Tuesday
- Australian NAB business confidence
- UK manufacturing production
Wednesday
- China`s CPI
Thursday
- New Zealand official cash rate
- RBNZ press conference, rate statement
- Australian employment change and unemployment rate
- Swiss LIBOR rate
- ECB long term refinancing option (LTRO)
- US core retail sales, retail sales and unemployment claims
Friday
- China`s industrial production
- US PPI
- US preliminary UoM consumer sentiment
I`ll be away from Wednesday onwards till the first day of 2015. No trading till the new year.
Monday, December 8, 2014
Friday, December 5, 2014
Non-farm employment surged, tiny improvement in trade balance deficit
An astonishing 321 thousand new jobs were created in November according to official government figures. The ADP report out two days ago only predicted 208 thousand new jobs last month.
However, the trade balance deficit narrowed to -43.4 billion compared to -41.3 billion predicted by economists. This is a tiny improvement from October`s -43.6 billion.
However, the trade balance deficit narrowed to -43.4 billion compared to -41.3 billion predicted by economists. This is a tiny improvement from October`s -43.6 billion.
Swiss foreign reserves increase
The Swiss Central Bank recorded an increase in foreign reserves to 462.4 billion compared to 460.6 billion in October.
Thursday, December 4, 2014
ECB: Real GDP revised downwards
In an earlier post this week, I mentioned about shorting EUR/USD whenever there`s a European Central Bank (ECB) press conference. Historically this pair has fallen each time Mario Draghi has given an official speech.
Well, nothing new this time around. The key interest rates remain unchanged. Non-standard monetary policy measures are to be taken, the purchase of covert bonds and asset backed securities will continue for two years.
Growth has been expected to be weaker and there`s a downward revision of the outlook for the euro area real GDP growth. It is expected that the growth in 2014 is 0.8%, followed by 1.0% in 2015 and 1.5% in 2016. The downwards revision have started since September.
The full speech can be found here.
Well, nothing new this time around. The key interest rates remain unchanged. Non-standard monetary policy measures are to be taken, the purchase of covert bonds and asset backed securities will continue for two years.
Growth has been expected to be weaker and there`s a downward revision of the outlook for the euro area real GDP growth. It is expected that the growth in 2014 is 0.8%, followed by 1.0% in 2015 and 1.5% in 2016. The downwards revision have started since September.
The full speech can be found here.
Unemployment claims solid; Target price for USD/JPY reached
Unemployment claims this week showed a decrease of 17 thousand less people filling for unemployment benefits. This brings the number to 297 thousand.
The USD/JPY pair breached my target price of 120.00 and suffered a slight drop afterwards. This level will be tested soon and the overall consensus for this pair is upwards.
Clarence Lim, a trading associate also agreed on the movements and predicted that the price of this pair will hover around this level till the year end.
I decided to hold this pair to collect swap interest and the potential gains from more appreciation.
The USD/JPY pair breached my target price of 120.00 and suffered a slight drop afterwards. This level will be tested soon and the overall consensus for this pair is upwards.
Clarence Lim, a trading associate also agreed on the movements and predicted that the price of this pair will hover around this level till the year end.
I decided to hold this pair to collect swap interest and the potential gains from more appreciation.
BoE rate maintained at 0.5%
The Bank of England`s (BoE) Monetary Policy Committee (MPC) held the bank rate at 0.5%.
Australian retails sales and trade balance beat estimates
Australia`s trade balance in November beat estimates by a healthy margin by closing at -1.33 billion. This is a huge drop from October which recorded a deficit of -2.24 billion. The full report on the trade balance can be found here.
While retail sales beat estimates it failed to record an improvement from the growth rate of 1.3% in October. November ended 0.4% vs 0.1% estimates. The breakdown of this figure can be found here.
While retail sales beat estimates it failed to record an improvement from the growth rate of 1.3% in October. November ended 0.4% vs 0.1% estimates. The breakdown of this figure can be found here.
Wednesday, December 3, 2014
ISM: Non-manufacturing growth up in November
The ISM non-manufacturing PMI rose to 59.3 in November, beating estimates and the previous period.
The full report can be found here.
The full report can be found here.
ADP: 208 thousand new jobs created in November
Ahead of the official non-farm employment change by the government, the ADP national employment report estimates that 208 thousand new jobs were created last month. This figure failed to hit the estimates of 223 thousand new jobs and a substantial drop from October`s 233 thousand jobs.
The full report can be found here.
Surprisingly though the US dollar is pretty strong at this hour in spite of the weak data.
All the common pairs as seen above moved in favour of the greenback`s strength.
Here is how my USD/JPY long is doing:
I bought this pair at 117.90 last Tuesday as seen in my earlier post. Once it hits my target price of 120.00, I`ll call it a day for this position.
The full report can be found here.
Surprisingly though the US dollar is pretty strong at this hour in spite of the weak data.
Here is how my USD/JPY long is doing:
I bought this pair at 117.90 last Tuesday as seen in my earlier post. Once it hits my target price of 120.00, I`ll call it a day for this position.
Surprise growth in UK services sector
I expected the services PMI to be red today based on the recent GDP report and the fact that the services PMI in October was a 17 month low.
UK service sector grew to 58.6 beating the estimated 56.6 and October`s 56.2. Anything above 50 indicates an expansion in the economy.
The key points of the report are:
- Activity and new business both rise at a sharper rate.
- Employment continues to increase as capacity constrain persist.
- Higher wage bill push up operating expenses, but low fuel prices limit inflation.
Check out the full report here.
UK service sector grew to 58.6 beating the estimated 56.6 and October`s 56.2. Anything above 50 indicates an expansion in the economy.
The key points of the report are:
- Activity and new business both rise at a sharper rate.
- Employment continues to increase as capacity constrain persist.
- Higher wage bill push up operating expenses, but low fuel prices limit inflation.
Check out the full report here.
Australian GDP growth down to 0.3%
In my post yesterday, it was stated in the Reserve Bank of Australia (RBA) rate statement that growth will be below trend for the next few quarters. As a country that is quite dependent on commodities, the decline in commodity prices has taken a toll on the Australian economy.
For the quarter ending September this year, the GDP recorded a growth of only 0.3%, missing estimates of 0.7%.
Check out the full report here.
I missed an entry to short the AUD/USD pair based on fundamentals as the signs of an uninspiring figure were present.
For the quarter ending September this year, the GDP recorded a growth of only 0.3%, missing estimates of 0.7%.
Check out the full report here.
I missed an entry to short the AUD/USD pair based on fundamentals as the signs of an uninspiring figure were present.
Tuesday, December 2, 2014
UK construction 13 month low
UK construction PMI fell to 59.4, a 13 month low since October 2013. The Chartered Institute of Procurement and Supply (CIPS) mentioned that this is due to much weaker increase in civil engineering activity. However, job creation still remains strong in November.
The full report can be found here.
The full report can be found here.
Minimal changes to RBA statement
The Reserve Bank of Australia (RBA) decided to leave the cash rate unchanged at 2.5%.
There are only tiny changes to the statement compared to the one issued last month. The key points are:
- Economic policies have responded in a way to support growth in the property market.
- Growth to be a little below trend for the next several quarters.
- Australian dollar remains above its fundamental value.
Traders should take caution of the final line as a lower exchange rate is likely to be needed to achieve balanced growth in the economy.
The statement can be obtained here.
There are only tiny changes to the statement compared to the one issued last month. The key points are:
- Economic policies have responded in a way to support growth in the property market.
- Growth to be a little below trend for the next several quarters.
- Australian dollar remains above its fundamental value.
Traders should take caution of the final line as a lower exchange rate is likely to be needed to achieve balanced growth in the economy.
The statement can be obtained here.
Australia building approvals more than double estimates
Building approvals in October was at a staggering 11.4%, more than double of what economists expected. This is a huge growth after the contraction of 11.2% in September.
The full report for the building approvals can be found on the Australian Bureau of Statistics website.
Monday, December 1, 2014
ISM manufacturing PMI projection at 58.7
The Institute for Supply Management (ISM) projected the manufacturing PMI in November at 58.7. This is a decrease of 0.3 from October`s 59.0.
Note that this is not the official manufacturing PMI released by the government.
The full report by ISM can be found here.
Note that this is not the official manufacturing PMI released by the government.
The full report by ISM can be found here.
UK manufacturing at a 4 month high
Manufacturing PMI rose to 53.5 compared to October`s 53.3. This represents a 4 month high in terms of the expansion rate in the manufacturing industry.
The full report is provided by the Chartered Institute of Procurement & Supply (CIPS).
The full report is provided by the Chartered Institute of Procurement & Supply (CIPS).
Environmental analysis for startups
Environment is defined in the Meriam-Webster dictionary as the conditions that surround someone or something. It is no surprise that environmental analysis in the context of business strategy is related to the analysis of external factors.
As seen above, environmental analysis can be separated into different layers according to Johnson Scholes and Whittington (JS&W). This is how the macro-environment is connected to an organization and in this post, I shall focus on this layer in the context of a startup.
Before developing the business plan, I believe the crucial step that many startup entrepreneurs overlook is the macro-environment. Here are some models to get started:
1) PESTEL
Who hasn`t heard of PESTEL: political, economic, socio-cultural, technological, environmental and legal factors? Fundamentally, entrepreneurs need to identify the factors that may contribute to the success of their business idea. For instance, in my dating startup, due to socio-cultural differences in Europe and Malaysia, our content has to vary. Also, in the real world, a number of these factors are interconnected and thus should not be seen separately.
2) Key drivers of environmental change
It is of utmost importance that entrepreneurs remember the business environment is not static. The key drivers of environmental change are based on globalisation trends:
- Cost globalisation
- Market globalisation
- Global competition
- Government policy
Entrepreneurs should have a bird`s eye view when working on a business idea. The strategic part of planning is crucial and should not be overlooked.
China`s manufacturing expanding slower than expected
China`s manufacturing PMI fell to 50.3 in November, failing to meet estimates of 50.5. In comparison, October`s manufacturing PMI recorded a figure of 50.8.
As for the HSBC final manufacturing PMI, it recorded a level of 50.0.
These data show that the expansion of the manufacturing industry is slowing down as both the official PMI and HSBC final fail to better the results in October.
As for the HSBC final manufacturing PMI, it recorded a level of 50.0.
These data show that the expansion of the manufacturing industry is slowing down as both the official PMI and HSBC final fail to better the results in October.
RBNZ: Reflections on 25 years of inflation targeting
The Reserve Bank of New Zealand (RBNZ) Governor Wheeler delivered a speech on inflation targeting done by the central bank for the past 25 years. The insights of the speech are:
1) Inflation targeting has delivered price stability without reducing long term growth rate.
2) Low and stable inflation expectations increase monetary policy`s effectiveness.
3) The long term path of real exchange rate is unaffected by the monetary and exchange rate regimes.
4) There are limits to what monetary policy can do: supportive structural and fiscal policies are also needed.
5) Monetary policy`s independence requires a high level of accountability and transparency.
6) Monetary policy needs to be supported by sound prudential policies.
7) The emergence of marco-prudential policies.
In his concluding comments, Governor Wheeler mentioned that there has been strong growth in new sector of activity including the information technology sector. He also remarked that the economy has remained resilient in the recent shocks from the GFC and Christchurch earthquakes.
The full speech can be found here.
Figure 1: Inflation and GDP growth
Figure 2: New Zealand`s real effective exchange rate
This is where traders should take caution as the RBNZ has mentioned several times that the exchange rate has been too high and making exports uncompetitive.
FXStreet has a recap on this speech as well.
1) Inflation targeting has delivered price stability without reducing long term growth rate.
2) Low and stable inflation expectations increase monetary policy`s effectiveness.
3) The long term path of real exchange rate is unaffected by the monetary and exchange rate regimes.
4) There are limits to what monetary policy can do: supportive structural and fiscal policies are also needed.
5) Monetary policy`s independence requires a high level of accountability and transparency.
6) Monetary policy needs to be supported by sound prudential policies.
7) The emergence of marco-prudential policies.
In his concluding comments, Governor Wheeler mentioned that there has been strong growth in new sector of activity including the information technology sector. He also remarked that the economy has remained resilient in the recent shocks from the GFC and Christchurch earthquakes.
The full speech can be found here.
Figure 1: Inflation and GDP growth
Figure 2: New Zealand`s real effective exchange rate
This is where traders should take caution as the RBNZ has mentioned several times that the exchange rate has been too high and making exports uncompetitive.
FXStreet has a recap on this speech as well.
Key indicators this week (Week 49)
Monday (1/12)
- RBNZ Governor Wheeler is set to speak
- China manufacturing PMI
- China HSBC final manufacturing PMI
- UK manufacturing PMI
- US ISM manufacturing PMI
Note: Chinese data would be an indicator for the Australian GDP out on Wednesday.
Tuesday (2/12)
- Australian building approvals
- RBA cash rate
- RBA cash rate statement
- UK construction PMI
- New Zealand GDT price index
Wednesday (3/12)
- Australian GDP
- UK services PMI
- ADP non-farm employment change
- ISM non-manufacturing PMI
Note: The ADP non-farm employment change is an estimated change in the labour market that is out 2 days before the government one. May or may not be indicative of the actual numbers.
Thursday (4/12)
- Australian retail sales
- Australian trade balance
- UK official bank rate
- UK MPC rate statement
- Euro minimum bid rate
- ECB press conference
- US unemployment claims
Note: Euro pairs usually drop during the press conference and a fall of 100 pips is normal. Shorting EUR/USD now would be a good option.
Friday (5/12)
- US non-farm employment change
- US trade balance
- US unemployment rate
- RBNZ Governor Wheeler is set to speak
- China manufacturing PMI
- China HSBC final manufacturing PMI
- UK manufacturing PMI
- US ISM manufacturing PMI
Note: Chinese data would be an indicator for the Australian GDP out on Wednesday.
Tuesday (2/12)
- Australian building approvals
- RBA cash rate
- RBA cash rate statement
- UK construction PMI
- New Zealand GDT price index
Wednesday (3/12)
- Australian GDP
- UK services PMI
- ADP non-farm employment change
- ISM non-manufacturing PMI
Note: The ADP non-farm employment change is an estimated change in the labour market that is out 2 days before the government one. May or may not be indicative of the actual numbers.
Thursday (4/12)
- Australian retail sales
- Australian trade balance
- UK official bank rate
- UK MPC rate statement
- Euro minimum bid rate
- ECB press conference
- US unemployment claims
Note: Euro pairs usually drop during the press conference and a fall of 100 pips is normal. Shorting EUR/USD now would be a good option.
Friday (5/12)
- US non-farm employment change
- US trade balance
- US unemployment rate
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