Scales of power seem to be swinging in favour of bears
Watch out for Fed minutes and US jobs report
How prices react around $1900 could set tone
This could be a week to remember for gold prices thanks to technical and fundamental forces.
For the most part of Q2, it felt like a choppy affair for the precious metal with prices trading within multiple ranges. However, the overall trend was bearish with gold shedding roughly 2.5% for the quarter.
As the second half of 2023 kicks off, the scales of power seem to be swinging in favour of gold bears. Indeed, appetite towards the zero-yielding metal has been hit by a stabilizing dollar, Fed hike expectations, and a return of risk appetite. On the technical front, bears remain in the driving seat with prices trading uncomfortably close to the $1900 support level.
A major breakout could be on the horizon and here are 3 reasons why:
FOMC meeting minutes
All eyes will be on the minutes of the June 13-14 FOMC meeting on Wednesday.
One of the biggest takeaways from the June meeting was the hawkish dot plot which signalled two more rate hikes in 2023. Since then, there have been conflicting views from Fed officials over how the central bank might move forward. On top of this, key data from the United States remains encouraging, pointing to economic resilience and supporting expectations around the Fed keeping rates higher for longer. Investors will be paying very close attention to the minutes for fresh clarity and details on the split between hawkish and dovish policymakers.
Gold prices are likely to move higher if the June FOMC meeting minutes strike a more dovish tone, with cautious policymakers expressing concern over high-interest rates negatively impacting the US economy.
Gold prices may sink lower if the June FOMC meeting minutes strike a more hawkish tone, with policymakers determined to raise interest rates to tame still-stubborn inflation.
US Jobs report
The US nonfarm payrolls report on Friday could rock gold prices, especially if it defies market expectations as we have seen in recent months.
Markets expect the US economy to have added 225,000 jobs in June, while the unemployment rate is seen ticking lower to 3.6% compared to the 3.7% seen in the previous month. Given how markets remain sensitive to anything relating to the US economy and rate hike expectations, this jobs report could trigger volatility across the board.
Gold prices may appreciate on a weaker US dollar if the June NFP report prints below the 225k market forecast, complemented by a higher unemployment rate. This combo may fuel speculation around the Fed pausing rate hikes down the road, offering breathing room for zero-yielding gold.
Gold prices may depreciate on a stronger US dollar if the June NFP reports exceeds markets expectations with the unemployment rate moving lower. This scenario may strengthen the argument around the Fed raising interest rates 2 more times this year.
Technical forces favour bears
Despite trading within multiple ranges, gold continues to respect a bearish channel on the daily charts.
Prices are trading below the 50 and 100-day SMA while the MACD trades to the downside. Bears may step into higher gears this week if prices sink below the $1900 level. This could open a path towards $1893 and $1858 – where the 200-day SMA resides.
Should prices push back above $1932, gold bulls could test $1959, $1985, and $2000, respectively.
At the time of writing, Bloomberg’s FX model forecasts a 72.3% probability that gold trades between $1893.79 – $2049.46 through the first week of July.
The credit rating industry in Africa is dominated by the three international agencies: Moody’s, S&P and Fitch. Together they control an estimated 95% of the credit rating business globally.
Credit rating agencies are institutions that assess a borrower’s creditworthiness in general terms, or with respect to a particular debt or financial obligation. A credit rating can be assigned to any entity that seeks to borrow money – an individual, a corporation, a state or provincial authority, or a sovereign government. Investors use a credit rating to make decisions about risk and return. So the rating is required if an institution wants to raise funds on financial markets.
South Africa was the first African country to receive a sovereign rating, in 1994. To date, 32 African countries have received a sovereign rating from at least one of the “big three” agencies.
A recent study by the UN showed that subjective biases in credit ratings had cost African countries a combined US$74.5 billion. This was through funding opportunities lost and excess interest paid on public debt.
Conditions are therefore ripe to advance the idea of establishing an African credit rating agency as a partial solution. China has its own state-owned rating agency, Dagong Global Credit Rating Company. The Arab countries are also calling for their own rating agency.
As a lead expert with the African Union on ratings agencies, I can explain the framework this agency would operate in and why it makes business sense.
African Union official decisions
In March 2019, African Union (AU) ministers of finance and economy officially adopted a declaration that such an institution was needed. The AU also developed a proposal for the legal, financial and structural aspects of the rating agency. What’s not yet agreed is how the sustainability, credibility and independence of the agency will be achieved. But there is a way this could be achieved as I set out below.
The need for an African Rating agency has been reiterated by the current Chair of the AU, President Macky Sall of Senegal, and the Champion of the AU financial institutions, President Nana Akufo-Addo of Ghana. They highlighted it as an important step towards intra-continental integration. It would also enable AU member states to access capital and integrate the continent with global financial markets.
Institutional model
When the AU establishes a new institution, it can be either:
an organ of the union funded by its member states’ contributions, or
a self-funded autonomous specialised agency of the union.
Because the credit rating business requires credibility and independence, the best option is the specialised agency. Examples already in operation are the African Export-Import Bank and Africa Risk Capacity agency.
As an independent specialised agency of the AU, the agency would have diverse classes of shareholders. African governments could own it either directly or through their designated public institutions. Shareholding could include other smaller African-owned rating agencies, multilateral finance institutions and African national financial institutions.
As a financing structure, the agency would adopt the “issuer-pay” business model. The issuers of debt will pay the agency for rating its entity and products.
It would be fully funded by its shareholders and through loans from pan-African financial institutions. Multilateral development banks would either encourage or make it mandatory for their clients to have a rating from the African rating agency. Once this is done it should be able to sustain itself through revenue generated from its services.
As is the process in the AU, the African rating agency would be established through an agreement, signed by at least 10 member states.
The business case
There are still 22 African countries that have no credit ratings from the “big three” agencies. This will be a clear niche for the AU rating agency.
There is also tremendous value in the alternative rating sector, which cannot afford the cost of maintaining a rating from the “big three”. This includes small to medium enterprises, initial bond offerings and initial public offerings. The agency could also provide environmental, social and governance scores and foreign direct investment ratings. These rating services are urgently needed on the continent to complement governments’ efforts to support the development of domestic financial markets.
With the backing that comes from affiliation to the AU, the rating agency could secure substantial business in the ratings of domestic instruments that are aligned with the continent’s goals.
It would have the advantage of understanding the domestic context of Africa. So it could issue more informative and detailed ratings than those issued by the “big three”.
Way forward
The African Union is forging ahead with its plans to establish an African rating agency to complement the three dominant international agencies, and support the development of domestic financial markets in Africa. Although it will have to overcome challenges to gain investors’ support, there is a huge appetite for an alternative and complementary credit rating institution in Africa. Its success will be in developing a comprehensive methodology adapted to the African context, and resident analysts that understand the continent’s dynamics.
On Friday, the PCE inflation rate, which is closely monitored by the US Central Bank, showed that price pressures are easing, fueling hopes that the Fed is nearing the end of its rate hike cycle. Investor optimism improved, leading to active buying of stocks. At the close of the stock market, the Dow Jones Index (US30) gained 0.84% (+2.01% for the week), and S&P 500 (US500) jumped by 1.23% (+2.43% for the week). On Friday, the NASDAQ Technology Index (US100) closed positive by 1.45% (+2.37% for the week).
The PCE price index, the Federal Reserve’s preferred measure of inflation, slowed slightly more than expected. But the figure is still growing, albeit at a slower rate. On an annualized basis, the index fell to 4.6%, the lowest level of core PCE inflation since October 2021. A more detailed report shows that services inflation appears to have peaked.
According to the final June data released Friday, the University of Michigan Consumer Sentiment Index rose to 64.4 (the previous 63.9). The rise reflects a recovery in sentiment caused by the resolution of the debt ceiling crisis early last month, as well as more positive sentiment about easing inflation.
The US Treasury Secretary Janet Yellen said Friday that the US economy is on track to maintain a strong labor market while lowering inflation. Yellen also added that solid household and corporate balance sheets would be a source of US economic strength, along with a continued surge in factory construction.
Equity markets in Europe were mostly up on Friday. Germany’s DAX (DE30) gained 1.26% (+1.72% for the week), France’s CAC 40 (FR40) gained 1.19% (+3.12% for the week) on Friday, Spain’s IBEX 35 Index (ES35) gained 0.99% (+3.47% for the week), Britain’s FTSE 100 (UK100) closed up by 0.80% (+0.93% for the week).
The inflation rate in the Eurozone declined from 6.1% to 5.5% y/y (5.6% expected). Core inflation (which excludes food and energy prices) rose to 5.4% (5.5% expected) from 5.3% y/y. Inflation in the Eurozone is becoming more resilient, making it harder to decide when to stop raising interest rates, European Central Bank Governing Council spokesman Gabriel Makhlouf said Friday. According to analysts, until services inflation begins to decline in Europe, it is too early to talk about ending the tightening cycle.
In Switzerland, the KOF economic barometer was 90.8 points, down 0.6 points from May. This is the third consecutive drop in the barometer. Thus, the outlook for the Swiss economy in the second half of the year remained below average (100).
Gold prices failed to maintain the upward momentum of the first three months of the year in the second quarter and fell more than 3% by the close of June. The yellow metal came under pressure from rising yields and a reassessment of monetary policy expectations in both the US and Europe in response to tight inflation. But banking analysts are confident in gold and believe the second half of the year will be upward for gold as central banks begin winding down their tightening programs.
Asian markets mostly rallied last week. Japan’s Nikkei 225 (JP225) gained 1.66% over the week, China’s FTSE China A50 (CHA50) gained 0.33%, Hong Kong’s Hang Seng (HK50) ended the week down by 0.09%, and Australia’s S&P/ASX 200 (AU200) ended the week up by 1.47%. Most Asian stocks rose on Monday as lower US inflation boosted hopes for less hawkish Federal Reserve policy, and data showing improved sentiment toward the Japanese economy sent the Nikkei Index back to a 33-year-high.
A Bank of Japan survey showed the country’s business sentiment improved in the second quarter, indicating that the economy is recovering as more firms pledged to increase capital spending.
Home prices in Australia rose for the fourth straight month. Australian households are among the most indebted in the world, and housing affordability recently hit a record low. The report indicates that higher interest rates and lower sentiment negatively affect the number of active home buyers.
S&P 500 (F) (US500) 4,450.38 +53.94 (+1.23%)
Dow Jones (US30)34,407.60 +285.18 (+0.84%)
DAX (DE40) 16,147.90 +201.18 (+1.26%)
FTSE 100 (UK100) 7,531.53 +59.84 (+0.80%)
USD Index 102.92 -0.42 (-0.41%)
Important events for today:
– Switzerland Consumer Price Index (m/m) at 09:30 (GMT+3);
– German Manufacturing PMI (m/m) at 10:55 (GMT+3);
– Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+3);
– UK Manufacturing PMI (m/m) at 11:30 (GMT+3);
– US ISM Manufacturing PMI (m/m) at 17:00 (GMT+3).
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
The US Treasury Secretary’s trip to China this week will be a hit with investors around the world, affirms the CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organizations.
The comments from Nigel Green of deVere Group come as Janet Yellen heads to Beijing between July 3 and 6 as part of continuing efforts by the Biden administration to strengthen communication between the US and China after a series of spates and instability between the two nations.
He says: “Yellen’s trip to Beijing this week is important to global markets for two main reasons.
“First, she is the top US economic policymaker, meaning that the US government appears serious about rebuilding economic ties between the world’s two largest economies.
“Also, Yellen’s visit to meet counterparts in China comes just three weeks after Secretary of State Antony Blinken visited the country, highlighting the attempts by the Biden administration to revive a more cordial relationship with the emerging superpower.”
The deVere CEO continues: “Second – and perhaps more importantly – it shows a commitment to globalisation.
“Investors are looking for global leaders to dismiss the prevailing protectionist narrative of the last few years as many countries have looked increasingly inwards, becoming more and more nationalistic.
“Globalization opens-up a wider array of investment opportunities beyond domestic markets. Investors can access a diverse range of industries, sectors, and geographies, allowing them to build well-diversified portfolios.
“History teaches us that by investing globally, investors can gain exposure to companies at the forefront of technological advancements, disruptive business models, and emerging trends. This exposure to innovation can drive portfolio growth and potentially generate above-average returns.”
Yellen’s forthcoming trip also comes a week after China’s premier Li Qiang condemned recent Western efforts to limit trade and business ties with the country, and encouraged international economic co-operation.
In the keynote address at a World Economic Forum event in which he criticised “the politicization of economic issues”, Li said: “Governments should not over-reach themselves, still less stretch the concept of risk or turn it into an ideological tool.”
This denouncing of economic “politicization” and defence of globalization in his speech at the so-called ‘Summer Davos’ address, was, says Nigel Green, “music to the ears of investors around the world.”
Yellen is expected to meet with senior Chinese officials as well as leading US firms with operations in China.
The Treasury says she will discuss “areas of concern” to cool tensions between the two largest economies in the world, ways to work competition between the two powers, as well as subjects where they can cooperate on international issues, such as climate change.
“Financial markets around the world will be cheered by the efforts being made by the superpower economies to foster policies of globalization,” concludes Nigel Green.
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 more than 70 offices across the world, over 80,000 clients and $12bn under advisement.
BTC reached 30,710 USD on Friday, marking a weekly growth of 2.35%.
Improvement in the domestic news landscape and the reestablished correlation with the US stock market are working in favour of the flagship cryptocurrency. At the same time, it should be noted that the rally is not formed yet because buyers remain cautious. For the BTC exchange rate to confidently move upwards, the cryptocurrency needs to secure above 31,150 USD. Once this is achieved, the next target for growth would be 33,000 USD.
The capitalisation of the cryptocurrency market is gradually increasing and currently stands at 1.190 trillion USD. The share of BTC remains at 50.2%, while the share of ETH has decreased to 18.9%.
BTC mining has become less complicated
According to a recent calculation, the complexity of mining the leading cryptocurrency has decreased by 3.26%. For May, the cumulative revenue of miners amounted to 916 million USD, which shows consistent growth since November last year.
The King of the UK ratifies cryptocurrency legislation
The King of the UK has ratified a draft bill allowing regulators to oversee digital assets and stablecoins. This is a formal measure, as the legislation was previously agreed upon at the House of Lords.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
AUDUSD set to post 1.8% climb in June – first monthly gain since January 2023
Bloomberg’s FX model forecasts trading range of 0.6524 – 0.6732 for AUDUSD in first week of July
AUDUSD’s presence above/below 0.660 next week could be dictated by China PMIs, RBA decision, FOMC minutes, and US jobs report.
AUDUSD is recovering slightly in recent sessions, despite having it tough so far in 2023.
The “Aussie” has a year-to-date decline of 2.8%, no thanks to the resilient US dollar as well as China’s faltering economic recovery.
Whether or not the “Aussie” can extend its recent recovery into the new month may well depend on the fundamental catalysts contained within the global economic calendar for the coming week:
Monday, July 3
AUD: Australia June inflation; manufacturing PMI (final)
CNH: China June Caixin manufacturing PMI
EUR: Eurozone June manufacturing PMI (final); Germany May trade balance
GBP: UK June manufacturing PMI (final)
USD: US June ISM manufacturing
Tuesday, July 4
AUD: Reserve Bank of Australia rate decision
EUR: Eurozone April retail sales; Germany April factory orders
US markets closed for Independence Day
Wednesday, July 5
AUD: Australia June services PMI (final)
CNH: China Caixin services and composite PMIs
EUR: Eurozone May PPI, services PMI (final)
GBP: UK June services PMI (final)
USD: FOMC minutes; speech by New York Fed President John Williams
Thursday, July 6
AUD: Australia May external trade
EUR: Eurozone May retail sales; Germany May factory orders
USD: US weekly initial jobless claims; speech by Dallas Fed President Lorie Logan
Friday, July 7
CNH: China June forex reserves
EUR: Speech by ECB President Christine Lagarde; Germany May industrial production
GBP: Speech by BOE policymaker Catherine Mann
USD: US June nonfarm payrolls
CAD: Canada June unemployment rate
In determining whether AUDUSD can keep its head above the crucial support 0.660 level next week …
Traders and investors will be casting their sights across 3 countries, namely China, the US, and Australia (of course).
Here are some key events to pay close attention to:
1) July 3rd: China June Caixin manufacturing PMI
Note that the Australian economy is very much reliant on China, being Australia’s largest trading partner.
Hence, when the Chinese Yuan strengthens, the Australian Dollar tends to follow suit.
(AUDUSD has a strong inverse correlation with USDCNY of -0.72 over a 5-day rolling period in the past 10 years)
AUDUSD may move higher should China’s Caixin manufacturing PMI come in above the 50 mark, which shows expanding conditions in China’s manufacturing sector.
AUDUSD may move lower should China’s Caixin manufacturing PMI come in below the 50 mark, which would show contracting conditions among factories in the world’s second largest economy.
2) July 4th: Reserve Bank of Australia (RBA) rate decision
The futures market predicts only a 1-in-3 chance that Australia’s central bank will hike by further 25-basis points.
On the other hand, the 27 economists surveyed by Bloomberg are split (13-14) on whether we will see a July RBA hike.
The economists in the “no July hike” camp would point to the latest Australian consumer price index (CPI – which measures headline inflation) of 5.6% for May.
That 5.6% number was below market forecasts for 6.1% and also lower than April’s 6.8% reading.
Should this coming Monday’s (July 3rd) inflation readings by the Melbourne Institute also show easing inflationary pressures, that may bolster the case for another RBA pause at next week’s meeting.
However, note that the RBA surprised markets with unexpected hikes at its past two policy meetings.
For the upcoming RBA decision:
AUDUSD may move higher if the RBA raises its Cash Rate Target to 4.35%
AUDUSD may move lower if the RBA leaves rates unchanged at 4.10%
3) July 5th: FOMC June meeting minutes
Recall how the Fed tried to warn markets at that mid-June FOMC meeting about two more incoming rate hikes this year.
Such warnings by Fed Chair Jerome Powell had little initial impact, as markets were willing to challenge the Fed’s forecasts.
However, the economic data since then suggests that the world’s largest economy remains resilient, likely paving the way for the Fed to raise its benchmark rates even higher so as to quell still-stubborn inflation.
AUDUSD may move higher if the June FOMC meeting minutes reveals a more dovish policy stance held by Fed officials who are adamant that US interest rates have moved high enough and are not willing to risk further economic damage.
AUDUSD may move lower if the June FOMC meeting minutes reveals a more hawkish policy stance held by Fed officials who are adamant about moving US interest rates even higher.
4) July 7th: US jobs report for June
Markets predict that 200,000 new jobs were added to the US economy in June.
If so, that 200k figure would be the lowest headline nonfarm payrolls (NFP) print since December 2019.
Yet, seasoned market watchers are only too aware that the NFP number has been notoriously hard to predict in recent months, frustrating many top economists.
After all, every single headline NFP number for each month of 2023 so far has exceeded market forecasts. Recall the recent blockbuster NFP print for May (released on June 2nd) which came in at a whopping 339k, far exceeding Wall Street’s forecast of 195k.
The June unemployment rate (also released on Friday, July 7th) is even expected to tick lower to 3.6% compared to May’s 3.7% jobless rate.
Still, with recession alarm bells ringing loudly in certain parts of global financial markets, investors are always looking further down the line and already asking when we will see the first negative NFP print (job losses) and a significantly higher unemployment rate.
AUDUSD may move higher on a weaker US Dollar if the June NFP report produces a lower-than-200k headline number, along with a higher unemployment rate. A weaker-than-expected US jobs report may allow the Fed to start thinking about pausing its rate hikes.
AUDUSD may move lower on a stronger US Dollar if the June NFP report, yet again, delivers another positive shocker that far exceeds the forecasted 200k print, while the unemployment rate moves lower. Another blockbuster US jobs report should force the Fed to hike twice more before 2023 ends.
Key levels
At the time of writing, Bloomberg’s FX model forecasts a 36.7% chance that AUDUSD might break below the 0.66 over the next one-week period.
The model also forecasts a trading range of 0.6524 – 0.6732 for AUDUSD through the first week of July.
Here are some key levels to watch within that forecasted trading range:
POTENTIAL SUPPORT
0.6600: psychologically-important level
0.65641 – 0.65738: March, May cycle lows
0.6524: lower end of Bloomberg model forecasted range; key battleground for bulls and bears in late May/early June.
POTENTIAL RESISTANCE
0.66627: June 23rd intraday low
100-day SMA
0.67255: 23.6% Fibonacci level from AUDUSD’s 1H23 peak-to-trough
The US indices mostly rose yesterday. The Federal Reserve stress test showed that the 23 largest US banks could withstand a severe recession scenario. At yesterday’s stock market close, the Dow Jones Index (US30) increased by 0.80%, and the S&P 500 (US500) added 0.45%. The NASDAQ Technology Index (US100) closed yesterday at opening level.
Wells Fargo & Company (WFC), JPMorgan Chase & Co (JPM), and Goldman Sachs Group Inc (GS) led the rally in the banking sector amid growing optimism after passing the stress tests. But analysts don’t share that optimism, as there are big doubts that the nation’s regional banks will be able to withstand the recession.
Atlanta Fed President Rafael Bostic continued to signal yesterday that the Fed should take a pause, saying it would be wise to keep rates at current levels in future meetings, as inflation is likely to slow without additional tightening.
Nike (NKE) posted mixed results for the fourth quarter as earnings came in below Wall Street estimates, but revenue exceeded forecasts on the back of the ongoing recovery in China. Sales in North America rose by 5% year-over-year in the fourth quarter, while sales in China, an important market for the sportswear giant, jumped by 16%.
The US Gross Domestic Product (GDP) for the second quarter was 2%, exceeding economists’ forecasts of 1.4%. Because of the Fed’s hawkish stance and strong economic data, the inversion of the US yield curve is deepening. This is a sign that investors are increasingly worried about slowing economic growth. An inverted yield curve occurs when short-term Treasury bond yields exceed long-term yields, reflecting bets that the Central Bank will have to cut rates in the future to support an economy hit by higher borrowing costs.
Equity markets in Europe traded flat yesterday. German DAX (DE30) closed at the opening level, French CAC 40 (FR40) gained 0.36%, Spanish IBEX 35 (ES35) added 0.36%, and British FTSE 100 (UK100) was negative by 0.38%.
Inflationary pressure is growing again in Germany. The consumer price level in the country rose from 6.1% to 6.4% in annual terms. Eurozone’s inflation data will be released today. General inflation is expected to fall from 6.1% to 5.6% y/y, but core inflation is expected to rise from 5.3% to 5.5% y/y. This will be a hawkish signal for the ECB.
Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) gained 0.12% yesterday, China’s FTSE China A50 (CHA50) lost 0.94%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.80%, and Australia’s S&P/ASX 200 (AU200) ended Thursday negative by 0.02%.
Bank of Japan Deputy Governor Ryozo Himino said the country’s banking sector remains resilient and has enough reserves to withstand any stress caused by future interest rate hikes. The least favorable condition for domestic financial institutions would be for Japan to keep interest rates ultra-low for too long amid a weak economy, Himino said. Analysts believe the Bank of Japan has been slow to prepare for monetary policy normalization.
Tokyo’s core consumer price index rose to 3.2% from 3.1% (forecast 3.4%). This Index is seen as a leading indicator of inflation across the country. Despite the fact that the inflation value was below the forecast, consumer prices are showing steady growth, which is exactly what the Bank of Japan wants to see before it changes its monetary policy.
China’s manufacturing activity declined for the third month in a row in June, while weakness in other sectors intensified. The official manufacturing purchasing managers’ index (PMI) rose to 49.0 from 48.8 in May, remaining below the 50-point mark that separates growth from contraction. The non-manufacturing PMI fell to 53.2 from 54.50 in May, indicating slowing activity in the services and construction sectors. New orders and new export orders declined for the third straight month, with export orders declining at a faster pace. This situation adds to the pressure on the authorities to do more to support growth as demand falls both at home and abroad.
S&P 500 (F) (US500) 4,396.44 +19.58 (+0.45%)
Dow Jones (US30)34,122.42 +269.76 (+0.80%)
DAX (DE40) 15,949.00 −2.28 (−0.014%)
FTSE 100 (UK100) 7,471.69 −28.80 (−0.38%)
USD Index 103.35 +0.45 (+0.43%)
Important events for today:
– Japan Tokyo Core CPI (m/m) at 02:30 (GMT+3);
– Japan Unemployment Rate (m/m) at 02:30 (GMT+3);
– Japan Industrial Production (m/m) at 02:50 (GMT+3);
– China Manufacturing PMI (m/m) at 04:30 (GMT+3);
– China Non-Manufacturing PMI (m/m) at 04:30 (GMT+3);
– UK GDP (q/q) at 09:00 (GMT+3);
– German Retail Sales (m/m) at 09:00 (GMT+3);
– Switzerland Retail Sales (m/m) at 09:30 (GMT+3);
– German Unemployment Rate (m/m) at 10:55 (GMT+3);
– Eurozone Consumer Price Index (m/m) at 12:00 (GMT+3);
– Eurozone Unemployment Rate (m/m) at 12:00 (GMT+3);
– US PCE Price index (m/m) at 15:30 (GMT+3);
– Canada GDP (q/q) at 15:30 (GMT+3);
– US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+3);
– Canada BoC Business Outlook Survey at 17:30 (GMT+3).
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
Numerous government agencies, including the FBI, Department of Defense, National Security Agency, Treasury Department, Defense Intelligence Agency, Navy and Coast Guard, have purchased vast amounts of U.S. citizens’ personal information from commercial data brokers. The revelation was published in a partially declassified, internal Office of the Director of National Intelligence report released on June 9, 2023.
The report shows the breathtaking scale and invasive nature of the consumer data market and how that market directly enables wholesale surveillance of people. The data includes not only where you’ve been and who you’re connected to, but the nature of your beliefs and predictions about what you might do in the future. The report underscores the grave risks the purchase of this data poses, and urges the intelligence community to adopt internal guidelines to address these problems.
As a privacy, electronic surveillance and technology law attorney, researcher and law professor, I have spent years researching, writing and advising about the legal issues the report highlights.
These issues are increasingly urgent. Today’s commercially available information, coupled with the now-ubiquitous decision-making artificial intelligence and generative AI like ChatGPT, significantly increases the threat to privacy and civil liberties by giving the government access to sensitive personal information beyond even what it could collect through court-authorized surveillance.
What is commercially available information?
The drafters of the report take the position that commercially available information is a subset of publicly available information. The distinction between the two is significant from a legal perspective. Publicly available information is information that is already in the public domain. You could find it by doing a little online searching.
Commercially available information is different. It is personal information collected from a dizzying array of sources by commercial data brokers that aggregate and analyze it, then make it available for purchase by others, including governments. Some of that information is private, confidential or otherwise legally protected.
The commercial data market collects and packages vast amounts of data and sells it for various commercial, private and government uses. Government Accounting Office
The sources and types of data for commercially available information are mind-bogglingly vast. They include public records and other publicly available information. But far more information comes from the nearly ubiquitous internet-connected devices in people’s lives, like cellphones, smart home systems, cars and fitness trackers. These all harness data from sophisticated, embedded sensors, cameras and microphones. Sources also include data from apps, online activity, texts and emails, and even health care provider websites.
This data provides companies and governments a window into the “Internet of Behaviors,” a combination of data collection and analysis aimed at understanding and predicting people’s behavior. It pulls together a wide range of data, including location and activities, and uses scientific and technological approaches, including psychology and machine learning, to analyze that data. The Internet of Behaviors provides a map of what each person has done, is doing and is expected to do, and provides a means to influence a person’s behavior.
Smart homes could be good for your wallet and good for the environment, but really bad for your privacy.
Better, cheaper and unrestricted
The rich depths of commercially available information, analyzed with powerful AI, provide unprecedented power, intelligence and investigative insights. The information is a cost-effective way to surveil virtually everyone, plus it provides far more sophisticated data than traditional electronic surveillance tools or methods like wiretapping and location tracking.
Complying with these laws takes time and money, plus electronic surveillance law restricts what, when and how data can be collected. Commercially available information is cheaper to obtain, provides far richer data and analysis, and is subject to little oversight or restriction compared to when the same data is collected directly by the government.
The threats
Technology and the burgeoning volume of commercially available information allow various forms of the information to be combined and analyzed in new ways to understand all aspects of your life, including preferences and desires.
How the collection, aggregation and sale of your data violates your privacy.
The Office of the Director of National Intelligence report warns that the increasing volume and widespread availability of commercially available information poses “significant threats to privacy and civil liberties.” It increases the power of the government to surveil its citizens outside the bounds of law, and it opens the door to the government using that data in potentially unlawful ways. This could include using location data obtained via commercially available information rather than a warrant to investigate and prosecute someone for abortion.
The report also captures both how widespread government purchases of commercially available information are and how haphazard government practices around the use of the information are. The purchases are so pervasive and agencies’ practices so poorly documented that the Office of the Director of National Intelligence cannot even fully determine how much and what types of information agencies are purchasing, and what the various agencies are doing with the data.
Is it legal?
The question of whether it’s legal for government agencies to purchase commercially available information is complicated by the array of sources and complex mix of data it contains.
There is no legal prohibition on the government collecting information already disclosed to the public or otherwise publicly available. But the nonpublic information listed in the declassified report includes data that U.S. law typically protects. The nonpublic information’s mix of private, sensitive, confidential or otherwise lawfully protected data makes collection a legal gray area.
Despite decades of increasingly sophisticated and invasive commercial data aggregation, Congress has not passed a federal data privacy law. The lack of federal regulation around data creates a loophole for government agencies to evade electronic surveillance law. It also allows agencies to amass enormous databases that AI systems learn from and use in often unrestricted ways. The resulting erosion of privacy has been a concern for more than a decade.
Throttling the data pipeline
The Office of the Director of National Intelligence report acknowledges the stunning loophole that commercially available information provides for government surveillance: “The government would never have been permitted to compel billions of people to carry location tracking devices on their persons at all times, to log and track most of their social interactions, or to keep flawless records of all their reading habits. Yet smartphones, connected cars, web tracking technologies, the Internet of Things, and other innovations have had this effect without government participation.”
However, it isn’t entirely correct to say “without government participation.” The legislative branch could have prevented this situation by enacting data privacy laws, more tightly regulating commercial data practices, and providing oversight in AI development. Congress could yet address the problem. Representative Ted Lieu has introduced the a bipartisan proposal for a National AI Commission, and Senator Chuck Schumer has proposed an AI regulation framework.
Effective data privacy laws would keep your personal information safer from government agencies and corporations, and responsible AI regulation would block them from manipulating you.
Inflation, a slowing global economy, and high stock valuations present the three major challenges for investors in the second half of 2023. They must be prepared to navigate through ‘significant headwinds’ while capitalizing on the tailwinds that offer promising prospects.
This is the analysis of Nigel Green, CEO and founder of deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organizations, as we approach the year’s second half, when investors are typically analysing the market outlook, macro risks, and forecasts.
He says: “2023 has been a better year to date for economies than many had expected, but we expect three significant investment headwinds for the second half of the year that investors need to consider.
“First, the persisting challenge of inflation remains a top concern for investors in the second half of 2023. Core and headline inflation are edging down, slowly, but core still remains comparatively high in major developed economies.
“Therefore, central banks will argue they need to continue with, or resume, interest rate rises to bring inflation back to target.”
Stock markets typically experience declines or volatility when interest rates are raised.
Borrowing becomes more expensive for individuals and businesses, affecting corporate profitability as companies face higher costs of borrowing to finance their operations, expansion, or investment projects. Rates hikes typically lead to a decrease in corporate earnings, which negatively impacts stock prices.
The jumped-up borrowing costs also discourage consumers from taking on new loans, such as mortgages or car loans, which can impact sectors such as real estate and automotive industries. Reduced consumer spending will likely then have a ripple effect on businesses’ revenues and earnings.
In addition, investors may reallocate their portfolios to take advantage of the relatively safer returns offered by bonds, reducing demand for stocks and putting downward pressure on markets.
The deVere CEO continues: “Most developed markets will experience the lag effect of monetary policy tightening during the second-half 2023. 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 – which is what we expect to see in H2 of this year.
“As the impact of monetary policy agendas kick in, we expect economies around the world to slow.
“Investors should closely monitor key indicators and adjust their investment strategies accordingly.
“And third, the current market environment is characterised by elevated valuations across various asset classes.
“This poses a serious challenge for investors seeking attractive entry points. The risk of overpaying for investments is amplified, increasing the importance of thorough analysis and due diligence. Investors should exercise caution and focus on identifying quality investments with solid fundamentals and reasonable valuations.”
However, the second half of 2023 will also present several tailwinds that can guide investment decisions and unlock opportunities.
“Amidst the challenges, there are attractive opportunities in both value and growth sectors,” affirms Nigel Green.
“Value investors can identify undervalued companies with strong fundamentals and the potential for future growth. Meanwhile, growth investors can capitalise on sectors that continue to demonstrate robust performance, such as technology, healthcare, and renewable energy.
“In an uncertain market environment, quality stocks tend to provide stability and resilience. Companies with solid financials, strong management teams, and competitive advantages are more likely to weather market volatility.
“Investors should focus on identifying companies with sustainable business models and a track record of delivering consistent returns to shareholders.
“Diversification remains a time-tested strategy for mitigating risks and maximizing returns.
“By spreading investments across different asset classes, sectors, and geographies, investors can reduce their exposure to any single risk factor. Diversification helps to smooth out volatility and provides a cushion against potential downturns in specific areas of the market.”
He concludes: “The second half of 2023 presents a mixed bag of headwinds and tailwinds for investors.
“While challenges like inflation, an economic slowdown, and high valuations persist, there are also opportunities in both value and growth sectors.
“By focusing on quality stocks and implementing a diversified investment strategy, investors can position themselves to navigate through uncertainty and capitalize on the inevitable rewards that lie ahead.”
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 more than 70 offices across the world, over 80,000 clients and $12bn under advisement.
Could a new currency be set to challenge the dominance of the dollar? Perhaps, but that may not be the point.
In August 2023, South Africa will host the leaders of Brazil, Russia, India, China and South Africa – a group of nations known by the acronym BRICS. Among the items on the agenda is the creation of a new joint BRICS currency.
As a scholar who has studied the BRICS countries for over a decade, I can certainly see why talk of a BRICS currency is, well, gaining currency. The BRICS summit comes as countries across the world are confronting a changing geopolitical landscape that is challenging the traditional dominance of the West. And while the BRICS countries have been seeking to reduce their reliance on the dollar for over a decade, Western sanctions on Russia after its invasion of Ukraine have accelerated the process.
Meanwhile, rising interest rates and the recent debt-ceiling crisis in the U.S. have raised concerns among other countries about their dollar-denominated debt and the demise of the dollar should the world’s leading economy ever default.
That all said, a new BRICS currency faces major hurdles before becoming a reality. But what currency discussions do show is that the BRICS countries are seeking to discover and develop new ideas about how to shake up international affairs and effectively coordinate policies around these ideas.
The BRICS countries have been pursuing a wide range of initiatives to decrease their dependence on the dollar. Over the past year, Russia, China and Brazil have turned to greater use of non-dollar currencies in their cross-border transactions. Iraq, Saudi Arabia and the United Arab Emirates are actively exploring dollar alternatives. And central banks have sought to shift more of their currency reserves away from the dollar and into gold.
All the BRICS nations have been critical of the dollar’s dominance for different reasons. Russian officials have been championing de-dollarization to ease the pain from sanctions. Because of sanctions, Russian banks have been unable to use SWIFT, the global messaging system that enables bank transactions. And the West froze Russia’s US$330 billion in reserves last year.
Meanwhile, the 2022 election in Brazil reinstated Luiz Inácio Lula da Silva as president. Lula is a longtime proponent of BRICS who previously sought to reduce Brazil’s dependence on and vulnerability to the dollar. He has reenergized the group’s commitment to de-dollarization and spoken about creating a new Euro-like currency.
The Chinese government has also clearly laid out its concerns with the dollar’s dominance, labeling it “the main source of instability and uncertainty in the world economy.” Beijing directly blamed the Fed’s interest rate hike for causing turmoil in the international financial market and substantial depreciation of other currencies. Together with other BRICS countries, China has also criticized the use of sanctions as a geopolitical weapon.
The appeal of de-dollarization and a possible BRICS currency would be to mitigate such problems. Experts in the U.S. are deeply divided on its prospects. U.S. Treasury Secretary Janet Yellen believes the dollar will remain dominant as most countries have no alternative. Yet a former White House economist sees a way that a BRICS currency could end dollar dominance.
Currency ambitions
Although talk of a BRICS currency has gained momentum, there is limited information on various models under consideration.
The most ambitious path would be something akin to the Euro, the single-currency adopted by 11 member states of the European Union in 1999. But negotiating a single currency would be difficult given the economic power asymmetries and complex political dynamics within BRICS. And for a new currency to work, BRICS would need to agree to an exchange rate mechanism, have efficient payment systems and a well-regulated, stable and liquid financial market. To achieve a global currency status, BRICS would need a strong track record of joint currency management to convince others that the new currency is reliable.
A BRICS version of the Euro is unlikely for now; none of the countries involved show any desire to discontinue its local currency. Rather, the goal appears to be to create an efficient integrated payment system for cross-border transactions as the first step and then introduce a new currency.
Building blocks for this already exist. In 2010, the BRICS Interbank Cooperation Mechanism was launched to facilitate cross-border payments between BRICS banks in local currencies. BRICS nations have been developing “BRICS pay” – a payment system for transactions among the BRICS without having to convert local currency into dollars. And there has been talk of a BRICS cryptocurrency and of strategically aligning the development of Central Bank Digital Currencies to promote currency interoperability and economic integration. Since many countries expressed an interest in joining BRICS, the group is likely to scale its de-dollarization agenda.
From BRICS vision to reality
To be sure, some of the group’s most ambitious past initiatives to set up major BRICS projects to parallel non-Western infrastructures have failed. Big ideas like developing a BRICS credit rating agency and creating a BRICS undersea cable never materialized.
And de-dollarization efforts have been struggling both at the multilateral and bilateral level. In 2014, when the BRICS countries launched the New Development Bank, its founding agreement outlined that its operations may provide financing in the local currency of the country in which the operation takes place. Yet, in 2023, the bank remains heavily dependent on the dollar for its survival. Local currency financing represents around 22% of the bank’s portfolio, although its new president hopes to increase that to 30% by 2026.
Similar challenges exist in bilateral de-dollarization pursuits. Russia and India have sought to develop a mechanism for trading in local currencies, which would enable Indian importers to pay for Russia’s cheap oil and coal in rupees. However, talks were suspended after Moscow cooled on the idea of rupee accumulation.
Despite the barriers to de-dollarization, the BRICS group’s determination to act should not be dismissed – the group has been known for defying expectations in the past.
Despite many differences among the five countries, the bloc managed to develop joint policies and survive major crises such as the 2020-21 China-India border clashes and the war in Ukraine. BRICS has deepened its cooperation, invested in new financial institutions and has been continuously broadening the range of policy issues it addresses.
It now has a huge network of interlinked mechanisms that connect governmental officials, businesses, academics, think tanks and other stakeholders across countries. Even if there is no movement on the joint currency front, there are multiple issues on which BRICS finance ministers as well as central bankers regularly coordinate – and the potential for developing new financial collaborations is particularly strong.
No doubt, talk of a new BRICS currency in itself is an important indicator of the desire of many nations to diversify away from the dollar. But I believe focusing on the BRICS currency risks missing the forest for the trees. A new global economic order will not emerge out of a new BRICS currency or de-dollarization happening overnight. But it can potentially emerge out of BRICS’ commitment to coordinating their policies and innovating – something this currency initiative represents.
About the Author:
Mihaela Papa, Adjunct Assistant Professor of Sustainable Development and Global Governance, The Fletcher School, Tufts University
Article by ForexTime
