Big week for the markets which will set the tone for global economic outlook next year. On early Thursday morning Fed Chair Janet Yellen is speaking at an economic forum in which it is expected she will convey to the markets whether the Fed will raise interest rates on December 16th or leave the Fed rate on hold once again. As the liquidity in the markets tends to be lower in December in the lead up to Christmas, this would make sense as to not shock the markets one way or the other on December 16th. It is expected the Fed will raise rates and the market has already partially priced in a rate hike with the USD index nearly breaking out to over 100. This would see the Aussie dollar, Canadian dollar and particularly the Euro fall heavily against the US dollar and commodities such as gold, oil and base metals like copper sell off. On Thursday evening, the European Central Bank is expected to announce the lengthening and increasing of their quantitative easing bond purchasing program. If they do, again the Euro will fall heavily against the US dollar and European share markets and in particular the German sharemarket the DAX will rise sharply. On Friday evening, OPEC (Organization of the Petroleum Exporting Countries) are meeting in Vienna in which it will be decided whether the OPEC countries which include oil producers such as Saudi Arabia, Kuwait, Qatar, UAE and Iraq will either they will cut production or not. Cutting production will lead to higher oil prices but will mean that OPEC countries will lose market share to non-OPEC oil producing countries. It is expected they won't cut production as they have resisted previously and indicated they do not want to lose market share to US shale oil producers which will push the cost of oil down even further and cause currencies such as the Canadian dollar and Norwegian Krone to sell off. This will also impact on headline inflation figures throughout the first half of next year. US non-farm payroll employment numbers are also due out on Friday evening which if the Fed has already indicated they will raise interest rates on Tuesday will either confirm the strength in the US dollar if the numbers are strong or somewhat contradict the Fed's stance on tightening monetary policy. Regardless it will impact the Australian dollar and commodities again. While I'm expecting the Australian dollar, the Euro, Candian dollar and commodities such as gold and oil will sell of this week, I will have both pending buy and sell orders on all positions at technical support and resistance levels in the chance the markets surprise to the upside. All positions are supported with stop-losses with downside risk to be capped and hedged. All positions are expected to be closed out by the end of the month and possibly by the end of the week if I believe the positions are over-stretched. Currencies: AUD/USD, USD/CAD and EUR/USD leveraged at 100:1 from between 5 to 10 lots. Indexes and commodities: German DAX index, gold ETF GDX and oil spot price leveraged at 10:1 from between 5 to 10 lots Shares: Short-selling BHP, Rio Tinto, Newcrest mining, Glencore and Exxon mobil leverged at 10:1 from between 5 to 10 lots. If the Australian dollar does sell off heavily by the end week, I would highly expect a recession to hit Australia within 12 months as capital starts to exit emerging markets for the US market and Australia's terms of trade fall further on the back of a slowing China. It's going to suck ass
Plus we have the closures of the car manufacturers to deal with next year also. I'm surprised we are not already in a recession. I predict they will call one after the new year 2016.
Well you are a depressing bastard CL. :/ EDited: wrong OP. And if it doesn't happen next week, it just delays the inevitable.
On the plus side I have homemade lemon meringue pie for dessert tonight. Made with real lemons, not that store bought lemon juice crap so it's not all bad
The longer-term consequences of this could be very bad if they are rapidly depleting their known reserves. Who knows when (decades most likely), but we could eventually see an oil price shock, along with massive social unrest in those countries when the money dries up leading to an environment ripe for Islamic extremism -- which of course will be exported to the West. .
Don't forget the possibility of an increase in GST which could further dampen consumer spending and drive spending off shore. Our government is intent on economic suicide.
I expect oil to bottom sometime next year around June-July but it may only gradually increase rather than dramatically spike. US oil rigs will keep dropping as the oil price drops in the short-term and I would expect inventories will be gradually allowed to decline, but that will be countered with slowing demand as I said, I expect capital to move out of emerging markets including China which is the biggest oil consumer and if China is declining, you can be assured the rest of the global economy is slowing barring maybe the US who will have hot money pouring in. This isn't taking into account any further escalation in the middle east which may impact the oil supply.
By default yes it will and they know it. Economists including guys like Schiffty Pete are expecting the US economy to tank on the back of a rate rise and in the short-term the US share market may sell off, but I'm expecting capital will run scared to the US dollar and the US share market out of fear rather than greed as emerging market's currencies and therefore their economies start tanking on a rising USD. That may take a quarter or two to really show up or it may happen a lot quicker. We saw a glimpse of it around late September - October when the Brazilian Real, Malaysian Riggit, South African Rand, Turkish Lira and Mexican Peso began selling off as China's share market tanked. Nothing structurally has changed since then. Even if the Fed raising rates is a policy mistake and they have to reverse and ease again, I don't think it capital will buy it. All that will happen is that capital will move out of government bonds knowing the Fed is screwed and move into the private assets such as blue chip US companies, commodities and productive real estate. The US could post really poor macro data and it's not going to make an ounce of difference as the rest of the global economy looks even worse. Don't get me wrong, I do believe the US economy is screwed, precious metals will rise from the ashes and we'll all be driving Lamborghini Huracans on our new found wealth, but the global economy will implode from the outside and move towards the core. Above all else after next week watch emerging markets currencies and share markets for signs of stress.
Or maybe really all is he is saying is that he's having homemade lemon meringue pie for dessert tonight. Made with real lemons, not that store bought lemon juice crap!!
What I'm saying is I like lemon meringue pie and I make references to completely off topic subjects within topics for the WTF factor
CL - so what you're saying is that your first post about the markets is off-topic, and what we should be discussing is your liking of lemon meringue pie? Personally, I prefer key lime pie over lemon meringue pie.
CL - serious (non-pie) question: When you say in your first post "This would see the Aussie dollar, Canadian dollar and particularly the Euro fall heavily against the US dollar ...", how much of a fall are you expecting for the Aussie dollar - a cent or more? I'm interested in your thinking on this.
I can see it at least bouncing off 70 cents if not breaking down below it. I believe at this moment the Aussie is overvalued given we're very much a commodity driven currency like the Canadian dollar and commodities have been selling off hard over the past few weeks and I expect commodities to sell off even harder this week. Australia has a fair bit of macro data due out this week itself which could influence its value, but not enough to outweigh the other stuff I mentioned. GDP figures, private credit figures, retail figures, current account and trade figures along with the RBA meeting are all out this week along with Chinese manufacturing figures.
I don't trade the AUD/EUR pair but I would think the AUD would strengthen against the EUR at least in the short-term. IMO there's more weakness in the EUR at present than the AUD.
Gold story continues: p.s There were 54 tonnes of gold bullion taken off the Shanghai Gold Exchange into mainland China in the latest week. http://jessescrossroadscafe.blogspot.com/
