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Cable finds life on the weekend

Four key markets in focus today: GBP/USD. Spot gold, Australia 200 cash and Newcrest Mining.

GBP/USD
Source: Bloomberg

GBP/USD

After a long period of sterling underperformance, cable has finally found some life over the weekend on the back of comments by Mark Carney. GBP/USD has popped higher at the open after Mr Carney suggested the key to raising rates will be confidence that prospective real wages are going to be growing sustainably. He added, the BoE won’t wait for this to raise them and that momentum is more assured. The market certainly took these comments as hawkish and this has pushed cable higher. The concern in the near term is a downtrend resistance which comes in at around 1.678 and has been in place since July 16 highs. The selling might resume in that region particularly if we don’t see a strong CPI reading tomorrow.

Spot gold

It is a big week for the USD and this could extend to gold as we are likely to get more insight on the Fed’s views. The precious metal is holding on to 1300 at the moment and I sense some caution with the Jackson Hole Symposium taking place. Janet Yellen will speak on “Re-evaluating Labor Market Dynamics” and we also get minutes from the July FOMC meeting. A slightly hawkish turn would suggest selling rallies in gold could be a reasonable trade, particularly into the 1316 region.

Australia 200 Cash

We are calling the ASX 200 around 0.2% firmer at the open today, with focus likely to remain on earnings. NAB and NCM are the two big names reporting, while we also have a fairly hefty dividend coming out of the market with the likes of Bradken, GUD Holdings and REA Group all trading ex-dividend. It’s clear a lot of investors have just been holding on for dividends and the weight of this, along with disappointing earnings, could see early gains evaporate.

Newcrest Mining

The gold miner reports its full-year earnings this morning and is likely to continue struggling from issues that have been flagged in the past. Whilst gold has held up better than what most analysts expected, there is still a lack of clarity from outlook and key projects continue to lag. Further writedowns are possible and NCM remains reluctant to provide clear outlook. From a price action perspective, NCM’s most significant move in recent times was the rally from December lows near $7 to March highs at $12.50. This rally was short lived and it wasn’t long before the stock dropped back to around the $10 mark. Since then, it has been a fairly range-bound affair for NCM and the stock tested the 23.6% retracement of the move on Friday which comes in at $11.19. However, there was no real conviction, showing the level of uncertainty around NCM’s earnings. Should earnings disappoint, the next level to look out for will be the 38.2% retracement of the move at $10.42.

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