Well it didn’t take long for the first Monday in 2010 to kick off the week with a very strong slant towards risk-taking. Equities opened up strong, Commodities were flying and some higher-yielding currencies, such as Aussie, had strong performances as well. We saw this pattern quite often towards the end of 2009 where risk-taking would outperform on Monday before the remainder of the week would be chronicled by sideways or a risk-averse environment. Hopefully that is where the resemblance to 2009 ends right?
In many respects 2009 will be remembered for the global recession, the exceedingly accommodative monetary policy stances taken by the old industrialized leaders and the 4.1m jobs lost in the US. For those keeping track that is 1m more jobs lost than in 2008.
There is good news though and there have been plenty of opportunities to trade during this period of high volatility. We all know about the seismic shifts in the Dow Jones, Crude and currencies, such as the GBP, over the past year or two. Hopefully the worst of the economic crises is behind us but for no reason does that suggest that the moves in our securities are about to stop. If anything the opposite holds true.
For example, in Currensee if you go to the Economic Calendar and click over to this Friday, January 8th you’ll see that the markets are awaiting the December US Non-Farm Payroll (NFP) report. Early expectations are for a Zero reading, or essentially unchanged from the -11k reading in November. Now should we really expect the same reading in back to back months when the US has been losing 300k jobs on average for the past 23 months? I don’t think so.
Just an off-hand look at the last 7 or 8 years shows that there is a 100k or so difference between Nov. and Dec. readings thus expecting a minimal change in employment over the holidays might not be the way to be positioned. In forecasting the NFP figure I analyze the jobless claims and they have been improving quite significantly over the last 2 months. Thus I’ll be expecting a positive job figure for December, to the tune of over 100k, but regardless of what I think, with the markets expecting an Unchanged reading for December then the hurdle for volatility due to moves in interest rates, stocks and currencies should be very low.
Is this the only economic release where expectations may be set up for a surprise? Nope and if you move back to this Wednesday you’ll see that Australian retail sales came in at +0.3% m/m in the prior month and the October reading is also expecting a +0.3% m/m reading. The last few monthly readings in Australian Retail sales have been +0.3%, -0.2%, +0.7% & -0.9%. More of a zig-zag fashion that a trend. If you look back though you’ll notice that the expectations are expecting more of a trend at +0.4%, +0.5%, +0.6%, +0.6%...
Certainly those making the predictions and those trading off the actual numbers have different interests it seems. If you look at the Market Watch on Currensee you’ll notice that 85% of the trader volume in AUD/USD is Long. This is a currency that has gone from approximately form 0.60 to 0.90 over the past year thus one can be certain that a few economic surprises will have this currency on the move again.
Which way? Well here is to hoping for fresh trading moves in 2010 and an Not economic repeat of 2009.
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