Weekly Review: US elections control financial assets trend risk aversion sentiment

Huitong.com November 5th - This week (October 31-November 4th), Japan, Australia, the United States, Britain and four countries interest rate resolutions, coupled with heavy data, the US monthly non-agricultural employment report has appeared in turn However, it is only a week or so away from the US presidential election. The unpredictable selection of the election is highly concerned by the majority of market participants, and the latter also controls the market trend to a considerable extent. The US dollar index showed a unilateral decline. It closed down 1.41% to 96.93 during the week and broke the 98 and 97 integers in one week. The precious metals and most non-US currencies rose sharply.

The dollar is long and the rout is "all thanks to Hillary"

On Friday (October 28), US Federal Bureau of Investigation Director James Comey said in a letter to a parliamentarian that it would investigate whether US Democratic presidential candidate Hillary Clinton sent more emails using a private mail server to determine whether the emails were sent. Contains secret information.

Subsequently, the results of a poll released by ABC News and the Washington Post this week were shocking. Trump had a 46% approval rate and Hillary was 45%. This is Trump since May. The first successful overtaking. And a week ago, Hillary was still 13 cents ahead of Trump.

The polls were conducted from October 27th to October 30th, and the time period completely covered the US Federal Bureau of Investigation's announcement to restart the investigation of Hillary's "mail door" scandal. Before the incident, the news site FiveThirtyEight had expected that Hillary would be up to 85% more likely to win the election.

A wave of waves has risen again. On Wednesday (November 2), WikiLeaks revealed to the public that Peter Kadzik, a senior US Justice Department official, secretly directed the Hillary team when he was the US Secretary of State’s Hillary Clinton in a violation of the e-mail usage regulations in May 2015. The person in charge disclosed the progress of the investigation.

In May 2015, while the US Department of Justice launched an investigation into Hillary’s “email violations” issue, Peter Kadzik wrote the message to the head of the Hillary team titled “Attention”: “Today’s House of Justice The committee has a hearing, and the head of the Civil Division will testify. It is likely to ask the US Department of State's e-mail violations."

In the face of the frequent negative news of Hillary Clinton, the dollar bulls will eventually escape the fate of defeat. Republican leader Trump has pursued conservativeism in economic and trade policies and threatened to intensify efforts to crack down on illegal immigration. The market is generally worried that once he is successfully elected president of the United States, risk assets will open a plunge mode. This has also greatly reduced the market influence of the Federal Reserve interest rate resolution and the October non-farm employment report.

Hussein Sayed, chief market strategist at FXTM, said: “For investors, the market change after the Brexit referendum is still in sight. No one wants to stand the wrong team now. As long as one or two polls show that Trump leads, it is enough to cause The market is tight."

CraiGE rlam, senior market analyst at Oanda in London, said: "At the time of the election day, the poll showed that Trump's support rate has risen, which makes investors feel very uneasy. Obviously, the market may prefer Hillary to win the US economy. Bring stability."

[The Fed does not trouble the market]

The latest interest rate decision and monetary policy statement issued by the Federal Reserve on Wednesday (November 2) was quite satisfactory – maintaining the federal funds rate of 0.25%-0.50% unchanged, and further strengthened the possibility of a rate hike in December.

The statement said that in this resolution, the proportion of members who supported the immobility and support for interest rate hikes was 8:2. Among them, George and Mestre opposed the fact that they did not move and were inclined to raise interest rates immediately.

The Fed gave up the wording that “expected inflation will remain low in the short term”. The Monetary Policy Committee said that economic momentum has increased, employment growth has remained steady, household spending has continued to increase moderately, and corporate investment remains weak. Policymakers also expressed a more optimistic view that inflation is moving toward the 2% target.

However, the market reaction is extremely limited, and the short-term shock in the US dollar is only 25 points. JoeSaluzzi, a partner at ThemisTrADI ng, said: "Obviously, political concerns have prevailed, and the Fed meeting has to give way. The market believes that the results of the presidential election have already been seen, and who knows the latest poll results surprised them."

Olf senior exchange rate strategist Alfonso Esparza said: "There is almost no tone FOMC is taking action at this meeting, because everyone is currently paying attention to the news of the US election."

Brian Jacobssen, chief portfolio strategist at Wells Fargo, pointed out: "The Fed’s November policy statement is entirely about playing games with investors. As long as there are several good-performing macro reports, you can see evidence that inflation continues to rise, indicating December plus The possibility of interest is great."

[October non-agricultural support at the end of the year]

On Friday (November 4), data released by the US Department of Labor showed that the number of non-agricultural employment increased by 161,000, slightly less than expected, but the salary increase was better than expected, and the unemployment rate fell, the overall performance was unsatisfactory, which is expected to be enough for the Fed 12 Monthly interest rate increase provides data basis.

According to specific data, the non-agricultural employment population in the United States increased by 161,000 in October, which is less than expected. It is expected to increase by 173,000. The previous value increased by 156,000. In the US, the private sector employed 142,000 in October, which is less than expected. It is expected to increase by 170,000. The value increased by 167,000.

The average annual hourly wage rate in the United States increased by 2.8% in October, which was better than expected. It is expected to increase by 2.6%, and the previous value will increase by 2.6%. The average monthly hourly wage rate in the US will increase by 0.4% in October, which is better than expected and is expected to increase by 0.3%. The value increased by 0.2%.

The US unemployment rate recorded 4.90% in October, which was in line with expectations. The previous value was 5%. The US labor participation rate in October recorded 62.80%, and the previous value was 62.9%.

The non-agricultural report was released only four days away from the US presidential election, and the report's influence on the market was also greatly reduced.

Bank of Montreal, Canada, said that the US non-farm payrolls report for October was generally good. After the seasonal adjustment, the number of non-agricultural employment is close to expectations, which makes the market not react too much to the data. This report makes the Fed more likely to raise interest rates in December.

Junichi Ishikawa, a senior foreign exchange strategist at AIA in Tokyo, said: "The non-farm payroll report supports a rate hike and pushes up the dollar briefly, but the rise in the face of 'Trump risk' quickly dissipated. Will provide opportunities for participants who are doing more dollars and want to close their positions."

Bank of Japan: 36 counts as the best policy

This week, the dollar against the yen exchange rate fell 1.56% at least 103.08, and refreshed the near four-week low to 102.54. In the context of the overall election sentiment in the United States, the Bank of Japan’s interest rate decision did not give a big guide to the yen’s short-term trend.

On Tuesday (November 1), the Bank of Japan announced that it will maintain the policy rate of -0.1% and the monetary base annual growth of 80 trillion yen, maintain the 10-year bond yield target of around 0%, and will continue to purchase Japanese government bonds until The 10-year bond yields to zero, while lowering 2017 inflation expectations, and postponing the 2% inflation target to the 2018 fiscal year (starting on April 1 of the same year) or later than 2018.

The time when the Bank of Japan once again postponed the inflation target means that Bank of Japan Governor Haruhiko Kuroda will not be able to achieve this goal during his tenure. Kuroda will step down in April 2018.

The Bank of Japan said that the momentum of rising prices to the target level continues, but it has weakened; policy measures will be appropriately adjusted to maintain the momentum to meet the price target.

Swiss Credit Bank had previously predicted that the Bank of Japan would not take any action, mainly because the US presidential election and the Fed meeting became the reason for its inaction. The current strong dollar trend has made the Bank of Japan feel a little peace of mind.

TanTeckLeng, a currency strategist at UBS Wealth Management, said that the Bank of Japan may maintain monetary policy stability for some time and continue to promise to keep the 10-year bond yield near zero, so the US Treasury yield will temporarily be The main force driving the exchange rate of the US dollar against the yen.

Bloomberg foreign exchange and interest rate strategist MasakiKO ndo wrote on Thursday (November 3) that the current Japanese inflation rate is growing more and more divergent from the monetary base. This trend indicates that if there is no weakening of the yen, the Bank of Japan It may not be possible to achieve its 2% inflation target.

Ogata Kazuhiko, chief Japanese economist at the French Agricultural Credit Bank, said: "The expansion of the monetary base caused the yen to weaken and the import price to rise, thus supporting the inflation rate. As investors began to doubt the sustainability of QQE, it stimulated the yen. Buying, this effect began to decline this year."

Brexit prospects are the main engine of the pound

The pound against the US dollar closed up 2.72% to 1.2516 this week and refreshed its nearly four-week high to 1.2556. On Thursday (November 3), the Bank of England decided in November to pass the interest rate of 0.25% and the asset purchases of 435 billion pounds. This decision is in full compliance with market expectations.

However, the possibility of the Bank of England diluting further interest rate cuts in the future is still unexpected. The Bank of England said it expects the impact of the Brexit decision on the UK economy in the next year or so will not be as serious as previously thought.

Bank of England officials also warned that the tolerance for inflation above the 2% target level is limited. This suggests that if the pound plunges and inflation accelerates further, the central bank may be prepared to raise borrowing costs.

The Bank of England’s change in policy stance highlights the uncertainty that the UK faces as it moves ahead in the direction of Brexit.

[British high law and government sing against Taiwanese opera]

On the same day, the British Supreme Court ruled that the government must first vote in Parliament when it initiates the Brexit process. Obviously, the ruling is not conducive to Prime Minister Teresa May to unilaterally initiate the Brexit process by triggering Article 50 of the Lisbon Treaty by the end of March next year.

The market believes that the ruling suggests that the pace of Brexit may slow down, which in turn will cause the pound against the US dollar to hit about 90 points in the short-term, breaking the 1.24 mark.

CMC analyst Michael Hewson said: "At present, the pound is somewhat relieved, and the worst situation of unilateral 'hard detachment' has been postponed. Now the market is beginning to pay attention to other factors, such as the US presidential election."

The British Prime Minister’s spokesperson immediately stated that all preparations for the commencement of Article 52 of Brexit will proceed as usual, and that it is legal for the government to use the privilege to initiate the Brexit process. The British government has applied for an appeal on this ruling.

Safe-haven is the king to push the price of gold to $ 1,300 / ounce

This week, the price of gold rose 2.26% to 1304.93 US dollars / ounce, successfully stood at the $ 1,300 / ounce mark. The Democratic Party’s presidential candidate, Hillary Clinton’s support rate, has greatly won the morale of the gold bulls.

MKSPAMPG roup trader JasonCerisola said that the uncertainty before the US election may provide support for the precious metals.

OANDA senior market analyst Jeffrey Halley said that this week's market focus is that after the "mail door" incident re-fermented, the Republican presidential candidate Trump quickly caught up with Hillary in the polling support rate. The main beneficiaries of the market are clearly gold.

Citigroup said in a report: "The implied volatility of gold has risen sharply in the past week. As the poll shows that the gap between the two presidential candidates has narrowed, investors will buy safe-haven assets. The election will be short-term. To promote the trend of gold, we expect gold volatility to remain at a high level before the election day."

RobHaworth, senior investment strategist at USBA nkWealthManagement, said: “Gold investors do not seem to value steady US non-farm payrolls and wage growth data, but rather focus on political risks. The London court’s previous decision made the Brexit time The line has become a problem, and the upcoming US presidential election will bring uncertainty."

Standard & Poor's GeorgeCA ssell said that as Republican presidential candidate Trump leads the polls, the nature of gold as a safe-haven asset is gradually enhanced, and investors hedge their risk through gold.

Crude oil is re-invaded into hell

This week, crude oil long-term dreams reappeared, international oil prices plunged more than 9%, WTI crude oil and Brent crude oil closed down 9.31% to 44.13 US dollars / barrel and 9.83% to 45.60 US dollars / barrel, the intraday prices have been brushed out in August The new low since the week of the 12th.

[EIA data growth record]

The US Energy Information Administration (EIA) announced that US crude oil inventories increased by 14.4 million barrels during the week ending October 28, and analysts expect an increase of 1 million barrels.

The well-known zero-hedging commentary said that the EIA crude oil inventories increased by 14.42 million barrels, the highest level in the 34-year history of EIA data compilation; the crude oil inventories in the Cushing area also increased slightly, although the gasoline and refined oil recorded declines can not withstand The impact of the surge in crude oil inventories, the US and the two oils plummeted instantly; it is worth noting that oil prices are entering a period of seasonal downturn.

According to James L. Williams, energy analyst at WTRGEconomics, the data is very, very, very bad, and the other data reported is not important.

[Saudi threatened to increase production]

The Reuters survey showed on Monday that OPEC oil production may hit another record high in October, with daily production reaching 33.8 million barrels. OPEC will hold a meeting on November 30th, hoping to finalize the production reduction plan.

Reuters quoted OPEC insiders as saying that after Iran refused to set the production ceiling below 4 million barrels per day at the OPEC technical meeting last week, Saudi Arabia has threatened to significantly increase crude oil production.

Oil market expert John Kilduff, a partner at New York Energy Hedge Fund AgainCapital LLC, pointed out that considering the fact that oil production in all corners of the world seems to be increasing rather than decreasing, the market has retreated the premium of the Algiers agreement, and this trend will continue. Before the meeting on November 30, the selling pressure will further intensify, and the US oil will even fall back from the $30 mark.

Former Saudi Energy Minister Ali Al-Naimi said on Friday that it was not optimistic that OPEC could finally reach a specific production reduction agreement on the agreement reached at the Algerian Energy Conference. Efforts similar to trying to unite oil-producing countries in 2014 ended in failure; no OPEC energy minister hoped to cut production.

RicSpooner, chief market analyst at CMCMarkets in Sydney, said that those who hope to reach a certain production agreement to boost the price of oil will hopefully collapse or appear to have speculative multiple positions to exit the market.