Gold nears a three month high, RBNZ dampens hopes of a rate rises, dollar traders remain confused
If anyone has noticed some strange movements in our FX markets over recent months, then you’re not alone. Many analysts and top trading firms’ traders are apparently struggling to cope with some of the wild gyrations witnessed in the major currencies over recent weeks. And as a consequence the poor, overworked darlings, are pulling late shifts in order to cope.
Of particular note are some of the gaps appearing as markets open for trading on Sunday evening, whilst the wild fluctuations, from bearish to bullish and vice versa, based on very little fundamental news, is as extreme as we’ve witnessed over recent years. And who’s to blame? Well Trump of course, he’s to blame for just about everything at the moment. The weather, polar ice cap melts, football teams in the UK’s premier league currently enduring a slump, the New England Patriots’ comeback at the Super Bowl, the list is endless…
Joking apart, Trump’s administration is partly to blame for the erratic nature of the dollar’s value. It’s not just his tweets, his office’s proclamations that; the “dollar needs protecting”, followed by statements that the “dollar is too strong” the following week and then that the “euro is grossly undervalued” (are you kidding? It’s close to parity with the greenback) has had many currency traders’ collective heads spinning. Perhaps they need to relax and adopt the same position many long term position traders have, assuming the COT report is to be regarded as a leading indicator; simply trade like the big market movers and short the dollar.
On Wednesday it was a relatively quiet day for economic news events. There was no surprise as the RBNZ decided to keep interest rates at 1.5%. The outlook for any increase (in the short to medium term) was dampened by the accompanying narrative that New Zealand’s central bank feels “very comfortable with the current outlook for inflation”.
In the USA mortgage applications rose by 2.3% from the previous figure of -3.2%. Until there’s a series of positive increases, it’s difficult to gauge any improvement with one month’s figures, after such a surprise negative number was printed in January.
Crude oil inventories came in way ahead of expectations at 13830k, beating the previous figure of 6466k. Despite a 40% increase in trading above the 100 day average trading level, WTI oil displayed little impact in terms of price on the inventory pile up, ending the day at circa $52.04 a barrel.
The SPX rose by 0.1% on Wednesday, to 2,294 in New York, only 0.2% below its all time high. The DJIA fell by 0.2%, banks and industrial shares fell. The STOXX 60 rose by 0.3%. The Dollar Spot Index fell by 0.1%, clawing back from being 0.3% down at one point on Thursday. EUR/USD was relatively flat at $1.068, cable (GBP/USD) rose to $1.2518.
Gold has risen by 8% in 2017, the weaker dollar, added to concerns over Trump’s presidency, has created a revived safe haven appeal for the precious metal. Gold’s rally has taken it above its 100-day moving average on a daily chart, perhaps a further bullish indication. Gold rose by 0.4% to $1,234 an ounce at midday in New York, Spot silver gained 0.4% to $17.78 an ounce. Platinum rose by 1.1% to $1,016.20 an ounce.
Economic calendar events for Thursday February 9th, all times quoted and London (GMT) times.
07:00, currency effected EUR. German Trade Balance (euros) (DEC). Germany is unique amongst its major peers as it posts positive trade balances. As a comparison the USA generally has a negative balance of -$500b a year, Germany posts positive balances of circa €300b a year. The anticipated print is 20.5b for the month, a fall from 22.6b previously.
07:00, currency effected EUR. German Exports s.a. (MoM) (DEC). The forecast is for Germany’s export reading to be -1.3%, a fall from 3.9% in November.
07:00, currency effected EUR. German Imports s.a. (MoM) (DEC). It’s predicted that imports will have fallen to -1.1%, from a 3.5% rise previously.
13:30, currency effected USD. Initial Jobless Claims. The weekly jobless claims number is predicted to come in at 249k, from 246k last week.
13:30, currency effected USD. Continuing Claims (JAN 28). The expectation is for continuous claims in the USA to have remained virtually sta