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COT Currency Speculators raised British Pound Sterling bearish bets for 10th week

By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter

Here are the latest charts and statistics for this week’s Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC).

The latest COT data is updated through Tuesday May 10th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar.

Highlighting the COT currency data this week was the rise in bearish bets for the British pound sterling currency futures contracts. Pound speculators have raised their bearish bets for a tenth consecutive week this week and for the eleventh time out of the past twelve weeks. Over the past ten-week time-frame, pound bets have dropped by a total of -79,261 contracts, going from -337 net positions on March 1st to a total of -79,598 net positions this week. The deterioration in speculator sentiment has now pushed the pound net position to the most bearish standing of the past one hundred and thirty-seven weeks, dating back to September 24th of 2019.

Pound sterling sentiment has been hit by a recent slowing economy as the UK GDP declined by 0.1 percent in March after flat growth in February. Also, weighing on the UK economy is the war in Ukraine that has sharply raised inflation in the country (and elsewhere) and which could see the UK economy with the lowest growth rate among G7 countries in 2023, according to the IMF.

Overall, the currencies with higher speculator bets this week were the Euro (22,907 contracts), US Dollar Index (1,705 contracts), Bitcoin (315 contracts) and the Mexican peso (2,102 contracts).

The currencies with declining bets were the Japanese yen (-9,660 contracts), Australian dollar (-13,198 contracts), Brazil real (-1,010 contracts), Swiss franc (-1,856 contracts), British pound sterling (-5,785 contracts), New Zealand dollar (-6,386 contracts), Canadian dollar (-14,436 contracts), Russian ruble (-263 contracts) and the Mexican peso (2,102 contracts).


Speculator strength standings for each Commodity where strength index is current net position compared to past three years, above 80 is bullish extreme, below 20 is bearish extreme OI Strength = Current Open Interest level compared to last 3 years range Spec Strength = Current Net Speculator level compared to last 3 years range Strength Move = Six week change of Spec Strength


Data Snapshot of Forex Market Traders | Columns Legend
May-10-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index
USD Index 57,556 84 34,776 86 -37,174 13 2,398 43
EUR 705,046 84 16,529 40 -43,026 64 26,497 18
GBP 264,594 80 -79,598 17 95,245 86 -15,647 23
JPY 247,278 87 -110,454 1 124,927 97 -14,473 24
CHF 51,282 37 -15,763 40 29,819 69 -14,056 16
CAD 151,009 31 -5,407 38 2,939 67 2,468 35
AUD 153,209 47 -41,714 46 47,126 54 -5,412 39
NZD 56,235 56 -12,996 49 16,874 56 -3,878 7
MXN 153,858 28 16,725 34 -20,866 64 4,141 61
RUB 20,930 4 7,543 31 -7,150 69 -393 24
BRL 61,450 55 40,778 90 -42,031 10 1,253 79
Bitcoin 10,841 57 703 100 -789 0 86 15

Open Interest is the amount of contracts that were live in the marketplace at time of data.


US Dollar Index Futures:

US Dollar Index Forex Futures COT ChartThe US Dollar Index large speculator standing this week came in at a net position of 34,776 contracts in the data reported through Tuesday. This was a weekly lift of 1,705 contracts from the previous week which had a total of 33,071 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 85.8 percent. The commercials are Bearish-Extreme with a score of 12.8 percent and the small traders (not shown in chart) are Bearish with a score of 42.8 percent.

US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS
– Percent of Open Interest Longs: 86.6 3.2 8.6
– Percent of Open Interest Shorts: 26.2 67.8 4.5
– Net Position: 34,776 -37,174 2,398
– Gross Longs: 49,864 1,837 4,970
– Gross Shorts: 15,088 39,011 2,572
– Long to Short Ratio: 3.3 to 1 0.0 to 1 1.9 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct): 85.8 12.8 42.8
– Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index: 6.6 -3.4 -19.3

 


Euro Currency Futures:

Euro Currency Futures COT ChartThe Euro Currency large speculator standing this week came in at a net position of 16,529 contracts in the data reported through Tuesday. This was a weekly increase of 22,907 contracts from the previous week which had a total of -6,378 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 40.1 percent. The commercials are Bullish with a score of 63.8 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 18.3 percent.

EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS
– Percent of Open Interest Longs: 32.4 53.3 12.0
– Percent of Open Interest Shorts: 30.0 59.4 8.3
– Net Position: 16,529 -43,026 26,497
– Gross Longs: 228,230 376,043 84,921
– Gross Shorts: 211,701 419,069 58,424
– Long to Short Ratio: 1.1 to 1 0.9 to 1 1.5 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct): 40.1 63.8 18.3
– Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index: -1.5 1.2 0.9

 


British Pound Sterling Futures:

British Pound Sterling Futures COT ChartThe British Pound Sterling large speculator standing this week came in at a net position of -79,598 contracts in the data reported through Tuesday. This was a weekly fall of -5,785 contracts from the previous week which had a total of -73,813 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 16.6 percent. The commercials are Bullish-Extreme with a score of 86.0 percent and the small traders (not shown in chart) are Bearish with a score of 23.2 percent.

BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS
– Percent of Open Interest Longs: 11.1 79.6 7.6
– Percent of Open Interest Shorts: 41.2 43.6 13.5
– Net Position: -79,598 95,245 -15,647
– Gross Longs: 29,469 210,627 20,157
– Gross Shorts: 109,067 115,382 35,804
– Long to Short Ratio: 0.3 to 1 1.8 to 1 0.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct): 16.6 86.0 23.2
– Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index: -28.5 25.6 -7.7

 


Japanese Yen Futures:

The Japanese Yen large speculator standing this week came in at a net position of -110,454 contracts in the data reported through Tuesday. This was a weekly decline of -9,660 contracts from the previous week which had a total of -100,794 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.8 percent. The commercials are Bullish-Extreme with a score of 96.6 percent and the small traders (not shown in chart) are Bearish with a score of 24.0 percent.

JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS
– Percent of Open Interest Longs: 4.5 86.2 8.0
– Percent of Open Interest Shorts: 49.2 35.7 13.9
– Net Position: -110,454 124,927 -14,473
– Gross Longs: 11,196 213,084 19,811
– Gross Shorts: 121,650 88,157 34,284
– Long to Short Ratio: 0.1 to 1 2.4 to 1 0.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct): 0.8 96.6 24.0
– Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index: -5.1 0.0 16.7

 


Swiss Franc Futures:

The Swiss Franc large speculator standing this week came in at a net position of -15,763 contracts in the data reported through Tuesday. This was a weekly fall of -1,856 contracts from the previous week which had a total of -13,907 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 39.8 percent. The commercials are Bullish with a score of 69.2 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 15.5 percent.

SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS
– Percent of Open Interest Longs: 9.2 74.6 16.1
– Percent of Open Interest Shorts: 40.0 16.5 43.5
– Net Position: -15,763 29,819 -14,056
– Gross Longs: 4,727 38,258 8,271
– Gross Shorts: 20,490 8,439 22,327
– Long to Short Ratio: 0.2 to 1 4.5 to 1 0.4 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct): 39.8 69.2 15.5
– Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index: -7.7 8.0 -7.6

 


Canadian Dollar Futures:

Canadian Dollar Forex Futures COT ChartThe Canadian Dollar large speculator standing this week came in at a net position of -5,407 contracts in the data reported through Tuesday. This was a weekly fall of -14,436 contracts from the previous week which had a total of 9,029 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 38.3 percent. The commercials are Bullish with a score of 66.9 percent and the small traders (not shown in chart) are Bearish with a score of 34.7 percent.

CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS
– Percent of Open Interest Longs: 25.6 49.8 21.8
– Percent of Open Interest Shorts: 29.2 47.9 20.1
– Net Position: -5,407 2,939 2,468
– Gross Longs: 38,679 75,215 32,880
– Gross Shorts: 44,086 72,276 30,412
– Long to Short Ratio: 0.9 to 1 1.0 to 1 1.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct): 38.3 66.9 34.7
– Strength Index Reading (3 Year Range): Bearish Bullish Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index: -4.0 14.5 -29.0

 


Australian Dollar Futures:

Australian Dollar Forex Futures COT ChartThe Australian Dollar large speculator standing this week came in at a net position of -41,714 contracts in the data reported through Tuesday. This was a weekly decrease of -13,198 contracts from the previous week which had a total of -28,516 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 46.2 percent. The commercials are Bullish with a score of 54.0 percent and the small traders (not shown in chart) are Bearish with a score of 39.2 percent.

AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS
– Percent of Open Interest Longs: 24.1 59.9 13.1
– Percent of Open Interest Shorts: 51.3 29.1 16.7
– Net Position: -41,714 47,126 -5,412
– Gross Longs: 36,869 91,731 20,131
– Gross Shorts: 78,583 44,605 25,543
– Long to Short Ratio: 0.5 to 1 2.1 to 1 0.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct): 46.2 54.0 39.2
– Strength Index Reading (3 Year Range): Bearish Bullish Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index: 7.3 4.7 -34.4

 


New Zealand Dollar Futures:

New Zealand Dollar Forex Futures COT ChartThe New Zealand Dollar large speculator standing this week came in at a net position of -12,996 contracts in the data reported through Tuesday. This was a weekly fall of -6,386 contracts from the previous week which had a total of -6,610 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 49.5 percent. The commercials are Bullish with a score of 56.4 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 7.4 percent.

NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS
– Percent of Open Interest Longs: 27.0 68.5 3.9
– Percent of Open Interest Shorts: 50.1 38.5 10.8
– Net Position: -12,996 16,874 -3,878
– Gross Longs: 15,203 38,541 2,216
– Gross Shorts: 28,199 21,667 6,094
– Long to Short Ratio: 0.5 to 1 1.8 to 1 0.4 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct): 49.5 56.4 7.4
– Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index: -20.4 26.0 -54.4

 


Mexican Peso Futures:

Mexican Peso Futures COT ChartThe Mexican Peso large speculator standing this week came in at a net position of 16,725 contracts in the data reported through Tuesday. This was a weekly advance of 2,102 contracts from the previous week which had a total of 14,623 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 34.5 percent. The commercials are Bullish with a score of 64.1 percent and the small traders (not shown in chart) are Bullish with a score of 60.6 percent.

MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS
– Percent of Open Interest Longs: 41.5 53.1 4.2
– Percent of Open Interest Shorts: 30.7 66.7 1.5
– Net Position: 16,725 -20,866 4,141
– Gross Longs: 63,921 81,735 6,467
– Gross Shorts: 47,196 102,601 2,326
– Long to Short Ratio: 1.4 to 1 0.8 to 1 2.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct): 34.5 64.1 60.6
– Strength Index Reading (3 Year Range): Bearish Bullish Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index: 10.6 -10.1 -3.5

 


Brazilian Real Futures:

Brazil Real Futures COT ChartThe Brazilian Real large speculator standing this week came in at a net position of 40,778 contracts in the data reported through Tuesday. This was a weekly lowering of -1,010 contracts from the previous week which had a total of 41,788 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 90.5 percent. The commercials are Bearish-Extreme with a score of 10.3 percent and the small traders (not shown in chart) are Bullish with a score of 79.4 percent.

BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS
– Percent of Open Interest Longs: 79.5 15.4 5.0
– Percent of Open Interest Shorts: 13.1 83.8 3.0
– Net Position: 40,778 -42,031 1,253
– Gross Longs: 48,835 9,454 3,070
– Gross Shorts: 8,057 51,485 1,817
– Long to Short Ratio: 6.1 to 1 0.2 to 1 1.7 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct): 90.5 10.3 79.4
– Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index: -1.8 3.5 -20.6

 


Russian Ruble Futures:

Russian Ruble Futures COT ChartThe Russian Ruble large speculator standing this week came in at a net position of 7,543 contracts in the data reported through Tuesday. This was a weekly fall of -263 contracts from the previous week which had a total of 7,806 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 31.2 percent. The commercials are Bullish with a score of 69.1 percent and the small traders (not shown in chart) are Bearish with a score of 23.9 percent.

RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS
– Percent of Open Interest Longs: 36.6 60.6 2.8
– Percent of Open Interest Shorts: 0.5 94.7 4.7
– Net Position: 7,543 -7,150 -393
– Gross Longs: 7,658 12,679 593
– Gross Shorts: 115 19,829 986
– Long to Short Ratio: 66.6 to 1 0.6 to 1 0.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct): 31.2 69.1 23.9
– Strength Index Reading (3 Year Range): Bearish Bullish Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index: -15.6 16.7 -18.8

 


Bitcoin Futures:

Bitcoin Crypto Futures COT ChartThe Bitcoin large speculator standing this week came in at a net position of 703 contracts in the data reported through Tuesday. This was a weekly gain of 315 contracts from the previous week which had a total of 388 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 14.9 percent.

BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS
– Percent of Open Interest Longs: 81.1 2.1 9.1
– Percent of Open Interest Shorts: 74.6 9.4 8.3
– Net Position: 703 -789 86
– Gross Longs: 8,789 227 989
– Gross Shorts: 8,086 1,016 903
– Long to Short Ratio: 1.1 to 1 0.2 to 1 1.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct): 100.0 0.0 14.9
– Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index: 19.0 -24.9 -13.6

 


Article By InvestMacroReceive our weekly COT Reports by Email

*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets.

The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.

Gold Suffers Its Fourth Straight Week Of Declines

By Ino.com

Editor’s Note: I will be speaking at an upcoming conference The Vancouver Resource Investment Conference in British Columbia on May 17 and 18. For more information please click the link above.

Gold opened at $1977 on Monday, April 18, and this would mark the beginning of four consecutive weekly declines. As of 5:10 PM EDT gold futures basis, the most active June 2022 Comex contract is fixed at $1810.30 after factoring in today’s decline of $14.30 or 0.78%. Today’s decline in gold occurred without the benefit of dollar strength. The dollar index declined by 0.36% and is currently fixed at 104.515

Kitco Gold Index (KGX)

The image above is a screen-print of the KGX (Kitco Gold Index) which was taken at 4:37 PM EDT. At that time spot gold was fixed at $1810.80 after factoring in a decline of $10.70. Market participants were active sellers resulting in a $14.30 price decline. Dollar weakness provided mild tailwinds adding $3.60 (+0.20%) in value.

The decline this week was the strongest percentage drawdown of the four weeks losing 3.87%. Considering that over the last four weeks gold’s value has decreased by 8.44%, almost half of that decline occurred this week. This correction devalued the price of gold by $167 per ounce, with $73 of that decline occurring this week.

Gold Update - DX Weekly Chart

Over the last four weeks, a major factor pressuring gold prices lower has been dollar strength. The dollar has gained value for the last six consecutive weeks. Over the last four trading weeks, the U.S. dollar has gained 4.15% in value. This means that dollar strength accounted for just under one-half of gold’s price decline.

Gold Update - DX Bi-Monthly Chart

The dollar has been trading in a defined range since the beginning of 2017. In January 2017 the dollar index opened at 102.80 and traded to a high of 103. 78 becoming the first instance of dollar strength at this level since 2003. Since 2017 the dollar index has traded to this level on three occasions.

Both the 2017 top as well as the second instance which occurred in March 2020 created a double top. In both instances, dollar strength peaked at these levels resulting in a price correction that followed these tops. This month the dollar not only challenged the highs created during the double top but effectively closed above them on a daily, weekly, and monthly chart.

The dollar index declined today by – 0.36%. However, the dollar had a strong weekly gain. Currently, the dollar index is fixed at 104.515 and the last time the dollar was this strong was the fourth quarter of 2002.

Yesterday I addressed that recent price changes in the dollar and gold have been headlined driven based upon fundamental events. Because technical studies by nature are lagging indicators there is an inherent disconnect. I was blessed to be mentored by two great market technicians one being Larry Williams. He told me a story that illustrated the shortcoming of only using technical indicators.

To paraphrase: A market technician is analogous to someone standing at the stern of a boat and using the wake from the propeller to indicate the direction the ship was headed. While it indicated where the boat had been, only the captain knows when he will turn the wheel.

In this instance, the Federal Reserve is at the helm attempting to steer the ship through a storm brought on by rampant inflation

For those who would like more information simply use this link.

Wishing you, as always good trading,
Gary S. Wagner
The Gold Forecast

By Ino.com – See our Trader Blog, INO TV Free & Market Analysis Alerts

Source: Gold Suffers Its Fourth Straight Week Of Declines

 

The Inflation-Yield Connection and Its Impact on Forex Markets

By Orbex

This week we had a bit of a worrying sign in the markets that has gone largely unnoticed in the major financial news outlets. The yield on the ten-year US Treasury blipped above 3.0% and came back down. It might seem a bit arcane or not particularly relevant, but that bond in particular is the “benchmark” for US interest rates. It has only been above 3.0% twice in the last decade, and each time was followed by turmoil in the markets.

Of course, the past doesn’t always repeat itself in the markets. And we kind of already have enough turmoil. The bond yield rose initially because the Fed hiked rates, but then fell back after the CPI data came in hotter than expected. Basically, investors reassessed their expectations of whether the Fed will manage to complete its hiking cycle before the economy faces a major downturn.

What’s going on?

The key here is that inflation and bond yields are intimately connected, because of how the banking system works. Remember, a bond yield basically represents the annual “profit” a bondholder can expect on the asset considering its price and interest rate. So, bond yields go up when people expect interest rates to rise, and go down when people expect interest rates to be lower.

The thing is that the benchmark is used as a reference when determining the price that banks loan money. And this loaning of money is what “creates” the money in circulation. In the current monetary system, banks are the ones who “print” money by loaning it out and backing it up with debt.

How it works

Basically, when you borrow money from the bank, the bank just creates the money in your account. Separately, the bank creates a “security” that represents the value of the loan. Banks can then negotiate those securities on the market for a lower interest rate than what you are paying. That’s how banks make money.

But it also means that as bond yields rise, the interest rate charged by banks also increases. The higher cost of loans means less people can afford to borrow money. And if banks are issuing less loans, then the amount of money in circulation stops increasing and eventually starts to shrink.

Is it 2018 again?

This was the problem about four years ago when the Fed was raising rates the last time. Interest rates rose above 3.0%, and the cost of credit increased enough that loan issuance started to fall off. The Fed had to quickly reverse course to get interest rates down and prevent the economy from sputtering.

Of course, inflation is much higher now, meaning that there is a lot more money in circulation. It might take a significantly higher interest rate to slow down loan creation enough to get inflation back under control. Meaning that the dollar could be set to strengthen quite a bit, as bond yields are key drivers of the value of a currency.

The downside is that if interest rates go too high and too much money is pulled from the economy, well, that’s what we call a recession.

Trading the news requires access to extensive market research – and that’s what we do best. Open your Orbex account now.


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Orbex is a fully licensed broker that was established in 2011. Founded with a mission to serve its traders responsibly and provides traders with access to the world’s largest and most liquid financial markets. www.orbex.com

Could Mijem’s New Scholarship Finally Get Gen Z Into Crypto?

Source: Streetwise Reports   05/10/2022 

With today’s college students scrambling to save money, technology firm Mijem is using $5k crypto scholarships to drive followers to its buy-and-sell marketplace. Here’s how it all works.

Gen Z

Mijem Newcomm Tech Inc. (MJEM:CSE), a Canadian social media company, is coming for Facebook Marketplace and Kijiji with its growing app. Established in 2014, the technology company offers a buy-and-sell marketplace aimed at Generation Z students in the United States and Canada. The company’s growth slowed during the pandemic when many campuses switched to remote learning. While college and university campus activity slowed down, Mijem took the opportunity to build new features in its app and subsequently completed its IPO in January 2022.  

Hybrid Tuition Scholarship

As tuition costs and student debts rise, Mijem has launched an unconventional tuition program. “We’re offering a scholarship giveaway that combines dollars and cryptocurrency. The winner will receive $5,000—half of it in dollars and the other half in Bitcoin SV (BSV),” Laurie Freudenberg, chief executive officer, shared in an interview with Streetwise Reports.

Cryptocurrency reward programs are gaining in popularity. Shake Shack announced a Bitcoin rewards program to attract younger customers earlier this year.

With an approximate market value of $1.5 billion US, BSV may not be as well known as cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), or Dogecoin (DOGE).

“BSV is perfect for this scholarship giveaway because it has a lower environmental impact than other cryptocurrencies, which is important to Gen Z,” Freudenberg shared in an interview.

The resource impact of cryptocurrencies has been controversial in recent years. Business Insider has estimated that mining Bitcoin produces an estimated 40 billion pounds of carbon emissions. In comparison, Google Cloud produced approximately 1,322,773 pounds of carbon emissions.   

The company offers two scholarships in its contest: one to students based in the United States and one to students in Canada. Announced in April 2022, the deadline to apply for the scholarship is June 13. To qualify for the contest, students must meet the eligibility criteria and be starting or returning to college or university in the summer or fall of 2022.

Loyalty Program With Cryptocurrency

In addition, the business has a loyalty program to encourage transactions with cryptocurrency. “For every $1 US transacted through Mijem’s platform, the loyalty program rewards both the buyer and the seller with 1 point each. The points can be converted at the user’s option to Bitcoin SV (BSV) and deposited into their integrated digital wallet,” Freudenberg explained. 

The business charges a transaction fee of 12.5% on each transaction made through the platform. 10.5% percent of the fee goes to the company as revenue, with the remainder of the fee funding the company’s loyalty program.

Cryptocurrency reward programs are gaining in popularity. Shake Shack announced a Bitcoin rewards program to attract younger customers earlier this year. In addition, several credit cards offer cryptocurrency rewards in the US, including BlockFi Rewards Visa Signature Card and the Gemini Credit Card.

Helping Students Buy and Sell

Mijem’s core business offering is a buy-and-sell marketplace for students. “The most popular item sold on the platform is textbooks. It’s a huge expense for students, even in a digital world,” Freudenberg commented. Other popular items in the market include electronics, clothing, and household goods.

Mijem earns revenue by charging a transaction fee on each sale completed on the platform. The app itself is free for students to download. App users can make payments through the app or pay outside the app. 

Debt and Affordability Concerns Drive Interest In Mijem

Every dollar saved by using Mijem means less debt for Gen Z. That’s significant because of the high level of student debt. According to the Federal Reserve, the average college debt is $32,731. In contrast, the National Association of Colleges and Employers found that the average college graduate’s starting salary is $55,260. 

Mijem also helps users list and find sub-leases for apartments. That capability is significant because rent prices have risen to historic highs in many cities. For example, the average rent for a one-bedroom apartment in New York is $3,450, a 38% increase compared to the previous year. 

In Toronto, Canada’s largest city, low vacancy rents contribute to higher rents. In the first quarter of 2022, the average rent for a one-bedroom apartment in Toronto was $2,145, a year-over-year increase of 17.8%. These economic pressures may be expected to drive students to seek ways to save money by using services like Mijem.

Building a Community App Experience

There is a limit to how often students will buy and sell textbooks, furnishings, and other products. Mijem has invested in adding additional community features to maintain and grow user engagement. 

Mijem has significant growth potential. Today, the company has 91 Canadian schools (i.e., about 33% of Canadian post-secondary institutions) and 1419 American schools (i.e., 36% of American institutions) with users on the app. The three largest schools by users are the University of Buffalo, the University of Waterloo, and Wilfrid Laurier University.

While the company has focused on students, the company does not require a school email address to sign up. Users can join several communities, including urban areas (e.g., the Toronto community) and academic-based communities (e.g., the University of Toronto).

Business Model

Seasonality is a significant factor in the Mijem business model. “App usage often increases at certain times of the year like August and September when students return to school,” Freudenberg commented. The seasonality trend is driven by students seeking housing, buying textbooks for courses, and equipping their accommodations. 

Maintaining student engagement and app activity levels during off-peak periods such as June and July is a challenge for the company’s business model. However, this limitation may be partially mitigated by the growing popularity of the summer semester and Mijem’s loyalty program.

 

Disclosures

1) Bruce Harpham compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor/employee. They or members of their household own securities of the following companies mentioned in the article: None.  They or members of their household are paid by the following companies mentioned in this article: None. Their company has a financial relationship with the following companies referred to in this article: None.

2) As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Mijem Newcomm Tech Inc. Please click here for more information. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.

3) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional, and any action a reader takes as a result of the information presented here is their own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice, and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services, or securities of any company mentioned on Streetwise Reports.

4) From time to time, Streetwise Reports LLC and its directors, officers, employees, or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in the securities mentioned. Directors, officers, employees, or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Mijem Newcomm Tech Inc., a company mentioned in this article.

The Gargantuan Task Of Replacing Russian Oil

By ValueWalk.com 

The economic sanctions against Russia continue, and so do the drastic changes that may be generated in the global economy. With the head of the European Commission, Ursula von der Leyen, reinstating the European Union’s urge to completely renounce Russian oil in the next six months —and before the end of the year, products derived from Russian crude oil— the global market is in the dark.

How would the global economy without Russian oil look like?

Sanctions Background

The European Commission’s announcement is full of complexities, not only because it would mean the most drastic economic sanction against Russia —it is estimated that 60% of Russian oil exports are for OECD countries in Europe— but also because several countries in the block are highly dependent on Russian oil to keep their industries running.

The new package of measures must be unanimously approved by the Member States in order to be executed, since questions such as where the crude oil will come from once the Russian supply ceases completely and what impact this will have on prices, must be taken into account.

According to an S&P Global report updated on May 10, “The conflict and its economic consequences have since displaced more than 2 million barrels per day from Russia. The EU’s oil sanctions are likely to reshape global energy flows as well as increase energy price pressures across the region.”

Critical Role

Stats from the International Energy Agency (IEA) in January this year show that Russian oil production reached 11.3 million barrels per day (mb/d), only behind Saudi Arabia and the U.S. —the largest producers on the planet.

However, the Russian industry has managed to establish itself as the largest exporter of refined oil to global markets and the second —after Saudi Arabia— in crude oil international sales.

Now, according to information from the IEA, 60% of Russian oil exports go to OECD countries in Europe —20% go to China— which includes countries like Germany or France.

IEA figures show that of the total German oil purchases, 30% comes from the Russian industry —the share reaches 80% in countries like Finland, for example.

Russia provides around 40% of the gas Europe consumes and accounts for 16% of the world’s supply. In addition, it is the third-largest oil producer in the world; before the war broke out in Ukraine, it is estimated that Russian exports of crude oil and refined products covered around 7.5% of world oil demand.

For the U.S., Russian oil accounted for about 3% of all crude shipments that reached that country last year, according to data from the US Energy Information Administration. Before the war in Ukraine, U.S. imports of Russian crude in 2022 were falling at the slowest annual pace since 2017, according to the intelligence firm Kpler.

Outlook

Replacing Russian oil is a tough, slow task, as not many nations can fill in and supply part of Russia’s quota, both on a global scale and from a market perspective.

First calculations by the International Energy Agency, OPEC, and private consulting companies point to countries such as Saudi Arabia, the United Arab Emirates, and Kuwait being capable of quickly answering the global demand for more oil amid the current crisis.

According to the most optimistic estimates, Iran and Venezuela could add over 1.5 million barrels per day, should geopolitical and logistical issues be overcome.

As for Iran, the nuclear agreement with Tehran would need reworking to lift restrictions on trade in Iranian crude. In the case of Venezuela, billions of dollars are needed, in addition to months to prep up the country’s oil infrastructure.

So, substituting Russian oil seems a gargantuan task in a period when prices could continue to rise. This would cause inflation to continue to rise in countries that have nothing to do with the war in Ukraine.

By ValueWalk.com

 

New ETFs You May Want To Own

By Ino.com

– New ETFs are popping up all the time. This is partially due to the ease of the process of opening a new product but largely because investors are looking for new ways to play different emerging trends and new technologies. Of course, it’s unlikely all the new ETF options will last the test of time; just look at how many ETFs close each year, but that doesn’t stop fund managers from opening new ones like it’s going out of style. I guess the thinking is, ‘throw as many things at the board and see what sticks.’

But from an investor’s point of view, it’s not costing you anything unless you invest in something that fails, and it gives us a lot more options to choose from. So with that in mind, let’s take a look at a few of the newer ETFs to hit the market; perhaps you may find one interesting enough to invest in or at least follow.

The first one that I would like to highlight is the iShares Emergent Food and AgTech Multisector ETF (IVEG). The fund will invest in companies that focus on agriculture technology, alternative proteins, nutritional innovation and safety, and sustainable food production and packaging. For the fund to hold a company, it must derive revenues from one of those themes; they also must expect to see profits from one of the themes increase by at least 5% during the coming 5-year period. The fund will have an expense ratio of 0.47%.

From 2010 to 2050, food demand is expected to increase by 56% worldwide. Furthermore, it is believed that 34% of global emissions are caused by food production. These two figures point toward some big changes in the food and agricultural industries in the coming decades. We may be early today, especially since this is not an industry that is known to change quickly, but it is hard to deny the fact that it is ripe for change in the coming years.

Another interesting one is the Invesco Electric Vehicle Metals Commodity Strategy No K-1 ETF (EVMT). This ETF focuses on gaining exposure to iron, copper, aluminum, nickel, and cobalt through a combination of futures contracts and commodity-linked ETFs. It will avoid being labeled as a commodity pool, which will allow it to have different tax status from other commodity-focused ETFs. The fund will have an expense ratio of 0.59% for the first roughly year and a half.

The demand boom we are seeing for EVs around the world is likely only going to grow in the coming years, and this is sort of a back door way to play the EV trade without trying to cherry pick which companies are going to make it and which ones will fade out. These materials will be required by all the companies trying to make EVs, and thus, these commodities will likely only move higher in price with time. The only question is, can they move high enough, quickly enough, so that the futures contracts don’t deteriorate and erode profits.

And finally, let’s take a look at the new AdvisorShares Drone Technology ETF (UAV). UAV focuses on companies that derive at least half their revenue or profits from the manufacturing of drones or the development of related technologies. It primarily focuses on US-based companies.

If you have been investing long enough, you remember when drones and this technology were all the hype a few years ago. This is the second drone-focused ETF; the first was launched in 2016 and failed. Part of this was fueled by Amazon.com Inc. (AMZN) announcing that they were trying to figure out ‘last mile delivery’ using drones. Other delivery services have also talked about trying to do this, but unfortunately, no one has figured it out enough to roll out a nationwide program. Unfortunately, it hasn’t happened yet for those working on it, but perhaps fortunate for those of us who may be interested in investing in this space prior to it really taking off, but after the initial pop and fade.

Drones are already being used for military applications, photography, e-sports, and just for enjoyment. Which is all good because the concept is sound, and the businesses in this industry are producing good products. But, the real money won’t flow in until drones can and are being used on a more commercial basis. So, investing in this industry today is risky but could offer big upside.

Matt Thalman
INO.com Contributor – ETFs
Follow me on Twitter @mthalman5513

Disclosure: This contributor did not hold a position in any investment mentioned above at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

By Ino.com – See our Trader Blog, INO TV Free & Market Analysis Alerts

Source: New ETFs You May Want To Own

Electric eels inspired the first battery two centuries ago and now point a way to future battery technologies

By Timothy J. Jorgensen, Georgetown University 

As the world’s need for large amounts of portable energy grows at an ever-increasing pace, many innovators have sought to replace current battery technology with something better.

Italian physicist Alessandro Volta tapped into fundamental electrochemical principles when he invented the first battery in 1800. Essentially, the physical joining of two different materials, usually metals, generates a chemical reaction that results in the flow of electrons from one material to the other. That stream of electrons represents portable energy that can be harnessed to generate power.

The first materials people employed to make batteries were copper and zinc. Today’s best batteries – those that produce the highest electrical output in the smallest possible size – pair the metal lithium with one of several different metallic compounds. There have been steady improvements over the centuries, but modern batteries rely on the same strategy as that of Volta: pair together materials that can generate an electrochemical reaction and snatch the electrons that are produced.

But as I describe in my book “Spark: The Life of Electricity and the Electricity of Life,” even before humanmade batteries started generating electric current, electric fishes, such as the saltwater torpedo fish (Torpedo torpedo) of the Mediterranean and especially the various freshwater electric eel species of South America (order Gymnotiformes) were well known to produce electrical outputs of stunning proportions. In fact, electric fishes inspired Volta to conduct the original research that ultimately led to his battery, and today’s battery scientists still look to these electrifying animals for ideas.

Copying the eel’s electric organ

Prior to Volta’s battery, the only way for people to generate electricity was to rub various materials together, typically silk on glass, and to capture the resulting static electricity. This was neither an easy nor practical way to generate useful electrical power.

Volta knew electric fishes had an internal organ specifically devoted to generating electricity. He reasoned that if he could mimic its workings, he might be able to find a novel way to generate electricity.

The electric organ of a fish is composed of long stacks of cells that look very much like a roll of coins. So Volta cut out coinlike disks from sheets of various materials and started stacking them, in different sequences, to see if he could find any combination that would produce electricity. These stacking experiments kept yielding negative results until he tried pairing copper disks with zinc ones, while separating the stacked pairs with paper disks wetted with saltwater.

This sequence of copper-zinc-paper fortuitously produced electricity, and the electrical output was proportionate to the height of the stack. Volta thought he had uncovered the secret of how eels generate their electricity and that he had actually produced an artificial version of the electric organ of fish, so he initially called his discovery an “artificial electric organ.” But it was not.

What really makes eels electrifying

Scientists now know the electrochemical reactions between dissimilar materials that Volta discovered have nothing to do with the way an electric eel generates its electricity. Rather, the eel uses an approach similar to the way our nerve cells generate their electrical signals, but on a much grander scale.

Specialized cells within the eel’s electric organ pump ions across a semipermeable membrane barrier to produce an electrical charge difference between the inside versus the outside of the membrane. When microscopic gates in the membrane open, the rapid flow of ions from one side of the membrane to the other generates an electrical current. The eel is able to simultaneously open all of its membrane gates at will to generate a huge jolt of electricity, which it unleashes in a targeted fashion upon its prey.

Electric eels don’t shock their prey to death; they just electrically stun it before attacking. An eel can generate hundreds of volts of electricity (American household outlets are 110 volts), but the eel’s voltage does not push enough current (amperage), for a long enough time, to kill. Each electric pulse from an eel lasts only a couple thousandths of a second and delivers less than 1 amp. That’s just 5% of household amperage.

This is similar to how electric fences work, delivering very short pulses of high-voltage electricity, but with very low amperage. They thus shock but do not kill bears or other animal intruders that try to get through them. It is also similar to a modern Taser electroshock weapon, which works by quickly delivering an extremely high-voltage pulse (about 50,000 volts) carrying very low amperage (just a few milliamps).

Modern attempts to mimic the eel

Like Volta, some modern electrical scientists searching to transform battery technology find their inspiration in electric eels.

A team of scientists from the United States and Switzerland is currently working on a new type of battery inspired by eels. They envision that their soft and flexible battery might someday be useful for internally powering medical implants and soft robots. But the team admits they have a long way to go. “The electric organs in eels are incredibly sophisticated; they’re far better at generating power than we are,” lamented Michael Mayer, a team member from the University of Fribourg. So, the eel research continues.

In 2019, the Nobel Prize in Chemistry was awarded to the three scientists who developed the lithium-ion battery. In conferring the award, the Royal Swedish Academy of Sciences asserted that the awardees’ work had “laid the foundation of a wireless, fossil fuel-free society.”

The “wireless” part is definitely true, since lithium-ion batteries now power virtually all handheld wireless devices. We’ll have to wait and see about the “fossil fuel-free society” claim, because today’s lithium-ion batteries are recharged with electricity often generated by burning fossil fuels. No mention was made of the contributions of electric eels.

Later that same year, though, scientists from the Smithsonian Institution announced their discovery of a new South American species of electric eel; this one is notably the strongest known bioelectricity generator on Earth. Researchers recorded the electrical discharge of a single eel at 860 volts, well above that of the previous record-holding eel species, Electrophorus electricus, that clocked in at 650 volts, and 200-fold higher that the top voltage of a single lithium-ion battery (4.2 volts).

Just as we humans try to congratulate ourselves on the greatness of our latest portable energy source, the electric eels continue to humble us with theirs.The Conversation

About the Author:

Timothy J. Jorgensen, Director of the Health Physics and Radiation Protection Graduate Program and Professor of Radiation Medicine, Georgetown University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 

Mid-Week Technical Outlook: Movers & Shakers

By ForexTime

– Global sentiment brightened on Wednesday with equities rebounding after a rally in technology companies helped reverse most of the losses on Wall Street overnight.

We already knew this would be an explosively volatile week for financial markets thanks to speeches from numerous Fed officials, ongoing geopolitical risks, and anticipation ahead of the US inflation report. Since Monday, there have been some significant movements with the dollar rallying to levels not seen in 20 years! Oil prices closed over 6% lower on Monday while gold secured a daily close under the $1855 support! There was some action in the FX space, with commodity currencies like the Australian Dollar and New Zealand dollar depreciating across the board.

With just less than one hour until the latest US CPI report is published, here and some technical setups we have our eyes on.

Dollar Index hovers near 20 year high

King Dollar marched into the week on a high note, reaching levels not seen in 20 years on Monday as U.S Treasury yields climbed on Fed rate hike expectations. Although prices have slightly retreated, the risk-off sentiment stemming from geopolitical risks should keep the DXY buoyed. Dollar volatility could remain a key theme, especially if the pending US CPI report exceeds expectations. Bulls may shift into higher gear on hawkish comments from Fed officials.

Looking at the technical picture, a strong daily close above 104.00 could open a path towards 104.50 and beyond. Sustained weakness below 104.21 could encourage a decline back towards 103.20.

Equally weighted USD bullish 

The subtitle says it all.

Prices are heavily bullish on the daily charts. There have been consistently higher highs and higher lows while prices are trading above the 50,100 and 200-day Simple Moving Average. A strong daily close above 1.1835 could encourage a move towards 1.1955. If bulls run out of steam below 1.1835, this could result in a technical throwback that sees prices trade back towards 1.1660 – 1.1600 before bulls return to the scene.

If prices sink back towards 1.1470, the equally-weighted USD index may decline back towards 1. 1300.

EURUSD on standby…

Where the EURUSD concludes this week may be heavily influenced by the US inflation data. The key levels of interest can be found at 1.0640 and 1.0500. A strong dollar could drag the currency pair well below 1.0500, opening the doors towards 1.0350. Should 1.0500 prove to be reliable support, this could trigger a rebound back to 1.0640.

Bonus: Gold glitters ahead of CPI data 

A softer dollar has injected gold bugs with renewed confidence ahead of the US inflation. Prices have staged a rebound from the daily 200-day Simple Moving Average but are still below the $1855 support level. Regardless of the recent rebound, the precious metal may face headwinds in the form of rising treasury yields and expectations over the Fed maintaining an aggressive approach towards monetary policy. On the technical front, prices are bearish on the daily charts with support found at $1855. It will be interesting to see whether bulls can defend this level of bear’s drag prices even lower. Whatever the outcome, volatility is certainly on the cards.


Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Five things that economists know, but sound wrong to most other people

By Renaud Foucart, Lancaster University 

Economists have shaped the modern world in many ways. Governments make policy choices in response to the data that we produce about things like GDP and inflation. Social media companies use our insights about human behaviour to create features that encourage people to use their platforms. And we’re at the heart of everything from incentivising renewables developers to build more wind farms to regulating the behaviour of tech giants like Google or Facebook.

Yet this is only one side of the story. A curious thing about our profession is that when we academic economists largely agree with each other on something important, the rest of the world often completely ignores our conclusions. Are these findings too counter-intuitive, too impractical, or something else? Here are five examples so that you can decide for yourself:

1. A lowest price guarantee means you will end up paying too much

Retailers make these kinds of price pledges all the time: if you find this item cheaper somewhere else, we will match the price. I see it everywhere from grocery stores to furniture shops to pharmacies. Yet while such a guarantee seems at first sight to benefit consumers, decades of evidence – from tyre retailers to grocery stores – shows that they are mostly a subtle way for retailers to collude on maintaining high prices.

When a retailer offers a low price, it mainly does it to attract consumers by being cheaper than its competitors. But by committing to a price match, each time your competitor offers a discount to your price, your customers know they can come to you and benefit from the same price. The competitor therefore has nothing to gain from offering a discount and prices remain high. Interestingly, it’s illegal for competitors to collude with one another to fix prices – yet price-matching effectively does exactly that, and it’s legal everywhere.

2. Housing subsidies given to tenants often benefit landlords

One of the first principles a student of economics learns is that people receiving a subsidy are not necessarily the ones who benefit from it. For example, in a study in France back in 2006, property owners were found to be pocketing more than three-quarters of housing subsidies being given to tenants.

The reason was that the subsidies motivated families to move into larger houses, and for students in those families to become independent earlier. Since the number of houses on the market remained fairly constant, the main effect of this extra demand was to increase rental prices both for larger homes and for student accommodation – thus transferring taxpayer money to those who needed it the least.

Compare this with a study of the effects of cuts to housing benefits in the UK in 2011-12. Households renting larger houses – in a reverse of what happened in France – demanded smaller ones, and this drove prices down and hurt landlords the most. On the other hand, the poorest households already lived in rental accommodation that was too small for their needs so could not realistically move to something smaller. For this reason, they had no choice but to absorb the benefits cut themselves.

In both the French and UK examples, instead of housing subsidies, the government should have simply given the renters money and let them decide what to do with it. That way, people would have chosen the most suitable accommodation and spent anything left over on other things, such as better food, education or healthcare.

3. Cost of living concerns are never a valid reason to avoid taxing pollution

Gas and fuel prices have soared following the Russian invasion of Ukraine. Motorists are having to pay much more to fill their tanks, while many households are struggling with their power bills.

To fight this crisis, European countries such as France have been offering fuel rebates to consumers. This helps people, but it is also great news for energy suppliers. In many cases the supplier is Russia, so it feeds directly into Vladimir Putin’s military budget and does nothing to help carbon emissions.

Most economists would instead place new tariffs on Russian oil to price in the cost of financing the war and induce businesses and consumers to switch to other energy sources whenever possible. The revenues raised by the tariffs can then be used to help people directly, be it by lowering other taxes or by financing social security.

In the UK, we are doing the exact opposite to this. Consumers are having to pay more national insurance while fuel duties are being cut.

4. Politicians are often more credible when they delegate

To convince people to trust you to do something, one solution is to take out of your hands the possibility of changing your mind later. This is why central banks are independent of governments: so that investors believe they are not playing with interest rates for electoral gains.

In most matters, however, governments are reluctant to delegate decision-making to independent institutions. In France, for instance, several governments spent billions of euros between 2009 and 2017 on the infrastructure needed to implement a tax on trucking, only to back down entirely in the run-up to the presidential election. Had the implementation of the tax been delegated to an independent agency, the fiasco would never have happened.

In another example, the UK recently launched the shared prosperity fund to replace EU-allocated funds to its poorest regions. The new system is much more centralised than before and it is hard to know how much previous funding will be matched. Centralised regional development funds can also be prone to favouritism and political patronage, which in the UK would reduce the credibility of the government in its plans to “level up” the country.

5. Investors consistently beating the market are probably doing something illegal

There is no magic formula to predict short-term changes in the value of a financial asset. Sure, some investments return more money than others, and financial bubbles certainly exist, but anyone asking you to trust them to make more money than the market in the long run is either lying or knows something the rest of the world does not.

If it’s the latter, we call it insider trading. This is illegal, although it still happens. During the 2008 financial crisis, for instance, politically connected investors who knew where the government would intervene made much more money than others did. Stories about financial geniuses may be much more appealing than these kinds of realities, but that doesn’t mean they are true.The Conversation

About the Author:

Renaud Foucart, Senior Lecturer in Economics, Lancaster University Management School, Lancaster University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 

Trade Of The Week: Will Gold Prices See More Pain?

By ForexTime

The past few weeks have certainly not been kind to gold.

After almost kissing the psychological $2000 level back in mid-April, bulls ran out of steam – allowing bears to drag the precious metal to prices not seen since February 2022!

Last Friday’s strong US report compounded gold’s woes as expectations intensified over the Federal Reserve maintaining an aggressive approach towards monetary policy. This report was published two days after the Fed raised interest rates by 0.50 bps points for the first time since 2000.

With the dollar climbing to its highest level in two decades and treasury yields rising amid expectations the Fed may continue hiking rates to tame inflation, gold could be in trouble.

The week ahead promises to be eventful for the precious metal thanks to key US economic data, speeches by Fed officials, and ongoing geopolitical risks.

On the technical front, the path of least resistance points south with prices wobbling above the $1855 support as of writing. Although the balance of power currently swings in favour of bears, bulls could still strike in the right conditions.

Before we cover what to expect from gold over the next few days, it is worth keeping in mind that the precious metal has dropped roughly 6% since the 18th of April when prices almost hit $2000.

Gold is down almost 2% month-to-date and has extended its longest run of weekly losses this year.

With the 10-year Treasury yield rising to its highest level since November 2018, gold may struggle to shine. It’s worth keeping in mind that the precious metal offers no yield, making it less attractive for investors to own in an environment of rising Treasury yields.

US Inflation data & Fed speeches in focus 

The major risk event for gold may be the pending US CPI report.

Given how markets remain highly sensitive to inflation fears, the report could spark explosive levels of volatility in gold. The key question is whether the report will send the precious metal tumbling or provide a lifeline. According to an economist’s poll by Bloomberg, US inflation is expected to rise 8.1% year-on-year in April compared with 8.5% in March. A figure that exceeds market expectations could send the dollar higher, enforcing downside pressures on gold prices. Expect the gold to also feel the burn if speeches from Fed officials over the next few days revive expectations around a 75 basis-point rate hike in June.

Geopolitical risks could provide cushion 

The heightened levels of uncertainty and volatility caused by geopolitical risks could direct investors towards gold’s safe embrace.

As the Russia-Ukraine conflict continues, global sentiment is likely to remain shaky with investors adopting a guarded approach toward riskier assets. Inflationary worries and increasing concerns relating to China could fuel the risk-off sentiment – lending some support to gold. Will this support be enough to counter the pressure created by an appreciating dollar, rising treasury yields, and Fed rate hike bets? Time will tell.

Gold ETFs favour bears 

According to an automated report from Bloomberg, gold ETFs cut 66,718 troy ounces of golf from their holdings last Friday, bringing this year’s net purchases to 8.42 million ounces.

The outflows could be the product of the strong US jobs report which boosted Fed rate hike bets and an appreciating dollar. A gold ETF provides investors exposure to gold without owning it physically. In this instance, outflows from ETFs are seen as bearish for the underlying asset.

Gold breakdown on the horizon?

The subtitle says it all.

Gold remains under pressure on the daily charts with prices wobbling above the $1855 support as of writing. Over the past few weeks, the precious metal has been battered by a stronger dollar, rising treasury yields, and Fed rate hike bets. Prices are bearish with a breakdown below $1855 opening a path towards $1820 and $1780. Should $1855 prove to be reliable support, prices may rebound back towards $1900 and $1920.

Zooming out on the monthly charts, prices remain in a wide range with support around $1700 and resistance at $2000. A major directional catalyst may be needed for gold to secure a monthly close above or below these key levels.


Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com