Forex Blog

August 12, 2010

Irish Borrowing costs ridiculous

Filed under: OANDA News — Tags: , , , , , , , , — admin @ 1:58 pm

Central Bank governor Patrick Honohan has described Irish bond market spreads as a “setback”.

Irish bonds spreads widened after the European Commission approved the Government’s move to raise the level of capital it can inject into Anglo Irish Bank.

“The spreads are a setback for our hopes of a narrowing to reflect the fiscal credibility of the country,” Mr Honohan told the Daily Telegraph.

“I don’t look at them every day but at this level they are ridiculous.”

Bond spreads yesterday hit the highest level in a month, reaching almost 300 basis points at one point, and the yield on Irish 10-year bonds broke through the 5.4 per cent mark, while German 10-year bund yields fell to a record low.

They closed just below 289 basis points, and this morning were at 288 basis points.

Mr Honohan also criticised Anglo in his interview, describing the bank as “egregious, in a league of their own”.

Irish Times

August 6, 2010

UK Manufacturing Production Rises

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U.K. manufacturing increased for a second month in June in the best calendar quarter for factory production in more than a decade as the economic recovery strengthened.

Output climbed 0.3 percent from the previous month, when it rose by the same amount, the Office for National Statistics said today in London. The median forecast of 24 economists in a Bloomberg News survey was for an increase of 0.4 percent. Overall industrial production unexpectedly fell due to earlier- than-usual maintenance of oil and gas fields.

Bank of England policy makers yesterday kept their 200 billion-pound ($318 billion) bond stimulus in place and held the benchmark interest rate at a record low. While economic growth accelerated to the fastest in four years in the second quarter, Governor Mervyn King has downplayed the data and said last week that officials must “keep our foot firmly on the accelerator.”

Bloomberg

Hungarians under pressure from CHF

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Melinda Nagy, a Hungarian special education teacher who knows little about financial markets, has started to lose sleep over exchange rates.

Nagy’s payments on her Swiss-franc denominated mortgage almost doubled after the Hungarian forint dropped 35 percent since 2008 against the Alpine nation’s currency, forcing her to clean houses and work at a chicken ranch to avoid foreclosure.

“I’d rather burn my house down than give it back to the bank,” said Nagy, 43, who lives in the eastern Hungarian city of Hatvan. “What’s the difference if I go to jail or become homeless?”

The amount of franc-denominated mortgages in Hungary surged to 2.2 trillion forint ($10.2 billion) in May from 133.8 billion forint at the start of 2005, according to central bank data. Non-performing loans at local lenders such as OTP Bank Nyrt, Erste Group Bank AG and Foldhitel es Jelzalogbank Nyrt may rise to as much as 10 percent of total loans by the end of the year, said Tamas Erdei, president of the Budapest-based Banking Association.

Bloomberg

June 29, 2010

China Growth Fears Push Down Bond Yields

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Fears that growth in China is weakening and falling Asian stocks conspired with the on-going European debt crisis to give investors greater concern for the safety of US debt. As a result, two-year Treasury yields fell to a record low today while 10-year yields fell below 3 percent.

“If you look at the Chinese stock market, it looks particularly ugly, and China has a tendency to lead in the ‘rest-of-the-world’ category,” said a trader in London.

In Europe the FTSEurofirst index of top European shares lost around 1.9 percent, with euro zone bank funding worries ahead of the repayment of 442 billion of European Central Bank emergency loans adding to concerns.

“A lot of (negative sentiment) is still emanating from concerns over Europe and the European banking system and the impact that might have if it rolls out globally,” said David Page, economist at Investec.

Source: Reuters

March 19, 2010

Canada’s Core Inflation Jumps 2.1%

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Canada’s core inflation rate rose 2.1 percent in February compared to 2 percent the previous month. The rate of increase beat earlier predictions of 1.7 percent and is the fastest advancement since the month of December, 2008.

The result is especially interesting as the Bank of Canada has a growth target of 2 percent. Earlier in the year, the Bank predicted that that the annual rate of growth would not reach 2 percent until the third quarter of the year. Based on this assessment, Bank of Canada Governor Mark Carney had pledged to maintain interest rates at a record low 0.25 percent unless changes in the inflation rate warranted action earlier. Could the results of the past two months warrant an increase to interest rates earlier than previously expected?

David Watt, senior currency strategist at RBC Capital thinks it is possible.

“Inflation has been much stickier than the Bank of Canada anticipated and the economy is starting to roll. Overall, the Bank of Canada has no flexibility left and would be justified in highlighting the risk of an early move.”

Source: Bloomberg

February 4, 2010

Bank of England pauses asset purchase program

Filed under: OANDA News — Tags: , , , , , , , , , , , , , — admin @ 5:13 am

Central Bank of England BOE

Bank of England

Bank of England policymakers on Thursday paused the central bank’s 200 billion pound ($319 billion) asset purchase program. A majority of economists had expected the Monetary Policy Committee to end the quantitative-easing measures at least for now, although a decision wasn’t seen as clear cut amid signs of a weaker-than-expected economic recovery. As expected, the MPC left its key lending rate unchanged at a record low 0.5%

MarketWatch

ECB to Hold Rates, Delay Exit Debate Until March

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The European Central Bank is expected to keep interest rates at a record low of 1.0 percent at its meeting on Thursday, and hold off until March before looking at an unwinding strategy for crisis support measures.

European Central Bank ECB

European Central Bank

All 86 economists in a recent Reuters poll expected the ECB to keep rates at their record low of 1.0 percent this month and only two saw any change before the middle of the year.

ING senior economist Carsten Brzeski said thrill-seekers could safely disregard Thursday’s monthly meeting, just three weeks after the January decision, and come back in March.

“Then, the ECB will present the latest staff forecasts and probably also (decide) whether and when the ECB’s open market operations return to flexible tenders and limited allotments,” he said.

CNBC

Australia Retail Sales Mixed, Home Building Booms

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Australian retail sales slipped in December as consumers recovered from a spending binge the previous month but sales for the whole fourth quarter were up strongly, making a healthy contribution to economic growth.

Other government data out on Thursday showed approvals to build new homes rose a massive 53 percent in December, from a year earlier, heralding a boom in home construction.

“These are pretty good figures overall,” said Brian Redican, a senior economist at Macquarie.

“Building approvals were very strong and home construction spills over into the broad economy in so many ways,” he added. “It fuels consumption as people furnish their new homes and it’s
very labour intensive — just try getting a tradesman right now.”

Financial market reaction was limited as analysts had anticipated a pullback in sales following interest rate hikes in October, November and December.

CNBC

January 19, 2010

Canada Rate Decision Imminent!

Filed under: Forex News — Tags: , , , , , , , , , , , — admin @ 6:48 am

Canada’s interest rate decision is due out at 9:00AM this morning.  It is widely accepted that they will leaves rates unchanged at .25%, which is a record low.  Inflation appears to be well within the Central Bank’s target rate of 2%, which could mean that they won’t consider a rate hike until the second half of the year.

Part of the reason to remain flat is due to Canada’s reliance on a US economic recovery, as the US is the largest market for Canadian exports.  So it is quite possible that we won’t see a rate hike in Canada until we see one in the US.  While the recovery is taking place in Canada, its not strong enough to warrant rate hikes at this time.

According to Bank Governor Mark Carney, the economy will operate with “slack” throughout the middle of next year as the Canadian dollar’s 20% gain versus the US dollar has hampered exports.

So barring any unlikely rate hikes, I expect the Loonie to trade sideways until inflation becomes a problem in Canada, and the Loonie will continue to benefit from its status as a commodity currency.

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December 4, 2009

30 Year Mortgages At Record Low

Filed under: OANDA News — Tags: , , , , , , , , , , , , , — admin @ 7:24 am

The interest rate on 30-year mortgages fell to a record low of 4.71 percent after the Federal Reserve injected $1.25 trillion into mortgage-backed securities as part of the government’s plan to reduce the cost of buying a home. Despite the low rates, qualifying for a loan remains difficult and lenders reserve the best rates for those with unblemished credit ratings and a full 20 percent down payment.

Associated Press

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