Weekly Market Update 17/07/16-22/07/2016
The Japanese Yen was the worst performer against the US dollar last week in the major group of currencies. UsdJpy rose 423 pips to 104.8 (+4.04% weekly). The rate reached its 200 weekly moving average and it may make a breakout if the Bank of Japan and Abe Government gain the trust of the financial community in their commitments. Helicopter money is more than a tool, it is a change in the statutory functions of central banks. Means a permanent monetization of sovereign debt through money printing. The meeting between Former Federal Reserve Chairman Ben Bernanke and Japanese Officials could trigger speculation about the intentions of Kuroda but at the moment the implementation of permanent purchase of bonds will require time as policymakers will debate the opportunity of this strategy. The most likely scenario would be stagflation, already experienced during the “lost decade”. The scenario with the highest risk could be hyperinflation and socially, this would be catastrophic. It’s worth mentioning that the Austrian Schools most prominent economist Ludwig Von Mises considered the mismatch between money creation and wealth creation. Eight years of record low global rates and subdued growth should have been a lesson for Central Bankers, as with cheap money investments opportunities are not evaluated with the same accuracy when money is a scarce commodity.
The Kiwi dollar slid against the US dollar 182 pips, and NzdUsd closed at 0.7115 (-2.49% weekly). EurUsd is trading in a range in the short term and the shared currency lost 19 pips with EurUsd at 1.1029 (-0.17% weekly).The British Pound was the best performer against the Greenback, with GbpUsd up 234 pips to 1.3173 (+1.81% weekly). The formation of a new government in UK that would start negotiations with The EU increased risk appetite on the British Pound. Swiss Franc against US dollar rate was almost unchanged at 0.9816 and AudUsd gained 13 pips to 0.7576 (+0.17% weekly). UsdCad lost 75 pips to 1.2962 (-0.57% weekly). During the coup attempt last Friday in Turkey the Lira increased its volatility the most since 2008, but UsdTry managed to close beneath its 2016 high. The Turkish Lira should rebound in the short term as the elected government is in full control. In the commodities market Crude Oil rose 1.89% weekly and Gold closed at 1,337.14 $/oz (-1.52% weekly). Volatility collapsed in equity indices as the S&P500 closed on a record high to 2,161.74 (+1.49% weekly). In Europe the FTSE Eurofirst 300 soared 39.69 points to 1,335.71 (+3.06% weekly). After the large majority obtained in the upper house by Shinzo Abe`s party, the Nikkei225 rose 1,390.87 points to 16,497.85 (+9.21% weekly). Global indices are above pre Brexit levels and this year the old saying “Sell in May and go away” as a trading strategy would have worked until Brexit referendum data as July is showing very high risk appetite thanks again to expectations of low interest rates. On Monday the US Total Net TIC Flows at 20:00 GMT should be the most relevant event in the calendar. On Tuesday at 01:30 GMT the Reserve Bank of Australia will release its Meeting`s Minutes and the European session would kick off with the UK CPI at 08:30 GMT. At 12:30 GMT US Housing Start data and on Wednesday would be released Eurozone Consumer Confidence data at 14:00 GMT followed by EIA Crude Oil Stocks Change at 14:30 GMT. On Thursday the European Central Bank will decide the interest rate level at 11:45 GMT and at 12:30 GMT the ECB will hold a press conference. On Friday Canadian Retail Sales and CPI data would be the most important events and US Baker Hughes Oil Rig Count would be the last event in the calendar.
About The Author
Leave a Comment
You must be logged in to post a comment.