Hi Everyone,
So, it does look like the United States may finally be pulling out of the crisis it started almost a decade ago. The rest of the world, not so much.
Europe’s banking system is still in a spot of trouble at the moment but does hope to pull out of it. Germany’s largest financial institution has rolled out a plan to raise €8 Billion and sell off €2 Billion worth of assets.
Deutsche Bank’s newest restructuring plan calls for it to go from four divisions to three, yet the CEO John Cryan insists that this is a necessary step to create growth.
You may remember that DB has been under fire a lot lately after being fined $630 Million for a Russian Money Laundering scandal, $7.2 Billion by the US for their role in the 2008 crisis, and failing to sell off Post Bank, which has been on sale since April 2015.
No doubt this bank is poor. Mr. Cryan will be on Bloomberg Television within the next hour cryin’ to investors and trying to convince them that this is, in fact, a solid investment.
-Mati
Today’s Highlights
- Yellin Yellen
- Confused Dollar
- Gold’s Footing
Please note: All data, figures & graphs below are valid as of March 6th. All trading carries risk. Only risk capital you’re prepared to lose.
Market Overview
It’s been a slow lazy start to the week. Most of the bigger events like the ECB and NFP are planned for later on this week and investors are still trying to piece together what happened on Friday.
Janet Yellen played her hand as expected and came out in favor of a rate hike in March. Expectations have indeed increased and we’re now looking at a 96% chance of a rate hike in March.
Somebody forgot to tell the Dollar.
Usually, when rates rise the underlying currency should do the same. However, we can see that the US Dollar Index fell hard on Friday afternoon after Yellen and Fischer…
Golden Reaction
Though this makes less than perfect sense it does give is some insight into a separate phenomenon. What is Gold reacting to, the USD or the FED?
Many analysts attributed the recent pullback in gold to the Hawkish Fed and rising rates. In fact, we can see that in the wake of the speeches from Yellen and Fischer, gold actually rose.
This is a clear indication that the pullback is not a reaction to the Fed, but rather a simple softening in relation to the US Dollar.
Here, let’s put Gold (red line) against the Buck (white line) to see this more clearly. Take a look at the yellow line where we can see gold starting to come down against the stronger Dollar.
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In the meantime, we can see that gold is now coming on some significant support at $1220 an ounce. If it holds or breaks that level can easily determine the next direction in addition to updates about North Korea’s Missile testing and any possible escalations on that front.
What else?
Please try to ignore Trump’s swipes at Obama, they don’t really make sense and they’re intended as a distraction anyway. The more important thing are his plans on tax reform and infrastructure spending.
The Reserve Bank of Australia will publish their interest rate decision tonight. The expectation is to remain at 1.5%. A surprise is certainly not likely here but I guess that’s why they call it a surprise.
Have an amazing week ahead!
Best regards,
Mati Greenspan
Senior Market Analyst
