Opinions

Archive for Opinions – Page 77

Mid-Week Technical Outlook: Major World Indices

Caution was the name of the game on Wednesday as more disappointing Chinese economic data left investors on edge.

Market players seem to be on the defense with renewed fears of a hawkish Fed sapping risk appetite. In the currency space, Sterling jumped after UK inflation remained higher than expected last month. Although consumer prices fell sharply to 6.8% in July, down from 7.9% in June, it was still above the 6.7% forecast. Looking at commodities, oil slipped for a third day while gold prices hovered around $1900.

Much attention will be directed towards the FOMC meeting minutes this evening which could offer key clues on the central bank’s next policy move. In the meantime, our focus falls on the global equity space with the tool of choice none other than technical analysis.

SPX500_m to extend losses?

The S&P 500 experienced a sharp selloff yesterday, closing below its 50-day SMA for the first time since March. This development could signal further downside with the next key levels of interest at 4390 and 4332, respectively. Should prices push back above 4500, bulls may target 4580.

NQ100_m breakout pending?

After breaking below the 50-day SMA, the Nasdaq 100 has traded within a narrow range with support at 14975 and resistance at 15300. A breakout below the current support could open a path toward 14250, just below the 100-day SMA. Should prices push back above 15300, bulls may eye 15925.

UK100_m eyes key support

UK100 bears remain in the driving seat on the daily charts with prices approaching key support at 7250. A breakdown below this level may encourage a decline towards 7180 and potentially lower. Should 7250 prove to be reliable support, prices may rebound back towards the 50-day SMA.

GER40_m trapped within wide range

The GER40 Index has been trapped within a range since April 2023 with major support at 15500 and resistance at 16500. Prices are trading below the 50 and 100-day SMA while the MACD trades to the downside. A break below 15700 may see prices test 15500. If bulls can take prices back above the 50-day SMA, the next key level of interest can be found at 16350.

STOX50_m choppy affair

As the subtitle says, the STOX50_m remains a choppy affair on the weekly charts. Support can be found at 4215 and resistance at 4480. A decline below 4215 may see bears target 4020, a level just above the 100-week SMA.

HSI50_m under pressure

The recent breakdown on the HSI50_m could signal further downside in the short to medium term. Should bears secure a solid close below 18200, this could open a path toward 17300. If prices experience a rebound from 18200, the next key level of interest can be found at 19500 – where the 100 and 200-day SMA reside.

Article by ForexTime

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

Opinions Stock Market News

16 Aug

Is inflation to fall faster than expected?

By George Prior

Inflation in most major economies is likely to fall faster than many expect, and interest rates will drop accordingly within the next 12 months, predicts the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations.

The prediction from Nigel Green of deVere Group comes as there are growing signs around the world that inflation has peaked.

He says: “We expect that major economies, including the US, UK and EU will see inflation fall faster than had previously been expected over the next 12 months.

“There are three key reasons for this.

“First, there’s unlikely to be a wage price spiral as real wages are typically going down despite the increases. Employers now seem to be holding back from increasing salaries on demand, which will help stifle wage inflation.

“Second, the time lag for monetary policies is incredibly lengthy. It takes around 18 months for the full effect of rate hikes to make their way into the economy – and that’s where we are – and so financial conditions will get squeezed even harder in the near term.

“And third, although many economies are now likely to avoid a full-blown recession, economic growth is still expected to be weak for the foreseeable future.”

Against this backdrop of inflation falling faster than expected, Nigel Green says that he expects “central banks, including the Federal Reserve, the Bank of England and the ECB, to start cutting interest rates within the next 12 months.”

This is why, he notes, that in the last earnings season, investors were pouring over the guidance more than usual.

“Guidance is critical as indicators show the economy is headed for a downturn and investors will be eager to know which companies are best-positioned to manage this. Guidance helps evaluate a company’s past performance in light of its future prospects.

“When costs are going up, investors should increasingly be looking at a company’s and a sector’s ability to maintain margin.

“Investors should be paying close attention to margin because it can indicate how well a company is managing costs and competing in its industry.

“It can also impact a corporation’s ability to invest in growth opportunities or pay dividends to shareholders.”

The deVere CEO concludes: “Investors should consider now the prospect of inflation falling faster than many have anticipated, to seize the opportunities and mitigate risks.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of offices across the world, over 80,000 clients and $12bn under advisement.

Economics & Fundamentals Opinions

12 Aug

US Dollar Index Speculator Bets drop for 6th straight week to new 2-year low

By InvestMacro

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

The latest COT data is updated through Tuesday August 8th and shows a quick view of how large market participants (for-profit speculators and commercial traders) 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.

Weekly Speculator Changes led by Australian Dollar & Swiss Franc

The COT currency market speculator bets were lower this week as just two out of the eleven currency markets we cover had higher positioning while the other nine markets had lower speculator contracts.

Leading the gains for the currency markets was the Australian Dollar (8,600 contracts) with the Swiss Franc (3,295 contracts) also showing a positive week.

The currencies seeing declines in speculator bets on the week were the EuroFX (-22,251 contracts) with the Canadian Dollar (-6,988 contracts), the Brazilian Real (-5,312 contracts), the Mexican Peso (-4,897 contracts), the Japanese Yen (-3,964 contracts), the British Pound (-2,542 contracts), the New Zealand Dollar (-1,954 contracts), Bitcoin (-610 contracts) and the US Dollar Index (-491 contracts) also registering lower bets on the week.

US Dollar Index Bullish Bets drop for 6th straight week to new 2-year low

Highlighting the COT currency’s data this week is the continued decreasing nature of the speculator’s positioning in the US Dollar Index.

The large speculative US Dollar Index positions fell for a sixth straight week this week with the speculator position now declining by a total of -12,344 contracts over this last six-week span.

This bearishness has brought the US Dollar Index speculator net position (currently at just a total of +2,624 contracts) to a new 110-week low, dating back to June 29th of 2021 when the speculator’s net position was last in negative territory at a total of -448 contracts.

Despite the speculator’s pessimism in the US Dollar Index contracts, the futures price has been on the rise for a fourth consecutive week. The USD futures price advanced by approximately 1 percent this week with a Friday close right around the 102.70 level, it’s highest close level since June. The USD Index futures had fallen to a price of 99.22 on July 18th before rebounding and starting back on it’s current trend higher.

Data Snapshot of Forex Market Traders | Columns Legend

Aug-08-2023	OI	OI-Index	Spec-Net	Spec-Index	Com-Net	COM-Index	Smalls-Net	Smalls-Index
USD Index	28,930	6	2,624	29	-2,678	71	54	16
EUR	760,968	69	149,811	76	-195,450	24	45,639	52
GBP	206,954	41	47,020	88	-57,879	13	10,859	79
JPY	229,849	62	-83,180	21	89,121	79	-5,941	41
CHF	43,122	46	-5,452	42	4,092	51	1,360	62
CAD	140,960	20	-623	54	-4,617	53	5,240	34
AUD	182,842	67	-43,192	45	55,845	61	-12,653	22
NZD	40,986	37	-368	53	1,454	50	-1,086	37
MXN	227,745	47	83,651	90	-86,640	10	2,989	30
RUB	20,930	4	7,543	31	-7,150	69	-393	24
BRL	45,709	33	28,039	71	-27,269	31	-770	38
Bitcoin	16,743	83	-1,149	57	456	0	693	29

Strength Scores led by Mexican Peso & British Pound

COT Strength Scores (a normalized measure of Speculator positions over a 3-Year range, from 0 to 100 where above 80 is Extreme-Bullish and below 20 is Extreme-Bearish) showed that the Mexican Peso (90 percent) and the British Pound (88 percent) lead the currency markets this week and are in Extreme-Bullish levels. The EuroFX (76 percent), Brazilian Real (71 percent) and the Bitcoin (57 percent) come in as the next highest in the weekly strength scores.

On the downside, the Japanese Yen (21 percent) and the US Dollar Index (29 percent) come in at the lowest strength levels currently. The next lowest strength scores are the Swiss Franc (42 percent) and the Australian Dollar (45 percent).

Strength Statistics:
US Dollar Index (29.3 percent) vs US Dollar Index previous week (30.1 percent)
EuroFX (76.1 percent) vs EuroFX previous week (84.7 percent)
British Pound Sterling (88.4 percent) vs British Pound Sterling previous week (90.2 percent)
Japanese Yen (20.6 percent) vs Japanese Yen previous week (23.0 percent)
Swiss Franc (41.6 percent) vs Swiss Franc previous week (32.5 percent)
Canadian Dollar (54.0 percent) vs Canadian Dollar previous week (60.5 percent)
Australian Dollar (44.8 percent) vs Australian Dollar previous week (36.8 percent)
New Zealand Dollar (52.6 percent) vs New Zealand Dollar previous week (57.9 percent)
Mexican Peso (90.2 percent) vs Mexican Peso previous week (93.2 percent)
Brazilian Real (71.4 percent) vs Brazilian Real previous week (78.2 percent)
Bitcoin (56.9 percent) vs Bitcoin previous week (67.5 percent)

Japanese Yen & Bitcoin top the 6-Week Strength Trends

COT Strength Score Trends (or move index, calculates the 6-week changes in strength scores) showed that the Japanese Yen (18 percent) and the Bitcoin (16 percent) lead the past six weeks trends for the currencies. The EuroFX (2 percent) and the Canadian Dollar (2 percent) are the next highest positive movers in the latest trends data.

The US Dollar Index (-21 percent) leads the downside trend scores currently with the Mexican Peso (-8 percent), Brazilian Real (-5 percent) and the Australian Dollar (-3 percent) following next with lower trend scores.

Strength Trend Statistics:
US Dollar Index (-20.6 percent) vs US Dollar Index previous week (-19.6 percent)
EuroFX (1.8 percent) vs EuroFX previous week (10.6 percent)
British Pound Sterling (-3.5 percent) vs British Pound Sterling previous week (2.0 percent)
Japanese Yen (17.6 percent) vs Japanese Yen previous week (16.9 percent)
Swiss Franc (-1.4 percent) vs Swiss Franc previous week (-10.7 percent)
Canadian Dollar (2.1 percent) vs Canadian Dollar previous week (37.2 percent)
Australian Dollar (-3.5 percent) vs Australian Dollar previous week (-2.0 percent)
New Zealand Dollar (1.3 percent) vs New Zealand Dollar previous week (11.5 percent)
Mexican Peso (-7.8 percent) vs Mexican Peso previous week (-6.8 percent)
Brazilian Real (-4.5 percent) vs Brazilian Real previous week (9.5 percent)
Bitcoin (16.5 percent) vs Bitcoin previous week (-16.3 percent)

Individual COT Forex Markets:

US Dollar Index Futures:

The US Dollar Index large speculator standing this week recorded a net position of 2,624 contracts in the data reported through Tuesday. This was a weekly decrease of -491 contracts from the previous week which had a total of 3,115 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 29.3 percent. The commercials are Bullish with a score of 71.5 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 16.4 percent.

Price Trend-Following Model: New Uptrend

Our weekly trend-following model classifies the current market price position as: New Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

US DOLLAR INDEX Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	59.6	22.1	11.3
– Percent of Open Interest Shorts:	50.5	31.4	11.2
– Net Position:	2,624	-2,678	54
– Gross Longs:	17,247	6,395	3,283
– Gross Shorts:	14,623	9,073	3,229
– Long to Short Ratio:	1.2 to 1	0.7 to 1	1.0 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	29.3	71.5	16.4
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-20.6	23.3	-25.7

Euro Currency Futures:

The Euro Currency large speculator standing this week recorded a net position of 149,811 contracts in the data reported through Tuesday. This was a weekly drop of -22,251 contracts from the previous week which had a total of 172,062 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 with a score of 76.1 percent. The commercials are Bearish with a score of 24.4 percent and the small traders (not shown in chart) are Bullish with a score of 51.8 percent.

Price Trend-Following Model: Uptrend

Our weekly trend-following model classifies the current market price position as: Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

EURO Currency Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	30.0	56.0	12.1
– Percent of Open Interest Shorts:	10.3	81.6	6.1
– Net Position:	149,811	-195,450	45,639
– Gross Longs:	228,048	425,875	92,240
– Gross Shorts:	78,237	621,325	46,601
– Long to Short Ratio:	2.9 to 1	0.7 to 1	2.0 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	76.1	24.4	51.8
– Strength Index Reading (3 Year Range):	Bullish	Bearish	Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	1.8	-0.7	-4.1

British Pound Sterling Futures:

The British Pound Sterling large speculator standing this week recorded a net position of 47,020 contracts in the data reported through Tuesday. This was a weekly lowering of -2,542 contracts from the previous week which had a total of 49,562 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 88.4 percent. The commercials are Bearish-Extreme with a score of 13.3 percent and the small traders (not shown in chart) are Bullish with a score of 79.3 percent.

Price Trend-Following Model: Uptrend

Our weekly trend-following model classifies the current market price position as: Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

BRITISH POUND Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	40.2	36.7	16.7
– Percent of Open Interest Shorts:	17.5	64.7	11.4
– Net Position:	47,020	-57,879	10,859
– Gross Longs:	83,239	75,990	34,505
– Gross Shorts:	36,219	133,869	23,646
– Long to Short Ratio:	2.3 to 1	0.6 to 1	1.5 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	88.4	13.3	79.3
– Strength Index Reading (3 Year Range):	Bullish-Extreme	Bearish-Extreme	Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-3.5	5.0	-7.7

Japanese Yen Futures:

The Japanese Yen large speculator standing this week recorded a net position of -83,180 contracts in the data reported through Tuesday. This was a weekly decrease of -3,964 contracts from the previous week which had a total of -79,216 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 20.6 percent. The commercials are Bullish with a score of 79.1 percent and the small traders (not shown in chart) are Bearish with a score of 41.4 percent.

Price Trend-Following Model: Strong Downtrend

Our weekly trend-following model classifies the current market price position as: Strong Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

JAPANESE YEN Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	10.1	73.8	14.5
– Percent of Open Interest Shorts:	46.3	35.0	17.1
– Net Position:	-83,180	89,121	-5,941
– Gross Longs:	23,135	169,528	33,411
– Gross Shorts:	106,315	80,407	39,352
– Long to Short Ratio:	0.2 to 1	2.1 to 1	0.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	20.6	79.1	41.4
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	17.6	-16.2	7.2

Swiss Franc Futures:

The Swiss Franc large speculator standing this week recorded a net position of -5,452 contracts in the data reported through Tuesday. This was a weekly increase of 3,295 contracts from the previous week which had a total of -8,747 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 41.6 percent. The commercials are Bullish with a score of 51.5 percent and the small traders (not shown in chart) are Bullish with a score of 62.1 percent.

Price Trend-Following Model: Uptrend

Our weekly trend-following model classifies the current market price position as: Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

SWISS FRANC Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	19.7	44.0	35.4
– Percent of Open Interest Shorts:	32.4	34.6	32.2
– Net Position:	-5,452	4,092	1,360
– Gross Longs:	8,509	18,991	15,265
– Gross Shorts:	13,961	14,899	13,905
– Long to Short Ratio:	0.6 to 1	1.3 to 1	1.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	41.6	51.5	62.1
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-1.4	-4.8	11.6

Canadian Dollar Futures:

The Canadian Dollar large speculator standing this week recorded a net position of -623 contracts in the data reported through Tuesday. This was a weekly decline of -6,988 contracts from the previous week which had a total of 6,365 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 with a score of 54.0 percent. The commercials are Bullish with a score of 53.0 percent and the small traders (not shown in chart) are Bearish with a score of 34.4 percent.

Price Trend-Following Model: Weak Uptrend

Our weekly trend-following model classifies the current market price position as: Weak Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

CANADIAN DOLLAR Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	20.9	52.0	24.0
– Percent of Open Interest Shorts:	21.4	55.3	20.2
– Net Position:	-623	-4,617	5,240
– Gross Longs:	29,481	73,301	33,774
– Gross Shorts:	30,104	77,918	28,534
– Long to Short Ratio:	1.0 to 1	0.9 to 1	1.2 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	54.0	53.0	34.4
– Strength Index Reading (3 Year Range):	Bullish	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	2.1	8.2	-31.9

Australian Dollar Futures:

The Australian Dollar large speculator standing this week recorded a net position of -43,192 contracts in the data reported through Tuesday. This was a weekly increase of 8,600 contracts from the previous week which had a total of -51,792 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 44.8 percent. The commercials are Bullish with a score of 60.5 percent and the small traders (not shown in chart) are Bearish with a score of 21.6 percent.

Price Trend-Following Model: Strong Downtrend

Our weekly trend-following model classifies the current market price position as: Strong Downtrend. The current action for the model is considered to be: New Sell – Short Position.

AUSTRALIAN DOLLAR Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	33.4	53.1	10.3
– Percent of Open Interest Shorts:	57.0	22.5	17.3
– Net Position:	-43,192	55,845	-12,653
– Gross Longs:	61,091	96,999	18,900
– Gross Shorts:	104,283	41,154	31,553
– Long to Short Ratio:	0.6 to 1	2.4 to 1	0.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	44.8	60.5	21.6
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-3.5	12.7	-32.3

New Zealand Dollar Futures:

The New Zealand Dollar large speculator standing this week recorded a net position of -368 contracts in the data reported through Tuesday. This was a weekly reduction of -1,954 contracts from the previous week which had a total of 1,586 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 with a score of 52.6 percent. The commercials are Bearish with a score of 49.9 percent and the small traders (not shown in chart) are Bearish with a score of 37.1 percent.

Price Trend-Following Model: Strong Downtrend

Our weekly trend-following model classifies the current market price position as: Strong Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

NEW ZEALAND DOLLAR Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	45.8	46.0	8.1
– Percent of Open Interest Shorts:	46.7	42.5	10.7
– Net Position:	-368	1,454	-1,086
– Gross Longs:	18,758	18,874	3,306
– Gross Shorts:	19,126	17,420	4,392
– Long to Short Ratio:	1.0 to 1	1.1 to 1	0.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	52.6	49.9	37.1
– Strength Index Reading (3 Year Range):	Bullish	Bearish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	1.3	0.6	-8.3

Mexican Peso Futures:

The Mexican Peso large speculator standing this week recorded a net position of 83,651 contracts in the data reported through Tuesday. This was a weekly drop of -4,897 contracts from the previous week which had a total of 88,548 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 90.2 percent. The commercials are Bearish-Extreme with a score of 9.7 percent and the small traders (not shown in chart) are Bearish with a score of 30.2 percent.

Price Trend-Following Model: Uptrend

Our weekly trend-following model classifies the current market price position as: Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

MEXICAN PESO Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	48.3	47.9	3.2
– Percent of Open Interest Shorts:	11.6	85.9	1.9
– Net Position:	83,651	-86,640	2,989
– Gross Longs:	110,008	109,028	7,344
– Gross Shorts:	26,357	195,668	4,355
– Long to Short Ratio:	4.2 to 1	0.6 to 1	1.7 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	90.2	9.7	30.2
– Strength Index Reading (3 Year Range):	Bullish-Extreme	Bearish-Extreme	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-7.8	7.9	-3.6

Brazilian Real Futures:

The Brazilian Real large speculator standing this week recorded a net position of 28,039 contracts in the data reported through Tuesday. This was a weekly decrease of -5,312 contracts from the previous week which had a total of 33,351 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 with a score of 71.4 percent. The commercials are Bearish with a score of 31.1 percent and the small traders (not shown in chart) are Bearish with a score of 37.9 percent.

Price Trend-Following Model: Uptrend

Our weekly trend-following model classifies the current market price position as: Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

BRAZIL REAL Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	71.8	19.0	8.0
– Percent of Open Interest Shorts:	10.4	78.7	9.7
– Net Position:	28,039	-27,269	-770
– Gross Longs:	32,815	8,706	3,663
– Gross Shorts:	4,776	35,975	4,433
– Long to Short Ratio:	6.9 to 1	0.2 to 1	0.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	71.4	31.1	37.9
– Strength Index Reading (3 Year Range):	Bullish	Bearish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-4.5	0.8	23.3

Bitcoin Futures:

The Bitcoin large speculator standing this week recorded a net position of -1,149 contracts in the data reported through Tuesday. This was a weekly decline by -610 contracts from the previous week which had a total of -539 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 with a score of 56.9 percent. The commercials are Bullish with a score of 73.9 percent and the small traders (not shown in chart) are Bearish with a score of 28.7 percent.

Price Trend-Following Model: Strong Uptrend

Our weekly trend-following model classifies the current market price position as: Strong Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

BITCOIN Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	77.6	6.5	7.5
– Percent of Open Interest Shorts:	84.4	3.7	3.3
– Net Position:	-1,149	456	693
– Gross Longs:	12,985	1,082	1,250
– Gross Shorts:	14,134	626	557
– Long to Short Ratio:	0.9 to 1	1.7 to 1	2.2 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	56.9	73.9	28.7
– Strength Index Reading (3 Year Range):	Bullish	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	16.5	-20.6	-9.3

Article By InvestMacro – Receive our weekly COT Newsletter

*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.

COT Updates Forex and Currency News Opinions

12 Aug

Speculator Extremes: Cocoa & Palladium lead COT Bullish & Bearish Positions

By InvestMacro

The latest update for the weekly Commitment of Traders (COT) report was released by the Commodity Futures Trading Commission (CFTC) on Friday for data ending on August 8th.

This weekly Extreme Positions report highlights the Most Bullish and Most Bearish Positions for the speculator category. Extreme positioning in these markets can foreshadow strong moves in the underlying market.

To signify an extreme position, we use the Strength Index (also known as the COT Index) of each instrument, a common method of measuring COT data. The Strength Index is simply a comparison of current trader positions against the range of positions over the previous 3 years. We use over 80 percent as extremely bullish and under 20 percent as extremely bearish. (Compare Strength Index scores across all markets in the data table or cot leaders table).

Here Are This Week’s Most Bullish Speculator Positions:

Cocoa Futures

The Cocoa Futures speculator position comes in as the most bullish extreme standing this week. The Cocoa Futures speculator level is currently at a 100.0 percent score of its 3-year range.

The six-week trend for the percent strength score totaled 8.9 this week. The overall net speculator position was a total of 79,502 net contracts this week with a change of 1,288 contract in the weekly speculator bets.

Mexican Peso

The Mexican Peso speculator position comes next in the extreme standings this week. The Mexican Peso speculator level is now at a 90.2 percent score of its 3-year range.

The six-week trend for the percent strength score was -7.8 this week. The speculator position registered 83,651 net contracts this week with a weekly change of -4,897 contracts in speculator bets.

Speculators or Non-Commercials Notes:

Speculators, classified as non-commercial traders by the CFTC, are made up of large commodity funds, hedge funds and other significant for-profit participants. The Specs are generally regarded as trend-followers in their behavior towards price action – net speculator bets and prices tend to go in the same directions. These traders often look to buy when prices are rising and sell when prices are falling. To illustrate this point, many times speculator contracts can be found at their most extremes (bullish or bearish) when prices are also close to their highest or lowest levels.

These extreme levels can be dangerous for the large speculators as the trade is most crowded, there is less trading ammunition still sitting on the sidelines to push the trend further and prices have moved a significant distance. When the trend becomes exhausted, some speculators take profits while others look to also exit positions when prices fail to continue in the same direction. This process usually plays out over many months to years and can ultimately create a reverse effect where prices start to fall and speculators start a process of selling when prices are falling.

British Pound

The British Pound speculator position comes in third this week in the extreme standings. The British Pound speculator level resides at a 88.4 percent score of its 3-year range.

The six-week trend for the speculator strength score came in at -3.5 this week. The overall speculator position was 47,020 net contracts this week with a change of -2,542 contracts in the weekly speculator bets.

VIX

The VIX speculator position comes up number four in the extreme standings this week. The VIX speculator level is at a 87.1 percent score of its 3-year range.

The six-week trend for the speculator strength score totaled a change of 14.9 this week. The overall speculator position was -44,404 net contracts this week with a change of -2,238 contracts in the speculator bets.

DowJones Mini

The DowJones Mini speculator position rounds out the top five in this week’s bullish extreme standings. The DowJones Mini speculator level sits at a 85.3 percent score of its 3-year range. The six-week trend for the speculator strength score was 65.0 this week.

The speculator position was 4,031 net contracts this week with a change of 2,451 contracts in the weekly speculator bets.

This Week’s Most Bearish Speculator Positions:

Palladium

The Palladium speculator position comes in as the most bearish extreme standing this week. The Palladium speculator level is at a 0.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -20.6 this week. The overall speculator position was -10,192 net contracts this week with a change of -895 contracts in the speculator bets.

5-Year Bond

The 5-Year Bond speculator position comes in next for the most bearish extreme standing on the week. The 5-Year Bond speculator level is at a 2.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -17.1 this week. The speculator position was -1,230,307 net contracts this week with a change of 26,739 contracts in the weekly speculator bets.

2-Year Bond

The 2-Year Bond speculator position comes in as third most bearish extreme standing of the week. The 2-Year Bond speculator level resides at a 3.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -7.7 this week. The overall speculator position was -1,109,126 net contracts this week with a change of -13,463 contracts in the speculator bets.

Ultra U.S. Treasury Bonds

The Ultra U.S. Treasury Bonds speculator position comes in as this week’s fourth most bearish extreme standing. The Ultra U.S. Treasury Bonds speculator level is at a 4.6 percent score of its 3-year range.

The six-week trend for the speculator strength score was -8.6 this week. The speculator position was -445,088 net contracts this week with a change of 11,341 contracts in the weekly speculator bets.

Ultra 10-Year U.S. T-Note

Finally, the Ultra 10-Year U.S. T-Note speculator position comes in as the fifth most bearish extreme standing for this week. The Ultra 10-Year U.S. T-Note speculator level is at a 13.9 percent score of its 3-year range.

The six-week trend for the speculator strength score was -3.8 this week. The speculator position was -149,951 net contracts this week with a change of 35,286 contracts in the weekly speculator bets.

Article By InvestMacro – Receive our weekly COT Newsletter

COT Updates Opinions

12 Aug

COT Metals Charts: Weekly Speculator Bets drop this week led by Gold & Copper

By InvestMacro

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

The latest COT data is updated through Tuesday August 8th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets.

Weekly Speculator Bets drop this week led by Gold & Copper

The COT metals markets speculator bets were lower this week as all of the six markets we follow had lower speculator contracts.

The markets leading the declines in speculator bets for the week were Gold (-21,939 contracts) with Copper (-20,801 contracts), Silver (-17,507 contracts), Platinum (-9,298 contracts), Steel (-1,065 contracts) with Palladium (-895 contracts) also registering lower bets on the week.

Data Snapshot of Commodity Market Traders | Columns Legend

Aug-08-2023	OI	OI-Index	Spec-Net	Spec-Index	Com-Net	COM-Index	Smalls-Net	Smalls-Index
Gold	427,759	3	142,985	40	-167,554	59	24,569	42
Silver	137,631	29	13,324	37	-30,349	57	17,025	61
Copper	228,537	65	-10,057	22	4,908	76	5,149	51
Palladium	20,470	100	-10,192	0	10,299	100	-107	35
Platinum	79,989	100	2,992	22	-8,591	76	5,599	43

Strength Scores led by Steel & Gold

COT Strength Scores (a normalized measure of Speculator positions over a 3-Year range, from 0 to 100 where above 80 is Extreme-Bullish and below 20 is Extreme-Bearish) showed that Steel (64 percent) and Gold (40 percent) lead the metals markets this week. Silver (37 percent) comes in as the next highest in the weekly strength scores.

On the downside, Palladium (0.0 percent) comes in at the lowest strength level currently and is in Extreme-Bearish territory (below 20 percent).

Strength Statistics:
Gold (40.0 percent) vs Gold previous week (49.7 percent)
Silver (37.3 percent) vs Silver previous week (62.2 percent)
Copper (22.2 percent) vs Copper previous week (40.1 percent)
Platinum (22.5 percent) vs Platinum previous week (43.9 percent)
Palladium (0.0 percent) vs Palladium previous week (6.4 percent)
Steel (64.1 percent) vs Palladium previous week (67.2 percent)

Gold & Steel are the least negative in the 6-Week Strength Trends

COT Strength Score Trends (or move index, calculates the 6-week changes in strength scores) showed that Gold (-4 percent) and Steel (-5 percent) topped the past six weeks trends for metals but were in negative trends.

Platinum (-21 percent) and Palladium (-21 percent) lead and show the most negative trends currently.

Move Statistics:
Gold (-3.9 percent) vs Gold previous week (0.9 percent)
Silver (-8.2 percent) vs Silver previous week (15.4 percent)
Copper (-11.2 percent) vs Copper previous week (7.7 percent)
Platinum (-21.2 percent) vs Platinum previous week (-16.6 percent)
Palladium (-20.6 percent) vs Palladium previous week (-19.1 percent)
Steel (-5.3 percent) vs Steel previous week (-0.6 percent)

Individual Markets:

Gold Comex Futures:

The Gold Comex Futures large speculator standing this week resulted in a net position of 142,985 contracts in the data reported through Tuesday. This was a weekly decline of -21,939 contracts from the previous week which had a total of 164,924 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 40.0 percent. The commercials are Bullish with a score of 59.3 percent and the small traders (not shown in chart) are Bearish with a score of 41.5 percent.

Price Trend-Following Model: Strong Downtrend

Our weekly trend-following model classifies the current market price position as: Strong Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

Gold Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	53.5	26.6	10.5
– Percent of Open Interest Shorts:	20.1	65.8	4.8
– Net Position:	142,985	-167,554	24,569
– Gross Longs:	228,846	113,890	44,996
– Gross Shorts:	85,861	281,444	20,427
– Long to Short Ratio:	2.7 to 1	0.4 to 1	2.2 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	40.0	59.3	41.5
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-3.9	3.0	2.9

Silver Comex Futures:

The Silver Comex Futures large speculator standing this week resulted in a net position of 13,324 contracts in the data reported through Tuesday. This was a weekly decline of -17,507 contracts from the previous week which had a total of 30,831 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 37.3 percent. The commercials are Bullish with a score of 57.1 percent and the small traders (not shown in chart) are Bullish with a score of 61.1 percent.

Price Trend-Following Model: Strong Downtrend

Our weekly trend-following model classifies the current market price position as: Strong Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

Silver Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	39.1	30.3	19.9
– Percent of Open Interest Shorts:	29.4	52.3	7.5
– Net Position:	13,324	-30,349	17,025
– Gross Longs:	53,781	41,636	27,349
– Gross Shorts:	40,457	71,985	10,324
– Long to Short Ratio:	1.3 to 1	0.6 to 1	2.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	37.3	57.1	61.1
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-8.2	-1.2	37.8

Copper Grade #1 Futures:

The Copper Grade #1 Futures large speculator standing this week resulted in a net position of -10,057 contracts in the data reported through Tuesday. This was a weekly reduction of -20,801 contracts from the previous week which had a total of 10,744 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 22.2 percent. The commercials are Bullish with a score of 75.7 percent and the small traders (not shown in chart) are Bullish with a score of 51.0 percent.

Price Trend-Following Model: Downtrend

Our weekly trend-following model classifies the current market price position as: Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

Copper Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	31.2	42.3	7.9
– Percent of Open Interest Shorts:	35.6	40.2	5.6
– Net Position:	-10,057	4,908	5,149
– Gross Longs:	71,247	96,728	17,983
– Gross Shorts:	81,304	91,820	12,834
– Long to Short Ratio:	0.9 to 1	1.1 to 1	1.4 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	22.2	75.7	51.0
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-11.2	9.4	10.4

Platinum Futures:

The Platinum Futures large speculator standing this week resulted in a net position of 2,992 contracts in the data reported through Tuesday. This was a weekly decrease of -9,298 contracts from the previous week which had a total of 12,290 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 22.5 percent. The commercials are Bullish with a score of 75.7 percent and the small traders (not shown in chart) are Bearish with a score of 43.0 percent.

Price Trend-Following Model: Strong Downtrend

Our weekly trend-following model classifies the current market price position as: Strong Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

Platinum Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	52.5	27.4	12.0
– Percent of Open Interest Shorts:	48.8	38.1	5.0
– Net Position:	2,992	-8,591	5,599
– Gross Longs:	42,007	21,899	9,574
– Gross Shorts:	39,015	30,490	3,975
– Long to Short Ratio:	1.1 to 1	0.7 to 1	2.4 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	22.5	75.7	43.0
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-21.2	20.8	-11.5

Palladium Futures:

The Palladium Futures large speculator standing this week resulted in a net position of -10,192 contracts in the data reported through Tuesday. This was a weekly fall of -895 contracts from the previous week which had a total of -9,297 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 0.0 percent. The commercials are Bullish-Extreme with a score of 100.0 percent and the small traders (not shown in chart) are Bearish with a score of 35.3 percent.

Price Trend-Following Model: Downtrend

Our weekly trend-following model classifies the current market price position as: Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

Palladium Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	20.5	60.2	8.1
– Percent of Open Interest Shorts:	70.3	9.8	8.6
– Net Position:	-10,192	10,299	-107
– Gross Longs:	4,198	12,313	1,659
– Gross Shorts:	14,390	2,014	1,766
– Long to Short Ratio:	0.3 to 1	6.1 to 1	0.9 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	0.0	100.0	35.3
– Strength Index Reading (3 Year Range):	Bearish-Extreme	Bullish-Extreme	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-20.6	16.7	24.0

Steel Futures Futures:

The Steel Futures large speculator standing this week resulted in a net position of -3,121 contracts in the data reported through Tuesday. This was a weekly reduction of -1,065 contracts from the previous week which had a total of -2,056 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 with a score of 64.1 percent. The commercials are Bearish with a score of 36.0 percent and the small traders (not shown in chart) are Bearish with a score of 26.2 percent.

Price Trend-Following Model: Downtrend

Our weekly trend-following model classifies the current market price position as: Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

Steel Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	8.5	86.2	1.1
– Percent of Open Interest Shorts:	23.5	71.4	0.9
– Net Position:	-3,121	3,074	47
– Gross Longs:	1,780	17,968	227
– Gross Shorts:	4,901	14,894	180
– Long to Short Ratio:	0.4 to 1	1.2 to 1	1.3 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	64.1	36.0	26.2
– Strength Index Reading (3 Year Range):	Bullish	Bearish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-5.3	5.4	-1.6

Article By InvestMacro – Receive our weekly COT Newsletter

COT Updates Metals Opinions

11 Aug

Week Ahead: NZDUSD to set new 2023 low?

By ForexTime

Earlier this week, we featured the best-performing G10 currency (Swiss Franc) against the US dollar so far in 2023 in our Trade of the Week, published on Mondays.

Time to switch gears and look at the other end of the spectrum …

The New Zealand dollar is the second worst-performing G10 currency against the US dollar so far this year, with NZDUSD having shed 5.2% during the period.

NOTE: The Japanese Yen still stands as the worst-performing G10 currency versus the US dollar so far in 2023, with USDJPY having climbed by over 10% year-to-date.

Traders will be monitoring the Reserve Bank of New Zealand’s (RBNZ) upcoming policy decision, nestled within a week that also features these major economic data releases and events:

* No tier-1 data scheduled out of major economies on Monday, August 14

Tuesday, August 15

JPY: Japan 2Q GDP
AUD: RBA meeting minutes
CNH: China July industrial production, retail sales, unemployment
EUR: Germany/Eurozone August ZEW survey
GBP: UK June unemployment
USD: US July retail sales; speech by Federal Reserve Bank of Minneapolis President Neel Kashkari
CAD: Canada July CPI

Wednesday, August 16

CNH: China July new home prices
NZD: RBNZ rate decision
EUR: Eurozone 2Q GDP and employment data; June industrial production
GBP: UK July CPI
USD: FOMC meeting minutes; US July industrial production

Thursday, August 17

JPY: Japan July external trade
AUD: Australia July unemployment
NOK: Central Bank of Norway rate decision
EUR: Eurozone June trade balance
USD: US weekly initial jobless claims

Friday, August 18

JPY: Japan July CPI
EUR: Eurozone July CPI (final)
GBP: UK July retail sales

What to expect from the RBNZ?

The RBNZ is expected to maintain its Official Cash Rate at 5.5%.

Markets are also predicting a greater-than-even chance (59% odds) that the RBNZ is already finished with its rate hikes.

This antipodean central bank has already tightened by 525 basis points since its first hike in October 2021, as the RBNZ got a head start on the Fed and other major central bankers.

After all, New Zealand is in a technical recession!

Its GDP fell for two consecutive quarters, contracting by 0.1% quarter-on-quarter in 1Q23, following the 0.7% decline in 4Q22.

That suggests that the RBNZ can’t keep raising its benchmark interest rate any further for fear of incurring further damage on the economy.

To buffer the fact, just today (Friday, August 11th), it was announced that New Zealand’s food prices fell by 0.5% in July compared to June 2023. This is its first decline since February 2022!

And that’s dragging the Kiwi dollar lower, being the sole G10 currency to be losing against the US dollar today (Friday, August 11th) as of the time of writing, with NZDUSD testing support around the psychologically-important 0.6000 mark.

In short, the NZD is set to be weighed down by the thought of no further RBNZ rate hikes along with the dour economic outlook.

Over to the US Dollar side of NZDUSD …

Next week, the world’s largest economy is set to unveil the following:

Tuesday, August 15: July retail sales data
Wednesday, August 16: minutes from the FOMC’s previous meeting in July.

The US dollar’s resilience may be buffered by a higher-than-0.4% retail sales print, showing that spending by US consumers remain robust, as well as more hawkish cues out of the FOMC meeting minutes.

The weekly jobless claims data, due out every Thursday, as well the Fed speak due over the coming week, may trigger more volatility for USD pairs as well.

Potential USD scenarios:

Overall, the US dollar should remain supported if the economic data points to yet another Fed rate hike later this year, with such a notion potentially dragging NZDUSD lower.
On the other hand, the US dollar may finally wilt at the thought that peak US interest rates are already at hand, especially on signs of waning US economic momentum, which may offer some relief to the Kiwi.

The Bloomberg FX model now forecasts a 71% chance that NZDUSD will trade within the 0.5913 – 0.6119 range through next week.

From a technical perspective …

Here are some key levels to look out for on the NZDUSD price charts:

POTENTIAL SUPPORT

0.59850: year-to-date low
0.59728: 23.6% Fibonacci level from NZDUSD’s February 2021 – October 2022 plummet
0.5913: lower bound of Bloomberg model forecasted range

POTENTIAL RESISTANCE

0.6050 – 0.6060: late-June/early-august cycle lows
0.6119: upper bound of Bloomberg model forecasted range / resistance area for NZDUSD highs this week (August 7-11)

Brace for technical rebound!

NZDUSD’s 14-day relative strength index (RSI) is flirting with the 30 mark, which denotes oversold levels.

Further declines may then spur a technical rebound in the week ahead, as was the case on June 1st.

Article by ForexTime

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

Forex and Currency News Opinions

10 Aug

US CPI: The two takeaways for investors

By George Prior

The US Consumer Price Index (CPI) is out today but it is the core inflation data, not the headline, that investors will be pouring over, affirms the CEO and founder of one of the world’s largest independent financial advisory organizations.

The comments from deVere Group’s Nigel Green come as the latest CPI shows a monthly increase of 0.2% for July and a 12-month rate of just 3.3%. A year ago, the annual rate was a staggering 8.5%, which was short of the highest level in more than 40 years.

Core CPI, a measure which strips out the volatile food and energy sectors, is at 4.7%.

The deVere CEO says: “Overall, the CPI data is pretty good news, with inflationary pressures substantially easing from their 2022 levels.

“But there are two main takeaways from today’s inflation report for investors.

“First, core inflation remains sticky – and this is critical to investors.

“High core inflation increases costs for businesses, including wages and raw material costs. If businesses struggle to pass these increased costs onto consumers through higher prices, their profit margins become squeezed. This then leads to reduced earnings expectations and consequently impact stock prices.”

He continues: “Second, even though the battle to tame inflation is being won, it’s not over yet.

“The Fed will want to be completely sure that inflation is fully under control and heading back to target before it even thinks about cutting interest rates – and we’re not there currently.”

On today’s CPI data, Nigel Green now predicts a pause in the Federal Reserve’s interest rate hike agenda following the next meeting of the central bank’s FOMC.

“The officials won’t and can’t say we’re completely done, but they also cannot ignore that the data clearly shows that things are going in the right direction. Therefore, we now expect there to be a pause in September.”

However, the deVere CEO goes on to add that he believes this is the time for the Fed to stop, not pause, rate hikes.

“The time lag for monetary policies is incredibly lengthy. It takes around 18 months for the full effect of rate hikes to make their way into the economy – and that’s where we are.

“We’re now starting to see the drag effects on the US economy with households and businesses becoming considerably more prudent. In addition, investors are becoming more and more concerned that additional hikes could steer the US economy into a major recession.”

He concludes: “Despite marginally good news from the data, it is core inflation that remains the major concern for investors.”

About:

Economics & Fundamentals Opinions

08 Aug

The Coming BRICS Currency Diversification

By Dan Steinbock

The pressure toward the diversification of world currency reserves is longstanding. It intensified after 2008, but has escalated since 2022. It is a prime topic in the next BRICS Summit that’s likely to further intensify the trend.

In 2016, US Treasury Secretary Jack Lew cautioned that “the more we condition the use of the dollar and our financial system on adherence to US foreign policy, the more the risk of migration to other currencies and other financial systems in the medium-term grows.”

Both the Trump and Biden administrations have ignored Lew’s warning. One consequence has been the Global South’s rising interest in the BRICS, which will have its next, highly-anticipated summit in South Africa in late August.

A key topic in Johannesburg will be the BRICS quest to develop alternative payment systems to US dollar.

Risks of dollar monopoly

In May – oddly, amid the US banking crisis – economist Paul Krugman attributed the “de-dollarization” brouhaha to crypto-cultists and Putin’s sympathizers, as if the trend was nothing but a misguided anti-patriotic melee.

However, as Krugman noted, much of world trade remains invoiced and settled in U.S. dollars; many banks based outside the United States nonetheless offer dollar-denominated deposits; many non-U.S. corporations borrow in dollars; central banks hold a large share of their reserves in dollar assets; and so on. The assumption was that, a bit like diamond, US dollar is forever. In reality, no dominant reserve currency has had an indefinite life-span.

What Krugman failed to understand is that it is precisely the current coercive monopoly of the US dollar – the world’s disproportionate dependency on US dollar in trade invoicing and settlement, and the dollar reliance by non-US corporate and financial giants, and dollar’s high share in central banks’ reserves – that increasingly worries not just the Global South, but an increasing number of major economies in the West.

When the dollar is weaponized by the US foreign policy in the name of international community but without the broad support of international consensus, it puts trade invoicing and settlement, foreign corporates, financials and central bank reserves at risk.

True, recently US Secretary of Treasury Janet Yellen said there’s still no alternative to the dollar-based monetary system. Then again, not so long ago, she also warned about a catastrophic scenario if Washington failed to agree on a (still another) new debt limit. Similarly, the British, too, touted the blessings of their sterling pound until 1914. But that primacy ended with the overstretch of the UK economy after 1945.

The early 21^st century has its unique characteristics, but it won’t be that different.

Advantages of diversification

How is the BRICS contributing to diversification? Thanks to its organizational flexibility, the bloc makes possible unilateral, bilateral and multilateral measures. Analytically, these range from gradual reforms to more unilateral individual measures. These, in turn, are driven by the original BRICS founder economies (Brazil, Russia, India and China), the new aspiring members and the coalition partners who share its vision and are considering membership as well.

Some 22 countries have formally applied to join the group, while an equal number of states “have been informally asking about becoming BRICS members,” according to Anil Sooklal, South Africa’s ambassador-at-large responsible for ties with Asia and the BRICS. Reportedly, countries looking to join the bloc include Argentina, Iran, Saudi Arabia, and the United Arab Emirates.

Indeed, the rising number of populous and large emerging economies make possible the kind of “network effects” and “positive spillovers” that will be critical to launch the new critical infrastructure for the proposed alternative global financial system.

However, what the BRICS offer is not simple de-dollarization. The goal is not to eliminate the dollar, which is typically the depiction by the critics and political adversaries of the BRICS, particularly in the West. At the eve of the Ukraine conflict, Atlantic Council characterized Russia and China as “partners in de-dollarization.” That, in turn, was portrayed as “an alternative to the US-dominated SWIFT” [the currently dominant payment system]. Touted widely in the West, the cooperation of Russia and China is understood as a de jure alliance, and de-dollarization as a ploy for dollar substitution.

The realities are a bit less scandalous and more nuanced. The BRICS have little to do with rogue states seeking covertly to subvert international order. Rather, like asset managers who seek to maintain appropriate diversification in their portfolios, the BRICS’ strategic objective is diversify and recalibrate rather than simple de-dollarization.

From Keynes’s Bancor to the BRICS’ currency diversification

The skeptics say that the dollar has been buried many times before. Why should it die this time? But who says it would have to die. The more, the merrier. Most BRICS economies still rely significantly on the US dollar, whereas those that have been sanctioned by the US and/or its allies have significantly reduced their dollar reserves, often opting for gold instead.

What the major BRIC economies seek for is a more diversified global currency regime. The present path is untenable. If it is not remedied gradually and over time, it will change through a major world crisis, disruptively. The BRICS goal is not to replace the dollar. Rather, it is to diversify the monetary system so that it would better reflect today’s world economy.

In historical view, it’s far from a new idea. John Maynard Keynes made a similar argument for the proposed supra-national currency bancor (the name was inspired by the French banque, “bank gold”) in Bretton Woods in 1944. But the idea was torpedoed by the U.S. negotiators, who wanted to replace the UK pound with the dollar as the world’s major reserve currency. However, Keynes cautioned that the dollar primacy would result in great uncertainty and volatility following the reconstruction and recovery of Western Europe and other major economies.

That’s what ensued in 1971, when President Nixon ended unilaterally the convertibility of the dollar to gold. Though introduced as a temporary measure, it made U.S. dollar a permanently floating fiat money. As gold no longer offered a yardstick for value, the perception of value replaced value itself. The consequent price shock reverberated across the world. With the twin oil crises, it was followed by the quadrupling of oil prices, then runaway inflation and stagflation, and eventually record-high US interest rates and massive rearmament drives.

Rise of complementary institutions

In geopolitics, the U.S. has continued to lean on major Western economies and Japan, but in international economy it refused to renounce the exorbitant privilege. As a net consequence, the dollar monopoly contributed to asset bubbles in the 1980s, early ‘90s, early 2000s and finally in 2008. Amid the Great Recession, China’s central bank governor Zhou Xiaochuan revived the idea and urged major Western economies to “reform the international monetary system.”

Great pledges were made in Brussels, Washington and Tokyo, but nothing much happened. Hence, the efforts at complementary development institutions and critical infrastructure, including the BRICS New Development Bank (NBD), the Asian Infrastructure Investment Bank (AIIB), the Bridge and Road Initiative (BRICS), and the quest for new currency arrangements.

The BRICS do not want to subvert the world order. Rather, they seek to foster one vis-à-vis diversification. Nonetheless, global currency arrangements must not just the interests of Americans who account for 4.1 percent of the world population. It must also reflect the aspirations of the multipolar world economy in which global growth prospects are driven by the large emerging economies.

About the Author:

Dr. Dan Steinbock is an internationally recognized strategist of the multipolar world and the founder of Difference Group. He has served at India, China and America Institute (US), Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see https://www.differencegroup.net/

The original commentary was released by China-US Focus on Aug. 4, 2023. See also Dr Steinbock’s interview by Berliner Zeitung “Wollen die Brics den Dollar ersetzen? Das sagt ein Wirtschaftsexperte dazu” on July 27, 2023. Berliner Zeitung is one of the leading German dailies.

Forex and Currency News Opinions

08 Aug

UK interest rates: crashing the economy is no way to bring down inflation

By David Spencer, University of Leeds and Muhammad Ali Nasir, University of Leeds

The Bank of England (BoE) has raised interest rates once again to 5.25%, mirroring similar moves by the Federal Reserve and the European Central Bank. The fact that the UK is still suffering from high inflation – higher than either the US or eurozone – made another rate rise appear inevitable.

Yet there are reasons to doubt the merits and effectiveness of this approach. The UK’s efforts to bring down inflation quickly could be risking the health of the economy.

It is important to understand how monetary policy “works”. In effect, the BoE is seeking to make households in particular poorer so they spend less. The idea is you dampen down demand to bring it into line with supply, so that upward pressure on prices can be curbed.

The other effect of raising rates is to reduce the wage demands of workers by creating unemployment. This is not the publicly stated goal, but it lies behind the rhetoric of wage restraint that the BoE continually espouses – despite nominal wage growth only recently matching inflation.

The current approach to monetary policy accepts a recession as a price worth paying, while implying a belief that higher unemployment leads to lower inflation. This can be disputed on economic grounds – in the UK in the recent past, low inflation was achieved with low unemployment, so the idea that there is a necessary trade-off between inflation and unemployment can be refuted historically.

There are also moral objections to current monetary policy. It can be argued that the BoE should have a responsibility to protect living standards, not harm them. Its mandate of achieving a 2% inflation target should not be at any cost. Creating unemployment will impose misery on many workers and have scarring effects on the economy, from lost skills to reduced industrial capacity, which may be difficult to heal.

The economic reality

The current inflation is also not a classic case of “too much money chasing too few goods”. There are pressures from higher food and energy prices linked to factors like Brexit and the Ukraine war that cannot be controlled by raising interest rates.

There are also structural problems in the UK, such as labour shortages due to increases in economic inactivity – the result of more over-50s leaving the workforce and rises in ill health. These problems are seen to have put upward pressure on wages, and require responses beyond raising interest rates if they are to be fully addressed.

For example, they require new investment in the health sector to help alleviate hospital waiting lists. A better-funded NHS would create a healthier workforce, overcoming current limits on labour supply due to poor health that are seen to be creating inflationary pressures.

In any case, inflation is set to come down – the BoE’s own forecasts show this. Monetary tightening at this stage is therefore short-sighted and probably counterproductive – especially when the BoE thinks deflation is distinctly possible in the next couple of years. A more cautious approach to monetary policy seems in order.

Other countries have followed different policies with different effects. Spain, for instance, has used mechanisms such as price controls on things like rents and energy to help curb inflation (the UK did also cap energy bills, though not as aggressively). This has helped to reduce inflation while keeping employment high. It shows that crashing the economy is not the only route to low inflation.

In short, the BoE is simply compounding problems rather than solving them through its actions. It is time it learnt the limits of its own policies, while the government needs to play a role too.

In the short term, attention should be given to controlling prices (including energy) and making businesses show restraint in their pricing behaviour. Longer term, greater investment in skills, health and productive capacity is needed to create an economy that allows for rising real living standards with full employment.

About the Author:

David Spencer, Professor of Economics and Political Economy, University of Leeds and Muhammad Ali Nasir, Associate Professor in Economics, University of Leeds

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

Economics & Fundamentals Opinions

08 Aug

China deflation risks could hit investors worldwide

By George Prior

As China grapples with a serious deflation threat, investors worldwide must prepare for the fallout and adjust their strategies accordingly, warns the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations.

The warning from deVere Group’s Nigel Green comes as China reports July inflation on Wednesday, with markets looking for further signs of deflation.

The government has been actively playing down fears about deflation, with officials from the People’s Bank of China and National Bureau of Statistics, among other agencies, repeatedly saying there is no basis for long-term price declines.

Talking about the threat publicly is also off the agenda for many China-based analysts and economists, according to media reports.

Nigel Green comments: “China’s economic trajectory has been a focal point of global attention for decades, with its staggering growth and transformation capturing the world’s imagination.

“But the recent emergence of serious deflationary pressures in the world’s second-largest economy is triggering concerns that extend well beyond its borders.

“This economic phenomenon has the potential to set off a chain reaction of global repercussions that could reshape financial markets, trade dynamics and even international relations.”

Deflation – a persistent decline in prices of goods and services – can be as detrimental as rampant inflation, “if not more so”, states the deVere CEO.

In China’s case, the underlying factors driving deflation are complex and interconnected; rooted in weak consumer demand, declining exports and a highly subdued – but critical – property sector.

“China is a critical trade partner for many nations. As its exports become cheaper due to deflation, other economies might face increased competition, forcing them to lower their own prices or risk losing market share,” explains Green.

“Also, reduced demand for raw materials and commodities due to its economic slowdown is likely to lead to a decrease in global commodity prices. Those countries heavily reliant on commodity exports would then experience economic hardships as their revenues decline.

“The deflationary environment can put pressure on central banks to implement aggressive monetary policies, such as lowering interest rates or engaging in quantitative easing. This could distort global financial markets, affecting asset prices and investment strategies.”

This scenario is “worsened by the lack of transparency” as some leading academics, analysts and economists are reportedly being censored by Beijing, which is fearful of creating a doom cycle with negative news.

The interconnected nature of the global economy means that China’s deflation doesn’t remain confined within its borders.

As such, investors around the world should adopt strategies that “promote diversification, consider more defensive investments, and remain adaptable to changing economic conditions,” suggest the deVere boss.

“By staying informed and understanding the nuances of China’s deflation, investors can better position themselves to mitigate risks to their long-term wealth and capitalise on the significant opportunities that we expect to emerge amid the turmoil.”

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Economics & Fundamentals Opinions

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