Keith Underwood 2 Comments

4 Things That Worry Me

  1. The Japanese yen (110.50 today) is strengthening versus the US dollar (52 week range 110.27 – 125.86) and the yen is typically viewed as a safe haven currency during market uncertainty and turmoil.
  2. The 10-year US treasury yield (1.74%) is lower (30% from it’s June 30th 2015 peak of 2.50%) even as inflation expectations are picking up. Safety is being sought as yields drop.
  3. Gold (1220.50) is, and has been rising, since December and now stands nearly 21% higher. Gold is also a safe haven for investors.
  4. Central bankers are using negative interest rates as a policy tool. Disaster.

 

Am I missing something here? Why are these 4 (should we add in oil as a fifth?) indicators painting such a negative picture and the world is just shrugging with acceptance? These 4 macro measures of the health of the investment community are not good. They are each, on their own, somewhat interesting, but together, these smell like the tin of tuna in the back of the fridge that was forgotten about months ago.

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Keith Underwood No Comments

US February Nonfarm Payrolls

The headline number is that total nonfarm payroll employment rose by 295,000 in February and the unemployment rate nudged down to 5.5% from 5.7% previously. Job gains occurred in food services and drinking places, professional and business services, construction, health care, and in transportation and warehousing. Added to this are revisions from the previous months where December remained at +329,000 and the change for January was revised from +257,000 to +239,000. With these revisions, employment gains in December and January were 18,000 lower than previously reported. This takes the 3-month average gains to 288,000 per month.

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Keith Underwood No Comments

CURRENCY PREDICTIONS FOR 2015

We all know from The Economist long ago that currencies is a ‘mugs game’ but just for fun I will offer out my predictions for certain currency pairs on 31st December 2015. We used to do this at year-end on the trading desk to kill time but rarely was the keeper of the predictions able to find them the following year or, worse, he was no longer with the bank. In that instance, our previous years predictions were invariably lost to the HR department’s desk contents file. Incidentally, today’s desk contents file is managed by the compliance department, as is most everything at banks these days. Since I am starting out this year I have none to review from last year so lets make some predictions just for kicks and not wager a dime on them.

 

Currency

AUD/USD

USD/CAD

EUR/USD

USD/JPY

USD/MXN

USD/NOK

NZD/USD

USD/SEK

USD/CHF

GBP/USD

Today’s Rate

0.8115

1.1620

1.2175

120.40

14.6900

7.4700

0.7760

7.8570

0.9875

1.5555

 

31st December 2015

0.7465

1.2315

1.1200

129.45

16.0120

8.1050

0.7605

8.3285

1.0370

1.4935

 

 

 

The US dollar will outperform in 2015 due to anticipated interest rate rises by the FED, improved wages/consumer spending and the general poor economies of Europe and Japan and those countries reliant on the price of oil. I believe these macro themes will dominate a majority of the year and provide the FX market the much needed trend that fund managers and sell-side traders so desperately need to justify expensive remuneration for services that are increasingly being performed by algorithms.

Wishing everyone a very happy, healthy and prosperous 2015!