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In-depth

Questionable OPEC Solidarity Casts Doubt on Output Cut Commitments

While vaccine news should be bullish for the oil market, the rally in crude oil price proves short lived. Ahead of next week’s meeting to decide extension of output cuts, a long-term OPEC member, the UAE, reportedly has shown discontent about the output cut deal. There are rumors that...

British Pound Remains Strong with Possible Trade Deal in Sight

The market has been thrilled amid signs of progress in the EU-UK deal. Last week, EU Commission president Ursula von der Leyen noted that there was “more movement” on the negotiations "difficult weeks with very, very slow progress". Yet, she warned that there were "some metres to the finish...

Yen’s Path Versus Dollar Defies Recovery Trend, May Cause Headache for Policymakers

The Japanese yen has been on a steady downtrend against most of its major peers since March when it exploded higher during the virus-induced financial turmoil. Although only the euro and the Australian dollar have managed to erase their year-to-date losses, the gap for the remaining currencies isn’t too...

With a Vaccine on the Horizon, What’s Next for Gold?

A combination of cheap money policies and runaway government spending propelled gold prices to new record highs earlier this year, but the metal has been trapped in a range for three months now, and the burning question is whether bullion’s best days are behind it now that a vaccine...

COVID-19 Update: More Positive Vaccine News from Pfizer and Moderna

Overall – current thinking While the situation in Europe is still serious, we see more rays of light. Many countries now see a turnaround in new infections and this week France joined the club with a big decline in new cases. In the Nordics, Finland has also achieved stabilisation, while...

Rebound in Crude Oil Price to be Short-lived as OPEC+ Cut Can Hardly Balance Market

Crude oil prices jumped amidst more optimistic news above coronavirus vaccine. The market also anticipates OPEC+ to extend the output cut deal until 1Q2021. For the latter, it appears that most OPEC+ producers agree to extend the cut as global oil demand should remain weak for the year ahead....

RBA Minutes; No Surprises; Clear Themes

The RBA has clearly signalled the overriding importance of the labour market and the evolution of the pandemic to policy outcomes. The minutes of the Reserve Bank Board meeting for November contain no new insights. That is not surprising given that we have seen the Governor’s post meeting Statement, including...

RBA Minutes Affirm that Future Monetary Policy will Rely on QE

The RBA minutes for the November contained little news. After cutting the policy to a new low of 0.1%, policymakers suggested the policy tool in the future will mainly be asset purchases. While the members remained reluctant to lower interest rates to negative, they might have to follow if...

China’s Economic Recovery and Less Policy Accommodation Lend Support to Renminbi

The latest set of economic data in China reflects that recovery continued in October. Growth was seen in both the supply and demand sides. However, while supply side continued to expand more than anticipated, the consumer spending did not perform as strong as market expectations. PBOC has recently mentioned...

Vaccine Spells Trouble for Big Tech But Old Economy Stocks Surge

Stocks around the world skyrocketed on news this week that the Covid-19 vaccine being developed by Pfizer and BioNTech is more than 90% effective in protecting against the virus. That’s a very impressive number when considering that it’s much higher than the most optimistic expectations and even more so...

Chance of Negative OCR Reduces as RBNZ More Confident About Economic Outlook

RBNZ announced that a Funding for Lending Program (FLP) will be implemented in “early December” with an initial size of about NZD 28B. Further details will be announced in coming weeks. The program aims at providing loans to commercial banks at low cost (e.g.: 0.25%). The central bank left...

China Data – Inflation Slowed Markedly on Food Price; Trade Surplus Widened as Exports Growth Strongly

China’s inflation moderated in October. Headline CPI eased sharply to +0.5% y/y, from +1.7% a month ago. The decline was mainly driven by food price, of which growth decelerated to +2.2% from September’s +7.9%. Non-food price actually stayed flat at 0%, while core CPI also steadied at +0.5%. Concerning...

Gold Got Dumped on Vaccine Hopes and Removal of Election Overhang

Pfizer coronavirus vaccine news has sharply lifted market sentiment. As the positive news raised hopes that the pandemic will soon be under control and global economy will be back on track, gold price, a traditional safe-haven asset, dived. The benchmark Comex contract slumped almost US$100/oz to settle at US$1853.2/oz....

Fed Discussed Options to Adjust QE, More Details Probably Out Next Month

As widely anticipated, the Fed left the policy rate unchanged at 0-0.25% and asset purchases at US$120B per month. The decisions were made unanimously. The members acknowledged that economic recovery remained under way. Yet, they warned of the downside risks to growth amidst the huge uncertainty of the coronavirus...

The FOMC Stands Pat, as Expected

The FOMC made no policy changes today, but it continued to acknowledge the downside risks that the pandemic poses to the economic outlook. Uncertainties Continue to Cloud the Economic Outlook As widely expected, the Federal Open Market Committee (FOMC) did not make any major policy changes at it policy meeting today....

FOMC Pledges to Keep Monetary Policy Accommodative

There was little change from the Federal Reserve Open Market Committee (FOMC) today as members voted to keep the policy rate at the current 0% to 0.25% range. The statement re-emphasized that the Fed is committed to use its "full range of tools to support the U.S. economy...

BOE’s QE Expansion Exceeds Expectations as Economy Heads for Double Dip

While leaving the Bank rate unchanged at 0.1%, BOE raised the size of asset purchases (QE) by +135B pound to 875 pound. Both decisions were made unanimously. The expansion came in larger than we had anticipated. The staff also revised lower GDP growth outlook, now expecting the economy to...

RBA Board Cuts Rates; Adopts Aggressive QE Policy

The RBA Governor has opened up the prospect of further QE having already decided on a policy which is more aggressive than expected. As expected the Reserve Bank Board decided to cut the cash rate target from 0.25% to 0.1%; cut the target yield on the 3 year bond from...

RBA Cuts Rates and Increases QE Purchases for at Least 6 More Months

As expected, RBA announced further monetary easing at today’s meeting. RBA cut the cash rate to 0.1%, from 0.25% previously. Similarly, the target for the yield on the 3-year government bond yield and the interest rate on new drawings under the Term Funding Facility were also lowered to 0.1%....

Door Wide Open for December European Central Bank Easing

Executive Summary The European Central Bank (ECB) kept monetary policy unchanged at today's announcement, but its accompanying comments were notably dovish in tone, offering a very clear signal of further easing in December. The onus now appears clearly to be on the economic data to improve perceptibly to avoid that...

China Economic Update and Outlook

Executive Summary China continues to lead the world in the containment of COVID as new confirmed cases are minimal. This apparent success can likely be attributed to early lockdown protocols, significant testing and other healthcare procedures designed to mitigate the spread of COVID, allowing for the economy to re-open...

The Tale of Two Recoveries: Canada Versus the U.S.

Highlights The Canadian and U.S. labour markets are rebounding from the devastating declines in March and April. So far, the Canadian recovery has been faster and more robust than what we have observed in America. A strong recovery in public sector employment, specifically education, is an important contributor to...

RBA Minutes Reveal Strong Conviction to Further Easing in November

RBA's minutes for the October meeting offered more supports that further easing will be rolled out soon. Potential measures include rate cuts and asset purchases. The bottom line is that the policy rate will not go negative. Assistant Governor Christopher Kent's speech earlier today signaled strongly the easing bias....

China’s GDP Growth Missed Consensus. Strong Activity Data Support Renminbi’s Outlook

The latest set of China's macroeconomic data is mixed in the headline. GDP growth in the third quarter came in below market expectation. However, major indicators such as industrial production, retail sales and fixed asset investment all beat consensus, confirming recovery is underway. Against this backdrop, we expect PBOC...

RBA Governor Gives ‘Game Changer’ Speech

I had expected that the events this week would be highlighted by the stunning 11.9% surge in the Westpac-Melbourne Institute Consumer Sentiment Index. That was not the case. RBA Governor Lowe delivered a speech on Thursday to a Banking Conference that was, quite simply, a game changer from the perspective of...

China’s Inflation Weakened as Growth in Food Price Decelerated. Subdued Core CPI Evidenced Domestic Economy Not Yet Out of the Woods

China’s headline CPI moderated to +1.7% y/y in September, from +2.4% a month ago. This has missed consensus of +1.9%. The weakness was mainly driven by pork inflation which slowed to +25.5% y/y, from +52.6% in August. This contributed about 0.7 percentage point to headline CPI’s moderation. Fresh vegetable...

U.K. Economy Underwhelms

Executive Summary Seemingly never ending uncertainty related to Brexit and a gut-wrenching battle against COVID-19 has wreaked havoc on the U.K. economy. Like most other economies, the U.K. economy began to bounce back in late spring/early summer. But, the recent rebound is threatened by a second wave of COVID-19...

OPEC+ Compliance Remains a Lingering Concern over Crude’s Demand/Supply Balance

The near-term outlook on crude oil price has turned sour, as supply is projected to rise despite high uncertainty in the demand outlook. Both crude oil benchmarks fell more than -2%, as Norwegian output resumes after strike, Libya supply is set to increase further and US production facilities restart...

PBOC Moves to Curb Renminbi’s Strength

PBOC announced over the weekend to lower the FX risk reserve ratio for forward foreign exchange sales from 20% to 0, effective October 12. The move is likely a response to the strength in renminbi (a.k.a. RMB, CNY). The central bank pledged to “maintain the flexibility of the RMB...

The Forex Market and Presidential Terms

How has the forex market performed around different US Presidential terms? Read on to discover what history can tell us about the Forex market and the President. (1) The US Dollar and the President’s Party At first, many traders are surprised to learn that there is rarely a direct, straightforward relationship...