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Week ahead - Debates, Speeches, PMI's & CPI's

Who else feels like this year has gone by so quickly? Each week ahead article, I have been talking about how the election is coming and how volatile times are coming ahead.  Now we are neck-deep into election season, with the first one in New Zealand granting Jacinda Ardern and her party a landslide victory, enabling them to govern themselves. All eyes now are on the Presidential Election in the United States and the Brexit outcome between the UK and the EU. Here is your week ahead.

Note that Jerome Powell is set to speak on Monday – however, this is regarding digital currencies that may provide good information on his stance on digital currencies, but is unlikely to move the market much unless he provides other viewpoints on the future of the economy.

Congratulations, Jacinda Ardern

Monday, 19th  and Tuesday 20th October – China's GDP YoY, Third Quarter and PBoC's Interest rate decision

Everyone likes to talk about how well New Zealand handled the Coronavirus, with the nation opting for an elimination strategy rather than a suppression strategy. However, not many talks about China's statistics. They, too, went with an elimination strategy rather than a suppression strategy and have achieved results similar to that of New Zealand.

Coronavirus is all but a memory in Mainland China, especially in Wuhan, where the virus originated. A Bloomberg Poll of economists expects China to a third-quarter economic growth rate of 5.5%, which is near pre-Coronavirus levels.  Morgan Stanley believes this is due to "very strong exports and the gradual improvement in domestic consumption," citing higher exports in the previous month.

Furthermore, China's central bank is set to release its decision on interest rates later this week. Unlike the rest of the world, which cut rates at the start of the Coronavirus pandemic, China opted to restrain in cutting rates in favor of the fiscal policy. Ma Jun, a PBoC adviser, stated earlier this year that "the PBOC doesn't use its bullets all at once. China has plenty of room in monetary policy". And it seems like analysts predict to keep it that way, with the consensus being that the PBOC will keep rates unchanged at 3.85% this week ahead.

Monday, 19th and Friday, 23rd October – ECB's President Christine Lagarde speech and EU PMI's

With a second wave of the Coronavirus hitting Europe as they enter into their winter seasons, Christine Lagarde is expected to reiterate further support for the economy and the central bank's relatively bearish stance. With lax lockdown measures in the UK and Spain, alongside many partial reopening's around the nations in Europe, has wreaked havoc as the second wave in many countries nearly doubles or even triples the new daily cases seeing the first wave.

Furthermore, PMI's are set to come out for both the EU as a whole and Germany. Analysts predict EU PMI's to drop below 50, to 49.5, showing a consensus of contraction in manufacturing in October.

Wednesday, 21st October – Australia's retail sales Month over Month

Australia has tamed its second outbreak of the Coronavirus, providing the opportunity for a quasi "trans-tasman" bubble that has been talked about between them and New Zealand. As things return to relative normality in Australia, many cities in Melbourne, Victoria, continue to be in a state of lockdown, which may weigh on the Retail Sales figure, which is predicted to drop by 4% this month.

Wednesday, 21st October – UK's CPI

The mismanagement of the Coronavirus by Prime Minister Boris Johnson has put the UK in a terrible position. Even with a second lockdown, the Coronavirus continues to post double-digit new cases each day, way more than the first wave. With Boris keen to get business back on track, his focus became on ensuring economic downfall was minimized as much as possible. However, as shown by countries that opted for a full elimination strategy rather than a suppression strategy, the first step in an economic recovery is eliminating the virus.

The UK seems to have skipped that bit and opted to recover without fully squashing the virus. This has lead to disastrous consequences, with England's deputy chief medical officer Professor Jonathan Van-Tam resorting to hopes that the UK can roll out a Coronavirus vaccine "soon after Christmas" A restriction in demand in the UK alongside many subsidies has forced business in the UK to raise their prices – therefore, analysts predict an increase in the CPI this month by 0.5%.

Wednesday, 21st October – Canada's CPI

Another country that opted for a relatively loose lockdown – who encouraged, but did not enforce, citizens to stay at home is facing the consequences. A second wave has hit many Canada regions, with 80% of the cases having stemmed from Ontario and Quebec, its two most populated provinces. However, the government still has not ordered a complete lockdown, with Ontario closing certain establishes like gyms, movie theatres, casinos, and restaurants. Analysts predict the rate of CPI increase to drop slightly by 0.7%.

Thursday, 22nd October – New Zealand CPI

New Zealand has been the poster child for how the world wishes they initially handled the Coronavirus. As I stated many times already, New Zealand opted for an elimination strategy, and has seemed to work. "Hard and Fast," the Motto Prime Minister Jacinda Ardern went by, seemed to work, with New Zealand back to a relatively normal. The Coronavirus success has also won many voters' hearts this weekend, with elections giving her and the party a second term with a landslide victory. They retained 49% of the votes, enabling them to govern alone.  With that said, there are mixed thoughts regarding CPI figures this week ahead, with last month's print showing a 1.5% increase.

Friday, 23rd October – US Presidential Debate.

A lot has happened since the last Presidential Debate. President Donald Trump contracted Coronavirus, a new stimulus bill has been proposed, and Biden's son Hunter Biden has been in the news for leaked emails. Personally, I do not think the debate will provide much insight into future policies. It will be more comedic than anything. If anything, I believe this is a period where traders and investors should keep trading at a low, as both candidates' comments may whipsaw the market – as shown by the previous debate.

Stay safe, Trade safe.

Week ahead: Central banks and GDP

A hectic week ahead as companies and countries start to position themselves to exit the pandemic in the best shape possible. Total Coronavirus Cases top 29 Million, with over 924 thousand deaths. Here is your week ahead.

Monday, 14th September – UK Parliamentary vote on Brexit

Boris Johnson has stated that he plans to change part of the terms in the Northern Ireland Protocol. Johnson agreed to keep the border open between the UK and Ireland a year ago. However, he plans to renege on this agreement bypassing UK legislation to override the clause. This has caused a stir between the EU and the UK as if the legislation is passed, would technically be violating international law. This has forced the UK's top government lawyer to quit in protest). This is on top of a possibility of a no-deal Brexit; amongst the global pandemic that has consumed every single politician's attention, a further wrench in the works may send the markets swinging this week ahead.

Tuesday, 15th, Wednesday 16th and Thursday 17th September – UK Unemployment Rate 3 months, UK CPI and Bank of England Monetary Policy decision

An Institute for Employment Studies Freedom of Information requests showed that 380,000 jobs were planned to be cut from May to July in the UK this year. In comparison, around 180,000 job cuts were planned from January to March 2009, around the financial crisis. The UK has taken a massive hit due to the Coronavirus, with cases continuing to rise even after the first lockdown. Social distancing measures have forced lower traffic to shops, forcing redundancies, which forces a vicious cycle. The Market predicts a 3.9% unemployment rate, which is identical to the rate three months ago. However, the CPI is predicted to increase by 0.3% by 1.3%, showing the potential effects of inflation on the UK economy.

The Bank of England, like many other central banks, are set to keep rates as is at 0.1%.

Wednesday, 16th September – US Retail Sales MoM

As US-China Tensions starts to ramp up before the election period, eyes on the consumer, which were regarded as the "Backbone of the economy" before the pandemic, has stayed relatively healthy due to government stimulus. With US retail sales rising three months in a row, economists predict that with stimulus checks ending soon, US consumers' total income should decrease, therefore seeing a drop in retail sales this month. Analysts expect a 0.1% decrease in retail sales to 1.1% in the next month.

Wednesday, 16th September - Fed Interest Rate Decision

As the Federal Reserve kicks into gear their higher inflation tolerance, the Market has its eyes set on any other support from the Federal Reserve to support the United States recovery. The Market predicts, like always, for the Fed to keep rates as is at 0.25%.

Wednesday, 16th September – GDP New Zealand QoQ and YoY

With New Zealand being touted as one of the most prosperous countries in trying to curb the Coronavirus, the country of 5 million is not immune to the economic damage caused by the virus. The country is set to see a GDP contraction the largest in history, with the Reserve Bank predicting a -14.3% fall in GDP growth. The Reserve bank is looking to Sweden as a template for negative rates. The currency markets pricing in a 72% possibility of the RBNZ cutting rates below 0% in February next year.

Thursday, 17th September – Japan BoJ Interest rate decision

With Yoshihide Suga being voted in by the party as the replacement of the current Prime Minister Shinzo Abe, Japan is currently enduring a turbulent period as it continues to grapple with the Coronavirus. Cases in Japan have recently been surging, as a reopening of the economy with no official lockdown has come back to bite the country. With declining GDP pre coronavirus, the Bank of Japan is set to keep interest rates as is at -0.1%. It is interesting to note that all the central banks with negative interest rates have left rates during the pandemic.

This week, with M & A kicking into gear, alongside further political action and central bank decisions, this week will undoubtedly be an extremely busy week ahead in the markets. Trade safe!

UK CPI, Japan GDP - Week ahead

There will be a week ahead post where the data being released will revolve around how well the economy chugging along, and analysts will argue whether a country has reached its peak or whether the NASDAQ is undervalued at 40 times earnings. However, this week isn't that week. Coronavirus continues to be the primary context around headlines, showing that we are still in the pandemic's neck. I have a feeling that it will be like this until real progress regarding a vaccine is achieved. Here is your week ahead.

Sunday, August 16th – GDP of Japan, Quarter over Quarter

Japan continues to post significant Coronavirus figures, with over 1,200 Saturday, topping 1,000 for the third straight day with cluster outbreaks as summer holidays begin. Initially praised for their laissez-faire regarding their quarantine strategy, i.e., has come back to bite them. However, unlike New Zealand, where they essentially forced everyone back into their homes at the slight hint of a potential outbreak, Japan continues to allow its residents outside. For example, they placed restrictions on the maximum number of spectators, concerts, professional sports, and other events – to 5,000. This has made analysts wary of Japan, considering they had low GDP growth before the Coronavirus pandemic. Analysts predict a contraction of 7.3% last quarter, at an annualized pace of 26%. A 7.3% contraction this week ahead would mark the largest GDP decline post-world war.

Tuesday, August 18th – RBA Meeting minutes, report

Like Japan, Australia was praised for its laissez-faire approach resulting in early positive results in Coronavirus cases. However, also similar to Japan, that approach has come back to bite them. Most notably in the state of Victoria, in which the Coronavirus has run rampant. Although the rate of daily increase in cases has slowed down due to the Premiere of Victoria, forcing a mandatory quarantine to all citizens, they are still recording triple-digit cases regularly. They recorded 279 new cases today, with 16 deaths. However, this is an improvement from 2 weeks ago, when they were recording jumps from 200 to 700 new cases in a day. Australia's RBA before the "second wave," took a confident approach that Australia would be capable of pulling out of the pandemic similar to New Zealand with a lower economic cost, and their monetary policy showed that. However, due to the second wave, the report being released will likely be extremely dovish and hint and further rate cuts in the future.

Wednesday, August 19th – UK CPI figures

The UK has seen its Coronavirus curve slowly rise, and that has made government officials anxious. They have recorded over 1,077 new Coronavirus cases in the pasty day, which is slightly under their 1,097 seven-day moving average. However, analysts predict CPI a small change from a 0.6% increase in the CPI to a 0.7% increase this week ahead. If the increase is larger than expected, we should see the GBP strengthen against its peers.

Wednesday, August 19th – Canada CPI Year over Year

Canada was one of the only nations to not impose a strict lockdown for its citizens and come out flattening the curve. Yesterday, Canada confirmed 237 new cases. While not entirely eliminated, the country has not experienced breakouts similar to that of Japan and Australia. Previously, the CPI was up 0.7% compared to a year ago, with analysts predicting a CPI increase of 0.2% this week ahead. With such wild variations, it is yet to be seen what the CPI is going to be. However, a rise in CPI signals a bullish stance in the Canadian dollar, with a hawkish central bank.

Thursday, August 20th – USA FOMC Minutes

The United States is not close to flattening the curve.

A staggering number: 5,565,114 Coronavirus cases, 173,080 deaths – a 6% mortality rate. The United States has not been able to flatten the curve. With an election coming up, President Donald Trump has tried to re-open the economy to boost his chances come election time. However, this has not worked. His selflessness has cost many people their lives. Usually, a market-moving event, TD Securities analysts noted that "at the July FOMC meeting, the Committee did not imitate any new policy actions, and that changes to the statement were minor." Combining this with August being a month were a lot of traders and managers take leave for their summer holidays, we should expect this to be relatively non-market moving.

As stated above, this month tends to be quite slow due to many traders, investors, and asset managers taking leave for the summer holidays. Therefore, the market should be relatively muted at this time. This may be an excellent opportunity for traders and investors to backtest their strategy or even paper trade to practice for the coming months. Many elections are coming, such as the United States and New Zealand general elections, which will cause significant market moves.

Trade safe! Have a good week ahead.

Week Ahead: Rates, Jobs, GDP and CPI Data

The Financial Markets have a heavy data week ahead. With geopolitical tensions ratcheting up, and concerns turning to how governments will slowly pull back their unprecedented support, we are starting to see how the world reacts to a post-Covid world. Currently, they are 8.92 Million confirmed cases globally, with 467k deaths. Here is your week ahead.

Global Coronavirus Cases in Blue, Coronavirus Deaths in Red

Reserve Bank of New Zealand Interest Rate decision –  Wednesday, 24th June

With New Zealand entirely out of lockdown, threats of random Coronavirus cases popping up have increased. Facts have emerged from individuals entering the country with special exemptions and not adhering to the quarantine rules. Currently, the country has 1,161 confirmed cases, with 22 deaths. With the RBNZ implementing asset purchases of $30 Billion, the central bank was ready to take the full brunt of the Coronavirus for the financial markets. With that said, analysts predict the central bank to keep rates as is at 0.25%. Chairman Adrian Orr stated that negative rates are not out of the question; however, it is highly unlikely and will not come till next year. (Also a partial reason as to why negative rates could not be implemented in the first place is due to banks’ computers not being able to handle negative rates)

ECB Monetary Policy Report – Thursday, 25th June

Similarly, to New Zealand’s Reserve Bank, the ECB has dedicated a sizable chunk to help the European economy recover from the Coronavirus. The Policy meeting hopes to discuss the future of the European economy, future monetary policy stance, and provide guidance on economic developments. This report will be fundamental in determining the mindset of the ECB, and what the future financial environment will be in the European Union.

US Initial Jobless Claims, US GDP Growth rate QoQ and US Core Price Index – 25th, 26th and 27th June

With Coronavirus cases increasing above their average in many states, the virus remains front in center for many Americans. With election season coming up, President Donald Trump has resorted to opening the states with regard to the rising cases. Peaceful racial protests continue to fuel the spread of the Coronavirus. The previous unemployment claims dropped to 1.52 million last week, showing signs of American citizens going back to work. Analysts predict that figure to drop to 1.508 Million unemployment claims. With the consumer being touted as the backbone of the American economy, hopes are on the consumer to provide that initial boost to the economy. Analysts predict a drop of the Core Price index to 0.9% year over year, down from 1%. Furthermore, analysts predict a -5% Quarter over Quarter growth rate.

Investors and traders need to be careful of sudden policy changes affecting their trades and investments in the week ahead. Here is your market recap over the weekend

Happy trading!