20150302 – DAILY MACRO

Good day

High Low High Low
EUR/USD 1.1241 1.1159 USD/ZAR 11.7560 11.6455
GBP/USD 1.5442 1.5385 GBP/ZAR 18.10 17.94
EUR/GBP 0.7300 0.7238 USD/RUB 62.70 61.46
USD/JPY 119.97 119.58 USD/NGN 202.7 202.0
GBP/CHF 1.4762 1.4678 S&P 500 2,111 2,102
USD/ILS 4.0089 3.9667 Oil (Brent) 62.60 61.15

Just goes to show how quickly global financial issues go from page 1 to page 20 in the newspapers and TV. For the past fortnight Greece was on everyone’s lips and typewriters. Now, I do not see much written or spoken. Granted the “agreement” is in place and the Greek’s have provided the EU/ECB/IMF with a list of austerity measures to maintain the cash flow. What we did see last week were a revival of demonstrations in Greece, this time demonstrating against the Syriza party for accepting Troika’s demands. No disrespect meant, but are the people that demonstrated living on the same planet as you and I? Do they not realise that this is not simply a case of saying no no no to Troika’s demands and countering them with this is what “we” want and there is no chance to debate it. Had the agreement not been agreed, the local banks would be out of cash and all those wonderful people throwing stones would have seen their money simply vanish. After all just because you have money in the bank doesn’t guarantee its safety. Over €1bn was being withdrawn daily before the deadline. I can assure you it would have been a great deal more than that had the talks failed. Greek citizens need to realise that the level playing field has changed and as such their “rights” are no longer taken for granted. They need to toe the line, cut their cloth according to their means and fall in line with the rest of the EU. Failure to comply is simply not an option. So change is in the air in Greece, and it will be interesting to see how successful Syriza are in implementing their reforms.

I just returned from Spain and had the pleasure of meeting up with large estate agents and businessmen who have been based in the Costa (Del Sol) for over 20 years. They commented that the authorities there have come down on property owners and businesses like a ton of bricks. Taxes are being collected, every industry is now under the microscope and even the corner vendor selling cheap cigarettes is being raided to avoid paying taxes. No doubt the old days of getting by are behind us and a new dawn is upon us. The authorities whether in Spain or Greece have a simple mission, collect taxes, reform labour laws, catch tax evaders and generally to clean up their backyard. This is only the start of things and changes to come.

This week all eyes again on NFP (Friday 1.30pm). The NFP data is likely to confirm yet another solid month of job gains that will leave open the prospect of the FED raising interest rates for the first time since 2006. Just like in the UK, the FED will be looking at the growth in average earnings. The 0.5% gain last month is expected to be followed by a 0.2% gain this month, rising over the course of the year to between 0.30/0.40%. As Gov. Carney of the BOE commented recently, growth in wages is CRUCIAL to determining when rates will be on the rise. As is the case on both sides of the pond (not to mention globally pretty much) with the recent fall in gas and energy prices,  households have seen a boost to their real incomes. These rises will be key factor which supports personal consumption and gives the FED the confidence to believe US economic growth is becoming more sustainable. So Friday’s report will in effect support the FED’s decision on rates and as we at PARITYFX have concluded these rate rises could come as EARLY as May (surprise move) otherwise at the June (17th) meeting. Needless to say the USD will remain Buoyant and supported on the back of this anticipated rate rise. As far as the ECB/BOE/RBA/PBC (to mention but a few), the rise in the USD is probably a GOOD thing for their own economies as it makes their goods MORE attractive to others (i.e., exporters 1, Importers 0).

No doubt we are slowly heading to a period of higher interest rates. The “free lunch” is about to come to an end!!! Be prepared


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