Djamel Brahimi

This is a difficult question to answer numerically. However, it will affect the markets and has done the last couple of days. We can see some nervousness start to creep in with traders and investors worried that the virus will spread. Previous virus spreads have also caused the markets to drop. And some comments I saw earlier from an investment banker said that during a previous virus outbreak in China, the economy almost came to a standstill and the markets dropped heavily. So to answer your question, money should start to flow into safe haven assets if and when the panic regarding the outbreak grows.

First off, I want to say that I am bias answering this question as I am in fact a macro trader. So yes I do believe it is the best way of assessing the markets. This is because there is always a reason an asset moves as it does. whether that is because of a cut or raise in interest rates, a trade war or some bad fundamental data. There is always a reason behind the move. My suggestion if you want to learn about macroeconomics is to get on twitter and learn from some of the Macro traders there. Also there are a number of free subscription newsletters available. Alternatively you could learn from the community here!

Now, of course, this is a difficult question to answer. However, I do believe there are a couple of reasons. Firstly, it does seem to me that Bitcoin is starting to act as a safe haven asset. Now, I don't think it is like your JPY or gold. However, it is reacting in ways that suggest people see it as a safe asset to put their money into when there are geopolitical issues. The second reason is dollar liquidity. i believe that when there are more dollars available, Bitcoin rises, and when less dollars are available, Bitcoin falls.

Many businesses are expecting the possibility of a recession occurring in the coming months, although history suggests to us that recessions don't normally occur when everyone is predicting one. That's not usually how it works, and in the current state, it seems everyone is calling for a recession this year. Usually, it comes as a shock to the market and surprises people. So I would suspect that the bull market will continue at least until the majority get comfortable.

With the recent tragedy hitting Australia, this has majorly affected their economy. With the agriculture industry being heavily affected, many were choosing to sell the Australian dollar in anticipation of a fall in this currency. And, they seemed to be right as we saw the AUD fall and risks of a rate cut rise. The amount of damage done will cost billions to the economy, but also the reduction in retail spending and tourism will likely fall, a key aspect in the growth of Australia. However in the last week the situation has began to ease and we have seen some buying in the AUD but we still expect a rate cut and therefore a further drop in the currency.

Germany being the largest economy in Europe has a decisive factor in how the Euro will perform against rival currencies. This is why I follow news on German data. Germany recently stated a modest growth, with a slight edge and positive statistics posted, meaning a little momentum is being carried forward into the new year. These are positive signs for Germany and the Euro as a whole. In the near term, I would expect the Euro to react positively from this data. However, the long term outlook doesn't look as strong and so we may see a fall in the medium to long term future.

Inflation is a sustained general increase in the price level of goods and services and the fall of the purchasing value of money. When the general price level rises, each unit of currency buys fewer goods and services and determines the purchasing power of individuals. In the current economic climate, the UK has currently reached more than a three year low, which overall can raise the pressure on the Bank of England to cut interest rates. And, with inflation falling in the UK this has caused the pound to slip as traders start to price in an interest rate cut.

The US have designated the SNB as currency manipulators due to their interference in the CHF exchange rate. This is usually done to make their currency cheaper. In this instance, the SNB were purchasing large quantities of other currencies against the Swiss franc to keep the price of the CHF low. This was done so it would make their exports cheaper to foreign buyer, therefore increasing the exports themselves. A way in which people can track SNB interference is via sight deposits. Currency manipulation is seen as an illegal act, and so, that is why the US listed them as manipulators. it is expected that the CHF will strengthen as a result of the US designation.

With the continuous back and forth between the US and Iran, this has caused investors to tread lightly in a high-risk situation with risk-averse investors driving the market and demand. Risk-off currencies benefitted with a strong rise in gold. Whereas stocks in Europe and Wall Street had little change with a small amount of movement in the market. This has meant that it's important to keep a close eye on the sudden changes and what might occur next. However, with Trump coming out and trying to de-escalate the situation in his most recent briefing, we have since seen risk on assets climb. Although, there is always the risk of further escalations, from either side.

GDP stands for the gross domestic product, which is a monetary measure of the market value of the final goods and services produced in a certain period, which can be affected by a households income and its expenditure. This affects how the different markets behave, both positively and negatively. In many cases, a strong GDP indicates higher earnings and expenditure cause an increase in goods, which usually correlates to economic growth. Although a fall in income usually causes an economic downturn so, it can be important to keep a watch on this data.

Russia and Saudi Arabia agreed to extend their oil cuts for up to nine months which could signal that oil prices are about to get stronger, however I don’t believe this is the case or the whole story when it comes to oil prices. An extension of cuts in normal circumstances would more then likely signal the start of an increase in prices, however we are not in normal circumstances this is because of the other issues going on around the world and how they affect prices. Firstly a positive for oil markets are that the trade tensions between China and the US are easing ever so slightly, they have agreed to restart talks and there has been some concessions from the US side. Even if there is still a long way to go it will be positive for oil markets if China’s economy improves and they purchase more. On the negative side for oil markets is the fact that the EU have set up a channel for them to continue trade with Iran meaning that they can buy Iranian oil without being sanctioned by the US meaning more supply to the markets pushing prices down. It is my believe that the second issue is greater then the first as there is still a long way to go in US China talks. This will push oil prices down in the near term.

After the positivity from the G-20 summit in Osaka, Japan especially the developments in the meeting between Xi and Trump and the decision to restart negotiations on a trade deal between the two countries I believe we could see a risk on environment in currency markets going into next week. The reason for this is that the worries regarding further escalations in the trade war will ease due to the US not adding any further tariffs and also now allowing US companies to sell to Huawei which had been at the centre of the trade war for a long time. Another reason is that the EU has now set up a channel for them to resume the previous deal agreed with Iran and by doing this they will still avoid US sanctions, this could bring the tensions with Iran down as if they still comply by the original deal agreed then there will be no reason for them to continue their uranium enrichment program, again easing the fears they will be working towards nuclear weapons. All these issues easing should enable investors to invest in risk on currencies such as the Australian dollar and move their money away from safe haven assets.

With President Trump and Xi set to meet at the G20 summit on Saturday it remains to be seen whether they can kickstart negotiations to potentially come to a deal between the two economic powerhouses. The two are not set to meet until Saturday so markets will be closed at that time but we can expect any comments after to have an affect, especially on the currency markets when they open on Sunday evening. As for whether they can kickstart a deal I believe that any deal is far off. This is because of a couple of reasons, firstly and essentially the US wants China to change its IPO laws. This is a big ask, especially to ask a more authoritarian regime like China to bow down and change laws at the request of the US would be seen as weak and that is not the image that the Chinese government will want to portray, neither is it the image that they have given off so far in negotiations. Finally all that has been achieved is that the two presidents have agreed to meet to talk, the differences (one of which mentioned above) are still clear to see and one side will need to make a large concession for any chance of a deal. So with that being said I think the meeting will kickstart talks but as for a deal being made there are still key issues to overcome.

German business leaders have added to the gloom surrounding Germany, the biggest economy the eurozone as the German Ifo business climate index showed that the mood amongst managers has weakened to the lowest level in five years. A quote from the Ifo institute warned that the German economy is heading for the doldrums which has seen a steady decline in its business climate index in the last few months. Germany has been struggling recently, we have seen their manufacturing sector struggle on the back of the US and China trade war and then there are the threats of auto tariffs from the US to further dampen the mood surrounding the economy. Since markets opened yesterday we have seen the Euro continue to strengthen against the dollar so the latest data from Germany doesn’t seem to have affected the Euro as of yet. While the Germany economy is just about surviving as of now, any further declines in manufacturing and exports could really add a strain and potentially put the country on the brink of a technical recession.

Today*

Since mid April we have seen the AUDJPY pair continually get weaker. This is due to a couple off macroeconomic conditions that has made it harder for the Australian dollar to gain any strength especially against the yen. Those conditions have included the escalating situation in Iran worrying global markets, the global slowdown which has resulted in a number of central banks including the RBA cutting rates and finally the US and China trade war which has had a large impact on the Australian economy due to the fact that the US and China especially are large trading partners of the country. The trade war has seen China’s economy weaken which has reduced their imports and intern slowed down Australia’s export and manufacturing sectors resulting in a weakening AUD. With the G20 meeting coming up and Presidents Trump and Xi due to meet to discuss trade we could see some retracement in the AUD against the JPY. However the complexities of this negotiation are still to great and it will take a great concession from one side before they can even come close to a deal so I believe we will continue to see the AUD weaken against the JPY in the medium to long term.

With the various macroeconomic issues occurring all at once, middle east and trade war worries to a stronger extent have worried investors around the globe and they have moved their money into the safe haven assets causing currencies like the yen to increase in value. With Japan relying on their export market they prefer to keep their currency valued at the lower end, this is because it will be cheaper for businesses in other nations to purchase products from Japanese companies and help to keep their export market attractive. So with the currency increasing in value this has started to worry Japanese diplomats. One of Japan’s top currency diplomats issued a warning earlier today stating that the excess volatility in the currency markets is undesirable and that the authorities will coordinate as needed. She also stated that they can take appropriate action if necessary and this to me shows that should the Japanese yen become too strong for the BoJ’s liking then they wont hesitate to intervene and maybe provide some stimulus in order to devalue the currency again.

Yesterday the Canadian government approved plans for a pipeline expansion on Alberta that was quite urgent in its need. The region was unable to produce as much oil as there was not enough pipes necessary to transport and store it meaning that they had a backlog, this in turn led to the oil that they did have being sold at a discount due to the need to move it out of the way. Now that the plans have been approved and work can start on the expansion what does this mean for the Canadian economy going forward? Well firstly it will provide a boost to the economy with recent data coming out saying that the lack of pipeline expansion was costing the Canadian economy billions each year. Secondly they will be able to produce more oil which will also give the economy a healthy boost. Finally once Canada is at a level where there production is back to normal it will once again allow for oil prices to become more correlated with the Canadian dollar once more due tas the country has the second largest oil reserves in the world.