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Strong nonfarm payrolls could put Fed’s interest rates on hold in 2020

06 December 2019 Lysakov Sergey

Stronger than expected nonfarm payrolls pushed US dollar against all currencies. Unexpected 266,000 change of employed vs 186,000 expected and 160,000 anticipated in November made US dollar surge to 1.1070 vs Euro (EUR) and 108.900 to Japanese yen (JPY). Gold dumped by 0.6% to $1467 an ounce just after labor market data were released.

Average hourly earnings were also above expectation at 3.1% year-on-year in November.

US Bureau of Labor Statistics also revised October nonfarm payrolls up to 156,000 from 128,000.

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OPEC+ output cuts could remain ink on paper

06 December 2019 Lysakov Sergey

OPEC+ decision on further cuts could be partially shrugged off by some members. As OPEC+ members gathered in Vienna on Thursday to discuss possible further cuts of crude output by additional 400,000 bpd latest OPEC analysis showed a large oversupply and build-up in inventories in the first half of 2020.

Saudi Arabia and Venezuela proposed even deeper additional cuts by 500,000 bpd to 1.2 mb/d according to the agreement to be running by end of March 2020 with a strict condition of "total compliance".

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Global uncertainty and stalling growth could push gold prices further up in 2020

28 November 2019 Lysakov Sergey

Global economic growth continues to be week despite some signs of recovery. The outlook for 2020 by OECD was recently trimmed to 2.9% with major world economies continue slowdown in a year to come.

Trade tensions between United States and China fueled by geopolitical risks retracting world trade. Central banks throughout the globe tend to lower interest rates or al least likely to maintain it at low levels. Government bonds such as US 10-year Treasuries as alternative safe heaven assets are underperforming inflation with low or even negative yields.

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Global growth seen on slow recovery track

28 November 2019 Lysakov Sergey

Global economy growth loses momentum slowing down to the weakest pace since the Great recession in 2007-2008. Although the are some signs of potential recovery at the end of 2019 uncertainties in trade policies, low public and private investments, and crumbling multilateral order makes sustainable growth fragile.

The Organization of Economic Cooperation and Development (OECD) has notched its outlook from estimated 3% in 2020 to 2,9%. Forecast for Global GDP growth for 2019 remain unchanged at 2.9%.

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Housing and consumer durable goods to look for a FED’s further interest rates actions

27 November 2019 Lysakov Sergey

US Federal Reserve Chair Jerome Powell in his recent speech before members of the Greater Providence Chamber of Commerce painted a bright almost unclouded outlook for the past decade and short-term perspective.

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Digital currencies to turn official. China leads the way

26 November 2019 Lysakov Sergey

People's Bank of China has started a crackdown campaign on digital currency in Shanghai and Shenzhen. Since a legal ban on digital currencies trading was introduced in 2017 most of such "exchanges" moved outside mainland China to Japan or Singapore, even EU and US. The most likely reason for a recent crackdown is to cease any operations in digital currencies to prevent capital flight.

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ECB interest rates short-term change unlikely, unconventional stimulus could dominate

22 November 2019 Lysakov Sergey

A new European Central Bank president Christine Lagarde confirmed she would start a strategic review of ECB's monetary policy to bolster economic growth and bring the euro area inflation closer to a 2% target. She reiterated that ECB's accommodative policy is a key element in supporting domestic demand that should be addressed by all European nations' institutions as a major driver for economic development.

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World surging indebtedness could spin-off a next financial disaster

22 November 2019 Lysakov Sergey

Surging world debt will exceed $255 trillion by the end of 2019 and will continue to rise. According to International monetary fund projections in 2022 general government gross debt in advanced countries will climb to 104.5% of GDP form 103.1% this year. Emerging market and developing countries general government gross debt expected to climb to 60.9% of GDP by the 2022 from 53.3% currently.

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FED rate is likely to be unchanged next 6 months. World major interest rates remain at low levels

20 November 2019 Lysakov Sergey

Federal Reserve System's Federal Open Market Committee (FOMC) due to release its FOMC meeting minutes on Wednesday (19:00 pm GMT). The markets does not expect a major news from it. However, it is vital for every financial institution in the world to understand the future sentiment for monetary policy in United States. The sentiment on the market is positive towards Fed rate unchanged until July 2020 with 43% of investors seeing rates unchanged according to CBOE Target rate probability futures. Vast majority of the investors (99.3% says rates unlikely to change on FOMC December meeting).

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No impeachment issues for the market. Trump likely to hold the office

20 November 2019 Lysakov Sergey

The impeachment inquiry by Democratic majority in the U.S. House of Representative went as an early bird presidential campaign in 2020. Democratic representatives are starving for something that might look like a personal vendetta to an alien President Donald Trump. This inquiry could be considered as a culmination of political confrontation between traditional American political mode and a new assertive way of ruling the country.

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Market focus

  • German factory orders unexpectedly fell in October
  • BOJ's Harada says no need to take additional policy steps
  • Eurozone construction activity continues to grow in November
  • Eurozone GDP up by 0.2% during the third quarter, as expected

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