickly. We’re looking for a move below $1.10, to $1.08 or $1.05, and the drivers are on the one hand they’re political, and as I mentioned, the market will worry that we’ll get a ‘cliff Brexit’ and that we won’t have enough time to reach this incredibly complicated agreement within two years.” Mr Saravelos added.

More pressure was place on the pound after the release of PMI Markit data which fell to 53.3 in February, down from 54.5 in January, and below analysts expectations for a figure of 54.1 and marking the lowest figure since September.

“The purchasing managers’ survey showing services activity slowing to a 5-month low in February with new orders muted fuels suspicion that the UK’s economy since last June’s Brexit vote is beginning to crumble and an expected slowdown is now materializing” noted Howard Archer, at IHS.

The review was prepared by FIBO Group analyst Andrew Masters.

Employment Data Boosts Australian Dollar, Will the Bullish Run Continue?

The Australian dollar has finally broken through the US77c mark on Thursday on the back of strong job figures which included a drop in the unemployment rate.

The Australian Dollar was rejected at 0.77 on Friday and close the week at 0.7662. However, a second attempt to break above this level will not be a surprise.

Employment data out from Australia showed the unemployment rate fell to 5.7 percent, down from 5.8 percent and slightly better than analysts’ expectations.

The number of new jobs created was 13,500 versus a forecast of 10,000 with part time employment rising 58,300 while the number of full time jobs slumped by 44,800.

The figures overall are a good result for the Australian economy but some say the rise in only part time employment is a worrying sign, and it may cause some problems later on down the track,

“January’s labour market figures highlight that jobs growth has sustained its recent momentum, but the now-familiar problem of the new jobs being mostly part-time ones rather than full-time ones reared its ugly head again,” Capital Economics chief Australian economist Paul Dales said.

“The number of people working full-time is no higher now than it was in August 2015. This is weighing on incomes as lots of people are working fewer hours and the excess supply of labour is keeping wage growth low,” he added.

Mr Dales also said that even if the unemployment rate continues to fall, it won’t benefit the economy much as wages will remain stagnant and inflation will continue to sit below the Reserve Bank of Australia’s target rate which may keep a rate cut on the table,

“Looking ahead, subdued economic growth will probably keep the unemployment rate close to 6 per cent this year. But even if it fell, the high rate of part-time employment and associated rise in underemployment will keep a lid on wage growth and the underlying rate of CPI inflation.” He said.

Technically, the Aussie lays in t critical level as a break above 0.78 can signal for further strength of the currency. The high inflation figures along with positive employment data indicates that the Reserve Bank of Australia might increase interest rates soon.

The review was prepared by FIBO Group analyst Andrew Masters.

Analysts are Deeply Divided over The British Pound

The British pound is trading slightly higher today as analysts are divided on the direction of the British currency as we approach the triggering of article 50, the time when Britain begins proceedings to leave the European Union.

British Prime Minister Theresa May has promised the citizens of the UK that article 50 will be invoked no later than March 31st.

So where does the pound go from here?

Analysts from Bank of America, predict there will be a major sell off in the pound in the run up to the end of March when the UK breaks ties with the EU, driving the currency as low as $1.1500 as jitters take over the markets and investors park there money safer currencies such as the US dollar and Swiss Franc.

After the dust has settled and we move into April, the BOA predicts there will be a stunning reversal in the pound as the British government cements favorable trade deals with the EU and money starts pouring into the UK and business carries on again as usual

“We expect one final dip in GBP as Article 50 is formally triggered and as the EU formally responds and sets out its negotiating position. We think the crystallization of risks and the start of the countdown to Brexit may prove to be the low in GBP and the opportunity to enter GBP longs,” noted analysts from Bank of America

“We have no doubt that many political hurdles lay ahead for GBP in the years ahead, but we doubt that the markets will be in a perpetual state of panic over every Brexit-related headline,” they added.

Not all analysts are taking the same view including the team from Deutsche Bank, who have advised clients to “stay short the pound”. Citing that “while early clarity on a transitional arrangement between the UK and EU” would be a “key stabiliser for the pound”,such a deal “seems unlikely”.

“There are no fallback options for hard Brexit, negotiating multiple free trade deals in parallel with EU talks over a two-year time frame is neither realistic nor good policy.” They added.

Analysts from Credit Agricole also remain bearish on the pound and believe a rate hike from the Bank of England, which some are starting to predict wont eventuate,  and this will be another factor which will curb any gains in the pound.

“With Brexit-related uncertainty unlikely to fall with actual exit negotiations from the EU drawing closer and as the Bank of England is unlikely to make a case of higher rate expectations anytime soon, we believe GBP downside remains at risk,” they said.

The review was prepared by FIBO Group analyst Andrew Masters.

US Dollar Still under Trump’s Policy Actions

January 20, America saw the official ceremony at which Donald Trump took office as President.

Despite expectations, the implementation of programs for fiscal stimulation and the conduct of infrastructure reform remained unaffected. However, if tax reforms are introduced then investors from the rest of the world, attracted by tax breaks of up to 85% may trigger the return of their capital, a sum of almost USD 1,000,000,000,000. And around a third of that capital will go as FOREX. This is what investors worldwide were expecting.

Therefore, it could be said that the President’s inaugural speech disappointed investors. The financial markets were not slow to react – the week’s trading commenced with a sharp weakening of the US dollar against all assets.

So far, the lack of intelligible rhetoric from this most unpredictable President makes no mention of a global change in the flow of investments. There are those who think that Trump’s cabinet will decide matters in sequence. For now, the key issue is the political battle, which did not end after the elections – according to major news sources, meetings of those opposed to the new President were attended by more than 2 million people.  It would be logical to assume that the current government will have to wait until this wave of meetings and protests is over before implementing any further strategies. Then it will be time for official meetings with representatives of the great world powers:

  • on 27 January, Trump had a meeting with Theresa May, prime minister of the United Kingdom (which, against a backdrop of the threat of the cancellation of the TPP agreement, may have a significant influence on the world economy);
  • and, on 31 January, there will be a meeting with the president of Mexico.

Based on the current market situation, it can be assumed that the weakening of the dollar is a temporary phenomenon. It could be said that Donald Trump has made a “lyric pause” to close down some bureaucratic issues and this pause will not last long. The financial markets need a “shake-up” and Trump understands this very well. The prospect of a strong dollar is still very possible.

Commentary by Andrew Masters, a FIBO Group analyst.

Bitcoin to Join Gold as a Safe Haven?

The gold price finished slightly lower on Friday marking its first weekly loss since the start of the year, and failing to benefit on weaker than expected data from the US.

Gross domestic product figures hit the market from America on Friday at 1.9 percent, below analysts’ expectations for a figure of 2.2 percent and well short of last month’s reading of 3.5 percent.

The gold price was unable to capitalize on this event and after jumping $5 on the news, gave back the gains and then some to finish the week at $1,191 an ounce.

For a technical point of view, the gold reached back to $1,200 mark and currently is trading on these levels.

“Resistance in gold prices is unchanged at $1220.20, this week’s high, still biased to the upside as long as gold closes above $1183.” says the latest technical analysis from Canadian-based Scotia Bank’s New York bullion team.

ING analyst Hamza Khan shared his thoughts, and noted that gold had to take a breather after a 4 week winning streak,

“The dollar is being a big influence on gold right now, so that’s what’s behind the current move,” he said,

“But overall I think the weeks of gains we’ve had are more indicative than this pull-back, which might just be due to people locking in some profits and waiting for the Fed meetings before they get long again.” He added.

In a startling revelation, Bobby Lee, the CEO and cofounder of BTCC, one of China’s three biggest bitcoin exchanges, claims that bitcoin will be up there in the nearest future alongside gold as a safe haven as it avoids government interference by central governments unlike regular currencies

“I think the world is starting to realize that, just like gold is a good hedge, bitcoin is a great hedge against the system because it’s outside the system” he said.

“Gold is sort of the hedge against the system, the status quo. Our society is ingrained with the current monetary system of fiat money, where governments issue it, they can put out as much of it as they want. Today’s money system, in a very rude way, it’s no different to airline miles or hotel reward points.” He added.

The review was prepared by FIBO Group analyst Andrew Masters.

The Impact of Trump and Brexit in 2017

The year 2017 is shaping up to be one of the most volatile and exciting times for the financial markets in recent years and we believe that two events in particular will play the most important part on how the year unfolds.

As the whole world already knows, Donald Trump has been elected president of the United States and is due to be sworn into office at the end of this week, which is bound to set off a chain of events that may leave investors who are holders of the US dollar feeling pretty good if Trump follows through on some of his policy promises.

The first policy on Trumps agenda is the proposed introduction of Tariffs on all imports coming into the country which is supposed to help the economy as more manufacturing will be done in the US which will boost jobs and create a significantly higher demand for the US dollar.

Many say that although the tariffs will be on all goods from all countries, the main aim of the move is towards China, and although there may be some benefits in the short term, the long term implications may be very damaging to the world economy as China is forced to retaliate, “If tariffs are more punitive and lead to a public trade spat with China, markets will get nervous, especially if a sharp, retaliatory, [Chinese yuan] depreciation looks like a realistic response,” said Ajay Rajadhyaksha, head of macro research at Barclays.

If the US does introduce the tariffs, other countries may follow suit to stop the added flow of goods which would otherwise had gone to the US. That will put pressure on the currency markets,  “If other countries follow this pattern, it could lead to a downward spiral or litigation at the World Trade Organization depending on the specific measures, retaliatory action from elsewhere could be expected while the risk of trade and currency wars could grow,” said Janet Henry, chief global economist at HSBC.

Another one of Trumps policies which may also give the US dollar a boost is the proposed  plan to open up federal lands for oil production which will likely flood the market with oil. As a reaction, we might see the oil prices tumble. The US already produces enough oil to be self sufficient and if they open up more land for drilling they are probably going to be a big exporter of oil which will create a huge demand for the greenback.

The Trump administration also plans to cut corporate taxes from 35% (one of the highest amongst developing countries) to 15% which most analysts predict will see many companies relocate their main offices to the US to conduct business which again create immense demand for the US dollar.

Although a stronger dollar may be good for some, there are other industries that suffer, especially if they are dealing in other currencies “At some point the strength of the U.S. dollar may well start to impact on U.S. corporate profits, For now U.S. investors don’t seem too concerned about that prospect, so caught up are they in the euphoria of the ‘Trump trade,’ but at some point overseas profits will take a hit in currency terms.” Noted Michael Hewson, chief market analyst at CMC Markets.

Another major factor that is bound to create volatility in the currency markets is the Brexit factor where Britain voted to leave the European Union with the process set to begin in March when British prime minister Theresa May invokes article 50 which will start the process of Britain’s exit.

Up until 1 month ago analysts thought that the UK would broker some sort of deal that would allow them to keep access to the single market and therefore make the effects of Brexit less worrying.

But comments and statements  by Prime Minister May during the previous week, where she noted that Britain plans to control immigration and not allow the flow of people through its borders have investors predicting a “Hard Brexit” meaning that the government is prepared to forgo the single market in order to control immigration.

“She(Theresa May) signaled once again that the aim of controlling immigration was a red line she would not be willing to cross,” said Esther Reichelt, a currency strategist at Commerzbank AG in Frankfurt.

“That means that following Brexit the country is likely to lose access to the single market,” she said, If the UK does loose access to the single market, the British pound is expected to come under immense pressure with the currency likely to head down towards around $1.15 against its US counterpart.

So for the foreseeable future it seems like the currency to own is the US dollar with further gains expected as we await Trump and Brexit.

The review was prepared by FIBO Group analyst Andrew Masters.

Trends in 2017

US Presidential Inauguration

The inauguration of the 45th President of the United States, Donald Trump will begin on January 19 and will continue for three days. This is reported in the media with reference to Trump’ the graph. The elected president said that on the first day in office as the boss of the the White House he intends to start on the country’s exit from the Trans-Pacific Partnership Agreement. According to Donald Trump, co-operation will be more transparent and a withdrawal from the agreement will contribute to the creation of new jobs in America. In addition, to solve the problem with jobs, Trump has promised to lift the restrictions on the US production of hydrocarbons, including offshore energy and coal.

If you imagine the overall picture of “Trumponomics“, we can see a significant upward trend. The indices are updating the historical highs, and the US bond yields rise. The prospects for the next six months are fantastic, provided Trump remains in power.

Looking forward to the story’s development as early as the twentieth day of 2017.

The US Federal Reserve’s Interest Rate

The markets are considering a 30% chance of the US Federal Reserve raising the interest rates in March. Any statistical information for the dollar will be given sufficient attention. Recall that, according to the December FOMC meeting, there are interest rate rises scheduled in 2017.

New Zealand Inflation

For New Zealand the consumer price index is the most relevant: At the end of 2016, the Bank of New Zealand is mainly focusing on this inflation indicator: The RBNZ expected it to grow. Taking into account the Regulator’s historic low interest rate, it is the CPI that may directly affect the immediate fate of its monetary policy. Recall that the RBNZ cut interest rates three times in 2016.

Brexit true

For the NZD the “out and about” indicator has come to end. Theresa May has promised to initiate the UK’s actual exit no later than March 2017. And you want to believe it, because the EU refuses to discuss the issue prior to the actual initiation of Article 50 of the Lisbon Treaty. Any changes to this date could put additional pressure on the pound, which, respectively, will affect the Bank of England, which could drop to zero interest rates.

Australian trends

The labor market could put additional pressure on the RBA and they had no choice but to proceed with a series of monetary policy easing procedures.

Following in England’s footsteps

Germany’s parliamentary elections will be held in the second half of 2017. We can already see Angela Merkel’s opponents speculating on the subject of refugees and terrorist attacks, thus trying to eliminate her from the political arena. This question remains acute and may be a destabilizing factor for the EU.

It is worth noting that the political calendar for the upcoming 2017 is full of events. The Foggy Albion has set the tone, so we continue to closely monitor the progress of the elections in the EU.

The review was prepared by FIBO Group analyst Andrew Masters.

The Australian Dollar Holds Steady But Remains Under Pressure

The Australian dollar is trading steady in today’s trading, still reeling from yesterday’s Federal Government mid-year economic update which showed a budget deficit out of control.

At 12.30pm (GMT) the Aussie dollar was trading at 0.7268 up 0.10% from  yesterday’s trading, rising from lowest level of 0.7240 earlier today.

The local currency has now racked up 5 days of continuous losses which was triggered by the US Federal Reserve slashing interest rates last Wednesday followed by an unexpected statement that they would probably cut rates 3 times next year instead of the expected 2.

With yesterday’s announcement of a blown out budget deficit as well as recent disappointing GDP figures, some are now predicting Australia will lose its precious triple AAA credit rating from one of the recognized ratings agencies as early as this week

“Given what’s gone on in recent weeks, we’ve had a negative GDP print for the last quarter, the construction work done was the worst in 15 years, wages growth has been terrible, full-time employment is waning and business investment has been terrible as well.” noted Angus Coote, the co-founder of Jamieson Coote Bonds,

He also mentioned that there is a “reasonably high” chance that the Australian economy would be downgraded by at least one of the agencies. “They are certainly looking at us,” he said.

Also pressuring the Aussie dollar today was a fall in commodity prices overnight with the price of copper leading the way followed by Iron ore, Australia’s biggest export,

“Base metals again came off fairly aggressively yesterday, with copper leading the charge, that’s also been weighing negatively on sentiment,” OANDA Australia and Asia Pacific senior trader Stephen Innes

This article is brought to you by FIBO Group.

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