Category Archives: News

Foreign Exchange Outlook

The USD index has bounced off its lows, driven by the softer EUR.  The US ten‑year continues to trade near the bottom of its 2014 range.  US retail sales (Tuesday) and a speech by Fed Chair Yellen (Friday) are the US macro highlights.  While US developments may cause some intra‑day volatility near‑term movements in the USD will be driven by ongoing reaction in the EUR to building expectations of future ECB policy easing and geopolitical tensions in the Ukraine.  The USD should be supported near‑term, but over the medium‑term relatively lower US real interest rates and the US’ US$380 billion current account deficit should remain headwinds. 

The Australian Federal Government Budget (Tuesday) is unlikely to have any lasting impact on the AUD.  The budget should help underpin Australia’s AAA sovereign credit rating, at a time the transition in the domestic economy away from mining‑investment led growth is coming through.  Expectations are that the Chinese economy picked up momentum in April (activity data due Tuesday) which should be AUD positive.  It is expectedAUD/USD and selected AUD crosses (particularly AUD/EUR) to remain supported.  

In Australian rates the highlight of the week is the Australian Federal Budget on Tuesday.  A tight budget could lift expectations that the RBA is on hold for longer.  There shouldn’t be a lasting impact in the rates market.  Offshore developments such as tensions in the Ukraine remain a focus and should dominate moves in the long‑end.

Market Watch

The ASX closed the last session of the week down 0.29% at 5460.8 finishing the week almost unchanged with a small rise of 0.05%. The drop was attributed to lower than expected CPI data in China sending worries through the local markets. Further downside pressure came from speculation of what this week’s budget may hold for companies and consumer spending if the toughest budget in decades is delivered as expected.

Overseas we saw the European index’s closely follow APAC’s lead with the majors all closing down around the 0.30% mark while the US session managed to reverse this with the Dow Jones and Nasdaq finishing the week 0.20% and 0.50% respectively.

Gold had its second consecutive weekly fall closing at US$1288.70/oz as investors start to feel more confident in the equity and treasury market on the back of Fed Chairwoman Janet Yellen’s testimony earlier in the week.

WTI Crude Oil also finished the day down 0.27% at US$99.99 per barrel as tensions in the Ukraine eased but we expect to see further volatility during this week’s sessions after further parts of Eastern Ukraine voted for independence from Kiev in a referendum slammed by the West.

The Australian Dollar finished the week higher against most majors. This was due to the better than expected employment figures, now boosting confidence around a sustained jobs market recovery. Also the Strong Chinese trade report help push the Aussie higher. The RBA also released its quarterly monetary policy statement on Friday suggesting that interest rates will remain on hold for the foreseeable future.

Roko

Roko get ribbon at Sports Carnival

Roko received a ribbon at his sports carnival for good effort. He ran hard and fast, as he always does, and put in a great effort. The school carnival was put on by his school, St Maroons, in Dulwich Hill.

As well as continuing his gymnastics he is hoping to enrol in jiu-jitsu lessons and occasionally does some Wing Chun with his dad.

Market Watch

A jump in China’s iron ore demand saw a renewal of risk appetite in the financial markets. This helped ASX rise 0.8% to close at 5476, further boosted by a revenue beat and dividend upgrade from NAB. Meanwhile in Europe ECB President Draghi managed to steal the limelight from Fed Chair Janet Yellen.

Mario Draghi indicated a strong signal that the ECB possess a challenge with deflation in the Eurozone and it is prepared to act, commenting that the ECB will adopt some sort of easing measures in June. Testifying to the US Senate, Yellen largely reiterated her previous day’s messages that interest rates are unlikely begin to rise until the economic conditions in US improve further.

Overseas equity markets rallied taking a lead from the Asia on the back of better than expected Chinese Trade balance data. In Asia the Nikkei finished up 0.93% and Hang Seng was up 0.42%. At close all the stock markets in US were up except Nasdaq due to recent crash in Twitter shares.

In commodities space Ukraine tension somewhat subdued demand for gold. The yellow metal traded sideways at $1289/oz while Oil dropped 0.5% to $100.25. Copper got a boost thanks to the Chinese data and traded at $3.08/lb.

The AUD rose to a three week high as job numbers surprised the market adding 14,200 jobs in April, smashing the forecast of 8,800 jobs. The unemployment rate remained firm at 5.80%. Trade figures in China helped improve overall sentiment in the Chinese economy and this carried over to our market, pushing the Aussie Dollar higher. Chinese exports climbed 0.90% in April from last year and imports gained 0.80% leaving a trade surplus of $18.46 billion.

AUD up nearly a cent in late trade

The Australian dollar is up by over $0.0080 in later trade. The 1% rise comes after the RBA kept interest rates on hold. Whilst the Reserve Bank indicated stability in the AUD the general sentiment is that interest rates will rise by the end of the year.

The ABS also reported a continuing trade surplus for Australia. Whilst the surplus was down, record trade with China ensured it stayed in positive territory.

The higher dollar should lead to lower prices for imports including EVA jigsaw mats such as the ones that Ezymats imports.

Ezymats offer a large range of jigsaw mats and gym mats.

Only two more weeks for new jigsaw mats stock

There are only two more weeks to go for our 40mm jigsaw mats to arrive. We currently have over 600 mats on the high seas. They will be allocated on a first come first serve basis. So be sure to reserve your mats.

Not to fear though. If you miss out on these we will surely have another container arriving soon after.

Overview of the Markets

A week of high impact data concluded on Friday night with the much anticipated Non-Farm Payroll report from the USA. The numbers did not disappoint, as employers boosted payrolls by the most in 2 years and the jobless rate plunged to the lowest since the collapse of Lehman Brothers. The report beat the expected number of 216,000 jobs as it surged to 288,000, the biggest beat since February 2012. Unemployment dropped to 6.3%, the lowest level since September 2008.

The market reaction was swift as the AUD sold off aggressively, only to bounce back within a few hours to levels that we were looking at on Friday afternoon in Sydney. This was attributed to soft wages data, with average hourly earnings, month on month and year on year numbers failing to show improvement.

The situation in Ukraine is still a concern, Barrack Obama says that more severe sanctions will be taken if the destabilisation continues.

This week is heavy on data in Australia, Building Approvals and Chinese Inflation numbers will move the market today, Trade Balance, the Cash Balance and RBA Statement are announced on Tuesday, Retail Sales Wednesday and Employment Data on Thursday. The week is rounded out with the RBA Monetary Policy Statement on Friday, all of which indicates another week of volatility is on the cards.