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Autumn storms ahead

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Good Morning, as the world’s markets waited all last week for the release of the Non-Farm payrolls data only for more serious news to partly side-line the event with the announcement that President Trump and his wife Melania had tested positive for COVID-19.

The markets knee jerk reaction was a flight to safety which benefitted the dollar, yen and to a lesser extent the euro.

The health of the President and its effect on the forthcoming election, now under 30 days away, will certainly dominate the headlines and the markets over the next week and for some time after. The markets will also remain fretful that other members of his administration could fall victim to the virus, especially Vice-President Mike Pence.

When the employment numbers were released and digested, they were somewhat underwhelming and served to underline that the recovery in the US is stalling and the need for a fiscal stimulus package to be delivered sooner rather than later. Unfortunately, the combination of the President’s illness and the forthcoming election makes the agreement of a stimulus package further away than ever. Looking ahead to Thursday the markets will focus on increased interest on the Vice-Presidential debates. The market is likely to continue to be volatile and with China on holiday all week, volumes will be thinner which in turn will exaggerate moves. Closer to home it will continue to be all about Brexit. After Boris Johnson’s Saturday call with Ursula von der Leyen, they both said that significant differences still exist and that both sides need to intensify efforts to find solutions. As the Brexit clock ticks ever louder the efforts of both sides to find a solution will dominate domestic news.

UK

Sterling had a good week making gains over the dollar to close above $1.2900 and on the euro where it settled €1.1000. So far sterling has stayed immune to the recent outbreaks of COVID-19 and traders’ attention has instead been concentrated on the chances of a Brexit trade deal. The coming week will be dominated by Brexit and after Saturday’s call between the leaders yielded little movement sellers may reappear.  Also as a beta currency sterling is vulnerable to the buffeting caused by changes in risk assessment.  The data docket looks a little bare in the week ahead with only August’s Gross Domestic Product and Manufacturing production being released on Friday.

Euro

With COVID-19 infections creeping up, the lack of agreement on the recovery fund is starting to concern traders and will continue to do so unless these concerns are addressed. However, these worries were side-lined as the euro benefitted from its safe-haven status as a risk-off mood returned to the markets and with President Trump in hospital this is set to continue. Retail sales are released later this morning and after these figures the economic calendar is light but there is a European Finance ministers meeting on Tuesday and a selection of speakers from the ECB during the week including Christine Lagarde twice on Wednesday. The drop in inflation may be starting to worry the ECB and the release of the minutes of their early September meeting may give a clue to how they are thinking about further stimulus.

US

The focus, of course, will be on the President’s health in the coming week and the shifts in risk sentiment associated with it. There was a rise in the Vix index last week, often known as the fear index, and the market was already bracing itself for heightened volatility ahead of the announcement of Donald Trump’s illness.  After the disappointment of the jobs report last Friday the market will turn its attention back to Fed this week with Fed Chairman Jerome Powell delivering a speech on Tuesday and the release of September’s FOMC meeting notes on Wednesday. Very little else of any importance is released apart from ISM services data today and the weekly employment figures on Thursday.

Scandi

Last week it was confirmed what many had feared: Swedes spent and shopped less which meant that retail sales contracted by 0.3% on a month-by-month basis. However, there was some light seen at the end of the tunnel when PMI Manufacturing data which came in showing that manufacturing activity had expanded. The krona remains rangebound and still cannot return to the levels it traded at during the summer against all major crosses. This week we are watching the industrial orders, the budget balance, and Swedish Housing Price Data. Any further mention of lockdowns will naturally grab our and the market’s attention. The Norwegian krone is still under pressure and this week the market will be watching out for the GDP figure and the latest inflation figures released on Friday which are expected to be well above most other major economies at 2%.

ROW
The Reserve Bank of Australia meets this week and more dovish rhetoric is expected, but this is likely to pale into insignificance when seen in the light of the likely shifts in global risk sentiment. Its near-neighbour the kiwi is also a hostage to global risk movements although it does have its own election looming on 17th October. The main beneficiary of uncertainty over both the US election and President Trump’s illness will most likely be the Japanese yen which looks set to strengthen whilst the Canadian dollar could suffer if its payroll number, released on Friday, is worse than anticipated and oil continues to weaken.

Question
What is the FOMC?
The Federal Open Market Committee (FOMC) consists of twelve members – the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis. By law, the Federal Reserve conducts monetary policy to achieve its macroeconomic objectives of maximum employment and stable prices. FOMC announcements inform the world about the US Federal Reserve’s decision on interest rates and are one of the most anticipated events on the economic calendar as are the detailed minutes of the meetings which are released about two weeks after.

Have a great week,

Synergy Exchange

Something For The Weekend?

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Weekend Briefing- 10/07/2020

Good Morning All,

Happy Friday!

  • Sterling ended up virtually unchanged yesterday, having traded up as high as $1.2670 at one point during the morning. This was caused by the market warming to Chancellor Sunak’s package of stimulus measures and encouraging sounds coming from the Brexit talks.
  • US jobless claims were better than expected, but the US equity markets turned tail in the afternoon due to increasing Covid-19 concerns. As they did, sterling gave back some of its gains, ending the day unchanged against both the dollar and the euro.
  • Both sterling and the euro are trading at or around their 200 day moving averages which if they break on the upside will be key buying signals for technical traders.
  • Away from sterling, Croatia and Bulgaria are set to get approval to enter ERM-2, a preliminary step toward joining the euro. They would be the first new members since 2015 and a decision is expected over the weekend.
  • The pound has enjoyed its best week for nearly a month, but overnight is lower as the markets adopt a more risk-averse tone. Today is a very quiet day on the data front and unless we get some positive news from the Brexit talks, sterling may well continue edging back down as traders look to book profits ahead of the weekend.

Support and resistance levels

GBP/USD Support 1.2512 Resistance 1.2651
EUR/USD Support 1.1222 Resistance 1.1402
GBP/EUR Support 1.1086 Resistance 1.1265

On This Day…

On this day in 1856 Nikola Tesla, the Serbian-American inventor was born. Considered by many as America’s greatest electrical engineer, he is credited with coming up with the idea for radio, and after whom the tesla (a unit of magnetic flux density) is named. His work fell into relative obscurity following his death in 1943, however, during the 1990s there was a resurgence in popular interest in Tesla.

We hope you had a good week and will have an even better weekend!

 

Australian market set to open lower

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Anyone who wants to invest in Chinese property must be ready to move there. According to regulations, individual foreign buyers need to demonstrate that they have worked in China for at least a year and are buying the residence for self use,” says Anthony Couse, managing director in the Shanghai office of global real estate consultancy Jones Lang LaSalle.

The capitalist elements of its economy make it easy to forget that China is a communist country. Although property ownership is common, in China “ownership” means one has obtained the right to use the land, not own it. “All land is owned by the government,” says Regina Yang, head of research and consultancy in the Shanghai office of global real estate consultancy Knight Frank. Land for residential use is typically leased to property owners for a period of 70 years, Yang says. “After that, whether or not ownership will revert back to the government is uncertain.”

Bigger Cities May Be Safer Foreign Investments

If an individual does find the right opportunity to purchase an overseas investment property, he or she can employ strategies to mitigate the risk of currency fluctuations when making a down payment or ongoing mortgage payments. For example, people who want to own a home abroad can set up a bid through an online foreign exchange service, which enables a buyer.

An important point for those looking for overseas investment properties: Anyone who wants to invest in Chinese property must be ready to move there. According to regulations, individual foreign buyers need to demonstrate that they have worked in China for at least a year and are buying the residence for self use,” says Anthony Couse, managing director in the Shanghai office of global real estate consultancy Jones Lang LaSalle.

The capitalist elements of its economy make it easy to forget that China is a communist country. Although property ownership is common, in China “ownership” means one has obtained the right to use the land, not own it. “All land is owned by the government,” says Regina Yang, head of research and consultancy in the Shanghai office of global real estate consultancy Knight Frank. Land for residential use is typically leased to property owners for a period of 70 years, Yang says. “After that, whether or not ownership will revert back to the government is uncertain.”

The Chinese government ranks cities into “tiers” based on their population size and gross domestic product (GDP). According to Yang, Tier-1 cities (e.g., Beijing, Shanghai, Guangzhou and Shenzen) and Tier-2 cities (e.g., Chengdu, Chongqinq, Hangzhou, Suzhou and Nanjing) are the best international real estate investments because they have.

Investors may have profited from leaked U.S. data: ECB research paper

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An important point for those looking for overseas investment properties: Anyone who wants to invest in Chinese property must be ready to move there. According to regulations, individual foreign buyers need to demonstrate that they have worked in China for at least a year and are buying the residence for self use,” says Anthony Couse, managing director in the Shanghai office of global real estate consultancy Jones Lang LaSalle.

The capitalist elements of its economy make it easy to forget that China is a communist country. Although property ownership is common, in China “ownership” means one has obtained the right to use the land, not own it. “All land is owned by the government,” says Regina Yang, head of research and consultancy in the Shanghai office of global real estate consultancy Knight Frank. Land for residential use is typically leased to property owners for a period of 70 years, Yang says. “After that, whether or not ownership will revert back to the government is uncertain.”

Bigger Cities May Be Safer Foreign Investments

If an individual does find the right opportunity to purchase an overseas investment property, he or she can employ strategies to mitigate the risk of currency fluctuations when making a down payment or ongoing mortgage payments. For example, people who want to own a home abroad can set up a bid through an online foreign exchange service, which enables a buyer.

An important point for those looking for overseas investment properties: Anyone who wants to invest in Chinese property must be ready to move there. According to regulations, individual foreign buyers need to demonstrate that they have worked in China for at least a year and are buying the residence for self use,” says Anthony Couse, managing director in the Shanghai office of global real estate consultancy Jones Lang LaSalle.

The capitalist elements of its economy make it easy to forget that China is a communist country. Although property ownership is common, in China “ownership” means one has obtained the right to use the land, not own it. “All land is owned by the government,” says Regina Yang, head of research and consultancy in the Shanghai office of global real estate consultancy Knight Frank. Land for residential use is typically leased to property owners for a period of 70 years, Yang says. “After that, whether or not ownership will revert back to the government is uncertain.”

The Chinese government ranks cities into “tiers” based on their population size and gross domestic product (GDP). According to Yang, Tier-1 cities (e.g., Beijing, Shanghai, Guangzhou and Shenzen) and Tier-2 cities (e.g., Chengdu, Chongqinq, Hangzhou, Suzhou and Nanjing) are the best international real estate investments because they have.

Fraying Confidence

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GBP: The Pound firmed over the course of last week, as persistently high UK inflation increased bets for hawkish interest rate hikes in the coming weeks. In fact, the Pound to Dollar exchange rate rallied close to six-month highs and could rise further in the days ahead if UK and U.S. economic data remains conducive to a continued rebound for riskier currencies. Looking forward, the British economic calendar offers the first readings of January’s activity numbers and will be watched closely to gauge the need for more stimulus from Sunak. Ultimately, Britain is still falling behind its peers in the race to spur economic growth and Prime Minister Rishi Sunak must act to boost investment, fix a lack of workers, and avoid chaos over post-Brexit rules.

EUR: The euro scaled a nine-month high on the dollar this morning as more hawkish comments on European interest rates contrasted with market pricing for a less aggressive monetary policy. In fact, ECB President Christine Lagarde, who last week pushed back against market bets that it would slow the pace of rate hikes given recent falls in inflation, is scheduled to make two appearances that could support the Euro’s recent gains. Furthermore, several European Central Bank officials are due to make appearances before policymakers enter their traditional pre-policy meeting blackout period on Thursday. Meanwhile, Eurozone data may give further indications of the health of the economy. The bloc is to release flash PMI data on Tuesday that is expected to tick higher, while the closely watched German Ifo business climate index on Wednesday is expected to improve for a second month.

USD: The dollar started the week testing a fresh nine-month low as market participants bet on the U.S. Federal Reserve trimming the size of its interest rate hikes for a second straight meeting in February. In fact, the dollar index was down 0.3% at 101.51, extending its losses from the previous week, and fully unwinding all of the gains it made since the Fed started raising interest rates last March. This follows a spate of weak economic data – with notable declines in retail sales and industrial production – which gave the impression that the U.S. economy slowed sharply at the end of last year. That’s likely to be visible in the first reading of U.S. Gross Domestic Product on Thursday, where the QoQ rate of growth is expected to slow to 2.6% from 3.2% in the third quarter. Ultimately, the data calendar should, in theory, keep the dollar on the soft side this week. However, investors are weary of whether the market is ready to add to short dollar positions ahead of next week’s FOMC meeting.