Forex Blog

June 28, 2011

The Final Countdown!

Filed under: Forex News — Tags: , , , , , , , , — admin @ 7:14 am

The market is in a bit of a holding pattern today as the countdown to the Greek vote on austerity is due in the next 24-hours, and as I have mentioned before, this is most certainly not a done deal. Protests in the streets of Greece (riots) have demonstrated the displeasure with the austerity measures and all it would take is a few votes against the austerity to sink the Euro.

Contagion is a much larger concern than Greece itself, which only represents some 3% of the Euro zone economy. If the Greeks end of not accepting the measures and end up defaulting, then this could set off a downward spiral which the Central bankers may not be able to prevent. So there is still a good deal of risk in the marketplace, and this is reflected so far this morning with lower equity prices and mild risk aversion to start the morning. But overall, the markets appear confident that this deal will get done, and that Greece will live to fight another day.

In the UK, GDP figures came in showing a decline in GDP to 1.6% from an expected 1.8%, though the quarterly number came in as expected at .5%. Yesterday noted BOE dove Adam Posen dismissed the BIS call for higher interest rates as “nonsense”. I guess he doesn’t consider 4.5% CPI data as inflationary and cites lower wage growth as reason enough to be dovish.

Later this morning the Case/Shiller home price index is due out and is expected to show declining home prices of around 4%, though consumer confidence figures are expected to have risen from last month’s reading.In the forex market: Aussie (AUD): The Aussie is now higher as the markets have just flipped from risk aversion to risk taking without a major catalyst that can be identified. It should be noted that there is now sentiment in the market that next move for the RBA in Australia may be a rate reduction rather than a rate hike as China attempts to slow their growth. (Click chart to enlarge)

audusd0628.JPG

Kiwi (NZD): The Kiwi is mostly lower after yesterday’s trade balance figures came in lower than expected, but there is additional sentiment that the recovery in Christ Church after the earthquakes has been slowing.

Loonie (CAD): The Loonie is mixed as higher oil prices trading up to a 92 handle have counter-balanced the weak US economic outlook that is causing some US dollar selling this morning. Tomorrow CPI data will be released which could show inflationary pressure.

Euro (EUR): The Euro is mixed as all eyes are on the Greek vote for austerity as riots in the streets of Greece are taking place. Tomorrow will bring German CPI data but this is of little importance in the grand scheme of things.

Pound (GBP): The Pound is mixed after GDP figures came in lower than expected showing that stagflationary forces may be rearing their ugly head. BOE dove Posen’s comments may not be so far-fetched if the economy continues to worsen. (Click chart to enlarge)

gbpusd0628.JPG

Swissie (CHF): The Swissie is higher across the board as money flows from the Euro to the safe haven currency with the risk of the Greek vote in full force.

Dollar (USD): The Dollar is actually weakening at this point despite the risk in the market as investors want to get in one more day of risk-taking going into the Greek vote. Home price figures are expected to show declines later this morning, though consumer confidence is expected to be up from last month.

Yen (JPY): The Yen is mostly weaker but not by much as risk is still prevalent in the marketplace. Retail trade figures came in better than expected showing gains of 2.4%, but big box retail sales decrease by that same amount.

The Greek vote is expected tomorrow morning and represents the single largest risk event currently in the markets. The US debt ceiling debate is also something to be concerned about, but that discussion is for another day.

It is no secret that economies are contracting around the globe, however the days of extend and pretend are over and it is time to face the harsh realities. Look no further than what is taking place in Greece as a microcosm for the global economy.

What happens if the citizens of the UK decide that they have had enough of 4.5% inflation even though the BOE continues to avoid dealing with it for fear of sinking the economy? Or what happens if the confidence in the full faith and credit of the US is called into question if the debt ceiling debate can’t be resolved?

These are all precarious positions which need to be handled by governments and not avoided. Unfortunately, most wait until there is a crisis to provide political cover for making difficult choices which can have negative effects going forward.

So keep an eye on this Greek vote and mitigate your risk exposure.

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!

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Tags: account, AUD, Aussie, cad, course, currenc, currency, currency market, currency trading, dollar, dow, economy, EUR, Euro, forex, free, fx, fxedu, gbp, Il, interest, jpy, nzd, practice, ssi, time, trade, USD, Yen

June 7, 2011

Enough Already!

Filed under: Forex News — Tags: , , , , , , , , , , , , , — admin @ 7:01 am

What I am specifically referring to is the Fed monetary stimulus known as QE2. Chairman Bernanke will speaking today but don’t expect any earth-shattering news to be forthcoming. The FOMC meeting later this month will be important as we may get a better understanding of whether or not the Fed is going to continue its stimulus or stop it entirely.

This is excessive prodding by the Fed is having the reverse effect of what was intended and the costs no longer outweigh the benefits. So far, it has been all monetary policy guiding the ship and its time the politicians in Washington step up and do something about fiscal policy.

Don’t expect that to happen any time soon though as the US slips into further mediocrity because politicians are to busy campaigning and not doing the job they were elected to do. As the US loses further clout and credibility on the world stage, it will be much harder to maintain influence. In fact, Chancellor Merkel of Germany is here in the US accepting an award of some sort, yet she is completely vilified in her own country despite Germany’s economic strength.

And speaking of German strength, factory orders came in much better than expected earlier this morning, as did Euro zone retail sales figures. However, the Greek debt crisis is still present and the “solution” of a roll-over of Greek bonds is unclear as to the response.

Overnight in Australia, the RBA left rates unchanged as expected, and the dovish accompanying statement has caused some Aussie weakness this morning.

However today the markets are set to open higher, with global stocks and gold leading the way. Oil has pulled back to a 98 handle, as Saudi Arabia said it will increase production. So the markets are moving more on individual fundamentals this morning than broad risk themes, though reversion to mean could take place.

In the forex market:

Aussie (AUD): The Aussie is mostly lower after the dovish comments from the RBA who maintained that current interest rates are “appropriate”. At 4.75% they might be right, but expectations of a further hike have been diminished.

Kiwi (NZD): The Kiwi is the main beneficiary of the RBA rate pause, as the RBNZ rate policy meeting is tomorrow afternoon and it represents the next possibility of a rate hike. While no change is expected, the statement could be a bit more hawkish as the NZ economy has fared better than most have expected. (Click chart to enlarge)

nzdusd0607.JPG

Loonie (CAD): The Loonie is strengthening despite lower oil prices after yesterday’s PMI figures beat expectations. The Canadian Finance Minister Flaherty said yesterday that Canada is looking to balance its budget within the next 3 years which elicited a favorable response from the markets.

Euro (EUR): The Euro is mostly higher after retail sales figures came in better than expected, showing a gain of 1.1% vs. an expected no change as the monthly figure rose .9% vs. an expected .3%. In addition, German factory orders rose 10.5% vs. an expectation of 9% showing signs of strength. Now if they can just get that pesky debt crisis ironed out.

Pound (GBP): The Pound is mostly higher as well as Dollar weakness on risk taking is causing the safe-havens to sell off. While Thursday’s rate decision is expected to provide no change, the release of the minutes will be more important.

Swissie (CHF): The Swissie is getting a respite from recent high demand as the safe haven currency is out of fashion today despite CPI data which came in slightly higher than expected at .4%. A rate hike would seem inappropriate at this time.

Dollar (USD): The Dollar is mostly weaker as risk taking is picking up steam as there is no really important data from the US that could derail sentiment. Unless Bernanke says something dumb later today, which is unlikely.

Yen (JPY): The Yen is selling off this morning as safe haven demand is decreasing and carry trades are starting to be re-established after last week’s selling. Japanese GDP figures are due out tomorrow night and are expected to decline which could prompt the BOJ to act to jump-start their economy. (Click chart to enlarge)

usdjpy0607.JPG

It’s put up or shut up time here in the US. The markets and the economy have had ample to time to prepare for the day that the music died, i.e. the end of QE2. The fact that politicians have done nothing on the fiscal side of the equation has left us severely unbalanced.

While the Fed may have been the root cause of the crisis, they are now the only hope for a solution. The longer these non-actions play out, the more the uncertainty will persist which will continue to keep us in this economic malaise.

While I am not an economist, I’ve begun to hear rumblings that the true effects of QE2 haven’t been felt yet. As the massive liquidity makes its way through the markets, this could set off some inflationary factors which coupled with economic disinterest could land us square in the middle of stagflation which is the worst possible scenario.

Only time will tell what happens, and we are running out of it as the clock is ticking!

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!

Tags: account, AUD, Aussie, blog, cad, course, currenc, currency, currency trading, dollar, economy, EUR, Euro, forex, forextrading, free, fxedu, gbp, Il, interest, jpy, market, Mike Conlon, nzd, practice, ssi, time, trade, USD, Yen

June 1, 2011

Manufactured Economies?

Filed under: Forex News — Tags: , , , , , , , — admin @ 7:07 am

When I think of something manufactured, I think of something made up. So it is no surprise that when I think about the global economy, it seems like manufacturing should be a more important component. Today we have received a slew of manufacturing reports from around the globe and they all have one thing is common: that they all show declines.

This exemplifies the “soft patch” that the global economy seems to be going through, though we must wonder if this situation is temporary or a sign of things to come.

PMI data from China, the Euro zone, the UK, and later this morning the all show that growth is slowing. Yet inflationary pressure due to a weak US dollar still has commodities prices near highs. With massive debt owed around the globe, it appears as though we are getting ready for global stagflation.

In Australia, GDP figures came in slightly lower than expected as a result of the flooding and this was a relief to the markets as the fear was that it was going to be much worse.

Today starts the first of three employment reports here in the US, with the ADP employment change figures today, initial jobless claims tomorrow, and lastly Non-Farm Payrolls on Friday.

So there is some risk aversion in the markets to start the day, led by lower stocks and commodities prices.

In the forex market:

Aussie (AUD): The Aussie is mostly higher despite the risk aversion as GDP figures came in showing a quarterly decline of 1.2%, just missing the expectation of 1.1%. This was seen as a positive by the market, which feared that it could be worse than expected. (Click chart to enlarge)

audusd0601.JPG

Kiwi (NZD): The Kiwi is mixed this morning as lower Chinese PMI figures highlight a slowing Chinese economy, and this affects the Kiwi as the Chinese import a lot from NZ.

Loonie (CAD): The Loonie is somewhat mixed today after yesterday’s BOC rate policy decision reported that they will “eventually” raise interest rates. This sent the Loonie higher yesterday and now the question is “when” and not “if”. (Click chart to enlarge)

usdcad0601.JPG

Euro (EUR): The Euro is mixed today as slightly lower than expected PMI figures and the focus on the Greek debt crisis leave the market befuddled.

Pound (GBP): The Pound is lower across the board after the biggest miss in PMI data, reporting a figure of 52.1 vs. an expected 54.1. In addition, mortgage approvals were lower to 45.2K vs. an expected 47K showing signs of economic weakness.

Swissie (CHF): The Franc is higher across the board receiving the dual benefit of risk aversion and better than expected retail sales figures.

Dollar (USD): The Dollar is mostly lower as the ADP jobs report came in much worse than expected this morning posting a gain of 38K vs. an expected 175K. This will likely reduce the expectation of Friday’s NFP and despite the risk aversion in the markets, money flows are moving elsewhere.

Yen (JPY): The Yen is mostly higher on risk themes as the Japanese Prime Minister Kan faces a no-confidence vote over his handling of the crisis taking place in Japan. Political uncertainty is not good as Kan was seen as moving toward fiscal responsibility.

Wow, just a dismal employment change number here in the US has the markets spooked about what Friday’s NFP might be. With many areas of the economy weakening, the possibility of QE3 may be back on the table.

With the theater taking place in Washington DC over raising the debt ceiling, the inability of politicians to get us back on the path to financial responsibility will cause this situation to stagnate further.

Should Bernanke continue with the misguided belief that further Fed easing be required, then we will most certainly be on our way to stagflation. Let’s face it, there is a time to spend and a time to save and with economic uncertainty where it is, saving is the right way to go regardless of whether or not the Fed makes it an unappealing proposition.

There is still great risk in the marketplace, whether it’s from a global slowdown or the Euro debt crisis. Do not be fooled into making irresponsible decisions just because that is what the government wants you to do!

Put your money with the financially responsible regions around the globe as they are the ones mostly likely to experience growth. A very simple way to do this is through the forex market!

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!

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Tags: account, AUD, Aussie, blog, cad, course, currenc, currency, currency trading, dollar, dow, economy, EUR, Euro, forex, forextrading, free, fx, fxedu, gbp, Il, interest, jpy, market, Mike Conlon, nzd, practice, ssi, time, USD, Yen

May 4, 2011

Rough Patch Ahead?

Filed under: Forex News — Tags: , , , , , , , , — admin @ 7:21 am

The data is starting to get a bit weaker and the market looks as though it is preparing for an economic “rough patch” that may be just around the corner. While we all know that QE2 will officially be coming to an end shortly, how long that lasts is anyone’s guess.

The first indicator of unemployment here in the US came out this morning, with the ADP jobs report showing gains that were les than expected. This comes ahead of tomorrow’s initial jobless which are expected in the low 400K range (which is higher than we had hoped when we reached the 300k range) and then Friday’s all-important Non Farm Payrolls report.

Overnight, the Central Bank of China issued hawkish statements that combating inflation was their number one concern, so the fear of a Chinese slowdown sent the MSCI Pac Rim stock index lower, taking commodities and commodity currencies lower as well.

Yet the Euro and the Pound are holding up well, as tomorrow’s rate policy decisions are expected to produce no change, yet the ECB policy statement could be hawkish. Retail sales figures in the Euro zone came in lower than expected, and home prices declined in the UK.

This all adds up to a global slowdown, which means that the market is convinced that Bernanke will attempt to come back to the rescue and put the training wheels back on the economy through further easing at the first sign of trouble.

In the forex market:

Aussie (AUD): The Aussie started the morning lower but has flipped to higher as the weak Dollar play is back in action.

Kiwi (NZD): The Kiwi is lower across the board as it is very much influenced by what goes on in the Chinese economy. Unemployment figures due out later tonight could put a positive spin on the NZ economy.

Loonie (CAD): The Loonie is mostly lower as oil prices have pulled back to a $110 handle and the dual problem of being so in bed with the US economy has further contributed to weakness. Nevertheless the weakening Dollar has just pushed the Loonie back toward .95 vs. USD. (Click chart to enlarge)

usdcad0504.JPG

Euro (EUR): Greek debt restructuring. Declining retail sales figures (-1.7% vs. an expected no change). Portuguese and Irish debt costs ballooning. These might seem like major problems to any other currency that is not considered the “anti-Dollar”. The ECB rate decision will keep rates unchanged, but the statement could surprise. (Click chart to enlarge)

eurusd0504.JPG

Pound (GBP): The Pound is also higher despite home prices that fell more than expected and the notion that the BOE will not change rate policy at tomorrow’s decision. Unlike the ECB, the BOE will not issue a policy statement.

Dollar (USD): The Dollar’s short-lived bounce from risk aversion has reversed and now we are looking at weakness as there is no confidence that a declining US economy will be allowed to function without the intervention of Bernanke and the Fed. The ADP employment change showed a gain of 179K jobs vs. an expectation of 195K.

Yen (JPY): The Yen is weaker as Japanese markets are closed today.

Well it looks like this is going to be a case of bad news is good news for stocks and commodities heading into the end of QE2. The worse the data gets, the higher the expectation that Bernanke will continue some sort of monetary easing.

Whispers of “QE2.5″ are making the rounds, and the artificial conditions that created thanks to this easy money policy are delaying the problem and not fixing it. While these delay tactics might be appropriate if we trying in earnest to get our fiscal act together, the politics of Washington are preventing certainty in the marketplace.

Questions about taxes, regulation, and government spending have not assuaged businesses, and the prevailing notion is that things are getting worse and not better.

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!

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May 3, 2011

Fear Of Retaliation?

Filed under: Forex News — Tags: , , , , , , , , , , , , — admin @ 12:53 pm

This morning the markets are starting out clearly in risk aversion mode as there is a sense of fear of retaliation from Al Qaeda due to the killing of their leader Osama Bin Laden. However, it looks as though everything is lower, including the price of oil and gold which given the risk in the market may not make sense.

For if the “risk” in the marketplace is due to a potential retaliatory strike, wouldn’t that increase the price of oil, and not the other way around? Something to think about.

Overnight, the RBA in Australia left interest rates unchanged at 4.75% but issued mildly hawkish comments with regard to inflation, though the market has discounted this and is more concerned with the risk we are seeing.

Both the Euro and Pound are lower, but the Pound is particularly weak as PMI data came in at 7-month lows. While both the ECB and the BOE are giving their rate decisions on Thursday, the ECB will issue and accompanying statement whereas the BOE will not.

This could create divergence between the two currencies as there may be more weight of clarity given to the Euro. Both Central banks are not expected to raise rates.

Friday’s Non-Farm Payrolls report here in the US will round out the week and may set the tone for the month ahead.

So stocks and commodities are lower, as are the “risk” currencies with Dollar and Yen higher.

In the forex market:

Aussie (AUD): The Aussie is mostly lower on risk aversion as the RBA left rates unchanged to no one’s surprise. Mildly hawkish comments by the RBA have been discounted.

Kiwi (NZD): The Kiwi is lower for the same reasons as Aussie as the flight to safety trade is out-weighing yield-seeking today. Employment figures due out tomorrow will give a better clue as to how the economy is faring in New Zealand.

Loonie (CAD): The Loonie is also down as oil prices have retreated to just under $112. Lost in the shuffle is the Canadian employment report due out on Friday and yesterday’s election of a conservative majority may mean both tax and budget reform.

Euro (EUR): The Euro is mostly lower despite in-line PPI data that was reported. The anti-Dollar properties are in full-effect this morning as risk-aversion is driving the action today. (Click chart to enlarge)

eurusd0503.JPG

Pound (GBP): The Pound is the worst performer this morning as PMI data came in at 7-month lows, showing a reading of 54.6 vs. an expectation of 57. This comes ahead of the BOE rate policy decision on Thursday that is expected to produce no change in policy, and data releases such as this may support that view. (Click chart to enlarge)

gbpusd0503.JPG

Dollar (USD): The Dollar is stronger this morning as risk aversion is causing a bit of the flight to safety trade as foreign currencies were at “extreme” levels vs. USD. The big news this week for the US is Friday’s NFP report, with lesser important placed on Wednesday’s ISM Non-manufacturing report.

Yen (JPY): The Yen is stronger across the board as carry-trades are reversed. There is no news of significance for Japan this week so the Yen will continue to trade on risk themes. A stronger Yen is undesirable at this point due to the recovery efforts so if Yen should continue to strengthen vs. USD, then we could see some action by the BOJ.

When markets begin to hit extreme levels, I always am on the lookout for the catalyst that could potentially reverse trends. While last week no one could have predicted this amazing development with the Killing of Bin Laden, I had a sense that something “had to give”.

To be honest, I was focused on the Royal Wedding where the potential for a risk event was obviously heightened.

So we have to look at both recent events as giving the people of sense of hope, in the face of seemingly dire economic conditions. For last Friday, UK citizens were able to forget about the 4% inflation they are seeing; and here in the US the euphoria over the Bin Laden killing occupies the minds of the people.

Not to be a complete skeptic, but these recent events are really nothing more than diversions that capture our attention for a while. The BOE will not change policy in the UK on Thursday, banking on the goodwill of the last week’s celebration to buy them more time for economic recovery.

So with heightened risk in the marketplace due to the potential for retaliation, the currency market will back away from extremes for a bit until policy comes back into focus.

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!

Tags: account, AUD, Aussie, blog, cad, course, currenc, currency, currency trading, dollar, dow, economy, EUR, Euro, forex, forextrading, free, fx, fxedu, gbp, Il, jpy, market, Mike Conlon, nzd, practice, ssi, time, trade, USD, Yen

April 15, 2011

April 14, 2011

Let The Debate Begin!

Filed under: Forex News — Tags: , , , , , , , , , — admin @ 12:52 pm

Yesterday President Obama came out with a speech regarding the debate that is about to heat up in Washington DC and define the economic course that the US will pursue moving forward. The obvious problem is the US Federal deficit, which is going to bankrupt this country (worse than it already is!) if nothing is done about it.

House Republicans have put forth a comprehensive plan that has both plusses and minuses, and will likely serve as a starting point for negotiations. However, nothing in yesterday’s speech outlined a credible plan to move tackle our problems, so the markets have become fearful of what could happen.

The near-term debate is going to be over what to do about the debt ceiling; if it is not raised or if cut-backs aren’t made, then we could be facing a funding problem. The timing of this essentially coincides with the end of QE2, which has pushed markets higher since its inception at the end of last year.

How the markets will react to both situations is uncertain at this point in time, but the markets are a discounting mechanism so at some point this all needs to be factored in. Perhaps that’s what we’ve been seeing over the last few days of selling.

This morning, both stocks and commodities are lower to start the day as we await the initial jobless claims numbers and the PPI data.

In the forex market:

Aussie (AUD): The Aussie is mostly lower on risk aversion though not by much as it is protected from shorting by its interest rate differential which makes it cost prohibitive to do so.

Kiwi (NZD): The Kiwi moved to a 5-month high after a successful bond auction increased demand for the currency. The Kiwi is tracking slightly higher despite the early risk aversion in the market. (Click chart to enlarge)

nzdusd0414.JPG

Loonie (CAD): The Loonie is mostly lower as its close ties to the US and a declining oil price to start the day have induced selling.

Euro (EUR): There’s no appreciable news out of the Euro zone this morning, so it is trading on its anti-Dollar sentiment which weakened it to start the day though it may reverse as US stocks open. (Click chart to enlarge)

eurusd0414.JPG

Pound (GBP): The Pound is trading mostly higher after consumer confidence figures came in higher than expected after reaching record lows.

Dollar (USD): The Dollar is mixed as it is receiving the benefit of the flight to safety trade, despite PPI data which just came in at .7% and initial jobless claims that came in higher than expected at 412K. Not a good sign for the economy, but perhaps good for Fed watchers.

Yen (JPY): The Yen is stronger across the board as the Dollar shed some of its safe haven status and the nuclear threat is still a major problem. Yet there are still estimates coming in that predict an economic rebound.

Today’s data in the US shows economic weakness which the Fed is praying may just be an anomaly and a re-start of an economic downturn. The road to stagflation is one the Fed was hoping to avoid, though misguided policies and unintended consequences may be both the cause and the effect.

This bring us back to the fiscal policy debate—if we don’t do something about fiscal policy, then the Fed will attempt to smooth things over with monetary policy. Let’s face it: 100% of the people enjoy a free lunch.

Until we get some real leadership out of Washington DC, we are going to continue to head closer to the cliff at warp speed. I hope you have a parachute!

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!

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Tags: account, AUD, Aussie, blog, cad, course, currenc, currency, currency trading, dollar, dow, economy, EUR, Euro, forex, forextrading, free, fx, fxedu, gbp, Il, jpy, market, Mike Conlon, nzd, practice, ssi, time, trade, USD, Yen

April 11, 2011

Slow Start To The Week!

Filed under: Forex News — Tags: , , , , , , , , , , , , — admin @ 12:36 pm

This week is starting out slowly as there is little news today to warrant any excessive volatility or trend disruptions. This may be a good thing as after Friday’s major moves higher in commodities and the resulting Dollar weakness, a quick pause to re-evaluate may be exactly what this market needs.

Here’s what we do know this morning: Chinese exports came in better than expected overnight giving them a trade surplus vs. an expected trade deficit. I guess that peg to the Dollar really helped out!Over the weekend, the US government was able to come to a compromise to keep the government operating—for now. Quickly the conversation is going to switch to the debt ceiling which needs to be raised if we want to keep doubling down, or perhaps this is just another political game to be played.

Japanese machine orders fell and the aftershocks keep coming as earthquake after earthquake continues to pound the island nation. A mixed reading of industrial production figures in the Euro zone has led to some minor weakness.

Later today, two noted Fed Doves (inflation deniers) Yellen and Dudley will be speaking. The only risk here is that a deviation from their noted dovish stances could belie a shift on the FOMC. This is highly doubtful.

Meanwhile, oil has “pulled back” to $112, and gold to $1470. US stocks are set to open higher, and Europe is mixed ahead data due out later this week.

But make no mistake about it; Dollar weakness is driving global markets higher, as the Dollar index has put in a 17-month low. How much lower the Dollar can go without disrupting economies abroad remains to be seen.

In the forex market:

Aussie (AUD): The Aussie is marginally lower this morning with no news to guide it higher. Commodities have pulled back a bit so the US dollar is strengthening some, but this could just be a cat-cat bounce. Consumer confidence figures due out on Wednesday highlight the extent of the news form down under.

Kiwi (NZD): The Kiwi has been moving higher very quietly as the re-building efforts from the earthquake are starting to add to the pick-up in economic activity. The Kiwi just broke its 2011 high vs. USD. (Click chart to enlarge)

nzdusd0411.JPG

Loonie (CAD): The Loonie is pulling back a little as oil is now trading at $111.50. This comes ahead of tomorrow’s BOC rate decision where the expectation is that rates will be left unchanged at 1%.

Euro (EUR): The Euro is starting the day lower as mixed industrial production figures do little to affect the Euro one way or the other. What is affecting the Euro this morning is a wee bit of US dollar strength, as oil prices retreat. The Euro fell just short of reaching 1.45 vs. USD. (Click chart to enlarge)

eurusd0411.JPG

Pound (GBP): The Pound is mixed this morning ahead of tomorrow’s CPI report which is expected to show inflation still a problem at 4.4%. Should inflation subside in any meaningful way, then the BOE may be afforded more time to allow fiscal policy reductions to work, rather than having to do it through monetary policy. UK jobless claims are due out on Wednesday.

Dollar (USD): The Dollar appears to be doing a little “dead-cat bounce” here, as oil prices have pulled back after the risk of being short over the weekend was navigated. Fed doves will speak today but don’t expect a change of heart with regard to policy stance.

Yen (JPY): Aftershock after aftershock keeps happening in Japan which has heightened the risk that this nuclear situation could get worse. While economic fundamentals are bound to be moribund in the short-term, the long-term prospects for growth appear grounded due to the re-building that will take place.

There are many factors contributing to the global economy that have had various push-pull effects on different markets. But the one underlying theme that continues to persist is Dollar weakness.

While economic data this week won’t be as telling here in the US, both the UK and Canada have news that could be market moving. But overall, the weak US dollar trend is still intact.

However, if you are not already short the US dollar, it may be difficult to get in here, so wait for pullbacks to get a better low-risk entry. And of course keep an eye on the news to see if any other region’s fundamentals begin to look as bad as the US.

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Tags: account, AUD, Aussie, blog, cad, course, currenc, currency, currency trading, dollar, dow, economy, EUR, Euro, forex, forextrading, free, fx, fxedu, gbp, Il, jpy, market, Mike Conlon, nzd, practice, ssi, time, trade, USD, Yen

April 6, 2011

Stealth Inflation!

Filed under: Forex News — Tags: , , , , , , , , , , , , — admin @ 12:21 pm

Now that the CPI reports have come and gone, it is apparent to market watchers that there is indeed stealth inflation taking place. Aside from Bernanke turning a blind eye to it, the markets are telling us that indeed it exists.

Look no further than the commodities markets, which absent the major headlines, continue to climb on a daily basis. The gold market, for example, is at an all-time high having reached above $1460/oz and oil is fast approaching $110/barell. Not only does this tell us that the expectations for inflation are heightened, but you can also see these commodities pick up a bit of a safe-haven bid as the Japanese yen appears to have lost that safe-haven dynamic.

This has lead many Central banks around the globe to conclude that higher rates are in their best interests, as China raised rates for the fourth time in six months just yesterday, and the ECB appears ready to begin a tightening cycle tomorrow.

The BOE, on the other hand, is not expected to raise rates despite their willful neglect of inflation, though improving economic metrics can provide more confidence that the economy is stabilizing. The problem is that for everyday of good economic data reported, the next day of data is seemingly negative.

Later tonight, the Bank of Japan will have their rate decision, and the market is expecting additional stimulus to help in the crisis they are experiencing form the earthquakes and tsunami.

Nevertheless, stocks are higher to start the day as they are the only game in town for the retail investor thanks to the Fed’s easy money.

In the forex market:

Aussie (AUD): The Aussie is mostly higher on risk appetite as its correlation to gold prices is being exploited, despite having home loans decrease more than expected.

Kiwi (NZD): The Kiwi is posting big gains this morning a day after the Australian rate decision which now has money flows shifting to NZ. The temporary hit they took due to their earthquake is behind then and priced in so now the market appears to be looking forward to the inevitable GDP growth that will accompany the rebuilding process. (Click chart to enlarge)

nzdusd0406.JPG

Loonie (CAD): The Loonie is mostly higher and continues to make new yearly highs vs. USD, now trading below .96. While higher oil prices have been the catalyst so far, the market has focused on the great economic story taking place north of the border.

Euro (EUR): The Euro is higher against all but the commodity bloc as tomorrow’s rate decision is expected to bring a rate hike. In addition, GDP estimates came in as expected, and German factory orders came in much better than expected showing signs that the Euro zone may be ready for higher rates. However, higher rates loom heavily on the debt-laden countries, and how this plays out will be anyone’s guess.

Pound (GBP): One day you’re up, the next down. That’s the story of the Pound which is seemingly getting conflicting economic reports on a day-by-day basis. Today both manufacturing and industrial production figures came in lower than expected ahead of tomorrow’s rate decision that is expected to leave policy unchanged.

Dollar (USD): Yesterday’s release of the FOMC minutes showed what everyone already knows—that the FED is deliberately trying to encourage inflation and is committed to a weak Dollar. The markets responded in kind.

Yen (JPY): Once again the Yen is weaker across the board as tonight’s rate decision is expected to provide additional stimulus to the Japanese economy to help in the recovery from the disasters. Yen is at a 6-month low to the Dollar. (Click chart to enlarge)

usdjpy0406.JPG

With Dollar and Yen weakness driving markets, there really is no reason NOT to be in stocks, commodities, and the higher-yielding currencies. Both Central banks are committed to weakening their respective currencies and whether or not you agree with this policy doesn’t matter—as an investor you have to jump on for the ride.

However, I am going to be quick to jump off of the train at the slightest hint that these policies are changing. The most obvious time for this is the end of QE2, which the market speculates could happen sooner than the pre-determined time (but I don’t think so) in June.

This should encourage a bit of selling heading in to it, but my feeling is that because policy has been so accommodative, it will be possible for stocks to continue to rise as rates and the Dollar does as well. Commodities on the other hand, should fall.

But in the meantime, enjoy the inflation (which technically doesn’t exist) and thank Uncle Ben Bernanke as you fork over more and more cash for necessities like food and gas!

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!

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Tags: account, AUD, Aussie, blog, cad, course, currenc, currencies, currency, currency trading, dollar, dow, economy, EUR, Euro, forex, forextrading, free, fx, fxedu, gbp, Il, jpy, market, Mike Conlon, nzd, practice, ssi, time, USD, Yen

March 29, 2011

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