Forex Blog

March 13, 2014

Gold Stumbles On US Claims But Recovers on Ukraine Turmoil

Gold has enjoyed a safe haven status this year. Last year losses were mostly driven by lower safe haven demand as the geo political issues where short lived and for the most part in the periphery economies such as Turkey. This year the conflict in Ukraine has deep implications for Europe’s supply of energy. The metal reached the 1,372 price point on geopolitical turmoil recovering from earlier losses in the day after the positive US employment numbers decreased the bullish trend.

Earlier today there were mixed reports about the global recovery. Chinese Industrial Production came in lower than expected. The figures did not take into account January which suffers from “Lunar New Year Holiday” distortion and still came under the previous reading. The United States had a 3 month low unemployment claims number which boosted the USD. 315,000 jobless claims were filed this week. The US Federal Reserve is trying to decouple the pace of tapering and rate hike expectations to the recovery of the job market. Yellen has explained that monetary policy should be linked to a single number that could be flawed like the unemployment rate. It is unclear how successful the Fed has been with moving the market’s perception of employment as the most important indicator.

Inflation concerns were largely on the background in 2013. Record low inflation in the major economies to the point of deflation had decreased the appetite in the yellow metal as an inflation hedge. With the Reserve Bank of New Zealand hiking rates yesterday that could change. The first major central bank to raise rates since 2011. This along the continued tapering from the Fed, even though the US central bank argues they are not linked, has boosted the expectation of a imminent US rate hike.

Gold lost over 20 percent in 2013 and this year started well for the metal. China and India’s demand for the commodity have decreased. Speculative demand to hedge inflation and geopolitical uncertainty have increased following the RBNZ hike and the improving US job situation.

The post Gold Stumbles On US Claims But Recovers on Ukraine Turmoil appeared first on MarketPulse.

March 11, 2014

Mining Companies Hurt by Ore Drop and China Lower Exports

Shares in some of the world’s biggest mining companies have been hit by a slump in the price of iron ore, amid fears of a slowdown in China’s economy.

Iron ore delivered into China fell 8.3% on Monday after Beijing reported weak export data over the weekend.

China is one of the biggest consumers of the commodity and there are concerns a slowdown in its economy may hurt demand and impact miners’ profits.

Shares of BHP Billiton, Rio Tinto and Glencore Xstrata all fell.

Rio Tinto shares ended the day down by 5.7%, while BHP Billiton fell more than 4% on the Australian Securities Exchange.

Fortescue Metals tumbled nearly 10% in Sydney on Monday.

Mining stocks listed in London were also hurt, with Anglo American, Antofagasta and Glencore Xstrata all down by more than 2%.

via BBC

The post Mining Companies Hurt by Ore Drop and China Lower Exports appeared first on MarketPulse.

November 26, 2013

USD/CAD down below 1.0530 as Oil Prices Drop on Iran Deal

The Canadian Dollar dropped to its lowest level in four months as the price of oil, Canada’s biggest export, fell after Iran and world powers reached an interim deal to set limits on its nuclear program.

The currency fell against the majority of its most-traded peers in the wake of the sixth-month agreement, which offers Iran about $7 billion in relief from sanctions in exchange for curbs on its nuclear program, while leaving in place banking and financial measures that have hampered its crude exports. World powers will continue negotiating for a more comprehensive deal to prevent Iran from developing nuclear weapons in exchange for ending sanctions.

“There’s a longer-term view being built in there that this is going to turn open the spigot for Iranian crude oil production which would obviously impact crude oil prices negatively,” said Mark Frey, chief market strategist at Cambridge Mercantile Group, a global foreign exchange and payments provider, by phone from Victoria. “In the short term, yeah I think oil is going to trade heavy, and I think it’s going to hurt the commodity currencies and I think you’re going to see that in the Canadian dollar.”

Bloomberg

The post USD/CAD down below 1.0530 as Oil Prices Drop on Iran Deal appeared first on MarketPulse.

November 25, 2013

A senior RBA official has reiterated governor Stevens’ comments that the central bank could intervene to drive the AU dollar down

The post A senior RBA official has reiterated governor Stevens’ comments that the central bank could intervene to drive the AU dollar down appeared first on MarketPulse.

U.S. Dollar Gaining in Popularity

Currency speculators have ramped up bets on the dollar strengthening against other currencies to their highest level in two months, the latest sign of bullish sentiment towards the U.S. currency making a comeback.

The value of the dollar’s net long position rose to $17.10 billion in the week ending November 19, up from $14.46 billion the previous week and the highest since the week ending September 10, data released from the Commodity Futures Trading Commission late on Friday showed.

According to Kathy Lien, managing director at BK asset management in New York, speculators hold the largest amount of long-dollar, short- yen positions in six years.

CNBC

The post U.S. Dollar Gaining in Popularity appeared first on MarketPulse.

August 9, 2013

Week in FX Americas – Loonie Rallies Despite Job Losses

Welcome to Canada’s swinging door job policy, one month up and the next down. Despite the disappointing -39,400-job loss headline, the commodity rich country’s unemployment rate is little changed. In fact, the rate is virtually unchanged from a year ago (+7.2%), while total employment is up +1.3% year-over-year. One cannot knock that it’s a positive number that reflects a modestly growing Canadian economy.

Digging deeper, its true, the headline looks bad, but some of the details are not as bad as you would think. The public sector cuts where much of last month’s decline came from (-74k, the largest on record can be attributed to the Harper governments austerity measures), should not be too big a surprise to many given the huge sector payroll increase at the beginning of the year. The July report is most likely playing catch up. Even better is that the private sector created jobs (+31.4k). This should be considered as a major plus for any economy going forward. Other details show that the labor force fell -14.2k from +66.7% to +66.5%. Wage inflation was almost non-existent (+1.8%, y/y), a good enough reason for the BoC to remain on hold indefinitely and not act on its mild rate hike bias.

What about the loonie? The first reaction was to sell CAD and end the currency’s weeklong rally. The weaker long Cad positions certainly got flushed out, however, the commodity and interest rate sensitive currency has since reversed its course. The loonie has managed to print weekly highs on the back of both oil and gold’s Friday appreciation shenanigans that has been influenced mostly by stronger Chinese data.

Investors seem more confident that China’s slowdown has stabilized – especially after Industrial Production numbers on Friday beat market expectations. Investors are ending the week looking to pick up currencies that will benefit from increased demand for their raw materials – Canada has abundance of commodities.

  • US and Japan Wrap First TPP Talks
  • US Fed Member Considers France Europe’s Biggest Threat
  • Chinese Data allows more room to Boost Stimulus
  • Fed Uncertainty Continues to Hurt the U.S. Dollar
  • Fed Tapering Still Possible at September Meeting
  • Continued Fed Uncertainty sees U.S. Dollar Fall Again
  • Gold Continues to Rise After US Unemployment Claims
  • Oil Continues to Fall as Fed Tapering Gets Jobless Claims Boost
  • US Jobless Claims Rise on Weekly Basis
  • Canadian Building Permits Drop 10 Percent in June
  • U.S. Dollar Index at Seven Week Low
  • US Mortgage Applications and Rates Rise
  • Mark Carney’s Legacy in Canada
  • Obama supports Continued Governmental Support for Housing Market
  • Fed May Cut Purchases Very Soon
  • Economists Favour Yellen as Fed Chief Successor
  • U.S. Growth in Services Likely Picked Up

WEEK AHEAD

* CNY New Yuan Loans
* JPY Gross Domestic Product
* JPY Bank of Japan meeting minutes
* EUR German Consumer Price Index
* GBP Consumer Price Index
* EUR German Economic Sentiment
* USD Advance Retail Sales
* EUR German Gross Domestic Product
* GBP Bank of England Minutes
* EUR Euro-Zone Gross Domestic Product s.a.
* USD Consumer Price Index
* USD U. of Michigan Confidence

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Week in FX Europe – Summer Doldrums Increase German Finance Costs

Filed under: OANDA News — Tags: , , , , , , , , , , — admin @ 2:39 pm

Do not rule out Germany paying its highest 10-year funding costs in a year and a half next week. They will be the only Euro country coming to the bond market with an issue slap bang in the middle of the Euro-annual summer holidays.

Credit rating agency Fitch reaffirmed Germany’s triple-A credit status earlier this week, citing some “overachievements” by Merkel’s right-wing coalition government on the fiscal front. They also happened to mention that various risks related to the Euro-zone crises directly had actually eased.

Improving Euro data has allowed their own bond yields to back up; it’s now becoming more of a global phenomena. Even the Fed’s plan to potentially reduce the size of its bond buying requirements (tapering) is also putting upward pressure on global bond yields. However, at the short end of most Central Banks yield curve, yields remain relatively low, supported by accommodating monetary policies being offered by most major central banks. The ECB’s ‘forward guidance’ stance will continue to anchor short-term yields.

Germany will offer €4b of the current benchmark 10-year, +1.5% May 2023 Bund. This will be the last time that they will tap this particular issue. The new 10-year Bund will be introduced next month. At today’s current levels the German government will be paying up – the secondary market is trading at +1.69%. Because of the holiday season that’s in it, both dealers and investors will be expecting some give and slippage due to the potential lack of interest – besides dealers like the issuer to pay up!

  • UK Trade Deficit Narrows Due to Rising Exports
  • German Economy Ministry Confident on 2nd Quarter Growth
  • Germany Economic Data Points to a Healthier European Engine
  • Greek Unemployment Hits New Record at 27.6 Percent
  • Swiss Inflation Unchanged in July
  • Swiss Unemployment Rate Unchanged at 3.2 Percent in July
  • BoE Mark Carney Confident Forward Guidance Should Boost UK Economy
  • OECD Says UK Growth to Strengthen in 2013
  • BOE’s Carney Keeps Stimulus Options Open
  • Italy’s GDP May Signal End of EZ Recession
  • Swiss Franc Looking Precarious on Euro-Zone Risk
  • Bank of England to Unveil New Rate Setting Guidance on Wednesday
  • IMF Warns France’s Public Spending and Rigid Labor Market Drag Recovery
  • UK Manufacturing Rises in June
  • Europe’s Economy is Slowly Stabilizing

WEEK AHEAD

* CNY New Yuan Loans
* JPY Gross Domestic Product
* JPY Bank of Japan meeting minutes
* EUR German Consumer Price Index
* GBP Consumer Price Index
* EUR German Economic Sentiment
* USD Advance Retail Sales
* EUR German Gross Domestic Product
* GBP Bank of England Minutes
* EUR Euro-Zone Gross Domestic Product s.a.
* USD Consumer Price Index
* USD U. of Michigan Confidence

Get OANDA’s exclusive weekly Market Pulse FX

Email Address: Preferred Format:

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

July 22, 2013

Gold: Bulls Vindicated After Record Bear Short-Run

Filed under: OANDA News — Tags: , , , , , , , — admin @ 4:56 pm

With the Fed’s ‘helicopter’ Ben dampening market speculation that a cut in stimulus is imminent is leaving the gold bulls somewhat vindicated for now. The yellow metal has managed to rally just shy of +7% in the past two-weeks. This includes the +2.65% or $34 surge since the Australasian open yesterday. With Bernanke highlighting last week that it was way too early to make any judgment as to whether US policy makers will start winding down its stimulus program in September, has allowed the commodity to print the two-week biggest gain in nearly 20-months. It was only in April that the market witnessed the commodity bundle prices in free-fall, as some investors lost faith in this particular metal as store-of-value.

The market price action is telling investors that the “Fed wants to see some visible improvement in economic conditions” before policymakers begin tapering is providing underlying support for the metal. A softer dollar is also helping the commodity bundles price plight.

Last weeks CFTC data reveled that speculators increased their net-long position by +56% to 55,535 futures and options contracts by July 16. This is the highest recorded long position in seven-weeks. On the flipside, the short contracts fell the most since last November. The report also showed that the net-bullish wagers across 18 U.S.-traded commodities jumped +28%, the biggest such gain since March. Most of the gain in the net-long position is attributed to a retreat in the short-holdings, which slumped to 61,002 contracts from 80,147. Long contracts increased +0.6%. In hindsight, the record-large bearish position had left prices vulnerable to a “short-squeeze.”

Last week, the yellow metal briefly tested $1,300 in the futures market. Gold gained +1.3 % by July 16th, and capped the first back-to-back weekly gain since May. Year-to-date, the metals prices have slid -24 %, wiping just under -$60b from Exchange Traded Products, mostly after investors lost faith in the commodity as a store-of-value.

It’s not as if the market has turned wholly bullish all of a sudden – the longs have not raced that far ahead. The fact that the overall short positions were at a record, it was only a matter of time, that with good enough reason, the bears would want to cover. Both Ben and the dollar have provided that impetus. To many it seemed that investors had become complacent in their positioning of gold as it went up for so long – the bears can feel somewhat vindicated in this month’s price action.

A recent Reuters survey has spot gold averaging $1,410.75/oz. this year. That is -13% below the average forecast ($1,627) three-months ago. Going forward, the yellow metals prices are expected to remain weak as the Fed begins to scale back QE and the dollar rises.


Dean Popplewell, Director of Currency Analysis and Research @ OANDA MarketPulseFX

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

GBP/USD – Pound Just Keeps on Rolling

The British pound took a brief weekend break, but didn’t miss a step as it continues to post gains against the US dollar. In Monday’s North American session, GBP/USD is trading in the mid-1.53 range. In today’s only US release, Existing Home Sales was a disappointment, dropping to a two-month low. There are no British releases on Monday.

Last week, the pound posted sharp gains for the second consecutive week, and didn’t let tepid numbers out of the UK get in the way of its rally against the dollar. British Retail Sales posted a very small gain, while Public Sector Net Borrowing missed the estimate. In contrast, the US posted strong employment and manufacturing data on Thursday, but this didn’t impede the pound’s ascent. GBP/USD has gained over five cents in the past 10 days, as it continues to recover from a terrible slide that started in mid-June.

Finance ministers and central bankers from the G20 countries concluded a meeting in Moscow on the weekend. The G20 released a statement saying that future changes to monetary policy would be “carefully calibrated and clearly communicated”. This is likely a hint to the recent market turmoil in response to statements from the Federal Reserve regarding possible QE tapering. The Fed has not always sounded consistent, and predictably, the resulting uncertainty has rattled the markets. Leaders of the G20 will meet in St. Petersburg in September, and a final draft statement from the Moscow meeting noted that a plan to increase jobs and growth and rebalance debt will be ready for the September meeting.

Over in the US, Federal Reserve chair Bernard Bernanke was at center stage on Wednesday and Thursday, as he testified before Congress. However, Bernanke did not add anything we haven’t heard before, and his testimony was not a market-mover by any means. Bernanke reiterated that the Fed’s monetary policy would remain accommodative, and added that the Fed’s bond-buying program was “not on a preset course”. This vague statement leaves the Fed plenty of wiggle room to scale down QE should it choose to do so. Bernanke reiterated that any decision to scale down QE would depend on improving economic conditions. He noted that present US unemployment levels (7.6%) were “well above” normal levels, and was careful to stay away from presenting any specific time deadlines for scaling down QE. So, the message from the Fed to the markets seems to be that QE tapering is not on the table before the economy improves and unemployment falls.

July 17, 2013

USD/CAD below 1.04 again on Speculation U.S. Fed May Sustain Stimulus

The Canadian dollar joined most major peers in rising against its U.S. counterpart on speculation Chairman Ben S. Bernanke will signal the Federal Reserve is in no hurry to slow monetary stimulus.

The currency ended two days of losses before Bernanke testifies to Congress tomorrow. The U.S. central bank has been buying $85 billion of assets per month while holding its short-term interest-rate target at almost zero. Bank of Canada Governor Stephen Poloz will keep the benchmark interest rate at 1 percent tomorrow as he releases his inaugural monetary policy report, according to a Bloomberg survey of 20 economists.

“The dollar’s on the back foot against everything because people are just squaring up before Bernanke tomorrow,” said Greg Anderson, head of global foreign-exchange strategy at Bank of Montreal, by phone from Toronto. “The Canadian dollar had not performed nearly as well as other commodity currencies up until 11 a.m. due to technical reasons. And then the technical picture changed.”

Bloomberg

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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