市場新聞與洞察

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Broadly speaking, inflation is a general increase in prices which result in a fall in the purchasing value of money. In this article, we are going to look at measures of inflation and other indicators that can help traders to detect early signs of inflation. Traders try to follow the inflationary pressures to anticipate the next interest rate move by central banks.

If the central bank sees that inflationary pressures are building up and that economic growth is accelerating, they can decide to raise the interest rate to combat inflation and slow down the economy. Producer Price Index (PPI) and Consumer Price Index (CPI) are widely used measures of inflation. PPI tracks wholesale price inflation while CPI follows retail price inflation.

As the name entails, PPI and CPI follow the changes in prices from the Producer’s and Consumer’s point of view respectively. PPI can be viewed as the leading indicator because higher producer prices will eventually be passed on to consumers.Therefore, PPI and CPI figures allow traders to forecast the central bank’s next move about the interest rate. Early Warning Signs of inflation There are other factors that can help traders to see that inflation is building up ahead of the release of PPI and CPI figures.

In doing so, forex traders are better able to trade inflation data more confidently. Consumer Confidence and Retail Sales These two economic data provide investors with an indication of the health of the consumers. Consumer Confidence offers an essential insight into the demand for goods and services regardless of consumers’ financial situation.

Consumers are likely to spend if they feel confident about the overall economy. Similarly, Retail Sales help to measure the trends in consumer spending which could cause investors to rethink the direction of interest rates. Labour Market and Wages - (Unemployment rate, Jobless Claims and Average Earnings) Employment rate helps to detect whether there is a shortage or oversupply of labour.

The simple demand and supply diagram of the labour market will provide you with the direction of wages when there are changes in the labour market. Wage inflation therefore translates into more spending and adds to inflationary pressures. Housing Market - (House Prices and Mortgage approvals) The correlation between the housing market and inflation can be a complex one.

However, for this article, we will look at house prices and interest rates. When interest rates are low, buying houses become more affordable. Depending on demand and supply, any change in house prices or mortgage approvals will provide insights on the inflationary outlook.

Inflation is critical for the Forex markets as it can exert a considerable influence on the exchange rate of a currency. Because central banks tend to adjust interest rate to fight inflation or deflation, forex traders monitor inflationary pressures very closely. It helps them to forecast whether the next move of the central bank will put downward or upward pressure on the currency.

The fourth quarter kicked off with some good news on trade with a last-minute agreement between US-Mexico- Canada just before the deadline. "America first" is the slogan by Trump and he managed to do just that at least when renaming NAFTA to USMCA. The new agreement came with rules for cars and trucks, labour, IP protections and dairy products. After more than a year of tumultuous negotiations, Trump revamped the nearly 25-year old deal.

Markets participants cheered a “Non-Disaster” scenario but continue to be wary of trade tensions. Investors welcomed the trilateral agreement and eliminated the downside risks of a trade war in this part of the hemisphere. Canada and Mexico are the United States’ two biggest export markets.

The largest exports are the automobiles and auto parts while the largest import with Canada is crude oil and gas. *(Data are goods only) While there are a few tweaks, or changes to the new agreement, the dairy and automobile industry emerged as the two main factors that helped all parties to revamp the trilateral agreement. Dairy Industry The dairy industry appears to be the deal maker even though this sector represents a negligible percentage. Canada is not a significant exporter or importer of dairy products, but its supply management system helps them to control their dairy sector and protect their farmers’ income by limiting imports and setting quotas on domestic production.

The US is facing a severe milk glut, and the US farmers are suffering heavy losses. The new deal gives American farmers greater access to the dairy industry in Canada worth 3.6%. The removal of the controversial Class 7 which is a domestic pricing class that governs milk ingredients such as skim milk powder and milk protein is “a win” for the Americans, Australians and New Zealanders.

They have insisted that this new pricing class has effectively pushed them out of the Canadian dairy markets and this was even challenged at the World Trade Organisation. However, some analysts are sceptical of whether this win on Canada opening up its dairy industry will solve the oversupply of milk in the US. Automobile Industry The agreement will reportedly benefit the car-manufacturing workers in all three countries. 75% of the parts that go into a vehicle is required to be made in North America to qualify for tariff-free, and it also requires 40-45% of a car be made by workers earning at least $16 an hour.

The reaction of the markets The deal brought a relief rally in the markets, but investors are aware that the US-China trade dispute is a much bigger issue. The US has a trade deficit of $71bn with Mexico and $18bn with Canada for goods transactions, and it took more than a year of negotiations for the trilateral agreement to be revised. China has a whopping $375.2bn trade deficit with the US and investors are aware that talks will be challenging.

The Asian markets will probably remain vulnerable to the tit-for-tat trade spat between the US and China. The European markets were able to build up the upbeat momentum on the USMCA as Brexit noises, and Italian risks weighed on markets’ sentiments. Investors are reluctant to put their money in those markets when the US stocks are more attractive given that its fundamentals are stronger.

USDCAD fell sharply to 1.2780 before rebounding and consolidating at the 1.2800 level. A lack of fundamental drivers is restricting the pair to make a firm move in a direction. On the technical side, the RSI remains above the 30 mark which is the oversold conditions which may signal that the pair could drop further down before making any correction.

Is it a “win” for Trump? At first glance, it looks like a victory, but the concessions are mostly similar to the TPP, so it is more good news for Canada. It is argued whether the damage done to the relationship was worth it.

Unlike China, Canada was a good ally to the US. Trade tensions are not over as US-China, US-Japan, US-Europe trade talks are still pending.

US Trade vs the World Since Donald Trump became the President of the United States in 2016, we have heard him say a lot about the "unbelievably bad" trade agreements the world’s largest economy has with some countries around the world. We have already seen Trump attempt to renegotiate the North American Free Trade Agreement (NAFTA), which has reached a deadlock, and there is a possibility of the US scrapping the decades-old agreement between Canada and Mexico. But how does the trade balance look between the US and other nations around the world?

Trade Surplus President Trump has said that "We don't have any good deals. In fact, I'm trying to find a country where we actually have a surplus of trade as opposed to... Everything's a deficit." However, there are many countries which the US has a positive trade balance with.

It’s largest trade surplus is with Hong Kong at $29.7 billion, followed by the Netherlands. The US exports reached nearly $37 billion with Hong Kong in 2017 (from January to November) with $6.9 billion worth of goods imported. However, some analysts are suggesting that Hong Kong’s trade with the US will suffer from the ongoing tensions between the two largest economies in the world.

Trade Deficit Trump has aimed some strong words towards the countries which the US has a negative trade balance with. Most of the criticism has been towards the trading relationship with China – the world’s second largest economy. He may have a point as the trade deficit stands at a whopping $344.4 billion (year-to-date).

Trump said – "With China we have close to a $500 billion trade deficit, so we have to do something. I spoke to the president, I spoke to many people — we're going to work on that very, very hard. And we're going to do things that are the proper things to do." The second largest trade deficit is with one of Americas two closest neighbours – Mexico.

Donald Trump has slated the NAFTA agreement in particular, which he has called a disaster for US manufacturing. However, since Trump was elected we have seen some big American companies move their production back to the US. Most recently Fiat Chrysler, the world’s eighth largest auto maker announced its plans to move production of its Ram heavy pickup trucks from Mexico to Michigan.

Moving production of the Ram, which is mainly sold in the US and Canada, means that Fiat Chrysler will not be paying the high import duties which are likely to apply if the NAFTA agreement is rolled back. Overall, we can see why Trump has been criticising the trading agreements with some countries around the world. But will he be able to change it during his presidency?

His current actions would suggest that the United States’ trade policies will be changing.

US Indices at Record Highs US Indices have hit record highs in 2017 and are continuing to rally since the Trump presidency began back in January. The recent rally in the US Indices is mainly due to big number of companies reporting stronger performance results than the experts were predicting and a weaker dollar. Now let’s look at how the main US Indices have been performing in 2017.

Dow Jones Industrial Average About the Dow The Dow Jones Industrial Average (The Dow, WS30 on the Go Markets MetaTrader FX trading platform ) is a price weighted measure of 30 US blue chip companies. This Index covers all industries apart from utilities and transportation. [caption id="attachment_57659" align="aligncenter" width="532"] Source: http://us.spindices.com[/caption] The Dow in 2017 On 25 th January 2017, Dow Jones reached the landmark 20,000 barrier for the first time ever as Trumps pro-growth policies boosted the financial markets. It took under a month for the Index to close at 20,500-mark for the first time ever.

Then on 1 st March, the Dow reached the 21,000-mark for the first time and the rally continued. Just over 5 months later, on 2 nd August, the Dow reached the 22,000-mark for the first time ever after Apple posted quarterly results that beat the expectations. WS30 [caption id="attachment_57655" align="aligncenter" width="600"] Source: Go Markets MT4[/caption] S&P 500 About S&P 500 The Standard & Poor’s 500 (S&P 500, US500 on the Go Markets MetaTrader 4 platform ) is an American stock market index, generally viewed as the best single gauge of large-cap US equities.

There is over $7.8 trillion USD benchmarked to the index, with index assets comprising around $2.2 trillion USD of this total. The Index includes 500 top companies and captures approximately 80% coverage of the available market capitalization. [caption id="attachment_57660" align="aligncenter" width="546"] Source: http://us.spindices.com[/caption] [caption id="attachment_57656" align="aligncenter" width="600"] Source: http://us.spindices.com[/caption] [caption id="attachment_57657" align="aligncenter" width="600"] Source: http://us.spindices.com[/caption] S&P 500 in 2017 The Index first reached the 2,300-mark on 26 th January before falling below the level at closing. It took two weeks before the S&P 500 finally closed above 2,300.

The S&P first crossed 2,400 on 1 st March before again falling below that level at closing. The Index finally closed at above 2,400 on 15 th May. As you can see in the chart below, the S&P 500 has been climbing consistently in 2017 and the Index broke the 2,450-mark on 19 th June and it is predicted that it will reach new highs by the end of the year.

US500 [caption id="attachment_57658" align="aligncenter" width="600"] Source: Go Markets MT4[/caption] By: Klavs Valters GO Markets

US Dollar Index Futures with GO Markets For stock traders, trading indices is a cost-effective way to gain exposure to many different companies in one single transaction. Similarly, the US Dollar Index acts as a benchmark to currency traders. The index measures the value of the US Dollar relative to a basket of foreign currencies.

In other words, the US Dollar index assesses the USD’s global strength in relation to other currencies. Given that USD is the most traded currency, the index is a good representation of the direction of the Dollar. Rather than analysing a single currency pair, the index enables market participants to monitor its movement and hedge their position against a rising or falling Dollar.

Components of US Dollar Index The index consists of 6 foreign currencies which comprises of 24 countries with 19 countries being the members of the European Union. Many countries operate under a floating exchange rate regime and therefore they are highly influenced by the central bank monetary policies such as interest rate decisions, current account balance or other economic and political factors affecting the currencies. Source: GO Markets MT4 Two weeks ago, the index plummeted after the disappointing retail sales data (Actual figures -0.1% and the forecasted figures was 0.2%) but recovered after a few hours following the 25bp interest rate hike.

While the hike was expected, the US Dollar recovered as traders are now anticipating one more hike in the next Fed meeting which will be held on 25-26 July. GO Markets offer a quarterly contract on the Dollar Index (USDOLLAR) and the next rollover will be in September. This market is available with GO Markets on a 1% margin requirement.

The minimum trade size is 0.1 and maximum is 100 contracts. The units of trading for 1 contract size is USD1000*Index Value. There are no overnight interests and swap charges for the USD Index with GO Markets.

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