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    The Day Ahead - Tuesday 21st July 2015

    Gold – Biggest daily move since December 1st 2014.

    AUD – Set for fall below 60?
    CAD – Disappointing Wholesale Sales

    On what was expected to be a quiet day in the markets with little economic news and Japan closed for observing the Marine Day holiday, there was a surprising jolt as Gold suffered a sharp drop. At around 04:30 GMT 3, shortly before lunch time in Australia Gold dived nearly $50 lower in a matter of seconds, falling from nearly 1130 to briefly touch 1081 before rebounding slightly to 1100. No news accompanied or triggered this with it being reported that it may have been stop losses being hit amid thin liquidity.

    One story surfaced in The Age as the chief investment officer of Deltec, a Bahamian private bank said that Australia was set to mirror Canada with a slump in the economy leading to a recession. One big takeaway from the comments was that they expect AUDUSD to fall below 70c within 6 months but do not see a bounce, with them not ruling out a fall below 60c.

    Whilst the trend for the AUD has been undoubtedly negative over the last few months, falling below 60cents seems like a very bold call at this stage, although the parallels with Canada, who just slashed interest rates last week, should not be ignored – an Australian recession could be on the cards.

    Yesterday’s only key indicator released was Canadian Wholesale Sales for May. The previous month figure was updated down to 1.7% but the big disappointment was this release coming in at -1.0% against expectations of a small, 0.1% gain. This is a good indicator of retails sales – if retailers are not ordering from wholesalers, that’s a bad sign for the economy.

    Tuesday sees the release of the Reserve Bank of Australia’s Monetary Policy meeting minutes. With it forecasted to only be around a 16% chance of a rate cut at the next meeting, all eyes will be on the statement to see when this next, expected cut is coming and what they say about the longer term value of the Aussie Dollar.


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