Fundamental Analysis 2017.08.11 – Safe Havens Still Growing

Market recap
The market seems to be in risk averse mood, not without reason in lieu of recent events – as a result CHF and JPY as go-to safe-havens continued moving up, as commodity currencies continued slipping. Joining the growth of safe-haven currencies where of course metals silver and gold. Oil experienced and abrupt drop mostly likely due to fundamental data release with the conclusion of the two-day OPEC meeting and US reports noting and increase in refinery output (even though the latest commercial crude reports showed shrinking reserves). Global stocks also saw a slight dip, the stocks that saw a boost where Jamaica and Argentina, Asian markets on the other hand saw a observable dip. The US PPI came in under expectation resulting in bond yield drop. Of course the N. Korean diplomatic fallout is on traders mind, and the dropping prices are proof of this.

William Dudley, New York Fed President, stated that weakening the USD should assist inflation, with the expected period for this affect to take place between 6-10 months – which of course is anything but a sign toward an impending interest rate hike in the near future. He further stated that Fed the US weak inflation rate to see an increase due to the weaker dollar and consistently tightening labor market… The Fed President also mentioned wage inequality an opinion which might actually be the reasons behind Fed futures dropping and the weakening of the dollar. The dollar’s price at the moment is tightly correlated with inflation recovery at the moment – This is why CPI is extremely important

GBP as also experienced a dip after the industrial production came in under forecasts and and the trade deficit continued to grow, even though analyst expected this to shrink. Finally the GBP is definitely not benefiting from the ongoing Brexit negotiations.

Today’s market
EU markets have been quiet for the most part, which inevitably benefits a strong EUR. Japan’s holiday also means that one of Asia’s primary markets was left without news – the only relatively significant news is the German CPI, but considering the stability of the country’s economy in general – it usually goes under most traders’ radar.

US CPI is going to be a noteworthy report on the other hand. Although it can’t be considered a measure or forecaster of Federal inflation targets it manages to gauge inflation rate in a general context. Ultimately the consumer price index and inflation rate count the same metric but just with different means.
The forecast is for an accelerated CPI, even though the core CPI is expected to hold its previous rate.








This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.

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