23 hours ago | December 21st, 2014 19:51:50 GMT.

Goldman Sachs Moffitt view – RBA to cut in H1 2015 unless AUD weakens

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Bloomberg is carrying a story over the weekend quoting Philip Moffitt, head of Asia-Pacific fixed-income at Goldman Sachs Asset Management in Sydney. Note, the interview is from December 18 but as I say the story is up on Bloomberg this weekend.

In it Moffitt says the gap in yield between Australian and US 10-year bonds is likely to narrow significantly in 2015, if not close completely:

  • “The Fed will push rates up next year and the RBA in Australia will most likely reduce them”
  • “There’s no reason why the range in bond spreads that we’ve been used to historically has to hold if the domestic fundamentals are different from the U.S”

More:

Moffitt says the RBA is set to cut the cash rate target by half a percent in H1 of 2015 unless the Australian dollar weakens:

  • “If we come back from Christmas holidays and in February the currency’s at 77 cents, then a cut’s most likely off the table for six months”
  • He think Japanese demand for Australian bonds will still lend support to the Australian dollar

This is a slightly different view from Moffitt; while Goldman have given their view of likely Australian rate cuts for some time (for example, from December 3:  Goldman Sachs now expecting an RBA interest rate cut of 25bp in March and again in August 2015) it appears their expectations of a cut in August have shifted forward a little 9unless the AUD weakens)

I don’t know why the story is out over the weekend given the interview was conducted on December 18. Perhaps it was out earlier and I missed it.

A narrowing of the gap in US/Australian yields should be a negative for the AUD, Australian bonds would not be as attractive as they currently are (Australian government bonds are a AAA rated sovereign debt that pay relatively high yields). But note, this isn’t new news from Moffitt, perhaps just a slight shifting forward of expectations of a cut.

Goldman Sachs Phil Moffitt

2014-12-21T19:51:50+0000

December 21st, 2014 19:22:13 GMT.

Currency fund manager vanishes with £130m

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A British fund manager has vanished after an alleged $200 million ponzi scheme.

Joe Lewis, 59, of JL Trading wrote an email to clients two weeks ago and admitted that since 2009 he hasn’t been trading at his fund but continued accepting client funds.

In the email sent on Dec 3, Mr Lewis wrote:

“Dear investor, I am writing to inform you that JL Trading is ceasing to carry on business. Contrary to the impression that I have hitherto given, the business has lost almost all of its assets, and there appears no prospect of those assets being recouped.

“JL Trading ceased foreign exchange trading in 2009 following substantial losses and since that time the business has suffered further losses, which I have tried to make good through investments in a number of commercial projects. However, it is now clear that the business will not be able to recover its losses and must cease trading. This means that, contrary to what was reported to you previously, you cannot expect any payments in the future.

“I can only apologise unreservedly for any losses or unfulfilled expectations of profit. I have tried to recover the position for a considerable period of time, but it is now clear that I will be unable to do so. I sincerely regret that I have not been able to do better on your behalf.”

Some clients had invested as much as £1.2m and the minimum was £16,000.

We’ve all seen this story a dozen times before. If returns are too good to be true, they’re probably fraud. And while the FCA has sent an army of bureaucrats to collect billions from banks for moving the market 10 pips at the fix, there are guys like this running schemes for a decade and the regulators can’t be bothered to check the accounts.

2014-12-21T19:22:13+0000

December 21st, 2014 19:15:03 GMT.

Monday morning Forex prices, early indications

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Good morning, afternoon, or evening depending on where you are on the globe

Welcome to the beginning of the new FX week, which will be somewhat curtailed by holidays in Japan (Monday), nearly everywhere on Thursday and many centres again on Friday.

But, as of right now, only the New Zealand market is open, and so market liquidity is super thin compared to most other times of the trading week. This is normally the case on a Monday morning, so nothing new, but I would caution extra care with many market players already having wound down for the holiday break.

Here’s the early price guide so we can see what the Kiwis are up to, liking the AUD a little this early morning!

monday 22 December 2014

Again, the usual caveats apply – it is relatively illiquid and prices can move sharply on not very much at all.

2014-12-21T19:15:03+0000

December 21st, 2014 14:21:27 GMT.

So how’s all that last-minute Christmas shopping coming along ?

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Or are you stuck in a traffic jam or on a station platform somewhere on your way to family and friends for the festive season ?

Either way here’s a quick reminder that we shall be operating on reduced hours/coverage until Jan 2 but we’ll be working behind the scenes as part of our ongoing commitment to bring you a brand new site and ideas sometime in January

And if you’re seeking to put a smile on your face in the face of shopping and/or travelling adversity then check out Ryan’s post featuring the ForexLive team making a few festive shapes!

And if that wasn’t enough here’s, not one but two, soothing Christmas classics with more to come over the next few days

Stay safe one and all

2014-12-21T14:21:27+0000

December 21st, 2014 13:31:57 GMT.

PM Samaras offers a Greek general election in 2015 if bailout talks are completed

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Speaking in an unscheduled television address today Greek PM Antonis Samaras said Greece had a duty to finish negotiations with the EU and IMF

Then, shielded economically and politically, we can find a suitable timeframe for national elections even at the end of 2015

The announcement was unexpected and comes just two days ahead of the second round of voting in parliament to elect a new President but on 11 Dec we reported on a similar plea to parliament in a bid to have Dimas elected. It was a disappointing result for the government in the first round last week when it won less support than expected.

If parliament does not elect a president by the third and final round of voting on Dec. 29, a snap general election would have to be held by early February, putting talks on ending Greece’s international bailout programme at risk

Samaras - A last throw of the dice ?

Samaras – A last throw of the dice ?

 

2014-12-21T13:31:57+0000

December 21st, 2014 12:54:43 GMT.

BOE’s Miles says UK’s falling inflation does not mean deflation risk ahead

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In an interview with the Sunday Telegraph today BOE MPC member David Miles says that some people were arguing that the plunge in inflation showed the need for a looser monetary policy.

This seemed wildly implausible just six months ago and I have my doubts even now

But it does mean that there is no great urgency in starting the process of moving monetary policy back towards a more normal setting.

Miles said it was possible that he would not vote for a rate rise before his term at the BOE ends in August and he pointed to expectations in financial markets that the first rate hike would only come later next year.

The UK inflation fall during 2014

The falling UK inflation

Falling prices can pose a threat to economies if consumers put off purchases in the belief that prices will be lower in the future. This forces businesses to cut prices to entice people to spend. Workers also feel the pain through wage cuts or redundancies, pushing up debt burdens in real terms.

Mr Miles said this risk was currently minimal:

The falls in energy and food prices are more likely to have increased the ability of households and firms to manage their existing debt than to have made it more difficult

Part of the reason for the recent plunge in world oil prices, which has pushed down inflation, was weaker demand in emerging economies, especially China he said.

It is relevant here, and in fact helpful, that the UK exports relatively little to China –- we get the benefit of the boost to real incomes from lower commodity prices that weaker Chinese growth brings but we don’t pay much of a price in terms of weaker exports

The situation was the reverse of a few years ago, when booming demand in China pushed up commodity prices and saddled Britain with high inflation, cutting into living standards.

The current reverse situation is partly why I see fewer reasons for worrying about deflation risks than if the undershoot of the 2 percent inflation target reflected purely domestic factors

One BOE MPC member certainly in no hurry to press the start button on interest rate normalization.

Read his full piece here

 Miles: In no rush to hike interest rates

Miles: In no rush to hike interest rates

 

2014-12-21T12:54:43+0000

December 21st, 2014 02:22:38 GMT.

ECB’s Coene supports government bond purchases: newspaper

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European Central Bank governing council member Luc Coene said in a La Libre Belgique interview published on Saturday:

  • ECB should start buying government bonds to tackle poor investor confidence and low inflation in the euro zone
  • Said the bank had already waited too long

Report via Reuters

Coene says corp buying is a current discussion

Coene would appear to be further laying the groundwork for ECB QE in the new year (January 22 is the expected date). Mike had more on this theme earlier in the weekend: ECB’s Constancio sees negative Eurozone inflation rate in the coming months

 

 

2014-12-21T02:22:38+0000

December 21st, 2014 02:22:28 GMT.

Pimco sees longer-term value in Russian bonds, and US rate hikes

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Pacific Investment Management Co (Pimco) investment chief Dan Ivascyntold German newspaper Frankfurter Allgemeine Sonntagszeitung in an interview to be published on Sunday:

  • Sees the economic crisis in Russia having only a limited impact on the financial system in the longer run
  • Said “Selected Russian bonds remain value-creating in the long run”

Also said he expected the U.S. Federal Reserve to raise interest rates in 2015:

  • “We believe that (Federal Reserve Chair) Janet Yellen will do this so carefully and with such restraint that there won’t be major asset price declines”

2014-12-21T02:22:28+0000

December 21st, 2014 02:22:21 GMT.

Italian PM Renzi wins confidence vote to get 2015 budget through Senate

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Italian Prime Minister Matteo Renzi won a confidence vote to get his tax-cutting 2015 budget through the Senate on Saturday:

  • Its expected to be approved by the lower house next week
  • Package includes tax cuts for low earners and a reduction in labour taxes for businesses
  • The budget must be passed by parliament by the end of the year
  • EU may demand more spending cuts in March

Via Reuters

Italian PM Renzi looking for a Prince Charming

2014-12-21T02:22:21+0000

December 21st, 2014 02:21:08 GMT.

China cuts red-tape for foreign bank branch openings, RMB business

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Reports in Chinese state media Xinhua on Saturday that  China has cut red-tape for foreign bank branch openings and entry into renminbi business

The cabinet revised the existing rules on Saturday

  • Abolished the requirement for foreign-owned and joint-stock banks to inject 100 million yuan ($16.08 million) or an equivalent in other currencies of working capital into a newly opened branch
  • new rules to take effect from January 1

Xinhua says this should speed up the approval process

More detail at Reuters

2014-12-21T02:21:08+0000
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