FX Strategist

Greg Gibbs

Fundamental analysis of topical themes in FX

Amplifying Global FX Capital

Amplifying Global FX Capital was founded in 2015 and is fully owned by Greg Gibbs. It is a registered company both in Australia and Colorado, USA and is a licensed in Australia to provide financial services.

We are producing a regular trading view orientated macroeconomic analysis of topical themes in global financial markets, with a particular focus on foreign exchange. We invite you to view an “executive summary” of these reports in “AmpGFX Reports” under our “Research” menu.

These reports are drawn from the analysis of Greg Gibbs and inform the capital management he undertakes on behalf of the company. The trading performance is posted periodically on our website. We aim to build our company into both a research and capital management business. We are currently in the planning phase for managing capital for wholesale customers.

Greg Gibbs has spent his working life of more than 26 years in financial markets, beginning in 1989 at the Reserve Bank of Australia, after completing a Bachelor of Economics Degree (Honours) at the Australian National University. He has been a CFA Charterholder since 2005. He has worked in Sydney, Singapore, New York and London for major global banks and presented on foreign exchange markets to major financial institutions and companies around the world, and maintained a high profile in the financial media.

Before Amplifying Global FX Capital, Greg was the Head of Asia Pacific Market Strategy at the Royal Bank of Scotland based Singapore. He now resides in Breckenridge Colorado.

Macroeconomics

Currency markets may remain in a choppy trendless state for the time being.  Low negative rate policies in the Eurozone and Japan, preclude us from buying their currencies.  The USD has a weaker trend for the moment as the market considers a prolonged period of stable rates in the US.  Global investor confidence also remains constrained by a range of factors and less responsive to quantitative low rate central bank policy (discussed in our report: <a href="http://ampgfxcapital.com/reports/oil-leaves-a-slippery-slick-for-global-markets/" target="_blank">Oil leaves a slippery slick for global markets, 15-Feb</a>). Global growth has lost momentum and global financial conditions have tightened since the beginning of the year.  Fear of lower for longer inflation is born out in market-based measures and surveys of long-run inflation expectations.  The risk is swinging towards sluggish global growth, low inflation and central banks across the globe reaching more for lowering rates, with zero no longer the lower boundary. Conditions are ripe for competitive currency devaluations and this is supporting the rising trend in Gold.  Below we discuss the Australian employment report and recent business surveys that suggest that the moderate recovery underway in 2015 may have lost momentum.  Australia is not alone facing challenges generating a sustainable recovery, and thus it is not clear that the AUD must go down, but we expect pressure to build for a weaker AUD and/or lower interest rates.

Currency markets may remain in a choppy trendless state for the time being.  Low negative rate policies in the Eurozone and Japan, preclude us from buying their currencies.  The USD has a weaker trend for the moment as the market considers a prolonged period of stable rates in the US.  Global investor confidence also remains constrained by a range of factors and less responsive to quantitative low rate central bank policy (discussed in our report: Oil leaves a slippery slick for global markets, 15-Feb). Global growth has lost momentum and global financial conditions have tightened since the beginning of the year.  Fear of lower for longer inflation is born out in market-based measures and surveys of long-run inflation expectations.  The risk is swinging towards sluggish global growth, low inflation and central banks across the globe reaching more for lowering rates, with zero no longer the lower boundary. Conditions are ripe for competitive currency devaluations and this is supporting the rising trend in Gold.  Below we discuss the Australian employment report and recent business surveys that suggest that the moderate recovery underway in 2015 may have lost momentum.  Australia is not alone facing challenges generating a sustainable recovery, and thus it is not clear that the AUD must go down, but we expect pressure to build for a weaker AUD and/or lower interest rates.

AmpGFX - Jobs Data Take Some Wind Out of Sails of the RBA's Recent Optimism

As Australia heads towards its May budget and a federal election later this year, debate over tax policy is heating up. The need to come up with fiscal plan is front and center in the wake of a collapse in commodity prices after it squandered the resources windfall.  The debate is coalescing around reducing tax concessions on residential property investment.  This is like defusing a ticking time-bomb that threatens to blow-up the Australian economy.  It might be done smoothly, but the risk is high that it takes critical steam out the housing market just as it is approaching a peak.  With one of the most leveraged households and most exposed banking systems to the domestic housing market in the world, the direction of government policy poses significant risks for the AUD and Australian financial markets.

As Australia heads towards its May budget and a federal election later this year, debate over tax policy is heating up. The need to come up with fiscal plan is front and center in the wake of a collapse in commodity prices after it squandered the resources windfall.  The debate is coalescing around reducing tax concessions on residential property investment.  This is like defusing a ticking time-bomb that threatens to blow-up the Australian economy.  It might be done smoothly, but the risk is high that it takes critical steam out the housing market just as it is approaching a peak.  With one of the most leveraged households and most exposed banking systems to the domestic housing market in the world, the direction of government policy poses significant risks for the AUD and Australian financial markets.

AmpGFX - Australian Government Tinkering with a Ticking Time-Bomb

Founder Evidente. Top rated quantitative analyst, Evidente

Sam Ferraro

Founder Evidente. Top rated quantitative analyst

Evidente

Evidente is an independent financial education firm that delivers innovative financial advice to wholesale investors, including active long only funds, hedge funds, pension funds, and sovereign wealth funds, in Australia and globally.  Drawing on academic research in asset pricing, behavioural finance and portfolio construction, Evidente provides wholesale investors with commercial solutions to stock selection and asset allocation decisions across equities and other asset classes.

<ul><li>Since September, the Australian dollar has remained broadly steady at a little above 70 US cents.  Evidente's econometric model of the currency shows that at current levels, the A$ is trading broadly in line with fair value.  After what had been strong out-performance for a little over three years, ASX listed US dollar earners have under-performed in the past year.  Despite the 10% depreciation in the A$/US$ over this time, the overweight bet in offshore earners has remained a crowded trade.</li><li>From a longer term perspective, the Big Mac index suggests that the A$ is under-valued against the US$ by 25%, which represents the biggest under-valuation since 2003 (see chart).  Deviations from purchasing power parity can extend for long periods.  But short-sellers of the Australian dollar should be cognisant that recent currency gyrations reflect primarily US$ over-valuation.  At present, the US$ is over-valued against all but three currencies based on the Big Mac index, notably the Swiss franc, Swedish krona and Norwegian krone.</li></ul>

Since September, the Australian dollar has remained broadly steady at a little above 70 US cents.  Evidente's econometric model of the currency shows that at current levels, the A$ is trading broadly in line with fair value.  After what had been strong out-performance for a little over three years, ASX listed US dollar earners have under-performed in the past year.  Despite the 10% depreciation in the A$/US$ over this time, the overweight bet in offshore earners has remained a crowded trade.From a longer term perspective, the Big Mac index suggests that the A$ is under-valued against the US$ by 25%, which represents the biggest under-valuation since 2003 (see chart).  Deviations from purchasing power parity can extend for long periods.  But short-sellers of the Australian dollar should be cognisant that recent currency gyrations reflect primarily US$ over-valuation.  At present, the US$ is over-valued against all but three currencies based on the Big Mac index, notably the Swiss franc, Swedish krona and Norwegian krone.

US Dollar Earners Continue to Struggle Despite A$ Weakness

<ul><li>The RBA Governor today delivered his twice year testimony to the Australian Parliament.  The central bank appears to have waved the white flag on Australia's growth prospects, with the Governor hinting that it had revised down the economy's potential growth rate.</li><li>The Governor re-iterated the central bank's easing bias, drawing attention to the fact path the inflation outlook does not pose an obstacle to further monetary stimulus if deemed necessary to support demand.  In contrast to the Governor's last testimony in September, Mr Stevens did not cite concerns that very low interest rates could foster a worrying debt build-up, nor did he refer to the macro-prudential measures implemented by APRA to maintain sound lending standards.  This suggest that central bank has left the door further ajar for more monetary stimulus.</li></ul>

The RBA Governor today delivered his twice year testimony to the Australian Parliament.  The central bank appears to have waved the white flag on Australia's growth prospects, with the Governor hinting that it had revised down the economy's potential growth rate.The Governor re-iterated the central bank's easing bias, drawing attention to the fact path the inflation outlook does not pose an obstacle to further monetary stimulus if deemed necessary to support demand.  In contrast to the Governor's last testimony in September, Mr Stevens did not cite concerns that very low interest rates could foster a worrying debt build-up, nor did he refer to the macro-prudential measures implemented by APRA to maintain sound lending standards.  This suggest that central bank has left the door further ajar for more monetary stimulus.

RBA Governor Waves the White Flag on Australia's Growth Prospects

At its first meeting for 2016, the RBA Board left the Overnight Cash Rate unchanged at a multi-decade low of 2%, as widely expected (see chart).  There was little change in the communication from the last meeting's statement two months ago.  It cited that global growth is lower than earlier expected, particularly in China and other emerging economies.  Risk appetite has diminished somewhat and credit conditions for low quality corporates has tightened, although funding costs remain low for high…

At its first meeting for 2016, the RBA Board left the Overnight Cash Rate unchanged at a multi-decade low of 2%, as widely expected (see chart).  There was little change in the communication from the last meeting's statement two months ago.  It cited that global growth is lower than earlier expected, particularly in China and other emerging economies.  Risk appetite has diminished somewhat and credit conditions for low quality corporates has tightened, although funding costs remain low for high…

The Reluctant Rate Cutter Leaves Policy Unchanged but Maintains Easing Bias

Australia

iShares MSCI Australia ETF is an exchange-traded fund incorporated in the USA. The ETF tracks the performance of the MSCI Australia Index. The ETF holds predominantly large-cap stocks from Australian companies. The ETF weights the holdings using a market capitalization methodology and rebalances quarterly.

iShares MSCI Australia (EWA US)

AmpGFX - Jobs Data Take Some Wind Out of Sails of the RBA's Recent Optimism

Currency markets may remain in a choppy trendless state for the time being. Low negative rate policies in the Eurozone and Japan, preclude us from...

Greg Gibbs

AmpGFX - Australian Government Tinkering with a Ticking Time-Bomb

As Australia heads towards its May budget and a federal election later this year, debate over tax policy is heating up. The need to come up with...

Greg Gibbs

US Dollar Earners Continue to Struggle Despite A$ Weakness

Since September, the Australian dollar has remained broadly steady at a little above 70 US cents. Evidente's econometric model of the currency...

Sam Ferraro

RBA Governor Waves the White Flag on Australia's Growth Prospects

The RBA Governor today delivered his twice year testimony to the Australian Parliament. The central bank appears to have waved the white flag on...

Sam Ferraro

The Reluctant Rate Cutter Leaves Policy Unchanged but Maintains Easing Bias

At its first meeting for 2016, the RBA Board left the Overnight Cash Rate unchanged at a multi-decade low of 2%, as widely expected (see chart). ...

Sam Ferraro