STOCKS in free fall again. OIL in free fall again. Deja vu
Oil seems to be the catalyst that is all bad right now. Fresh worries that the introduction of Iran’s supply coupled with a continued supply from the Saudi’s will leave the market with a glut of oil. I guess even at $30p.b it is money in the bank. It is no wonder then the Saudi’s are pressing ahead and not taking their foot off the accelerator. While this all bodes well for you and I (and the airlines) at the pumps, the market does not like it.
GBP opens weaker this morning ahead of Gov Carney’s speech at 10.45am. Not sure what else he can add to what he already said last week regarding interest rates and the state of the union. We know now the BoE are likely to hold back raising rates, we know the dire state of the Chinese economy is having a severe knock on effect globally and we will probably know later this evening when Pres. Yellen (FOMC) speaks that the FED too are concerned. And so they should be. Plunging oil prices, plunging stocks, a Chinese economy in disarray and not so good US economic data will see the FED leave rates unchanged and in all probability stay unchanged for the time being. It’s no wonder the USD (vs EUR) has remained range bound since December. No new event risk has left EURUSD with no place to go.
Emerging currencies remain under pressure. This week (Thursday) the SARB announce their interest rate decision and the locals are expecting a 0.25% hike. I am not quite sure how this will aid the local economy which is already under pressure. The carry trade is dead in the water and the chances of the Japanese (who got out remember 2 weeks ago) are unlikely to jump back in. There is just too much risk for the now. I just don’t see how the S.African economy can withstand yet another rate hike. Nigeria’s naira (NGN) traded weaker on the open while stocks gained for the fourth day as domestic investors snapped up banking and oil shares in anticipation of the central bank’s decision on rates and any word on forex controls. The Central Bank of Nigeria (CBN) will keep its policy rate on hold at 11 percent on Tuesday but investors are hoping to see a relaxation of tight foreign exchange controls and a weaker naira currency.
Be prepared for FURTHER stock losses, oil prices, and GBP!!! The tarot cards are all showing signs of continued volatility.
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