What we learned from Christine Lagarde last week, Bitcoin's plunge and what's driving CAD

Giles Coghlan LLB, Lth, MA Financial Source

Bitcoin falls as China announces fresh warning on cryptocurrencies

Last month Bitcoin was strongly bid on the comments from China’s President Xi (Oct 24) that China should accelerate its development of block chain technology. Investors assumed that this would involve a mainstream welcome to existing cryptocurrencies. However, that initial enthusiasm in price has now slumped on the realisation that President XI’s positivity on blockchain may not include Bitcoin. The People’s Bank of China have recently warned that it will tackle growing cases of illegality involving virtual currencies. The PBOC also warned investors not to confuse blockchain technology with cryptocurrencies.

What’s driving the CAD?

The CAD strength that came into the market last week on the back of comments from BoC Governor Poloz when he said that he thought monetary conditions are ‘about right’ was further supported by the Canadian Retail sales data. In this coming week we will have a look at Q3 growth and there has to be some upside risks to this data release now. The chances of a December rate cut are now unlikely and, barring a breakdown in US-China trade negotiations you would expect to see CAD strength going forward. I would expect EURCAD sellers on pullbacks going forward as the eurozone’s outlook is still pretty bleak.

EUR: What did we learn from EUR PMI’s and Christine Lagarde last week?

As we got the news that eurozone PMI’s decreased in November from 50.6 to 50.3 the spillover impact from the manufacturing sector to the service sector is at the heart of the decline. With still no confirmation of a phase 1 US-China trade deal risks to the eurozone remain tilted to the downside. Christine Lagarde’s first policy speech passed without any major impact. Christine Lagarde stated that:

The ECB will start strategic review of its monetary policy in the ‘near future’,
The ECB will ‘continuously monitor the side effects of its policies,
Reiterated a call for fiscal policies.

This speech from Lagarde gave very little away and the next monetary policy speech from Lagarde now will be December 12 with the ECB interest rate decision.

Learn more about HYCM

Author

Giles Coghlan LLB, Lth, MA

Financial Source

Giles is the chief market analyst for Financial Source. His goal is to help you find simple, high-conviction fundamental trade opportunities. He has regular media presentations being featured in National and International Press.

AUD/USD remains depressed 0.7000, awaits FOMC Minutes

AUD/USD struggles to capitalize on its recent recovery move and trades with a negative bias below 0.7000 in Wednesday's Asian session. Amid geopolitical uncertainty, the US Dollar attracts some dip-buyers after a fresh leg up in US bond yields, keeping the pair under pressure despite hawkish RBA expectations. All eyes now remain on the FOMC Minutes.

USD/JPY holds firm near 158.50 ahead of Fed Minutes

USD/JPY hangs close to a one-and-a-half-week high near 158.50 in the Asian session on Wednesday, with bulls now awaiting a move beyond the 200-day SMA hurdle before positioning for further gains ahead of the FOMC Minutes. Meanwhile, a fresh leg up in US bond yields revives US Dollar demand amid geopolitical uncertainties, boosting the pair amid dovish BoJ commentary.

Gold extends range play around $4,150, with eyes on FOMC Minutes

Gold edges lower in the Asian session on Wednesday, stalling the previous day's goodish bounce from the $4,100 neighborhood, or a two-month low. The safe-haven US Dollar attracts some dip-buyers following this week’s pullback from the YTD high amid geopolitical uncertainties. This, along with a fresh leg up in US bond yields, caps non-yielding bullion, which remains confined within a one-week-old range ahead of FOMC Minutes.

ZEC expands institutional momentum as Winklevoss files for Zcash ETF

Winklevoss Asset Services, co-owned by crypto exchange Gemini founders Cameron and Tyler Winklevoss, filed a Form S-1 registration statement with the US Securities and Exchange Commission (SEC) on Tuesday for the Winklevoss Zcash (ZEC) ETF. The filing proposes a fund that would hold ZEC and seek to track its price.

RBI looks set to step up Repo Rate by 25 bps to 5.5%

The Reserve Bank of India is set to announce its bi-monthly monetary policy decision on Wednesday at 10:00 AM IST, in a meeting where the central bank is expected to initiate an interest rate hike cycle after maintaining a status-quo so far this calendar year. According to the market consensus, the RBI will hike its key Repo Rate by 25 basis points to 5.5% from 5.25%.

Eurozone inflation just hit 3.8%, its highest in three years. This chart shows why the ECB can’t simply hike its way out

The ECB would normally have a relatively straightforward answer to inflation running almost twice its target: raise interest rates. But these are not normal circumstances. This time, the bond market is already doing part of the tightening for it, leaving the ECB facing an increasingly difficult dilemma.