Today is Non Farm Payrolls day in the USA . This report is released,
typically, on the first Friday of every month. It is a closely watched event,
as employment is one of the foremost criteria for the determination of monetary
policy, in most jurisdictions.
The NFP report for February, which is scheduled for release at 1:30 PM
GMT today (13:30 Hrs) will be more closely watched than usual, as the last two
such reports have been poor. This has given rise to the possibility that the US
economy might not be recovering as expected, which in turn has potential
implications for the end of Quantitative Easing (QE) and therefore the strength
or otherwise of the US dollar.
We will be staying out of the market today because the critical nature
of the NFP report often gives rise to severe bi-directional volatility in the
Forex market. For example, the chart above shows that the rate for Cable, the
British pound against the US dollar (GBPUSD) moved a full cent from top to
bottom in the two hours after the release of the Non Farm Payroll report last
December, before coming back to rest more or less where it started.
Later, we will assess the outcome and, more importantly, the reaction of
the market to said outcome.
Gold and the Ukraine
As regular readers will know, we have been bearish on gold, which means
that we have been expecting it to reduce in price. It has failed to do so. At
the start of the business yesterday it looked like it was well and truly on the
turn, and we said so.
However, also yesterday, sanctions against Russia
were mooted by both the EU and the USA
as a response to the situation in the Ukraine
and Crimea . The Russian ambassador to Ireland was quoted as saying that Russia was not
afraid of sanctions and that they were, in any event, a “double edged sword”,
and so would have consequences also for the nations that chose to impose them.
Then the market discovered, as did we, that Russia was the largest producer of
Palladium, a rare and precious metal that is the main component of catalytic
converters. There is one of these in every modern motor vehicle on the planet.
The price of Palladium surged, which caused gold to rise in sympathy, as
another precious metal. Gold is bought anyway in times of geopolitical tension,
as it is perceived by many to be a safer investment than currencies in these
situations.
So it looks like we must wait a bit longer for the expected decline of
the yellow metal.
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