Crown, forint expected to firm as interest rates rise: Reuters poll

from Forex News https://www.investing.com/news/economy/crown-forint-expected-to-firm-as-interest-rates-rise-reuters-poll-2580495
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Investment Bank Outlook 05-08-2021

CitiUSD held steady in the G10 space and traded mixed against the EM space following Clarida’s hawkish comments overnight and mixed results on ADP and ISM. USDTHB traded higher to 33.170 level after a more dovish-than-expected BoT outcome yesterday where policymakers lowered GDP forecast on the back of rising covid cases and deteriorating growth expectations. Elsewhere, oil advanced to $68.3 a barrel amid tensions in the Middle East. Looking ahead, BOE meeting is due today and markets expects MPC to hold policy steady.Credit AgricoleAsia overnight: In Asian hours risk sentiment was stable with US stock futures trading slightly higher at the time of writing. At the same time the USD has been holding on to most of its recent gains, mainly against lower yielders such as EUR, CHF and JPY. This is mostly driven by a combination of better-than-expected services sector[1]related business activity and Fed Vice Clarida suggesting that conditions for rate lift off by the end of 2022 could be met and that tapering may be on the cards as early as by the end of this year. As long as growth data continues to paint a more constructive picture, more supported monetary policy expectations should fail to dampen risk sentiment more meaningfully. Elsewhere, the risk sensitive AUD has been among the outperformers, mostly driven by Australia posting a record trade surplus.BNZOvernight US economic data and comments by Fed vice[1]chair Clarida caused a bumpy ride for US Treasuries, with little net change in the 10-year rate overall. Some modest USD strength overnight has been evident, although the NZD has managed to hold onto its gains seen yesterday after the very strong labour market prints and lift in domestic rates across the curve.FX: In currency markets the USD was on the soft side until the strong ISM services print and Clarida’s remarks got the market’s attention and sent it higher. Net movements have been small and the BBDXY index is up just 0.2% for the day. The NZD enjoyed strong support after the NZ labour market reports were released (see below) and traded up to an overnight high of 0.7089. Post the USD rebound, the NZD has since retreated back to 0.7050, little changed from the NZ close, but reinforcing the 0.71 level as a mark as technical resistance. Being the strongest major for the day and holding its own against the USD overnight, NZD crosses are all higher. NZD/AUD has steadily risen up to 0.9550. JPY has been the weakest of the majors, seeing NZD/JPY up 0.9% for the day to 77.2.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/investment-bank-outlook-05-08-2021"
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Daily Market Outlook, August 5th, 2021

Daily Market Outlook, August 5th, 2021 Overnight Headlines Brazil Raises Key Interest Rate By The Most Since 2003 Japan Set To Expand Covid-19 Curbs As Surges Strain Hospitals Sydney Suffers Worst Pandemic Day As Lockdown Nears Six Weeks Fed's Daly Sees Bond Program Taper Later This Year Or Early 2022 Key Fed Officials See Rates Liftoff In 2023 As Policy Debate Heats Up Yellen Sees Inflation In Line With Fed’s Goal By End Of Year FDA Weighs Faster Timeline For Approving Pfizer Vaccine Dollar Rebound Holds As Yields Steady Ahead Of Jobs Data Oil Prices Rise On Mideast Tensions; Crude Stock Build Caps Gains Asian Stocks Hold Gains, Dollar Strong On Fed Official Comments Uber Beats Estimates, Core Business Lost $509Mln In Q2 Unilever Is Said To Kick Off Sale Of Large Part Of Tea Business Moody's Upgrades Deutsche Bank, Says Outlook PositiveThe Day Ahead Today’s Bank of England meeting is not expected to lead to any immediate changes in policy. Keeping Bank Rate at a record low of 0.10% is likely to be a relatively straightforward decision for the Monetary Policy Committee (MPC). However, there will be much more debate over the QE programme. Recent speeches from external MPC member Saunders and Deputy Governor Ramsden have signaled some concern about the ongoing rise in inflation. So at least one, and possibly both, may vote to curtail the current £150bn tranche of asset purchases underway. The latest economic projections in the Monetary Policy Report (MPR) are likely to show a much higher peak in inflation relative to the May MPR, with annual CPI inflation likely to be forecast well above the 3% mark later this year. However, as it will probably still be assumed that the rise is ‘transitory’, the medium-term projections are likely to be little changed with inflation seen easing back down to be at, or close to, the 2% target in 2-3 years’ time. That should justify the majority of the MPC remaining in wait-and-see mode and the completion of the asset purchase programme. While policy tightening remains some way off, it is possible that the BoE will provide some preliminary guidance based on their ongoing review. The previous guidance that the balance sheet (stock of QE) will not be run down until interest rates reach at least 1.5% has been criticised by BoE Governor Bailey as being too prescriptive. The MPC may take the opportunity to give some new guidance on the ‘sequencing’ of future changes to policy. If they do so, just how much detail will be provided remains highly uncertain. It is feasible that there could be a shift to a more flexible framework to reflect the current policy mix. That might allow the MPC to move between higher rates and balance sheet unwinding, and to use the latter at a much earlier stage of the tightening process than under the existing guidance.G10 FX Options Expiries for 10AM New York Cut(Hedging effect can often draw spot toward strikes pre expiry if nearby) USDJPY - 111.40/50 776m. 109.90/110.00 937m. 109.70/80 652m. 109.50 1.27bn (659m P). 109.20/30 1.49bn (881m P). 109.00/10 1.29bn (839m C). 107.50 400m. EURUSD - 1.2000 629m. 1.1920/30 736m. 1.1900/10 722m. 1.1880/90 1.40bn (729m P). 1.1860/70 2.76bn (1.56bn C). 1.1840/50 1.55bn (1.16bn P). 1.1820/30 1.46bn (938m P). 1.1790/1.1810 2.21bn (1.43bn P). GBPUSD - 1.3780/1.3800 542m. AUDUSD - 0.7480/0.7500 1.11bn (577m P). 0.7350 455m. USDCAD - 1.2640/50 864m. 1.2540/50 1.59bn (929m C). 1.2520/30 831m. 1.2470 669m. EURGBP - 0.8550/60 540m. 0.8500 486m. USDCHF - 0.9200 400m. AUDJPY - 82.20 464m. 80.50 619m. 78.50 450m. USDZAR - 14.20 455m. CADJPY - 88.00 555m. 86.00 650m. USDHKD - 7.80 787m. USDCNH - 6.49 1.18bn (665m P). 6.47 700m. - Source: CT NewsTechnical & Trade ViewsEURUSD Bias: Bearish below 1.1950 Bullish above Pinned down by option related orders on both sides EUR/USD opened 0.23% lower after completing a bearish outside day It grinded within a narrow 1.1832/39 range in quiet Asian trading Option related buyers ahead of 1.1825 and sellers 1.1845 helped contains Support is at the 21-day MA at 1.1826 and break opens up base at 1.1750/60 Resistance formed 1.1900/10 where sellers are tipped EUR/USD may move sideways ahead of the key US payrolls on FridayGBPUSD Bias: Bearish below 1.40 Bullish above. Steady after trading a tight but busy 1.3877-1.3896 range in Asia BoE expected to maintain it's stimulus despite rising inflation... Any clues on unwinding the stimulus will be key for the next sterling move Charts; 10 & 21 daily moving averages climb - momentum studies conflict Positive signals wane, but bias remains higher while 1.3830 21 DMA holds 1.3991 61.8% June-July fall and 1.4000 upper 21 day Bollinger pivotal Break would bring 1.4090 76.4% retracement of June-July fall into playUSDJPY Bias: Bullish above 109 Bearish below USD/JPY bid in Asia, 109.47 early to 109.71 EBS, holding bid Short-covering interest noted, bounce in US yields helping Treasury 10s bounced to 1.215% overnight, Asia 1.189-1.202% range Option expiries help cap upside, 109.70-90 total $838 mln, 110.00 $725 mln Below, $1.25 bln at 109.50 strike, supportive Plenty tech levels in area - daily Ichi cloud 109.30-110.17, 100-DMA 109.61 Action in Asia today between 109.38100-HMA, 109.70 200-HMA currently Asia risk mood mixed but Nikkei +0.3% @27,678, E-Minis +0.2% @4402 JPY crosses buoyant - GBP/JPY 151.97-152.34 into BoE policy announcement EUR/JPY 129.64-82, AUD/JPY 80.71-81.81.06, NZD/JPY 77.04-35 on RBNZ view Large nearby option expiries in AUD/JPY, CAD/JPY, EUR/JPY, GBP/JPY todayAUDUSD Bias: Bearish below .75 Bullish above AUD/USD opened -0.16% at 0.7381 after USD gained in NY on Clarida comments... Asian equity markets steadied with the AXJ index +0.12% and Eminis +0.16% The steady markets helped underpin the AUD/USD late in the morning Into the afternoon it was at session high 0.7792 after trading 0.7377 There was no reaction to Aus trade data which was as expected... Close support is at the 10-day MA at 0.7374 with bids ahead of 0.7355 Resistance is at the 21-day MA and close above would ease downward pressure AUD/USD likely to range trade ahead of the key US payrolls on Friday

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/daily-market-outlook-august-5th-2021"
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Market Update – August 5 – USD Holds gains following Hawkish Clarida

Market News Today – USD (USDIndex 92.28) & Yields (10yr 1.20%) boosted.   – Fed Vice Chair Clarida continues the hawkish tilt. Earlier a big miss for ADP (330k vs 700k) had seen Yields tank to 1.127% (6-mth low) and USDIndex 91.80  before and a big beat for ISM Non-manu. PMI and Clarida’s “rate lift-off in 2023” and “tapering in 2021” comments. Equities mixed at close (USA500 -0.46% 4402)  Asian markets hold gains.  Oil inventories show a big build (+3.6m vs -3.2m & -4.1m last week) – USOil declined further to $67.40 (11-day low) Gold spiked to $1830 after ADP back to $1809 now. German big beat 4.1% vs 2.1%.

European Open –  The September 10-year Bund future is up 20 ticks, while Treasury futures are slightly lower, as investors continue to digest comments from Fed’s Clarida,  Clarida said he was surprised by the extend of the slide in global yields and indeed it seems surprising that with the recovery now pretty much confirmed, the German 10-year rate should be at -0.503%, i.e. lower than the deposit rate.

BOE Outlook – There is also some risk of a hawkish twist. The bank is generally expected to keep policy settings unchanged, but some wait for Bailey to explain the outcome of the review on how to best withdraw stimulus when the time comes. If he does so, it should not be seen as a sign of imminent tightening, but it could spook markets, especially after Clarida’s comments yesterday. DAX and FTSE 100 futures are little changed, after a lackluster session across Asia overnight. U.S. futures are fractionally higher. In FX markets EURUSD is little changed at 1.1835, while Cable is at 1.3890 ahead of the BoE.

Today – US weekly jobs, BoE Policy Announcement & Press Conference, Fed’s Waller. Earnings: Adidas, Bayer, Continental, Credit Agricole, Lufthansa, Deutsche Post, Siemens, Glencore, Rolls Royce, WPP, ViacomCBS, Kellogg.

Biggest FX Mover @ (06:30 GMT) AUDJPY (+0.32%) Rallied from 80.50 support to 81.00 yesterday before closing lower at 80.75. Retesting 81.00 again today. Faster MA’s aligned higher, MACD signal line & histogram over 0 significantly and moving higher, RS 60 and still rising. H1 ATR 0.081, Daily ATR 0.710.

Click here to access our Economic Calendar

Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Dollar adrift, but volatility to drive FX markets in short run: Reuters poll

from Forex News https://www.investing.com/news/economy/dollar-adrift-but-volatility-to-drive-fx-markets-in-short-run-reuters-poll-2580229
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Roller coaster ride for EM currencies to roll on: Reuters poll

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Dollar Edges Higher on Hawkish Fed Comments; Labor Data Eyed

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Dollar Up Over Fed Hints at Early Asset Tapering, Interest Rate Hikes

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Dollar firms as Fed members talk of tightening

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Allianz SE: Earnings Outlook: Q2 2021

Allianz SE, a German multinational financial services company with core businesses of insurance and asset management, is scheduled to report Q2 2021 earnings on Friday, 06 August 2021 prior to market opening. Allianz’s core insurance business includes the protection of property as well as life and health. In addition, there are also business areas with global reach, such as global corporate customer insurance, credit insurance, assistance services and reinsurance. Meanwhile, their asset management includes Allianz Global Investors (AllianzGI) and PIMCO.

https://www.allianz.com/content/dam/onemarketing/azcom/Allianz_com/investor-relations/en/results/2021-1q/en-highlights-1q-2021.jpg

Although Q1 2021 revenue fell 2.6% to €41.4 billion and was flat compared to the previous year’s level, the company reported a 44.8% increase in operating profit to €3.3 billion with contributions across all segments. Net income attributable to shareholders increased 83.4% to €2.6 billion driven by growth in operating profit and better non-operating results after lower impairment losses and higher income taxes had a slightly offsetting effect. Basic Earnings per Share (EPS) increased 85.2 percent to 6.23 euros, from 3.36 euros). The company targets a confirmed 2021 operating profit of 12.0 billion euros, plus or minus 1 billion euros.

https://www.marketscreener.com/quote/stock/ALLIANZ-SE-436843/financials/

Higher investment income came from Allianz’s fixed index annuity business primarily in the United States, while in Europe there was a lower decline in value compared to the highest level recorded in the first quarter of 2020. A further contributing factor was unit-linked management costs which were higher in Italy.

Overall the company has been able to increase its revenue, in a very challenging market. As such, recent analyst forecasts suggest that the company will continue to see its earnings expand broadly for the industry or on company fundamentals. With its shares down 3.0% over the past three months, it’s easy to overlook Allianz. However, stock prices are usually driven by a company’s long-term financial performance, which in this case looks quite promising. Tipsrank rated it moderate buy with an average target price of €239.54; EPS consensus forecast of €4.8 versus €3.71 in the same period last year.

Recently, Allianz  said that China’s local asset management unit has received regulatory approval and will become the country’s first foreign-owned insurance asset management company as Allianz takes advantage of regulations that relax ownership restrictions for foreign players in the asset management, insurance and securities brokerage sectors.

---

Technical Levels

The #Allianz stock posted a historic peak of 353.55 in April 2000 and it took 20 years to return to the 61.8% retracement (232.55) in February 2020 before the global pandemic broke out. The economic recovery that has been going on since last year has not been able to bring #Allianz back to pre-pandemic levels, with the share price only strengthening to 223.45. The stock price on H1 rose +4.8% and closed at 210.35 in June, while in July there was no significant price movement; the asset tried to match the January 2021 open (200.70) with a low of 199.58 but closed at 210.30, just 0.20 euros lower of the opening price of 210.50 to form a monthly doji candle.

#Allianz, D1

The outlook is tentatively neutral after July’s decline that failed to surpass the opening price and remains temporarily stuck above the 200-day moving average. Throughout the early years to date, stock prices seem to be consolidating more than trending. Technical tools provide information that consolidation is likely to continue until the earnings report. The stock price has broken through the thin Kumo which is formed from a thin trading range, the RSI is flat between the middle 50 level (at 48.46 as of the time of writing) and the MACD is still in the sell zone with the histogram thinning to the neutral side. A break of the support level of 199.58 would be very decisive for the direction of the weakness, but as long as this level holds, the price projection is likely to test 214.30 and 223.45.

Click here to access our Economic Calendar

Ady Phangestu

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Midweek Market Podcast – August 4

USD started the month under pressure, with yields lower and equities higher. The Kiwi has had a boost as expectations rise for a rate hike this month from the RBNZ. BOE & NFP still to come this week.

HotForex · Midweek Market Update – August 4

The Market Week – August Week 1 

Another volatile week to start the month; USD remains pressured as economic data reports are mixed, Equities hit all-time highs again supported by strong earnings and US treasuries hold onto their strong demand as yields sink.  All eyes now on the BOE (Thursday) and NFP & Canadian Jobs data (Friday).

It’s NFP week so jobs, earnings and unemployment take centre stage.  The weekly US unemployment claims missed expectations again, coming in at 400,000, with 382,000 expected this week. NFP is expected to be around 870,000 and unemployment to drop to 5.7%. Although the data continues to trend lower overall, it is a very choppy ride for the long term unemployed.

The vaccine rollouts continue to drive sentiment, but the Delta variant remains a significant concern. A surge of cases in the US and China spooked markets earlier in the week, but upticks in vaccination rates in some key US states calmed worries. Over 4.26 billion doses of vaccines have been administered globally but many low-income countries have less than 5% vaccination rates, and the death toll now exceeds 4.2 million.

This week FX volatility was evident again.  The USDIndex slipped to 91.75 and struggles to hold 92.00, and EURUSD tested up to 1.1900 before slipping back to 1.1850, while USDJPY declined as low as 108.85 before recovering to 109.20. Cable rallied to 1.3985, then cooled to 1.3850 but holds over 1.3900 ahead of the BOE on Thursday.

US stock markets posted more new all-time highs and continue to consolidate at highs on the back of the strong Q2 Earnings Season, which has over 88% of companies outperforming expectations. The USA500 holds over 4,400, the USA30 over 35,000 and the USA100 over 15,000.

The Gold price moved up this week as the USD remained pressured and US Treasuries in demand.  The price held over $1800, posting highs at $1832 and lows at $1806. The 20-day moving average is up to $1809.

USOil prices had a volatile week, as missile exchanges in the Gulf and tanker hijackings crept back into the news. A spike to $73.50 was followed by a quick dip to $68.60 before recovering the key $70.00 handle ahead of the EIA weekly inventories later today.

The yield on the US 10-Year Treasury Note remains very much in focus. A weekly low of 1.15% on Monday provided a weak support as the rate remains below 1.20% at 1.18%, just above the July low at 1.13% ahead of the NFP data on Friday.

    

Click here to access our Economic Calendar

Stuart Cowell 

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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What Joe Biden's bipartisan infrastructure deal means for cryptocurrency investors

The US unveiled a $1trn bipartisan infrastructure agreement this week, and cryptocurrency investors were able to win some last minute concessions.

Cryptocurrency exchanges were initially caught off guard last week by plans to partially fund US president Joe Biden’s bipartisan infrastructure agreement, which includes money for railways, roads and broadband access, by higher taxes on cryptocurrencies. 

The changes were expected to generate around $28bn in additional tax revenue over the first ten years, says Bloomberg. 

As expected, the proposals stirred an uproar in the crypto community. 

“Instead of rushing through an untested provision with vast unintended consequences, we encourage Congress to work with industry to find language that works for all stakeholders,” said Kristin Smith, head of the Blockchain Association. 

The bipartisan plan is the first part of Biden’s infrastructure agenda. It proposes $550m in new spending over five years above projected federal levels and is widely perceived as one of the most game-changing plans in the country’s history.

So what do the proposals now say on cryptocurrencies? 

The latest legislative text released this week omitted some of the terminology that had caused concern among crypto market watchers. 

Language that specifically mentioned decentralised exchanges or peer-to-peer marketplaces was omitted, to be replaced with a looser definition of brokers, meaning that decentralised peer-to-peer exchanges may not specifically be required to report transactions. 

Part of the reason that Biden is targeting crypto is to raise money to fund his eye-wateringly expensive infrastructure agenda. Another reason, however, is a desire to tackle the underreporting of bitcoin gains. As it stands, crypto exchanges do not have to report gains and losses incurred by customers, but this could change even with the more generous text. 

Nonetheless, the infrastructure agreement is still believed to have ramifications for the crypto market. 

What Biden’s plans mean for cryptocurrencies 

As Chris Etherington, private client tax partner at RSM UK, puts it, the main effect of the proposal is that it will force crypto exchanges to collate and share more data and “provide the IRS [Internal Revenue Service, the US tax authorities] with a much clearer picture of who should be paying tax on their crypto investments and the amounts due”. 

This means investors who use centralised exchanges such as Kraken and Coinbase should expect the IRS to gain a much clearer picture into the exact amounts they earn from trading crypto, analysts tell MarketWatch, and should also expect to pay higher taxes. 

The higher reporting requirements being proposed by the US could trigger tax authorities in other countries including the UK to follow suit, resulting in cryptocurrencies being treated by tax authorities in a similar way to the US Foreign Account Tax Compliance (FATCA), which requires non-US financial institutions to report to the US Treasury department details of and assets held by their customers with connections to the US, and the OECD’s Common Reporting Standards (CRS), which aims to prevent tax evasion by exchanging financial information between various countries’ tax authorities.

“The US is again using its size and influence to bring in these rules, and it will be interesting if other governments now follow, like they did with FATCA [ and CRS],” says Alex Straight, partner at law firm Blick tells Rothenberg. 

“These rules could set a precedent for other tax authorities like HM Revenue & Customs to make requests for similar information to be shared with them,” Etherington says. 

But it’s important that the tax regulation doesn’t act as a deterrent to investors. Such a scenario could mean tax authorities will eventually “shoot themselves in the foot” and get less tax revenues,” he adds. 

So is this a good thing or a bad thing for crypto?

The concessions in the newer text for the crypto market may be branded as a win for the industry, but still many hurdles exist. 

US senators will start debating the text this week, so there will no doubt be further changes to the text, both good and bad. 

The increased reporting requirements may result in higher taxes being paid on cryptocurrency gains and could eradicate a cloud of uncertainty and underreporting in the market. 

But it is worth noting that even with increased transparency, cryptocurrencies are still very much prone to regulatory upset. In May, China banned cryptocurrency mining in the country and prohibited Chinese financial institutions from participating in the sector. 

Yesterday, Gary Gensler, chair of the Securities Exchange Commission, the U financial regulator, branded cryptocurrencies as the “Wild West” and called for more reform. 

So keep an eye on how the final infrastructure deal pans out when it becomes law, but also on the many other headwinds looming over the crypto market.

from Moneyweek RSS Feed https://moneyweek.com/investments/alternative-finance/bitcoin-crypto/603674/what-the-us-bipartisan-infrastructure-deal
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Market Spotlight: NZD Soars On Data Beat

New Zealand Employment Data Beats ExpectationsThe New Zealand Dollar is moving firmly higher today on the back of a strong set of employment releases overnight. The headline unemployment rate was seen falling back to 4% from the prior month’s 4.6% reading, well below the 4.4% figure projected. On a quarter basis, the employment change indicator recorded a 1% result, up from the prior month’s 0.6% and the 0.7% forecast. Additionally, the country’s labour cost index was seen rising 0.9% on the quarter, up from 0.4% last quarter and above the 0.7% forecast.This latest set of positive data has further fuelled expectations of an imminent rate hike from the bank. Following the RBNZ recently announcing that QE is set to end their monthly asset purchases from September, the market is now looking for the next step along the pathway to policy normalisation. With August 18th scheduled as the next policy review, NZD is likely to remain supported over the coming weeks.Technical ViewsNZDUSDThe rally in NZDUSD has seen price reversing higher off the .6933 floor. Price is now fast approaching the .7110 level, with the bear channel top sitting just above. This is will be a key challenge for bulls, with a break higher here opening the way for a run up to the .7315 level next, in line with bullish MACD and RSI.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/market-spotlight-nzd-soars-on-data-beat"
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Bitcoin miners are cleaning up their act, using green energy to drive higher profits

• SEE MORE Bitcoin does consume a lot of energy – but here’s why it’s worth it

Today we consider the profit motive.

When it comes to coercion and “getting people to do the right thing” we argue that profit is a far more powerful incentive than government edict, and the outcomes are better.

We follow the Adam Smith argument, that self interest motivates what we do, yet that by acting in our own self-interest we promote the greater good. An individual may intend “only his own gain” but he is “led by an invisible hand to promote an end which was no part of his intention.”

To demonstrate this point we contrast Western governments’ Green Industrial Revolution with that most heinous of activities, bitcoin mining.

We have observed on these pages many times that Western governments’ grand plans for a Green Industrial Revolution are going to require extraordinary amounts of fossil fuel to be burnt in order to realise, especially to mine all the required metal.

What is the more environmentally friendly solution? To carry on driving the old banger, or to buy a new electric vehicle, with all the fossil fuel requirements there are in the manufacture of that vehicle, and in the creation of electricity to power it? I rather suspect the former.

We now park that thought, and turn to bitcoin mining, pilloried as wasteful and environmentally unfriendly. 

Bitcoin’s vast energy use is a feature, not a bug

Bitcoin’s “proof-of-work” system of verifying transactions on the blockchain means that extraordinary amounts of energy are required to power the network. Some estimates are that bitcoin’s annual energy demands are equivalent to those of the Netherlands with its 20 million people. 

In previous missives I’ve explained why this energy consumption is inherent to bitcoin, and how it is a feature, not a flaw. 

By the way, just because something consumes a lot of energy does not mean it is wasteful. Energy consumption is part of progress. After the Agricultural Revolution we started to use animals to labour for us, then, following the Industrial Revolution, machines. In today’s digital age, we consume more energy per capita than ever. As we progress we have found better means to provide that energy.

Bitcoin mining, as we all know, consumes lots of electricity. A bitcoin miner can, in theory, locate itself pretty much anywhere. It could locate itself in Mayfair or it could set up shop in the darkest reaches of the Amazon. Its chief concern is that energy is cheap. 

The cheapest energy in the world is energy that goes unused or is wasted, often stranded renewables in remote parts of the globe. If bitcoin miners can access that energy, they become more profitable. Location does not matter; that energy can be anywhere, and bitcoin mining is constantly seeking it out. 

Let me give you some recent examples.

The first relates to gas flaring. This is the practice in the oil and gas industry of burning off the huge quantities of natural gas that rise to the surface as oil is extracted from wells. That gas is often uneconomic to pipe to market and so, to dispose of it, it is flared. 

Some $20bn worth of gas is flared every year – as much CO2 and other greenhouse gases are released into the atmosphere as a result as from the use of 200 million cars: 150 billion cubic metres of gas. It’s an extraordinarily wasteful and polluting practice. The World Bank has attempted to impose initiatives to eradicate it, but it continues. 

If only the oil and gas industry could find a way to turn that gas to profit, then much of the waste and environmental harm could be averted. Enter bitcoin.

Bitcoin mining uses energy that would otherwise go to waste

One company, Great American Mining, has found a means to deliver portable bitcoin mining machines, in great crates, to oil and gas fields. That energy from that gas is now used to power bitcoin mining operations.

In July, another start up, Compass Mining, signed a 20-year deal with nuclear fission company Oklo, which builds microreactors. The deal enables Compass to use all the excess energy from Oklo’s microreactors. The partnership is a “beacon” for the intersection of cryptocurrency and clean-energy development, says Oklo CEO Jacob DeWitte. Bitcoin mining generally is making use of unwanted land close to nuclear power stations, especially in France.

Also in July, payments company Square, founded by Jack Dorsey of Twitter, announced that it is funding a solar-powered bitcoin mining facility with Blockstream

El Salvador hit the headlines in June when it became the first nation to authorise bitcoin as legal tender. Within hours of the announcement El Salvador’s president, Nayib Bukele, was outlining plans for bitcoin mining rigs “with very cheap, 100% clean, 100% renewable, zero emissions energy from our volcanos.” 

Around 8% of all bitcoins have been mined in Iceland, where hydroelectric and geothermal account for almost all of the power generation. 

The extraordinary energy that bitcoin requires to power its network is powering an energy revolution that is happening in real time around us now. The motive is profit. 

And we hark back to Adam Smith. “Every individual”, he said, “neither intends to promote the public interest, nor knows how much he is promoting it... he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”

That very dynamic is at work with bitcoin’s vast energy demands.

The Bitcoin Mining Council, which was set up in May in reaction to criticism about bitcoin’s energy consumption, especially from Elon Musk, found in its first report that over 50% of bitcoin’s energy comes from sustainables. Research by investment house CoinShares estimated that the number is much higher: 74% of bitcoin mining is powered by renewables, it said. 

Bitcoin gets singled out for criticism. No other industry receives as much scrutiny, but in fact it is making better use of wasted or renewable energy sources than almost any other large-scale industry in the world.

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