ETF Securities Research Blog

No bounce for the Aussie Dollar

Although the Australian economy set a record of not having a recession in 104 quarters – since 1992 – growth in Q1 2017 was the weakest in over seven years. With the Reserve Bank of Australia (RBA) remaining firmly in an accommodative policy stance, the downside risks for the Australian Dollar (AUD) are mounting in the near term. Read more…

China A-shares finally in after four attempts

MSCI  has finally decided to include China mainland companies in its MSCI Emerging Market benchmark. While some obstacles that have prevented A-shares to be included in the past remain, many have been removed. As a result of the inclusion, A-shares stocks may benefit from short-term bet. We however believe that a credible reform agenda and adherence to it would be a stronger support for domestic companies over the longer run.

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From the horse’s mouth: Fed rate hike likely to prompt further USD weakness

The market has been fully pricing in a rate hike from the Federal Open Markets Committee (FOMC) for over a month – since mid-May, the US Dollar (USD) has fallen nearly 3%. Recent Fed speakers prior to the ‘blackout’ indicate that the view is relatively pragmatic and balanced. However, the USD could still weaken further even if the Fed follows through on market expectations for a rate rise Read more…

Further unnecessary political uncertainty and sterling volatility

The promise of ‘strong and stable leadership’ has bred more unnecessary political uncertainty and sterling volatility. With a tough Brexit process now likely, Theresa May could lose her job or be forced into a drawn out process to agree a coalition. This, and a lack of political unity in parliament is also likely to weigh on upcoming Brexit negotiations which are due to begin in 2 weeks’ time.

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ECB communication – a masterclass in subtle communication

Today’s European Central Bank (ECB) press conference was an exercise in subterfuge: a subtle communication of tapering without actually discussing the concept. Draghi is trying to throw the market off the ‘scent’ by noting “there were 2 observations on policy normalisation (aka tapering) but no discussions on it”. As a result, we expect the Euro to move lower in the near-term until the need for tighter monetary policy for the Eurozone becomes a more strongly voiced position. Read more…

Recent events highlight investor’s appetite for safe havens

In the run up to a FED rate hike gold prices are typically weak, but so far this year gold has risen 12%, with one rate hike already and likely another next week. This year gold ETPs have globally seen inflows of US$4.6bn, only one quarter of what was seen in 2016 but in some ways these inflows are surprising given the threat of further rate hikes.

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GBP to gain after the UK election

We expect that the British Pound will gain after a period of consolidation around current levels ahead of the UK election next week. The latest polling indicates that Prime Minister May’s lead has declined, prompting a modest pullback in the local currency. We expect that although GBP could soften further in the coming week, as the Conservative party’s lead see-saws, but believe it will stay above key support of 200-dma, which is currently 1.2595.

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Oil prices fall as OPEC has no positive surprise up its sleeve.

OPEC and its non-OPEC partners have agreed to freeze production at current levels for another nine months. Current production levels are approximately 1.8mn barrels per day lower than they were in October 2016, if the output figures are to be believed. The market has been led to believe that this would be the likely outcome from the meeting after the major players had already announced that a nine-month extension was palatable. With the market conditioned to expect surprises emerging from the “smoke and mirrors” format of OPEC meetings, the result of the current meeting has been an anti-climax. Read more…