ETF Securities Research Blog

Is Bitcoin a reversion to the gold standard?

“We have gold because we cannot trust governments.” President Herbert Hoover famously commented. Many investors are buying bitcoin for precisely this reason and feel that central bank intervention is devaluing fiat currencies. Others invest because the potential widespread acceptance and usability of Bitcoin will see prices rise over time.

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Is dovishness dead at the Fed?

Economists are notorious for sitting on the fence and Federal Reserve (Fed) Chair Yellen is no different: her latest speech spent part of the time focussing on the possibility that the Fed underestimated the weakness of the price and labour market dynamics and the other part highlighting that policy shouldn’t move too slowly to offset potential inflation pressure. However, the more hawkish tone of Chair Yellen’s comments underpinned a rise in bond yields and the US Dollar (USD): two trends which we expect to continue.

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Deflating the ECB’s bond ‘balloon’

European bond yields are hovering near the lowest levels in history, but we believe it is not a bubble in the traditional sense. Yields are artificially low, driven by extraordinary levels of stimulus from the ECB. In this framework, we would characterise the situation as a bond balloon, not a bond bubble. Read more…

If Bank of England doesn’t hike rates in 2017, then when?

One year on from the last rate cut, the Bank of England has kept rates on hold, with the MPC voting 6-2 in favour of the decision (roughly the same as last month). Although policy remains unchanged, GBP should remain supported by what is expected to be a tighter policy path in 20-17/2018. Indeed, Governor Carney indicated that policy may need to be tightened at a faster rate than the market is currently pricing. Read more…

Is the Canadian Dollar signalling an oil price bottom?

The Bank of Canada (BOC) raised rates for the first time in seven years this week, the second major central bank to do so after the Federal Reserve. The BOC indicated that its economy ‘is approaching full capacity’. As a result, the Canadian Dollar, the so-called Loonie, jumped to the highest level against the US Dollar in 13 months. A rising CAD could be signalling a bottom for oil prices. Read more…

The problem with cryptocurrencies

Cryptocurrencies are very much an emerging asset class, and the technology underpinning it is steadily developing. However, we believe there are intensifying issues regarding regulatory scrutiny, liquidity, trade execution/confirmation time, scalability, trust in the money creation process and the fundamentals that drive the currencies.

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No bounce for the Aussie Dollar

Although the Australian economy set a record of not having a recession in 104 quarters – since 1992 – growth in Q1 2017 was the weakest in over seven years. With the Reserve Bank of Australia (RBA) remaining firmly in an accommodative policy stance, the downside risks for the Australian Dollar (AUD) are mounting in the near term. Read more…

From the horse’s mouth: Fed rate hike likely to prompt further USD weakness

The market has been fully pricing in a rate hike from the Federal Open Markets Committee (FOMC) for over a month – since mid-May, the US Dollar (USD) has fallen nearly 3%. Recent Fed speakers prior to the ‘blackout’ indicate that the view is relatively pragmatic and balanced. However, the USD could still weaken further even if the Fed follows through on market expectations for a rate rise Read more…

ECB communication – a masterclass in subtle communication

Today’s European Central Bank (ECB) press conference was an exercise in subterfuge: a subtle communication of tapering without actually discussing the concept. Draghi is trying to throw the market off the ‘scent’ by noting “there were 2 observations on policy normalisation (aka tapering) but no discussions on it”. As a result, we expect the Euro to move lower in the near-term until the need for tighter monetary policy for the Eurozone becomes a more strongly voiced position. Read more…