There was a time when the acronym “BRIC” dominated market news, insofar as markets focused on the incredible growth stories of Brazil, Russia, India and China and the relevance of these economies was apparent in buoyant Emerging Market stock indices, commodity and currency trading and in international investment flows. It allowed “Global Macro” hedge funds, Commodity Trading Advisors and trend followers to prosper. I find it somewhat strange and disturbing that news about these four gigantic and incredible economies has largely been displaced by news surrounding “FAANG” stocks and their celebrity CEOs (and now thankfully, to a lesser extent crypto-currencies) and that global market volumes have become dominated by high frequency trading algorithms, and the resurgence of “day speculators” gambling on a range of fantasy products, many of which are doomed to fail. Frankly it feels to me a bit like the end game of the dotcom boom and bust. After that particular bubble ended, the BRIC era really took off, and in today’s relatively low interest rate environment, BRIC economies and Emerging markets are potentially areas which I believe may out-perform this year. I mention this, merely because I notice that whilst China celebrates Chinese New Year this week, the Central Banks of Brazil, India and Russia will all deliver interest rate announcements. Of the FAANGs (Facebook, Apple, Amazon, Netflix, Google (Alphabet)), it is Google that will report earnings on Monday (after trading hours).
Last week the Australian dollar was a strong performer helped by better than expected inflation numbers and a broadly weaker US dollar. This week Australian retail sales (M/M for December) will be released early Tuesday morning and are expected to be flat to negative. These numbers precede, the Reserve Bank of Australia Interest rate announcement. The RBA is expected to keep interest rates on hold at 1.5%. On Tuesday afternoon the US Institute of Supply Management will release its Non- Manufacturing PMI Index for January expected at 57 versus 58 for December. ISM Manufacturing data beat expectations last week and both ADP and Non-Farm Payrolls data came in strongly. This and a dovish Federal Reserve Bank statement, gave US markets a boost.
On Wednesday morning, RBA Governor Lowe is expected to give an interview and so the Australian dollar will likely take its cue from his comments. New Zealand employment numbers are due late in the day with unemployment expected to have risen.
On Thursday, the Bank of England is due to announce its interest rate decision and UK rates are expected to remain on hold at 0.75%. The Bank of England will also release minutes of its meeting alongside its inflation report.
On Friday, the RBA monetary policy statement will be released and later on in the day, Canada reports employment numbers, expected to show a slight gain of 6000 new jobs created.
Of the “BRICs,” Brazil is expected to leave interest rates on hold at 6.5% on Wednesday, India is expected to keep interest rates on hold at 6.5% on Thursday and Russia is expected to keep interest rates on hold at 7.75% on Friday. Of these economies, I feel that Long INR short USD represents the most compelling carry trade.
Happy Chinese Year of the Pig! Watch out for me on video on Tuesday and Thursday. Good Luck and Good Trading. Ben Robson.
Ben Robson is the CEO of Spectrex Commodities and author of Currency Kings- How Billionaire Traders Made Their Fortune Trading Forex And How You can Too.