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Best CFD Broker Australia 2020 | Public Finance International

Choosing the best CFD broker in Australia for your needs can be a time-consuming task. For this reason, you can use this article on the best CFD brokers in Australia, to short-list your candidates before you make an informed decision on who you go with.

Choosing the best CFD broker in Australia for your needs can be a time-consuming task. For this reason, you can use this article on the best CFD brokers in Australia, to short-list your candidates before you make an informed decision on who you go with.

Many of the best brokers and trading platforms currently offer CFD trading to the investment public in the country. We picked the top 5 CFD brokers.

Here are the top CFD Brokers in Australia in 2020:

  1. XTB – Best CFD Broker in Australia 2020 Overall. Trusted by 170,000 Clients. Listed on the stock exchange.
  2. AvaTrade – Global CFD Broker. Large variety of CFD Instruments. Powerful platform.
  3. eToro – Best Copy Trading Platform. Easy account opening. Free stock and ETF trading.
  4. Plus500 – Best Platform For Advanced Traders. Listed on the LSE (London Stock Exchange)
  5. IG – Wide Variety of Markets Available.

Best CFD Platforms for Australians

RankBrokerInformationOur Score
#1XTBBest CFD Broker for Australians4.9/5
#2AvaTradeGlobal CFD Trading Platform4.9/5
#3eToroSocial/copy trading platform4.7/5
#4Plus500Global CFD Broker4.7/5
#5IGWide variety of products available4.6/5

1. XTB

XTB is a global CFD broker based in Europe that offers its services to clients in Australia. This provider charges low fees on stock index CFD trades and offers a quick online registration process that only takes a few minutes to be completed.

Additionally, deposits and withdrawals can be made without incurring an extra charge, which is great for traders with a limited amount of capital.


CFD trading fees for this broker are on the low-end of the industry and these are the average spreads charged for the most popular instruments:

  • S&P CFD trading fees: 0.6 average spread.
  • Europe 50 CFD trading fees: 2.2 average spread.

For individual stocks, fees are a bit higher compared to the CFD trading platforms mentioned above.
As a reference, for a hypothetical $2,000 long position held for one week with a leverage ratio of 5:1 the cost of trading an Apple CFD would be $17.9.

Available Markets

This is a list of the CFD instruments offered by XTB:

  • 42 stock index CFDs.
  • 1,700 individual stock CFDs.
  • 103 ETF CFDs.
  • 18 commodity CFDs.
  • 3 bond CFDs.
  • 25 cryptocurrency CFDs.

Account Opening

The minimum deposit to open a CFD trading account with this broker is $250 and two accounts are available: the standard and the pro account.

The standard account offers wider spreads but no commission fees on CFD trades while the pro version offers tighter spreads but with an extra commission fee.

XTB offers various base currencies for its accounts including the Australian Dollar, which is good news as clients in Australia can save money on conversion fees.

Deposit & Withdrawal

No deposit fees are charged by this broker for debit card, credit cards, or bank transfers, but a 2% charge applies to e-wallet deposits.

No withdrawal fees are charged by this broker as long as the withdrawal is higher than $100. Withdrawal amounts lower than $100 incur a $20 fee.

Deposits can be made via debit card, credit card, e-wallet, and bank transfer, while withdrawals can only be made via bank transfer.

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2. AvaTrade

AvaTrade offers investors a wide range of features designed to serve both experienced and amateur traders including an expedite account opening process, a well-designed and top-performing proprietary trading interface, and the possibility of using third-party platforms such as Meta Trader.

Even though AvaTrade’s portfolio of CFDs is fairly limited compared to some of its competitors, this trading platform makes up for that shortage by offering a top-notch platform, decent research tools, and no deposit or withdrawal fees.


The cost of trading with AvaTrade is a bit higher compared to other CFD brokers and the cost is embedded in the bid/ask spread of each instrument offered by the platform.

This broker charges an average spread of 0.5 for trading the S&P 500 index and an average spread of 1 for trading the Europe 50 index.

Meanwhile, the cost of trading CFDs on individual stocks varies from one stock to the other.

A hypothetical position of $2,000 held by a week with a 20:1 leverage ratio for stock indexes and a 5:1 leverage ratio for individual stocks should generate the following costs:

  • S&P index: $0.9 per trade.
  • Europe 50 index: $0.6 per trade.
  • Apple stock: $4.1

There is also a $50 inactivity fee charged by AvaTrade each quarter if the user fails to log into his account for a period longer than 3 months.

Available Markets

The portfolio of CFDs offered by this platform includes:

  • 20 stock indexes.
  • 630 individual stocks.
  • 5 ETFs.
  • 17 commodities.
  • 2 bonds.

Trading Platform

AvaTrade offers a web-based, desktop, and mobile version for its proprietary trading platform (Webtrader), while traders can also use Meta Trader 4 and Meta Trader 5.

Webtrader has a user-friendly interface that allows investors to browse through the platform’s available CFDs easily while also allowing them to take a look at certain comprehensive reports showing the performance of their trades, fees paid, and other similar information.

One downside of the web version is that it does not support price alerts and it does not offer a two-step login feature.

The desktop version is fairly similar to the Meta Trader interface, but this one does support price alerts.

Finally, the mobile trading app offers a well-designed interface that takes advantage of the limited screen space provided by most mobile phones. The search function works perfectly and there’s a unique feature that’s only available for the mobile version which is the AvaProtect order type, designed to prevent financial losses resulting from trades if an additional fee is paid.

The app is available for both Android and iOS.

Account Opening

Opening an account with AvaTrade could not be easier as the process can be completed 100% online. This trading platform is available for most countries except for places where CFDs are banned, such as the United States, and other countries like Iran and Syria.

Four different types of accounts can be opened with AvaTrade and the minimum deposit required is $100. However, if the deposit is made via bank transfer, the minimum goes up to $500.

The ID verification process with AvaTrade is faster than with other brokers and it typically takes less than a day as long as the user sends all the information required on time.

AvaTrade also offers a demo account for traders who want to test the trading platform before depositing money on it.

Deposit & Withdrawal

AvaTrade offers 5 different currencies for their accounts including the Australian Dollar (AUD), which is a great feature for residents of Australia as they can save money on conversion fees.

No deposit fees are charged by this trading platform and debit and credit card deposits are credited instantly.

Bank transfers, on the other hand, may take a few days to be cleared.

Withdrawing money from AvaTrade doesn’t generate an extra fee but there’s a maximum withdrawal limit of up to 200% of the last deposit made if the withdrawal is sent to a debit or credit card.

For bank transfers, there’s no upper limit for withdrawals.

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3. eToro

eToro is one of the best CFD brokers in Australia, offering two distinctive features that set this trading platform apart from others: zero commission on US-listed stock trades and a top-notch social trading environment.

eToro is the pioneer of the social trading movement, offering a social-media like environment within its trading platform through which traders can connect and share ideas, thoughts, past performance, and trades.

Additionally, for traders living in Australia, eToro offers free trades for US-listed stocks and ETFs.


For Australian traders, eToro charges no fees for US-listed real stock and ETFs trades, while other instruments are traded via CFDs.

Meanwhile, the costs of trading CFDs with eToro are the following:

  • Forex CFD commissions starting at 3 pips for EURUSD.
  • Commodity CFD commissions start at 2 pips for copper.
  • Index CFD commissions start at 4 pips for the US Dollar Index (DXY).
  • Stock & ETF CFDs generate a 0.09% commission per trade.
  • Cryptocurrency CFD trading commissions start at 0.75% of the value of the trade for Bitcoin.

Overnight fees apply if the CFD is held for longer than a day and the overnight interest rate varies per instrument. eToro also charges a $10 monthly inactivity fee if the user fails to log into the account for 12 months or more.

Available Markets

The following markets and instruments are offered by eToro’s CFDs:

  • 153 ETFs.
  • Individual stocks from 17 different exchanges.
  • 13 stock indexes.
  • 15 commodities.
  • 47 currency pairs.
  • 94 cryptocurrencies.

Trading Platform

eToro’s only offers its proprietary trading platform, which was primarily conceived for amateur traders as reflected by its highly user-friendly design and simplistic interface. Meta Trader is not supported by this broker. eToro only offers a web version and mobile trading app, as no desktop platform has been released yet.

Both are incredibly well-designed and incorporate the social trading feature. The search function works perfectly and charting tools are available, featuring more than 70 different technical indicators. The charting tool, though, only goes as far as 6 months, which is a bit disappointing. Additionally, the news feed is limited to tweets sent by traders within the platform, known as the social feed. Also, no fundamental data is provided for the stocks listed on the platform.

eToro’s platform is available in 26 different languages and price alerts and notifications can be set for different instruments and they can be sent via push notifications to the trader’s phone or web browser.

Account Opening

Opening an account with eToro only takes a few minutes and the trading platform can be accessed without even being registered. The minimum deposit required for residents of Australia is $50 for most payment methods while for bank transfers the minimum deposit required is $500.

The standard account offers limited leverage, while professional accounts offer higher leverage ratios but certain minimum criteria must be met to apply for one. A demo account is available for traders who want to try out eToro’s proprietary platform before joining.

Deposit & Withdrawal

eToro doesn’t charge deposit fees and money can be deposited via debit/credit card, e-wallet, or bank transfers.

eToro only offers accounts in USD$, which means that clients in Australia must pay a conversion fee for both deposits and withdrawals. These fees start at 50 pips – roughly 0.46% of the amount deposited or withdrawn.

There’s a $5 withdrawal fee charged by eToro and a minimum amount of $30 per withdrawal.

Any withdrawals that are lower than that amount incur a $10 fee.

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4. Plus500

Plus500 is one of the most popular CFD brokers in the world and most of its popularity is attributed to how easy it is to start trading CFDs with them. The online registration process is one of the fastest in the industry and its fees are below the average compared to other CFD brokers.

Additionally, the company is listed on the London Stock Exchange, which adds a whole lot of credibility to its operations.


Plus500 trading fees are on the low-end of the industry and this broker does not charge a commission for CFD trading, as its fees are embedded within the bid/ask spread of each instrument.

The spread is the difference between the price at which a CFD can be bought and sold and this is the average spread charged by Plus500 for some of the most popular financial instruments covered by their CFDs:

  • S&P 500 CFD: 0.45 pips.
  • Europe 500 CFD: 1 pip.
  • EURUSD currency pair CFD: 0.6 pips.

Additionally, a 0.3% currency conversion fee is charged for currencies different than the base currency of the account and a $10 quarterly fee is charged to accounts that have been inactive for 3 months or more.

Available Markets

These are the financial assets covered by Plus500 CFDs:

  • 1,800 individual stock CFDs.
  • 33 stock indexes CFDs.
  • 92 ETF CFDs.
  • 22 commodity CFDs.
  • 14 cryptocurrency CFDs.

Trading platform

Similar to eToro, Plus500 also offers a proprietary trading interface and it does not support third-party software such as Meta Trader.

Plus500 platform is very user-friendly as it was primarily conceived to enhance the trading experience for amateur traders by helping them in getting accustomed to charts and other elements of a traditional trading platform.

The customizability of the web-version and the mobile trading app is fairly limited but they offer a selection of 107 different technical indicators, a trader’s sentiment tool for each instrument, an economic calendar, and a news feed powered by high-end providers like Reuters and CNN.
However, no fundamental information is provided on the stocks listed.

Finally, both versions allow for a two-step security login and the mobile app offers biometric recognition for logging in as well.

Account Opening

The minimum deposit required by Plus500 is $100 for clients in Australia unless the deposit is made via bank transfer. In that case, the minimum goes up to $500.

The process of opening the account is very easy and two accounts are available for traders: retail and the pro accounts.

The main difference between both is that pro accounts entitle the user to higher leverage ratios, but users have to meet certain criteria to be eligible for it.

Deposit & Withdrawal

No deposit fees are charged by this CFD broker and Plus500 also offers five free withdrawals per month.

After those five withdrawals are exhausted, a $10 fee applies to any additional withdrawals made. Meanwhile, the minimum withdrawal amount is $50 for e-wallet withdrawals and $100 for bank transfers.

Also, this broker offers 10 different base currencies for CFD trading accounts, including the Australian Dollar.

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5. IG Markets

IG Markets is a UK-based CFD broker that provides access to more than 16,000 different markets and offers competitive trading fees to investors in Australia.


The cost of trading CFD with IG Markets varies depending on the instrument. This list references the trading fees charged by IG Markets for different underlying assets:

  • Individual stock CFD trading fees: 0.1% of the value of the contract.
  • Commodity CFD trading fees: 0.3% of the value of the contract
  • Index CFD trading fees: 0.4% of contract value.
  • Cryptocurrency CFD trading fees: 0.2% of contract value.

There’s also an inactivity fee of $12 per month if the user fails to log into the account for more than 24 months.

Available Markets

IG Markets offers the following number of underlying assets for its CFDs:

  • 68 stock index CFDs.
  • 10,500 individual stock CFDs.
  • 1,900 ETF CFDs.
  • 47 commodity CFDs.
  • 13 bond CFDs.
  • 8 cryptocurrency CFDs.

Account Opening

The minimum deposit to open an account with IG Markets is $300 for debit, credit cards, and e-wallets while no minimum is required for bank transfers.

The process of verifying an account with IG Markets is reportedly slower than usual, as it takes an average of 3 days to complete it.

Deposit & Withdrawal

Not additional charges are collected for deposits or withdrawals made with IG Markets and accounts in Australian Dollars are available for residents of Australia.

You can only change the base currency of your account by writing an e-mail to IG Markets’ customer service department.
Deposits can be made via debit card, credit card, bank transfer, or e-wallet and the same applies for withdrawals except for e-wallets which are not supported for withdrawing money.

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What should you look for in a CFD broker?

There are many key variables you should consider when choosing the best CFD broker in Australia and some of them are:

  • Reliability of the CFD provider: your CFD broker should be regulated by an agency from a tier-1 jurisdiction, such as ASIC, and the company should have a clean record of transparency and excellent customer service so you can feel safe enough as to entrust them with your money.
  • Available underlying assets & markets: traders like to have a wide variety of available financial instruments they can trade by using CFDs. Your CFD broker should be able to provide you with access to a wide range of markets and global stock exchanges.
  • Conditions to open an account: each broker has a certain criteria to open an account with them including a minimum deposit required, whether they offer an AUD-based account, the process of opening such account, etc. You should know what to expect when registering with them.
  • Deposit & withdrawal conditions: depositing and withdrawing money from your CFD broker should be fast and easy. Some brokers charge a deposit fee while others charge withdrawal fees or impose a minimum withdrawal amount and these are all details you should know before you deposit your money with them.
  • Trading fees: the cost of trading CFDs is comprised of various elements including a spread that varies depending on the underlying asset, an overnight trading fee if you hold the CFD for longer than a day, and the cost incurred for leveraging your transaction.
  • Non-trading fees: brokers commonly charge other fees aside from their regular trading fees including inactivity fees, deposit fees, withdrawal fees, account opening fees, or premium-access fees.
  • Trading platform: since you will be spending a significant amount of time in front of your computer screen, your broker’s trading platform should be user-friendly and well-designed to provide you with a comfortable trading experience.
  • Research tools: new ideas for trades don’t just grow on trees and the broker you ultimately pick for CFD trading should be able to provide you with some trading ideas through certain reports like analyst recommendations, an economic calendar, a news feed, or market summaries.
  • Educational materials: CFD traders progressively learn how to get better by using the materials provided by their brokers, along with other tools. Having things like educational videos, webinars, glossary terms, and other similar materials at hand could be very valuable to continue improving your trading skills.

What is a Contract for Difference (CFD)?

A Contract for Difference (CFD) is an innovative financial product that tracks the price of an underlying asset – i.e. a stock, bond, commodity, or other similar instruments – and generates profits or losses for the investor based on the relative fluctuation of the price once the contract is settled.

Traders can take both long or short positions by using a contract for difference and they can hold the contract for as long as they want, even though there are holding costs associated with holding CFD positions for longer than a day.

These instruments are primarily conceived for high-frequency traders – i.e. day traders – due to these holding costs, with the longest holding period commonly extending to a week.

One important thing to keep in mind with CFDs is that traders do not hold the underlying security of a CFD, which means that the contract per se doesn’t have any value if the price moves in the opposite direction that the trader expected.

Also, there’s a high risk of losing money while trading CFDs if traders do not set proper stop-loss orders that can quickly get them out of a certain position if the price moves in the opposite direction from their trade.

It is also important to keep in mind that all CFD brokers report that a high number of investor accounts lose money while trading CFDs, which means that you should consider trading this financial instrument only if you understand the risks involved in doing so and how your holdings can be adversely affected by unfavorable price movements.

What’s the Australian Securities and Investments Commission (ASIC)?

In Australia, the institution in charge of overseeing CFD brokers and other financial institutions and investment organizations is known as the Australian Securities and Investments Commission (ASIC).

The role of this organization is to ensure the adequate functioning of financial providers, including CFD brokers in Australia, by enforcing a set of rules and guidelines that seek to maintain an optimal level of transparency within the financial markets.

To put it in plain words, their job is to protect investors by preventing unlawful practices that may harm their interests.

ASIC regulated brokers are those that have passed a set of standards set by the institution. Being approved to operate in Australia means that their activities will be monitored by ASIC and investors can conduct their transactions by using their brokers’ trading platforms knowing that there’s a government agency that has their backs.

More information about ASIC can be found on their website and ASIC regulated CFD brokers have to display their license number on their website and they must also inform investors that they have been approved to operate in Australia.

Meanwhile, certain well-reputed trading platforms offer their services to CFD traders in Australia even though they may not be regulated by ASIC directly. In this case, it is important to ensure that your CFD broker is licensed and regulated by a tier-1 jurisdiction agency.

This is a quick list of regulatory bodies in the countries where online brokers are usually registered:

  • Canada – Investment Industry Regulatory Organization of Canada (IIROC)
  • United States – Securities & Exchange Commission (SEC)
  • Singapore – Monetary Authority of Singapore (MAS)
  • European Union – European Securities and Markets Authority (ESMA)
  • Cyprus – Cyprus Securities and Exchange Commission (CSEC)
  • Switzerland – Swiss Financial Market Supervisory Authority (SFMSA)
  • United Kingdom – Financial Conduct Authority (FCA)


In conclusion, here are the best rated CFD Brokers for Australia in 2020:

  1. XTB – Best CFD Broker Overall – 4.9/5Visit XTB
  2. AvaTrade – Global CFD Broker – 4.9/5Visit AvaTrade
  3. eToro – Best Social Trading Platform – 4.7/5Visit eToro
  4. Plus500 – Best Platform For Advanced CFD Traders – 4.7/5Visit Plus500
  5. IG – Lots of CFD Markets Available – 4.6/5Visit IG Markets
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Daily Financial News

What is the best crypto wallet ?

What is the best crypto wallet_ a hardware wallet, a software wallet, or a mobile wallet_

What is the best crypto wallet: a hardware wallet, a software wallet, or a mobile wallet?

In the early stages of learning how to use Bitcoin, the security question arises: how to ensure your coins remain in your possession? Only by generating and storing keys in a way that can be verified can you be certain. It is impossible to be sure no one else has a copy of your keys unless you know they were created properly and stored offline.

Hardware wallets create your keys offline using a random number generator, so they cannot be logged. Additionally, the keys are kept permanently offline, so they cannot be accidentally shared on a network.

In software wallets and mobile wallets, random number generators are often built into the device the wallet is installed on. Since they use inputs like the current time to calculate randomness, they are difficult to verify and generally not secure. Even if your device generates randomness in a secure manner, host the resulting keys on a networked device, and an attacker can extract, view, or intercept them at any time.

It is transparent to verify that open-source hardware wallets create and store randomness securely, and that your keys are kept offline while being protected from threats like phishing. It is different in the case of open-source Bitcoin wallet though.

In addition to protecting against other vulnerabilities, hardware wallets resolve new attacks both progressively and reactively among security researchers. Supporting bug bounty programs ensures that all types of security issues are regularly checked.

What is the best crypto wallet_ a hardware wallet, a software wallet, or a mobile wallet_

What is the best crypto wallet_ a hardware wallet, a software wallet, or a mobile wallet_

Stay more secure everywhere

Hardware wallets have set a new standard for universal cybersecurity, as we discussed above. According to speculators, the future of the internet – dubbed Web3 – will rely on cryptographically secure keys backed up physically. In the cryptosphere, as well as in everyday business, e-commerce, and social media, hardware wallets are essential.

Your assets and identity are both protected offline when you use a hardware wallet for authentication, so there is no counterparty risk.

As a result of forgetting passwords and changing authenticator devices, security has long relied on third parties. Using the open recovery seed standard, users can backup their accounts safely without relying on a third party and recover accounts from any compatible device. Using Shamir backup, the recovery seed is split into multiple equal parts for stronger security.

Keeping in mind that not just crypto can be targeted is important. Similarly, your data can be leaked, resulting in phishing attacks, hostage situations, or compromised devices arriving by mail.

It has become easier and more affordable for everyone to have verifiable security thanks to hardware wallets.

The base layer of crypto security is hardware wallets

By bridging the digital and physical worlds, hardware wallets create digital keys offline and keep them safe. Crypto assets can be controlled with the keys in many ways, such as two-factor authentication, digital signatures, or two-factor authentication.

With open standards, you can ensure the same level of security across any app you use. As a result, dozens of hardware wallet manufacturers have appeared around the world, accelerating the adoption of crypto security and ensuring standards are maintained to ensure your coins remain yours regardless of wallet.

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Industry News

School4Trading Review – How to Spot Possible Forex Broker Fraud

School4trading Review

School4Trading Review – How to Spot Possible Forex Broker Fraud

In this School4trading Review, we will look at the features of the software, as well as the customer support. First, let us look at the interface. The design is simple and easy to navigate. It also provides a chatbot, which helps you to communicate with the broker. The customer service is warm and inviting, which is a hallmark of a good broker. In contrast, a fraudulent broker will use cold and impersonal customer support to lure people in.

Another problem with the system is that the login process is not always intuitive. You may have to retype your password several times to get in. Then, you may experience difficulties withdrawing your funds or accessing your account. In such cases, you might have to wait for days or even weeks before you can withdraw the money you’ve invested. This is not a good sign. It’s better to choose a different trading platform altogether.

If you’re having trouble logging in, you should also check the legitimacy of the broker. Whether the broker is licensed by a reliable regulatory body or closed down, you’ll want to be sure it’s legitimate. If the broker isn’t licensed by the right body, don’t trust him. You shouldn’t waste your time with an inexperienced company. This will only cause you problems in the long run.

The next factor that should be checked is the licensing. A legitimate broker will have a license from a high regulatory body. However, a broker without a license will be unreliable. Moreover, a reliable regulator will take away the license of a scam broker. As a result, a trustworthy School4Broker/Profittrade review should mention fees, account rules, and contract terms. A scam broker will be unable to operate legally.

Secondly, look for warning signs. The broker should be licensed and regulated by a reliable regulatory body. It should be regulated by a high level. If it doesn’t, it’s a scam. Lastly, it should have a website that lets you easily access your account. Moreover, you should not hesitate to check the contact information. If you find any information that seems suspicious, you should reconsider using the broker.

In summary, Forex trading isn’t easy, but it doesn’t have to be complicated. It’s not as difficult as it seems if you’ve heard about the program. You’ll learn everything about the basics and how to become a professional. But if you’re still unsure about whether this program is right for you, don’t hesitate to contact a school4trading’s website.

The most important thing to remember when it comes to Forex trading is that it’s not easy. While it’s important to have a strong background in trading, there are a number of factors that can affect your success. Having a proper plan is vital in the long run, because you will be trading with real money. And, the platform should be reliable. Otherwise, you’ll end up losing a lot of money.

As we’ve mentioned, Forex is not easy. Investing isn’t something you can do in the comfort of your own home. You need a proven system. There are no free trials, so you’ll have to find a way to do it yourself. This isn’t a scam, and it’s a great way to make money without any help. A Forex system can help you learn the intricacies of the market.

Although the process of learning Forex isn’t an easy one, it’s certainly not impossible. Fortunately, there are many people who are willing to take the time to learn how to trade. But, even the most experienced trader needs to be aware of the risks of the market. While Forex trading isn’t easy, it can be done with the right knowledge. The software’s user-friendly interface is key.

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Daily Financial News

Don’t Count On JPY Correction; Staying Long GBP/JPY

The path of the potential pace of the JPY decline may still be underestimated by markets, which continue trading the JPY long.

While the 10% USDJPY advance from September lows looks impressive from a momentum point of view, it may no thave been driven by Japan’s institutional investors reducing their hedging ratios or Japan’s household sector reestablishing carry trades.

Instead, investors seemed to have been caught on the wrong foot, concerned about a sudden decline of risk appetite or the incoming US administration being focused on trade issues and not on spending. Spending requires funding and indeed the President-elect Trump’s team appears to be focused on funding. Here are a few examples: Reducing corporate taxation may pave the way for US corporates repatriating some of their USD2.6trn accumulated foreign profits. Cutting bank regulation could increase the risk-absorbing capacity within bank balance sheets. Hence, funding conditions – including for the sovereign – might generally ease. De-regulating the oil sector would help the trade balance, slowing the anticipated increase in the US current account deficit. The US current account deficit presently runs at 2.6% of GDP, which is below worrisome levels. Should the incoming government push for early trade restrictions, reaction (including Asian sovereigns reducing their holdings) could increase US funding costs, which runs against the interest of the Trump team.

Instead of counting on risk aversion to stop the JPY depreciation, we expect nominal yield differentials and the Fed moderately hiking rates to unleash capital outflows from Japan.The yield differential argumenthas become more compelling with the BoJ turning into yield curve managers. Via this policy move, rising inflation rates push JPY real rates and yields lower, which will weaken the JPY. Exhibit 12 shows how much Japan’s labor market conditions have tightened. A minor surge in corporate profitability may now be sufficient, pushing Japan wages up and implicity real yields lower.

JPY dynamics are diametrical to last year . Last year, the JGB’s “exhausted”yield curve left the BoJ without a tool to push real yields low enough to adequately address the weakened nominal GDP outlook. JPY remained artificially high at a time when the US opted for sharply lower real yields. USDJPY had to decline, triggering JPY bullish secondround effects via JPY-based financial institutions increasing their FX hedge ratios and Japan’s retail sector cutting its carry trade exposures. Now the opposite seems to be happening. The managed JGB curve suggests rising inflation expectations are driving Japan’s real yield lower. The Fed reluctantly hiking rates may keep risk appetite supported but increase USD hedging costs.Financial institutions reducinghedge ratios and Japan’s household sector piling back into the carry trade could provide secondround JPY weakening effects

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