Daily analytics by the experts from Fibo Group Forex Broker
First Fed meeting in 2020
Following a two-day meeting at 22:00 (+3 GMT) on January 29, a decision will be made on the interest rate of the Fed (federal funds target rate).
The press conference of Fed Chairman Jerome Powell is expected at 22:30 (+3 GMT).
Against the background of the Chinese coronavirus factor that appeared a week earlier, the American dollar received support due to the massive exodus of investors from risky assets around the world. The protective function of the US dollar is increasing, causing pressure on emerging markets. Maybe partly because of the strong dollar and the lack of inflation, Donald Trump again on his Twitter calls on the Federal Reserve to lower the interest rate.
However, everyone understands that the unforeseen factor of the virus will restrain the leadership of the Central Bank from making hasty decisions.
Thus, today we expect the key rate to remain unchanged and soft rhetoric from Jerome Powell.
Also, despite a pause in the softening of the DCT at the moment, a surge in trading activity is expected across a wide range of currency pairs. Expanse and potential profit for intraday traders. Mostly in strategies to buy the US dollar.
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Australian Dollar: Consumer Price Index Rises
General Australian inflation rose slightly, accelerating slightly from 0.5% in the 3rd quarter to 0.7% in the fourth quarter.
Effect on #AUDUSD quotes was minimal. As before, the downtrend remains.
The final inflation rate for 2019 was 1.8%, which is significantly lower than the values that the Reserve Bank of Australia (RBA) was oriented on. This gives confidence that at the next meeting of the RBA, the key rate will remain unchanged
The basic scenario for the Australian - he has no chance, the data do not reach the forecast, the RBA pauses - #AUDUSD runs the risk of failing even lower by testing a multi-year low of 0.6670.
Fed kept key rate
The US Federal Reserve following the meeting on Wednesday left unchanged the key interest rate and parameters of operations in the money market.
The rate of federal funds, reduced three times last year, will remain in the range of 1.5-1.75% per annum. This decision was unanimously adopted by 17 members of the open market committee of the American central bank.
Major currency pairs reacted weakly to published data. A more pronounced reaction was in #GOLD gold and American stocks.
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Coronavirus: OPEC emergency meeting
OPEC countries are hastily preparing an emergency meeting in connection with the outbreak of coronavirus in China, due to which oil prices fell by 10% in a week.
On the one hand, you might think that they are alarmists, because ten percent volatility for oil is sensitive, but not fatal.
However, if you look ahead 3-6 months, we will see that against the background of a paralyzed infrastructure in the Asia-Pacific region, nobody needs oil. But nobody is getting it less. Therefore, if quotas are not changed now, the OPEC countries risk being left without buyers.
Base scenario:
decline in oil quotes #BRENT c $59 to $53
reduction of oil prices #WTI from $53 to $47 (Available for trading with us #USOIL)
The critical mark is $50 per barrel #WTI - if prices manage to break through it, there will be a risk of mass liquidation of positions in the futures market, which will fail quotes sharply down.
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Gold prices are set to break seven-year records
The fear, uncertainty and doubt that engulfed capital markets give gold a moon ticket. Already in this quarter, the price of gold due to the merger of fundamental and technical factors can soar like a rocket.
️ Gold price rose 0.9% to $1,590.70 an ounce. Thursday is the highest in three weeks.
️The influx of gold exchange-traded funds (ETFs) has already reached a seven-year peak.
️Massage sales in capital markets and investor flight from risk.
However, not only coronavirus leads to growth. The decision of the Federal Reserve to lower interest rates and fix them at a level significantly below the historical average level also increased the attractiveness of the precious metal. As a non-profitable asset, gold is an attractive investment at low interest rates.
Nearby gold targets:
seven-year peak value - $1,619.60
psychological level - $1700.00
#fibogroup #forex #gold #coronavirus #dollar #investment #capital
️ Latest news and events for the week ️
Coronavirus claims the title of black swan. Now, commodity markets are paralyzed by fear of the Wuhan Plague, which hit air travel, stunned Chinese industry, and in the event of a global pandemic, it will drop the world economy more than the 2008 crisis.
Here are a few numbers:
Worst January in 29 years. In the first month of 2020, oil prices collapsed by 15%. because of this, OPEC + members will hold an emergency meeting on February 4-5 in Vienna.
“Unprecedented sale”: Chinese investors returning from the New Year holidays have fallen off the Chinese stock market (at the moment it is losing 9.1%).
The largest regulators added #virus to other uncertainties that will affect the market.
Weekly Calendar:
02/03/2020, Monday
no significant events
02/04/2020, Tuesday
Rate of the Reserve Bank of Australia (RBA).
Emergency OPEC + meeting.
Message from Donald Trump to the US Congress.
02/05/2020, Wednesday
Changes in employment in New Zealand.
Report of the European Commission on the revision of budget rules.
US crude oil reserves.
02/06/2020, Thursday
Day off - New Zealand.
Speech by Christine Lagarde in Brussels.
02/07/2020, Friday
Change in US employment ️:exclamation:️:exclamation:️
Change in employment in Canada.
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Pound is falling 1%
The pound reached its biggest recession in seven weeks, as conflicting statements by the UK and the European Union raised concerns that negotiations between the two parties on a future trade deal would be tough.
#hard_tags
EU chief negotiator Michel Barnier said in Brussels that Britain is offered a “very ambitious” trade deal, but only if London agrees with its rules.
Speaking a few minutes later in London, Prime Minister Boris Johnson DENIED the demand and insisted that Britain would prosper, even if the negotiations failed.
#GBPUSD still confirms its status as one of the most volatile currency pairs. As we see, the fog over Albion has not cleared and political upheaval will affect sterling throughout the current year.
️Record-breaking oil fall️
The cost of a barrel of Brent crude oil fell below $ 55 for the first time since January 3, 2019, increasing losses from the beginning of the year to 18%.
Contracts for WTI (traded with us #USOIL during the bidding dropped to $ 50 per barrel and stopped, seemingly, having found local support there.
The main reason is the #pandemic from China and the collapsed demand from them. That is why an emergency meeting of OPEC + members should start #today in Vienna. However, some participants say that this meeting will not help get rid of the problem, because symbolic steps cannot rectify the situation for one simple reason.
According to the reports of #OPEC and #IEA, even without the Chinese factor, world production in the first half of the year exceeds 1.2 #million barrels per day. Here you can add the growing volumes of Brazil and Norway, which add another barrel per day.
To all this, we can add the demand from #China, which collapsed by 20%, we add these 3 million barrels to the current surplus and we get the storage facilities filled to capacity. Oil #traders will be forced to provide significant discounts to bidders, which will put pressure on #oil for the first half of this year.
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Australia Central Bank interest rates statement
The unexpected decision of the Reserve Bank of Australia (RBA) to maintain interest rates forced the Australian dollar to grow slightly. Despite the threat of coronavirus and damage from forest fires, the RBA chose a wait-and-see position, making it clear that there was still no time to reduce it.
However, RBA Governor Philip Low sets ambitious economic development goals: growth of about 2Âľ% this year and 3% next year, which will be a step forward compared with the growth rate over the past two years. Without easing monetary policy, achieving such a pace will be difficult. So now this #trigger (rate cut by 0.5%) is shifting to the March meeting.
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US Private Sector Employment Growth in January
US companies significantly increased their workforce in January. According to the labor market provider Automatic Data Processing Inc (ADP), compared with the previous month, 291,000 jobs were created, which is 2 times more than the forecast (159,000 people).
The US dollar reacts extremely unpredictably:
In relation to major currencies, it is stronger than ever. Most likely, this is a reaction to the growing signs of the readiness of foreign Central Banks of the world to lower rates (if necessary to maintain economies in the face of the epidemic).
In relation to the Australian dollar, the “American” on the contrary, has significantly weakened, thereby demonstrating a strong imbalance in the capital market.
In any case, the situation with coronavirus puts pressure on the markets, the Central Bank of the world is ready to launch printing presses to keep the economy afloat.
So far, only one thing can be said - this week we will not see active actions. We interpret market signals without paranoia:
- stock indices are rising,
- business activity indices indicate the recovery of the economies of Great Britain and the Eurozone,
- The number of people employed in the USA has grown significantly.
We are waiting for confirmation of the data on Friday and continue to earn in the US dollar.
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PMI: activity in the manufacturing sector at highs
The main indicators of the economic calendar of the current week are the values of the #PMI index for January.
These are the first statistical indicators that reflect the state of the economy in 2020 (since the published values of inflation, GDP reflect the state of the economy of the LAST year).
As of February 6 (Thursday), according to surveys, almost half of all countries surveyed reported a PMI above 50.0, which is an undeniable sign of recovery, despite the trade debate between the US and China, and a raging pandemic.
About ten of the 15 markets reporting expansion in January were the so-called emerging markets, including: China, Vietnam, the Philippines, and Brazil. In Asia, excluding Japan and China, the PMI reached a 19-month high in January.
The situation in developed markets:
USA recorded the strongest PMI growth.
UK PMI has stabilized, ending an eight-month recession.
Eurozone factories reported the smallest drop in activity since April last year (the fastest declining manufacturing sector was re-discovered in Germany).
Japan also remained in decline, registering a seventh contraction in a row.
These indicators are leading and make it possible to judge the strength of a particular economy. It appears that the US is ahead of everyone except China, and the crisis has already come in the Eurozone and is not going to end.
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Thousands of tons of Euro: German banks massively go to cache
Since 2014, the ECB lowered the deposit rate below zero, requiring banks instead of earning interest income to pay extra for the storage of reserves.
The largest banks in Germany rushed to the physical cache, filling banknotes to failure, storing which becomes more profitable than keeping non-cash funds in accounts with the Central Bank.
By the end of 2019, they had tripled and reached a historic record of 43.4 billion euros, Bloomberg reports, citing ECB statistics.
This is 442 tons in banknotes of 100 euros, 800 tons - in 50-euro banknotes of 1.7 thousand tons, if you use the face value of 20 euros.
Negative deposit rates this year will cost German banks $ 2 billion euros, which does not add to the positive banking system and puts pressure on the single European currency.
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Canada: January unemployment rate fell to 5.5%
Canada’s unemployment rate fell to 5.5% in January.
#USDCAD drops to 1.3280.
The growth in the number of workers amounted to 35.7 thousand people, which is more than 2 times more than the projected 15.0 thousand new jobs.
- Growth occurred mainly in the industrial sector (construction, manufacturing).
- Decline in the health sector and socially oriented areas.
This indicates a powerful development potential in the region - in fact, the beginning of a new four-year business cycle. Volumes of construction are growing not from scratch, but as a result of necessity. We are also reporting rapid growth in the manufacturing industry. The Canadian dollar is reasonably strengthening today and we believe that the region will maintain this organic growth for many years to come (sell #USDCAD)
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️Relevant news and events for the week ️
We continue to monitor events: commodity markets are recovering, but overall the picture is weak, #OPEC and #IEA reports can serve as drivers. Federal Reserve Chairman Jerome Powell will once again be in the spotlight: for two consecutive days he will report to Congress on his work.
Weekly Calendar:
02/10/2020, Monday
January inflation in China.
02/11/2020, Tuesday
Preliminary UK GDP data.
Speech by Christine Lagarde in the European Parliament.
Jerome Powell’s Report to the US House of Representatives.
02/12/2020, Wednesday
Rate of the Reserve Bank of New Zealand (RBNZ).
Report of Jerome Powell to the US Senate.
Overview of #OPEC oil market.
02/13/2020, Thursday
January inflation in the USA.
IEA Oil Market Review.
02/14/2020, Friday
The United States and China will reduce duties under the previously signed agreement.
The final OPEC + decision on an emergency reduction in oil production.
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Canadian dollar strengthened to a weekly high
The Canadian dollar strengthened to a one-week high against its American counterpart on Wednesday, as declining concern over the economic impact of the outbreak of coronavirus led to an increase in risky assets and oil prices, one of Canada’s main export commodities.
The #USDCAD pair touched its strongest intraday level from February 5 to 1.3264.
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Inflation: The US Consumer Price Index was 2.3% in January
Inflation in the United States, measured by the Core Consumer Price Index (CPI), rose 2.3% year-on-year in January to match December readings, monthly data released by the US Bureau of Labor Statistics. This value was higher than market expectations of 2.2%.
The dollar ignored these values, slightly changing by symbolic 0.03%
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️ The industrial crisis in Germany brought the euro to the bottom of 2017 ️
The euro is rapidly getting cheaper in the #forex market to the accompaniment of the ECB’s “printing press” and depressing macro-statistics, which showed a record decline in industry in the EU for 10 years.
The ECB’s money issue, which since September last year has been buying assets from the market in the amount of 20 billion euros per month, continues to press on the foreign exchange market.
Until January, this inflow of liquidity was offset by the operations of the Fed, which in the fall - simultaneously with Europe - resumed pumping, but the Fed’s balance has not been growing for six weeks now.
In other words, the euro is becoming more and more on the market, while the dollar mass remains the same. This is what creates the imbalance of foreign exchange flows.
The EU has stalled the main export and industrial engine: in Germany, production volumes have fallen by 7.1%.
The coronavirus epidemic in China, breaking global production chains, will push the euro area’s largest economy into recession. There can be no question of any growth in the euro with such macro statistics.
To understand what will happen to the Euro, just remember 2014-2015. Then the launch of the “printing press” of the ECB collapsed the course of the single European currency from 1.4 to 1.03 dollars.
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️Relevant news and events for the week ️
Weekly Calendar:
02/17/2020, Monday
Day off - President’s Day.
02/18/2020, Tuesday
Labor market data block from the UK.
02/19/2020, Wednesday
January inflation in the UK.
January #PPI inflation in the US.
January inflation in Canada.
Publication of Fed protocols.
02/20/2020, Thursday
Labor market data block from Australia.
#China interest rate.
Publication of ECB protocols.
US crude oil reserves.
02/21/2020, Friday
#PMI preliminary data for February USA.
#PMI preliminary data for February Germany.
January #inflation in the Eurozone.
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Japan falls into recession
The Japanese economy collapsed by more than 6%, and because of the coronavirus it could even be in a recession.
Japan experienced a landslide drop in GDP in the fourth quarter of 2019. According to the government on Monday, in October-December, the size of the economy shrank 6.3% in annual terms and 1.6% from the previous quarter.
The recession was a record since 2014 and almost doubled the average forecast of analysts
The fact that the Japanese economy will fall was predictable: this is the result of an increase in the “consumption tax” from 8% to 10% (an analogue of the sales tax). As a result, the volume of private consumption, which forms about 60% of GDP in Japan, fell in the last quarter of last year.
Also negatively affects the Japanese economy:
Last October, typhoon Hagibis severely disrupted traffic and production chains in central Japan.
Coronavirus (66 patients in Japan), this affects primarily trade with China.
As a result, a combination of factors can lead to the fact that in the current quarter the economy will again be in the red. A recession for two consecutive quarters is a recession.
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