All posts by Fawad Razaqzada

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…

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…

Gold On Shaky Footing As Dollar Surges To Highest Since 2003

Fawad Razaqzada

Sentiment towards gold remains and grows negative by each passing day. The perceived safe-haven metal’s recent big plunge has been in part due to a sharp improvement in risk appetite, as highlighted for example by the rally in US equity prices. In addition, benchmark global bond yields have been rising, further damaging the appeal of the noninterest-bearing precious metal. But it is the dollar which is exerting the most pressure on the buck-denominated gold, as after all the metal in euro terms is still positive on the week (see the inset). more…

Dollar Shines In An Eventful Week In US Politics

Fawad Razaqzada

Contrary to most analyst predictions, including ourselves, the US dollar looks set to close the week higher after an eventful week in US politics. The greenback has surged higher against most currencies except the British pound, which has been supported by the Bank of England dropping its dovish bias amid concerns about overcooking inflation in the UK. In contrast, the euro, yen, Swiss franc and all the commodity majors have slumped versus the dollar. The Canadian dollar has resumed its downward trend amid slumping oil prices, weak domestic data and on the back of a dovish Bank of Canada. Elsewhere, the Reserve Bank of New Zealand cut interest rates in mid-week and warned of more easing steps due mainly to a strong currency and the kiwi has correspondingly sold off. more…

Could The FTSE Hit New Record Highs?

Fawad Razaqzada

European stock markets have started Friday’s session brightly, extending their advance from the late afternoon rebound on Thursday. The rally has probably taken many people by surprise, although this shouldn’t be the case given that the markets in both the UK and US are still very close to their all-time highs. There is a reason why the markets are still elevated despite all the doom and gloom out there, and it continues to be this: cheap central bank money. Although the Fed looks almost certain to raise rates in December, central banks elsewhere will remain extremely accommodative – not least the Bank of Japan and the Bank of England. The focus will be on the European Central Bank next week and market participants will want to know whether policymakers here have started discussing the prospects of tapering ECB’s QE stimulus programme. If Mario Draghi again denies this and delivers a dovish message then we could see further gains for the European markets. more…

GBP/USD: After The Flash Crash, What Will NFP Do To Cable?

Fawad Razaqzada

Besides form the obvious question of what the actual hell happened to sterling overnight, there are so many other questions marks participants will be asking themselves. Has the pound now bottomed out, what exactly was the overnight “low,” what will the Bank of England do now? The pound’s crash has obviously overshadowed today’s supposed big event: the US non-farm payrolls report. This is scheduled for release shortly and the headline jobs report is expected to come in at around 170 thousand net jobs gained, which, if correct, would be slightly higher than the prior month’s total of 151 thousand. The unemployment rate is expected to have remained unchanged at 4.9% while the average hourly earnings index is seen rising 0.2% month-over-month. A strong set of data would reinforce expectations that the Fed will raise rates in December. more…

OPEC’S Decision Will Likely Boost Oil Prices Further In Short Term

Fawad Razaqzada

The OPEC surprised the market yesterday and actually managed to agree on a production cut, with details to follow in their November meeting. Up to 800,000 barrels of oil per day will potentially be removed from the oversupplied market which would lower the production target for the cartel to a range between 32.5 and 33.0 mb/d. Oil prices surged some 6% in the immediate aftermath of the news, though they have since eased off a tad as traders make a more sober assessment of the whole situation. more…

Silver Shines As Yields, Dollar Dip

Fawad Razaqzada

Precious metals have found strong support over the past couple of days, with gold surging back to $1340 and silver to $20.00 per troy ounce. The US dollar has weakened while benchmark government bond yields have fallen across the board once again. This is mainly due to a slightly more dovish Federal Reserve and as the Bank of Japan announced new set of policy measures aimed at extending its quantitative easing programme in order to overcook inflation. The lower government bond yields have boosted the appetite for racier assets like equities, while at the same time they have made precious metals – which, unlike bonds and stocks, pay no interest or dividend – appear more appealing to investors on a relative basis. more…