Major Indices took a breather last week, with US equity markets closing down more than 1% after posting record highs the week prior. In economic news, the incoming US administration announced a $1.9 USD trillion fiscal-stimulus plan that aims to counter the effects of COVID-19 and support markets as recent weak economic figures are indicating they are under some stress. COVID-19 With reported deaths in Norway of patients who were recently administered the Pfizer vaccine, US vaccine distribution falling well short of expectations and new coronavirus strains being detected, investors are concerned that economic lockdowns could be longer than hoped.

Equity Markets US markets are closed on Monday for the MLK holiday. After that, the earnings season will kick off with big names like Intel, IBM, Netflix, Intel, Goldman Sachs and Proctor and Gamble reporting this week. These bellwether companies should give an indication of how the US economy has weathered the COVID storm.

Cryptos With impressive rallies the week before, Major Cryptocurrencies pulled back last week but still remained well bid on any significant drop. A strengthening US dollar and comments from ECB President Lagarde regarding the need to regulate Bitcoin could be headwinds going forward for these assets. FX Markets After declining for 3 months straight the US dollar Index bounced off support and rallied close to 1% for the week.

This meant a decline in USD pairs with AUDUSD finishing near the 0.77 big figure. This US dollar strength also weighed on USD denominated commodities, with both Oil and Gold declining for the week. Key events ahead Monday Chinese GDP (AUDUSD, CHINA50, USDCNH) Thursday Bank of Canada rate statement (USDCAD) Australian Employment change and unemployment rate (AUDUSD, ASX200)bank of Japan Monetary policy statement (USDJPY, JP225) ECB Monetary policy statement and press conference (EURUSD.

Euro Indices) Friday Bank of England Governor Bailey speaks (GBPUSD, UK100) New Zealand CPI q/q (NZDUSD) German Manufacturing and services (EURUSD, DAX30) Tuesday, 19 January 2021 Indicative Index Dividends Dividends are in Points ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50 0 6.777 0.143 0.022 0 0.829 0.257 ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50 0 0 0 0 0 0 0

World equity markets finished modestly positive for a week sparse of economic news. US markets again hit all time highs on the back of strong corporate earnings, continued optimism in fiscal stimulus and COVID progress as the US infection rate eased to its lowest level since October. Equity Markets US The NASDAQ outperformed with Twitter (TWTR.NAS) continuing the good run of earnings coming from the tech giants in recent weeks.

Disney (DIS.NYSE) surged to all time highs after reporting strong performance in Q1, despite the company’s theme parks in California having been shuttered for the best part of a year. Source: CQG Entering the last week of Q1 corporate reporting we have Walmart (WMT.NYSE) reporting on Thursday, this paired with US retail sales, released on the same day will give a good indication of US consumer demand recovery. AUSTRALIA The Australian Market finished slightly down on a week with no major economic announcements.

This week we have the employment change and unemployment rate released on Thursday. These figures will be of extra importance with rolling back of JobSeeker payments scheduled for March in what some social advocacy groups are calling a “national crisis”. Zip Pay (Z1P.ASX) was one shining light, rallying 25% and continuing the surge higher of recent weeks.

FX Markets The US dollar index finished down 0.5% weakening against all major currencies with the exception of the NZD. Source: Bloomberg AUDUSD The Aussie continued its impressive rallies after the dip preceding the RBA’s surprise announcement of its bond buying QE programme at the start of the month. A weak US dollar and record iron ore and copper prices are driving it back to the important 78c level.

AUDUSD has experienced strong resistance at these levels this year, the employment report on Thursday will be an important Indicator as to whether the Aussie can break through. Source: GO MT4 Commodities – Oil US Crude Oil continued its strong rally breaking the $60 USD a barrel mark, with prices now back in line with pre-pandemic levels. China’s rapid economic recovery from the pandemic has been cited as the single most bullish factor for oil prices at the moment.

China’s January crude oil imports averaged 11.12 million bpd. This was up by more than 18 percent from the December average. Weekly US Crude inventories will be released Friday with the last 3 weeks having much larger draws than expected.

Eyes will be on the figure to see if oil demand is continuing to strengthen. Source: GO MT4 Bitcoin Bitcoin continued its surge upwards to all time highs as news that an investment arm of Morgan Stanley is considering adding Bitcoin to its list of possible trades. This comes on the back of a recent Tesla announcement of investment in the cryptocurrency and could indicate a coming broader uptake of Bitcoin in corporate investment circles.

Source: GO MT4 Tuesday, 16 February 2021 Indicative Index Dividends Dividends are in Points ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50 11.709 8.488 0.489 0.038 0 0 0 ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50 0 0 0 0 0 0 0

Not even one week after crypto exchange FTX officially filed for bankruptcy another Cryptocurrency entity has felt the wrath and submitted its own Chapter 11. The spread and contagion effect from FTX was always a concern and now cryptocurrency lender BlockFi has fallen. BlockFi had been struggling even prior to the FTX collapse.

In fact, the company was bailed out with credit support form FTX of which the company could access up to USD 400 million. BlockFi is not a traditional exchange, rather a lender in which it used cryptocurrency assets as collateral for the loans. As the value of the crypto assets has declined the value of the company’s collateral became lower and lower and the company was unable to cover its liabilities.

Once the FTX crisis broke out, the support the credit offered by FTX was of course no longer available leading to a liquidity crisis. The bankruptcy filing outlined that the company currently has 256.9 million dollars of cash on hand which it says will provide enough liquidity in the short term to keep it operational until a restructuring can be done. The company owes approximately 100,000 creditors and the top creditor is the SEC is number which is owed 100 million dollars to settle charges it has in relation to one of its products that it offered.

The company has halted withdrawals from its platform and acknowledged the significant exposure it has to FTX. Will BlockFi end up like FTX? The manager of the financial group that advising BlockFi has made it clear that the situations Is not the same as FTX.

This is because they believe that the management teams of BlockFi are experienced, competent, and responsible as opposed to the leadership at FTX. There have been to date, “No failure of corporate controls and the company’s financial statements have shown to be trustworthy”. The difference in management and leadership does represent a potential safe exit for BlockFi and perhaps a lower level of negative impact on the crypto sector.

Ultimately, the situation surrounding BlockFi just highlights how precarious the whole FTX crisis is and the potential for other firms to be caught up in the fiasco. With such an interconnected market other exchanges and entities need to stay vigilant and aware of their exposure to the falling value of their assets.

The FTX bankruptcy case has been a fascinating study in the failure of corporate governance providing a warning to the Cryptocurrency industry that a lack of regulation will not excuse poor financial management and that these exchanges are not immune to failure. In the last week, the company engaged distressed company expert, John Ray III to take over control as the company's CEO as it declares bankruptcy. Ray who has helped companies such as Enron wind up their business and dealt with fraudulent and criminal business activity will help wind up the company.

In FTX’s Chapter 11 Bankruptcy filing, Ray provided some intriguing insight and warnings for other business and companies that may be in a similar boat, stating “Never in my career have I seen such a complete failure of corporate controls”. For market participants the information out of the filing is helpful in providing direction for potential investment and trading decisions going forward. Overview FTX, prior to its demise was the world’s second largest cryptocurrency exchange under the management of founder, Sam Bankman-Fried.

The initial announcement of the company failing, lead to a drop in the price of Bitcoin by almost 25% and a panic in the market and FTX losing a rumoured 1 billion dollars in customer funds. Outlined below are some of the key issues that Bankruptcy filing found as being responsible for FTX becoming insolvent. Cash Management The issues highlighted by Ray, included a lack of cash management controls.

The company did not maintain accurate books and cash accounts and currently is not able to locate accurate accounts and transaction history to verify its positions. This means that currently, there is no clear indication of how much money the company on its balance sheet. Disbursements and record keeping The company’s management and control of its disbursement were so poor that it was not “appropriate for a business enterprise”.

For example, there were no records of loan documents, for money used purchase homes for employees. In addition, wage requests made by employees were made and approved with the use of personalised emojis and messages that automatically deleted after a short period of time. The lack of record keeping was also evident in its management of the actual digital assets under it held.

There was no record of the coins or digital assets that the firm was holding for its customers. This adherent lack of record keeping has made it increasingly difficult to work out the financial position of the company. Auditing Failures This also leads to the next major issue which was the auditing opinions.

Although most segments of the business were audited, Ray, made it clear that none of the opinions should be relied upon by current and future stakeholders. In addition, there has so far been no indication of auditing performed on Alameda and Venture segments of FTX. The failure of the auditing process was an essential risk management measure that was missed.

Lack of Employee records The failure in governance also extended to Human Resource Management within the company. No clear records of employees and contractors have been found and even now there is no clear indication of how many employees FTX, and its various subsidiaries had. In fact, the problems relating to employee records have been so poor that there has been difficulty even locating some of members of the workforce to verify their employment.

Ray ended the filing with perhaps the most damming statement of all which was that Sam Bankman Fried does not represent creditors and that his current actions are not only problematic but highly irrational including social media posts that he currently engages in. The lack of regards and contempt held for Bankman Fried is indicative of complete failure from the senior leadership team at FTX. The situation at FTX has been brought about by a sector that hides itself behind low regulation and complex technical language that allows it to escape much scrutiny and criticisms.

The environment of ambiguous leadership roles and no clear focus on compliance and risk lead to a situation whereby failure on such a large scale has been allowed to occur.

One of the must-watch economic events this week will be the Bank of Canada interest rate decision. The rate decision is due to be announced at 15:00 PM London time on Wednesday. Why is the announcement important?

A bank interest rate is a rate at which a country's central bank lends money to local banks. The interest rate is charged by the nation's central or federal bank on loans and advances to control the money supply in the economy and the banking sector. The Bank of Canada has an inflation target of 1% to 3% (currently 1%).

The interest rates are changed accordingly to meet the target. The decision to increase, decrease, or maintain the interest rate has a significant impact on the financial markets so it is one of the most closely watched economic events in the calendar. Bank of Canada interest rate changes since 2015 Expectations All eyes will be on the Bank of Canada governor, Tiff Macklem on whether the interest rate remains unchanged at 0.25% or reduced closer to 0%.

Canada has had one of the strictest lockdown measures in the world in its fight to defeat the Coronavirus in recent months, which has had a considerable impact on the country’s economy. Despite that, the rates are expected to remain unchanged, according to economists. Brett House, vice-president, and deputy chief economist at Scotiabank: ''We do not expect a rate cut from the Bank of Canada at its next meeting as rate-sensitive sectors don’t need an additional boost.

For instance, Governor Macklem noted before the holidays that we should watch how housing is faring... Canadian home sales were up 7.2 per cent month-over-month in December to set a record for the month, which completed an annual gain of 12.6 per cent year-over-year. In other areas, retail sales have been above year-ago levels for several months.'' ''Although some immediate risks to the economy have gone up with intensified restrictions to stem the spread of COVID-19, medium-term risks relevant for setting monetary policy have abated.

Vaccines are being delivered about a year ahead of the Bank of Canada’s earlier expectations; the U.S. stimulus and funding bill passed and a government shutdown was averted, which will provide some positive spillover effects into Canada; and financial conditions remain favourable to growth.'' The Monetary Policy Report is set to be released shortly after the rate decision.

What is the Gold-to-copper ratio and why is it important? And more importantly, what could it be telling us? The Gold-To-Copper Ratio Health Check Copper is often referred to as a barometer for economic growth and gold has historically been the safe-haven, a risk-off asset of choice for investors, so naturally comparing the two allows one to take a decent look at broader market sentiment.

Why Copper? Copper is one of the most widely used metals from both established and emerging economies and on top of that it is the only base metal used throughout all aspects of industrialization. Therefore increase in industrialization equates to an increasing demand in copper which ultimately relates to higher copper prices.

For this reason, the metal holds the moniker of "Dr. Copper." and why we can use it as an indicator of economic growth. The Ratio Explained In layman's terms, the gold-to-copper ratio is the current gold price divided by the current copper price.

However what is more import is what this ratio indicates and how it can help us get a firmer understand of the macro forces at play within the market. The gold-to-copper ratio is effectively a visual representation of risk-on/risk-off sentiment. The higher the ratio means that fewer people are buying copper and more are buying gold so what we see is a risk-off sentiment, meaning that people are more cautious with their money and investments, sticking to low-risk products.

The lower the ratio equates to the inverse, vis-à-vis risk-on sentiment and more stimulus into the economy. Gold-to-Copper Ratio Historical Traits In June of 2016, the story on everybody’s radar was bond yields at the lowest since the middle of the financial crisis with the U.S. 10-year yield printing lows at 1.3579% in and then for the next few weeks we saw the yield sit at around the lows and the 1.50% level. Was the gold-to-copper ratio signaling a shift to us?

The ratio peaked in early September 2016 but very quickly began to tumble as Gold prices started to see sell-offs and Copper started to see pretty heavy buying, this resulted in seeing the ratio price drop by about a third. It was during the second leg lower for the ratio that we started to see a bid in bond yields and the transition to a more risk-off environment, which we can see in the chart below that shows both the U.S. 10yr Bond yield (orange line) and the Dow Jones Industrial Index (white shaded line) begin their rally higher. U.S. 10yr Bond yield & Dow Jones Industrial Index So how can we utilise this within our trading?

To quote Samuel Goldwyn “The harder you work, the luckier you get.” and in this case, the harder you work to understand the interconnectivity of financial markets the ‘luckier’ you get with trading. Understanding how certain assets can be used to evaluate market/economic sentiment allows you to move away from being dependent on the obvious indicators, i.e. economic data & mainstream media sources and will enable you to be ahead of the curve, active as a pose to reactive. So, with the Gold price just popping above $1200 an ounce and Copper prices pushing lower on the back of poor Chile exports, we could see the gold-to-copper begin to push higher again, was the Gold-to-copper ratio flashing a warning to us before the significant equity market sell-off on Wednesday the 10th?

Will a push higher in the ratio signal a further sell-off in equities? We will be watching closely, both the commodity prices and equity indices to see where the market takes us next. This article is written by a GO Markets Analyst and is based on their independent analysis.

They remain fully responsible for the views expressed as well as any remaining error or omissions. Trading Forex and Derivatives carries a high level of risk. Sources: Bloomberg