*Please note; The author is working from UTC +13 when determining the timeline of data releases.
What 3 Events Will Traders Be Watching This Week?
24 Jan – 29 Jan, 2022
Tuesday, January 25:
NAB Business Confidence
NAB Business Confidence from Australia hits the market early afternoon on Tuesday.
The Index may rebound after November’s sharp drop, where it fell to 12 points from 20 points in the previous report. Several factors have recently occurred that may impart a great deal of positivity in Australia’s business community. Perhaps the most impactful event is the loosening of monetary policy in Australia’s largest trading partner, China.
There is room for further loosening in China’s loan rates and the expectation that the People’s Bank of China will use it over the coming months to help prop up slowing economic activity. Australia should be a benefactor of such policy and improve Chinese economic activity.
As such, perhaps we will see some positive follow-through in the AUDUSD, which is currently trading at 0.71746, down 1.4% YTD.
Thursday, January 27:
BoC Interest Rate Decision
Fed Interest Rate Decision
Two significant interest rates decisions are being served up on Thursday.
First is the Bank of Canada (BoC) Interest Rate Decision, due at 4 NZDT in the morning.
The BoC is dealing with 30-year-high inflation (4.8% YoY to December) yet may be hesitant to raise rates sooner than March. It could be that the Bank is waiting for the British Columbian floods and the spread of Omicron to subdue until initiating its first rate hike.
However, the market may have already partially priced in a 25 basis point rate hike that could leave the CAD vulnerable if the BoC doesn’t deliver what is expected on Thursday.
The second interest rate decision is due from the US Federal Reserve on Thursday at 8:00 am. I’m sure most of us will be watching the ensuing volatility in the USD, after Jerome Powell and his team’s announcement. The USDJPY and the NZDUSD may be some of the biggest movers on this day, with the USD seeking to claw back some of the recent losses against the former and further appreciating against the latter.
While an interest rate hike is not likely on Thursday, investors will want to see if the Fed will move up its rate hike schedule. As it stands, the market is expecting a March rate hike, the first of many that the Fed will have to enact to combat the 40-year-high inflation in the US.
We are only 20 days into 2022, and several developing events are already looking like they will become year defining. Here are 3 events that may define trading in 2022.
How hawkish will the US Federal Reserve act in response to inflation?
3 rate hikes are tentatively planned by the US Federal Reserve this year. According to Fed board members, such as Christopher Waller and Patrick Harker, 3 rate hikes is the baseline number needed to control the current level of inflation, but 4 or more hikes is definitely on the table and up for discussion if warranted.
The aggressiveness of each hike is likely to play an equally important role in trading in 2022. While 25-basis point hikes are usual for the Fed (and what is anticipated by the market), some commentators, such as Bill Ackerman, suggest that the Fed may have to double this value for its initial rate hike to help restore its institutional credibility.
The first hike is expected as early as March, but a February hike is entirely possible.
Will the Nasdaq 100 have a negative year?
Naturally, as the cost of debt increases (via the aforementioned rate hikes from the US Fed), the growth prospects of the Nasdaq 100 can be squeezed, leading to a flat or negative year for the Nasdaq 100 index.
The last time the Nasdaq 100 had a genuinely negative year was in 2008, dropping in value by 41.9%. The Nasdaq 100 fell 1.04% in 2018, but this is arguably characterised as a flat year rather than a negative year.
With at least 3 rate hikes on the cards for the US Fed, the possibility of a negative year for the index is perhaps higher than a flat year. Bolstering this sentiment is the prediction of Jamie Dimon, CEO of JP Morgan Chase (NYSE: JPM). Dimon has floated the idea that the Fed may have to resort to six or seven rate hikes to tame the 40-year high inflation that the US is currently experiencing. However, Dimon didn’t specify if he believed all these rate hikes should take place in 2022.
Can oil finally hit US $100 per barrel as predicted?
Several big banks, including Goldman Sachs (NYSE: GS), predict that oil could hit $100 per barrel in 2022 or 2023.
Oil is currently in a solid position, trading between US $80 and US$90 a barrel and not far off the US $100 forecast.
Without OPEC committing to any significant increase in oil output, it looks unlikely that the price of oil will fall without a demand reduction. Yet, even with the possibility of new covid variants emerging or tightening monetary policy of some nation’s central banks, OPEC is confident in predicting that oil demand will grow by 4.2 million barrels per day over 2022.
BlackBull Markets is excited to announce the launch of its Share Trading Platform, offering clients access to 80+ global markets and 23,000+ shares, via desktop and mobile app, and for some of the lowest brokerage fees in the world.
Our clients can now access shares from a variety of global markets all from one easy, retail-accessible platform, including the US, Canada, the UK, Australia, Mexico, Germany, France, Japan, and many more territories.
Online platforms have helped investors control their financial future and spurred a DIY investing revolution. As such, we understand that retail investors have never been more sophisticated, knowledgeable, and eager to participate in the global economy.
BlackBull Markets COO, Benjamin Boulter, is keen for retail investors to build upon their financial independence with more diversity and at a cheaper cost:
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The BlackBull Markets Share Trading Platform sits in complement to our CFD products, which remain a client favourite for trading forex, commodities, energy, US shares, and global indices.
*Please note; The author is working from UTC +13 when determining the timeline of data releases.
What 3 Events Will Traders Be Watching This Week?
17 Jan – 21 Jan, 2022
Monday, January 17:
YoY China Retail Sales Dec
Year over year Retail Sales in China is predicted to slow in December 2021’s reading from 3.9% to 3.7%.
The Offshore Yuan has eyed a sub-6.34000 value against the USD since December 2021 but hasn’t held the nerve to stay this low for anything more than a brief intraday flirtation. The USDCNH is currently on the precipice of this level, trading at 6.35283 and could finally close sub-6.34000 in a daily time frame if an unexpectedly strong December Retail Sales report helps dispel rumblings of a weakening Chinese economy.
Tuesday, January 18:
BoJ’s Press Conference
The Bank of Japan’s (BoJ) Governor Haruhiko Kuroda will speak on Tuesday Evening. No significant changes to the Bank’s ultra-loose monetary policy are expected, but traders will watch for signals concerning future rate hike decisions. The market may have already begun anticipating such, with Japanese Yields hitting a six-year high last week, and with it, the Japanese Yen experienced its best weekly gain in six months.
Wednesday, January 19 to Friday, January 21:
Wednesday: YoY UK Inflation Rate Dec
Thursday: Canadian YoY Inflation Rate DEC
Friday: Japanese YoY Inflation Rate DEC
The market will be reacting to three important inflation data reports In quick succession for the last three days of the week.
A 0.1 percentage point increase is expected for all three reports. Perhaps the most important to watch will be Friday’s report from Japan as it can be considered in tandem with the BoJ Monetary Policy Minutes report, which is released twenty minutes after the inflation report.
BlackBull Markets is pleased to share its updated brand profile, reflecting the leadership position that it has achieved in its industry and the modern, technology-driven, user-friendly experience of its clients.
Under the leadership of BlackBull Markets’ Marketing Manager Anita Hayhoe, the brand update was undertaken by global media agency Dentsu New Zealand. Hayhoe commissioned Dentsu New Zealand, for its reputation for experience-led profile transformations, having been impressed with recent creative projects for Rocket Lab and Qantas Airways.
Praising the outcome, Hayhoe noted, “the Company’s brand update has been a chance to encapsulate what our clients experience every day, and will be integral in communicating the quality of the many BlackBull Markets’ products and services“.
The rebranding process coincided with a comprehensive set of market research, performed to home in on how BlackBull Markets is viewed by clients and staff alike. We arrived at a brand that is the hero for our customers, igniting their potential for greatness.
As such, Hayhoe further noted that “the rebrand has sought to exemplify two key facets in reaction to the insights provided by Dentsu’s research. The first is our role as the go-to platform for investors looking for more from their financial providers, and the second is the trader-centric experience we offer, built upon principles of transparency, low fees, education, and a high availability of support staff and account managers.“
Alluding to future projects, Chief Operating Officer Benjamin Boulter indicated that “the brand update is the first step in a series of product and business expansion plans, which the company is implementing to further improve our offerings and operations. The team is looking forward to rolling out these projects across quarters one and two of 2022. We expect these projects to be no less than game-changing for the company and our clients”.
We welcome you to explore our new branding profile, implemented site-wide and on all our social touchpoints.
The index that measures the strength of the JPY against a basket of other currencies (JXY) is down approximately 9.5% year-to-date.
At the time of writing, the index is valued at 87.97, after spending the past month climbing up from its yearly low of 86.60. Not only was 86.60 a yearly low, but also a four and a half year low (last seen in March 2017) for the JXY.
Will Santa deliver a stronger JPY before Christmas?
Two important economic reports are set to influence the strength of the JPY and subsequently the JXY over this coming week. The first, released on Wednesday, is the Monetary Policy Minutes from the Bank of Japan (BoJ), covering its meeting last week. The board members’ opinions will be noted against the Bank’s decision to rein in some of its pandemic-related spending but remain ultra-accommodative in every other sense.
In particular, it will be interesting to see how the board members talk about the possibility of inflation in the country accelerating to 0.4%, which has been forecast. The second important economic report this week, Japan’s Inflation YoY to November, is scheduled to be confirmed just after midday Friday.
An inflation rate of 0.4% is hardly likely to set off alarm bells with BoJ officials and instigate a more hawkish position. But some acknowledgement should be necessary.
Any deviation from the forecast could relay into some JPY trading opportunities.
GBPJPY or USDJPY
The upside to the JPY in relation to the GBP could be a little more potent than against the USD. Case in point, after the Bank of England, surprised (half) the market last week Friday with a rate hike, the GBPJPY has since given up its immediately preceding 1.3% appreciation.
The predicted choppy week leading up to Christmas might also provide some motivation to buy into the JPY against the GBP, but unlikely to do so against the USD, as the risk-off environment should spread amongst both these safe havens currencies.
*Please note; The author is working from UTC +13 when determining the timeline of data releases.
What 5 Events Will Traders Be Watching This Week?
20 Dec – 24 Dec, 2021
Monday, December 20:
China’s loan prime rate 1Y and 5Y is updated Monday afternoon.
Rising costs, a slowing economy, and the solvency of Chinese real estate companies are very much a concern for the Chinese economy at the moment. Thus, the People’s Bank of China (PBoC) has recently reduced the Reserve Requirement Ratio (RRR) for retail banks on December 15, which is seen as targeted support for the country’s smaller firms.
However, the PBoC cutting its benchmark 1Y and 5Y rate is less likely after it has already tinkered with the RRR. As it stands, the PBoC’s 1Y rate is 3.85%, while its 5Y rate is 4.65%. It is expected the loan prime rates will remain as is.
Tuesday, December 21:
Germany’s GfK Consumer Confidence January report is released Tuesday night.
Excluding two bright spots in October and November, the GfK report has registered negative values all year.
January’s report is expected to turn even lower, from its current -1.6 to -2.7.
Inflation (at 5.2%) and all-time high Natural Gas prices appear to be the main reasons for the low consumer confidence.
Wednesday, December 22:
The Bank of Japan (BoJ) Monetary Policy Meeting Minutes are released on Wednesday, just before 1 pm.
Traders will be looking for awareness from the BoJ that producers may finally be passing rising costs onto consumers. The BoJ acknowledgement should go some way to temper concerns that may arise from the release of the Japanese Inflation Rate YoY for November, forecast to reach 0.4%, a 20-month record, on Friday 25.
Thursday, December 23:
The GfK Consumer Confidence index (December) for the United Kingdom is released on Thursday afternoon.
UK consumers are reeling from much of the same issues afflicting Germans. The UK’s inflation reading for November was 5.1%, the highest rate since September 2011. The index is expected to turn lower by a couple of points to -16.
The surprise turn by the Bank of England (BoE) last week to hike interest rates 15 basis points to 0.25% will have been too late to filter into the GfK Consumer Confidence index for December.
Friday, December 24:
Data releases can still be found on Christmas eve. Perhaps the most critical data point released today is the United States Durable Goods Orders (November).
After two months of falling demand, forecasts are expected an upturn of 1.1 to 1.5%. However, when the orders for durable goods excludes the biggest ticket items such as aircraft and transport, the US manufacturer sector looks a little more robust. For example, October’s United States Durable Goods Orders grew 0.8% but was dragged down by a -21.8% drop in defence aircraft and parts.
This week has been wall-to-wall interest rate decisions. So far, we have had decisions from The US Federal Reserve, the Central Bank of the Philippines, The Bank of Indonesia, The Swiss National Bank, and The Norges Bank.
Although already passed, it would be imprudent to not gloss over perhaps the most important decision, from what Bloomberg referred to as the Reserve Bank of the World, the US Federal Reserve.
On Wednesday (US time), the Federal Open Market Committee (FOMC) confirmed what the market was expecting; namely, the Federal Reserve would double the pace of its bond-buying taper, scheduling its completion for March of 2022. The one unexpected point in its announcement was its greater embrace of rate hikes, which it now thinks will occur thrice in 2022.
It will be interesting to see how the FOMC’s decision might be reflected in, or outright influence, the decision of other central banks, due for announcements this Thursday/Friday. There will be plenty of opportunities to analyse this, with six major central banks releasing their respective decisions on Friday.
Six Interest Rate Decisions might prompt volatility this Friday
In order of release, we have announcement upcoming from The Central Bank of Turkey, The Bank of England, The European Central Bank, The Central Bank of Mexico, The Bank of Japan, and The Central Bank of the Russian Federation.
The Central Bank of Turkey (TCMB) perhaps presents the most interesting case, as the politicisation of the Bank’s decisions is far more explicit than any other. The Bank of England (BoE) and The Central Bank of Mexico (BdeM) are perhaps the next most interesting decisions to follow.
The Central Bank of Turkey
The Turkish Lira is trading at an all-time low against the USD low (14.80 Lira per USD) as the TCMB implements an unorthodox monetary policy. The TCMB, under the influence of the Turkish president Tayyip Erdoğan, has been forced to cut interest rates while inflation in the country is running at 21%. In response, the Lira has depreciated 49% YTD.
The TCMB is expected to continue its unorthodox policy and another 100 basis point cut in its rate to 14%. Consequently, the Lira may slide past 15 Lira per USD, at least according to a majority of options traders.
The Bank of England
Much has been written about the BoE’s imminent interest rate decision, including here at BlackBull Markets.
Volatility could manifest in the GBP as half the market is expecting a rate hike, opening the possibility that some traders could be caught on the wrong side of a trade. This can manifest regardless of the decision taken by the BoE. The Bank’s hawkishness is under suspicion in the face of growing Omicron variant cases in the country.
The Central Bank of Mexico
The Mexican Peso strengthened after the US Federal Reserve’s interest rate/ tapering decision on Wednesday, appreciating by more than a per cent in the proceeding hours.
The expectation for the BdeM is for a rate hike of 25 basis points. If it eventuates, it will constitute its fifth straight hike of this magnitude and bring the country’s benchmark rate to 5.25%.
Uncertainty regarding the direction the BdeM comes with its leadership change at the end of 2021. Although she does not control the reins of the Bank as yet, the new Governor, Victoria Rodriguez, is anticipated to take a relatively dovish stance in contrast to the outgoing Governor.
China Evergrande, the second-largest real estate developer in China, has been narrowly dodging default for months. The Company has more than US $300 billion in debt that, as it warned the market back in September, it believed would be difficult for it to service. (As an aside, it is believed that China Evergrande could have an additional US $150 billion in debt, off its official financial books).
Put simply, the cash flow of the Company, severely dampened by the cooling Chinese housing market, is not enough for it to service interest payments to those from which it borrowed funds, typically in the form of interest-bearing corporate bonds.
One such unlucky purchaser of China Evergrande corporate bonds, among others, are off-shore investors. Off-shore bondholders will likely be the least prioritised of the Company’s investors when receiving interest payments or reparations.
China Evergrande defaults!
Perhaps fortuitously, it was the failure by China Evergrande to make interest payments to this very group of investors that prompted Fitch Ratings to upgrade the Company’s status to “restricted default” on December 9. Interestingly, China Evergrande is the twelfth Chinese real estate firm to default on bonds in 2021, and by far the largest to do so.
Now what?
Other rating agencies, such as Moody’s and S&P Global, have not been so quick to upgrade their status of China Evergrande. However, S&P Global has noted that China Evergrande’s default is “inevitable”.
China Evergrande themselves seem to be ignoring public comment on its failure to meet its obligation, nor has it ceased operations or begun any formal paperwork to address its potential bankruptcy.
China Evergrande is currently under restructuring while attempting to continue operations as usual. The restructuring includes renegotiating its liabilities and offloading non-construction arms of the Company at bargain prices such as its property management business, as well as stakes in a major Chinese bank and (strangely enough) a streaming services.
Pressure is being applied to the Company’s leaders to speed up its restructuring since the change in its Fitch rating. According to Bloomberg, the China Evergrande restructure is being heavily monitored, if not outright controlled by Chinese Authorities in Beijing and the Company’s home province of Guangdong.
Right now, the official line from the Central Bank of China is that the China Evergrande crisis is being handled as per the “principles of marketization and rule of law,”. If more rating agencies follow Fitch Rating in the coming weeks, China Evergrande could slip into something a little more serious than restricted default and the above quote may become a little truer, with Chinese authorities being hamstrung in their ability to interfere with a meltdown.
*Please note; The author is working from UTC +13 when determining the timeline of data releases.
What 5 Events Will Traders Be Watching This Week?
13 Dec – 18 Dec, 2021
Monday, December 13:
Japan’s Tankan Large Manufacturing Index covering Quarter 4 of 2021 is due Monday, just before 1:00 pm. The Index is expected to show an improvement of one to two points in the business sentiment of Japan’s large manufacturers, capping off six straight quarters of improving sentiment. A bullish index reading could help the Japanese Yen retain some ground it lost against major trading partners last week, as market participants opted for a risk-on bias.
Tuesday, December 14:
Data emanating from the UK will take up Tuesday, Wednesday, and Friday headlines, with three important events set to influence the direction of the Great British Pound.
On Tuesday night, the UK’s Unemployment Rate YoY to October is expected to decrease to 4.2% from 4.3% in September. The Bank of England (BoE) will consider the Unemployment Rate for its Interest Rate decision, released on December 17. Complicating the matter is the recent covid-19 restrictions (aka. “Plan B”) in the country.
However, the BoE, among other commentators, has recently noted the resilience of the UK job market. Accordingly, Plan B, and any of its negative side-effects, may only end up a footnote in the BoE’s final decision.
Wednesday, December 15:
Forecasts suggest a significant lift in the UK Inflation Rate could be reported Wednesday night. TradingEconomics is forecasting a lift to 5.0% from 4.2% for the UK’s November YoY figure.
However, a higher than expected inflation rate may not lead to any market turmoil in the GBP. Case in point, leading up to the last BoE Interest Rate Decision, the BoE’s Monetary Policy Committee (MPC) were already predicting that inflation would exceed 5% in 2022. Yet, the MPC voted to delay raising its benchmark rate. This kind of hesitation, on behalf of the BoE, hints that the headline value is a secondary consideration for its Interest Rate Decision.
Thursday, December 16:
The US Interest Rate Decision on Thursday morning is wedged in between the UK data releases. The interest rate decision is accompanied by the Federal Open Market Committee (FOMC) Economic Projections. Investors will be watching for notes concerning the Fed’s plan for an accelerated taper and consequently, whether the USD can generate more upside in response.
Friday, December 17:
To cap off all the UK data is the BoE’s Interest Rate decision, released at 1:00 am New Zealand time, so bear in mind your own local time for this major event.
As it stands, investors are giving an interest rate hike a 50/50 chance, down from a 70/30 chance in favour of a hike at the beginning of the month.
