All posts by Fawad Razaqzada

AUD/USD Rises As US-China Trade War Fears Recede

Fawad Razaqzada

The Australian dollar has been among the strongest of currencies out there today, helped along by a rally in base metal prices. The commodity currency rose in what started out to be a “risk on” day for the markets with global stock indices rising sharply after the US and China backed down from a full-on trade war at the weekend. With China being Australia’s largest trading partner, any positive development for the world’s second largest economy is thus positive for Australia’s export. However, the Italian stock and bond market sell-off held back risk sensitive assets a little, although it wasn’t enough to stop the UK’s FTSE 100 from hitting new all-time highs today. But in the US, the stock markets couldn’t sustain the early rally although the indices were still in the positive territory at the time of writing. Meanwhile the US dollar gave back its earlier gains as the slight risk-off tone in the second half of today’s session supported the likes of the euro, Swiss franc and Japanese yen. Even gold managed to catch a small bid more…

Could BoE Inaction Propel FTSE To Fresh Record?

Fawad Razaqzada

The UK’s FTSE 100 index has had an amazing run of late, outperforming many of its peers. It has been supported above all by a weaker pound after a run of poor economic pointers sharply reduced the probability of a Bank of England rate increase in May. Just a few weeks ago the BoE was widely expected to increase interest rates 25 basis points today, which now looks highly unlikely. As speculators priced out the prospects of an imminent rate increase from the BoE, this weighed heavily on the pound which helped to underpin more…

US Dollar Down On Government Shutdown, But Could It Rebound?

Fawad Razaqzada

The market’s main focus remains fixated on developments in Washington. The dollar has started the new week on the back foot as US politicians failed to break a stalemate on a stopgap bill needed to fund the government at the weekend. As a result, the shutdown has dragged into its third day, raising doubts over a March Federal Reserve rate hike. The uncertainty has also weighed on stocks with US index futures being slightly lower at the time of this writing. The fact that neither the dollar nor the stock markets have sold off heavily yet means investors are probably still hopeful – maybe rightly so – that there will be some sort of more…

GBP/USD Hits New Post-Brexit High As Dollar Extends Drop

Fawad Razaqzada

The big news today is that the dollar’s losses have sharply accelerated, but without any fresh news. The economic calendar is light and US stock markets will be closed in observance of Martin Luther King Day. This hasn’t stopped the Dow futures from melting up another 140 points. It goes to show that in low-volume days like today, it is even harder to resist against a strong trend. The markets simply drift in the trend direction as resting stop orders above (in the case of stock indices) or below the market (in the case of the dollar), attract prices towards them. In dollar’s slipstream, the GBP/USD has hit a new post-Brexit high of more…

Crude: Rallying Oil Prices May Top Out Soon

Fawad Razaqzada

Overnight saw the price of WTI crude hit its best level since May 2015, before falling back a little. Oil prices have hit the ground running at the start of this year, continuing their recovery from the middle of 2017, as global crude stockpiles fell from record high levels and due to good compliance with the production cuts by OPEC and Russia. Given that the production agreement has been extended to the end of 2018 at the OPEC’s last meeting, the market clearly expects crude inventory levels to drop further. But with the OPEC set to review the duration of oil output cuts based on fundamentals at its next meeting in June, there is a possibility they could end the agreement sooner than expected. What’s more, oil prices are now at levels more…

EUR/USD’S Six Month Bull Run May End But Trend May Not

Fawad Razaqzada

After rising for six straight months, the EUR/USD looks set to end September lower, barring an unexpectedly sharp rally at the end of this week. Part of the reason for its sluggish performance can be explained away by a rebounding US dollar, which has recently found support on renewed hawkishness from the Federal Reserve. From the Eurozone, political uncertainty and disappointment that the European Central Bank has so far more…

GBP/USD Stuck Between A Rock And A Hard Place

Fawad Razaqzada

On this day of last week, the pound had rallied by a cool 300 pips against the US dollar as investors welcomed news of a snap election in the UK, announced by UK Prime Minister Theresa May. Market participants apparently came to the conclusion that Theresa May will have a stronger mandate to secure the UK’s EU exit from the EU as she will be able to push back hard deadlines for a trade deal until the next election in 2022, assuming she wins this one. But after that sharp rally, the more…

GBP/USD At Key Level Ahead Of UK Budget

Fawad Razaqzada

The general consensus going into today’s UK budget is that Chancellor Philip Hammond will disappoint and that the GBP/USD may extend its declines towards 1.20. He is well aware of Brexit risks and may thus predict a more turbulent economic outlook. The risk therefore is if he expresses more optimism about the economy and delivers more fiscal spending plans than expected. If that’s the case, the GBP/USD could easily rebound. It is worth pointing out that those who had sold the pair, may cover their positions now, triggering a short-squeeze or relief rally on the cable. There’s some important US economic data coming up as well, so there is even more reason why the sellers may bank profit. more…

Gold Slumps As Dollar Extends Trump, Fed Rally

Fawad Razaqzada

Precious metals have been big victims of the Trump- and now Fed-inspired dollar rally, especially gold. Silver has only just made a lower low relative to last month’s $16.15/20 print, whereas gold is fast approaching its 2015 lows. Thus precious metal bulls may be better off with silver once a bottom is formed, although this could take a while. Conversely, the bears may be better off with gold. Unlike gold, silver has dual usages as both a precious metal and an industrial material, so it tends to do better than the yellow metal when base metals are rising. For now though, both metals are falling and risk sentiment appears be quite positive despite the rising yields and dollar. So far, no one is paying much attention to gold as a hedge against inflation. But this could be something that could help limit the losses for the metal in the coming months. more…

Pound Bruised But Not Broken (Again)

Fawad Razaqzada

The pound has fallen sharply over the past couple of days. It has been among (if not) the worst performer in G10 currencies. As well as uncertainty over how and when the Brexit process will start, the pound has been undermined by weakness in UK data as industrial production in October suffered its worst month since 2012. The currency’s latest drop is not exactly gigantic, but it does represent a sizeable retracement against the recent gains made amid hopes of a ‘soft’ Brexit. I do however think the worst of the selling is over as the Bank of England is no longer looking to cut interest rates again. But it nevertheless remains vulnerable to sharp falls here and there. However against weaker currencies like the Japanese yen, it may be able to stage a comeback soon. more…