Forex Blog

July 25, 2014

ECB Action has Euro Economy Showing Unexpected Strength

Euro-area manufacturing and services activity strengthened in a sign of confidence that further stimulus by the European Central Bank will consolidate a fledgling economic recovery.

A Purchasing Managers Index for both industries jumped to 54 in July from 52.8 in June, matching a three-year high reached in April, London-based Markit Economics said today. That’s the 13th month the gauge has exceeded 50, the mark that signals expansion. Economists predicted an unchanged reading of 52.8, according to the median of 22 estimates in a Bloomberg News survey.

The pickup comes after policy makers introduced a negative deposit rate and targeted loans to bolster lending, growth and an inflation rate running at a quarter of the ECB’s goal. While risks to the economic outlook have increased with escalating tensions in the Middle East and Ukraine, strengthening manufacturing in China bodes well for export demand.

Bloomberg

July 11, 2014

Japan Minister Sees Room for More QE

Japanese Economics Minister Akira Amari warned that it would be premature for the Bank of Japan to consider an exit strategy from its massive stimulus program, voicing hope instead for further monetary easing if achievement of its inflation goal falls behind schedule.

Amari also said that while Japan appears to be emerging from years of persistent price declines, it was too early to formally declare a sustained end to deflation with the economic recovery still vulnerable to external shocks.

“The BOJ has expressed strong determination that it won’t hesitate to take further action if (the timing for meeting the inflation target) is not on schedule,” Amari said in an interview at a Reuters Newsmaker event on Friday.

“If the BOJ judges that it’s not on schedule, I think the central bank will decide on its own (to act),” he said.

The central bank has kept policy unchanged since deploying an intense burst of monetary stimulus in April last year, when it pledged to double base money via aggressive asset purchases to accelerate inflation to 2 percent in roughly two years.

With Japan only halfway to meeting that target, the BOJ is set to keep its stimulus plan intact well into next year, in contrast to its U.S. and British counterparts, which are starting to telegraph plans for interest rate hikes.

via Reuters

July 8, 2014

Research: JP Exporters Can’t Rely on Weak Yen

Japanese exporters looking to boost shipments after the first monthly decline in more than a year can’t rely on a weaker yen for support, according to economists led by Mary Amiti of the Federal Reserve Bank of New York.

While depreciation typically favors exporters, a decline in the yen would boost the cost of the fuel imports needed by Japanese companies to manufacture products, according to a post today on the New York Fed’s Liberty Street Economics blog.

“Yen depreciation drives up the marginal costs of Japanese exporters,” Amiti wrote, with Oleg Itskhoki of Princeton University and Jozef Konings at University of Leuven. This “results in a smaller share of the depreciation being passed on into their export prices.”

Bloomberg

June 4, 2014

US Private Sector Adds 179,000 in May

Job creation in the private sector was disappointingly slow in May, with companies adding just 179,000 positions, according to the latest reading from ADP and Moody’s Analytics.

Economists in a consensus survey expected ADP’s national employment report to show the economy created 215,000 private payrolls in May, down from the prior month’s 220,000 figure.

The number could cause economists to ratchet down the projections for Friday’s nonfarm payrolls report, which is projected to show an addition of 210,000 positions for the month. Capital Economics said in a note that the ADP report “adds to the downside risk” for its forecast of 230,000 jobs created.

Services accounted for most of the jobs, adding 150,000 to the total, while goods-producing employment increased by 29,000. Even in the services sector, though, there was weakness, with new professional and business positions tumbling to 46,000 from 75,000 in April.

via CNBC

April 4, 2014

Week In FX Americas – Loonie Unable to Fly to High

Canada’s bad February job report was quickly forgotten after Friday’s reported March surprise. The land with “the loonie” added +43k new jobs last month, the biggest increase in seven-months, which now pushes the six-month average to +10k. On the face of it, the double-digit print is not considered that bad given the subdued fundamental reporting of late. Digging deeper, about a 1/3rd of those gains came in the private sector, which suggests that there is room for improvement. Businesses are now beginning to ramp up hiring and investments to take advantage of the country’s weaker currency. The CAD is currently underperforming outright against its largest trading partner south of the 49th parallel ($1.0980).

A small concern is that most of last month’s job growth was due to a bounce-back in part-time jobs. The +30k rise follows two month’s of negative reporting. In the good’s sector, employment fell -15.6k, with manufacturing taking the brunt and reporting -9.2k job losses. Analysts note that this seems to contradict the apparent positive momentum in the sector – for instance the jump in exports for the month of February.

The loonie managed a hearty rally against the dollar immediately after the strong domestic report, but succeeded in giving back a third of its advance after the market digested the strong NFP report in detail. Not doing the CAD any favors was the softer than expected Canadian Ivey PMI print (55.2 vs. 58.3). The volatility in the pair remains confined, piggybacking the Fed’s strong conviction of draining their excess liquidity while Governor Poloz at the BoC policy is seen as firmly stuck in neutral.

  • Canada Adds 43,000 Jobs in March
  • US Economy Adds 192,000 Jobs in March
  • Canada Reports Trade Surplus For First Time in 5 Months
  • US Jobless Claims Rise to 326,000
  • Roubini Says That Markets Are Underestimating Risks
  • US Mortgage Applications Fall In Last Week of March
  • US Private Sector Added 191,000 Jobs In March
  • High Frequency Traders Exiting Equities Into FX Markets
  • Apartments In New York Hit New Record High
  • Bank of Canada To Lag US Fed Rate Hike Schedule
  • Major Economics Slow Down in First Quarter of 2014
  • US Manufacturing Posts Strong Growth in March
  • Commodities Biggest Winner In Q1 Versus All Traditional Asset Classes
  • USD Weakness Seen Ahead Of ISM Manufacturing Data
  • Gold Drops to Six Week Low on Central Bank Heavy Week

WEEK AHEAD

* JPY Bank of Japan Monetary Policy Statement * GBP NIESR Gross Domestic Product Estimate * USD Fed Releases Minutes from March FOMC * GBP Bank of England Rate Decision * GBP BOE Asset Purchase Target * CNY CPI * EUR German Consumer Price Index * USD U. of Michigan Confidence

The post Week In FX Americas – Loonie Unable to Fly to High appeared first on MarketPulse.

March 24, 2014

Bank of Japan Governor Stays Confident on 2 Percent Inflation Target

Bank of Japan Governor Haruhiko Kuroda expressed confidence Friday that Japan will achieve its target of 2 percent inflation.

“Japan’s economy has been following a path toward achieving the 2 percent price stability target as expected,” Kuroda said during his speech at the London School of Economics and Political Science. “Of course, we are only halfway there and will steadily pursue the QQE (quantitative and qualitative monetary easing).”

Delivering his speech in English, he said, “Japanese firms that originally were equipped with excellent technologies and human capital have started to take on new initiatives again, and the economy and prices have changed dramatically…The day that Japan’s economy can contribute more and more to the global economy is at hand.”

After Kuroda took up his post on March 20 last year, the central bank introduced a set of monetary easing measures in April aimed at hitting the 2 percent inflation target to beat deflation, including additional purchases of government bonds and higher-risk financial assets such as exchange-traded funds.

via Mainichi

The post Bank of Japan Governor Stays Confident on 2 Percent Inflation Target appeared first on MarketPulse.

Japanese Survey Shows 76.5 Percent Worried After Post Sales Tax Economy

A total of 76.5 percent of respondents in a Kyodo News opinion poll said they are worried about the future of the Japanese economy following the planned consumption tax rate increase to 8 percent from 5 percent on April 1, while 22.4 percent said they are not worried.

The nationwide telephone survey conducted over the weekend also showed 65.7 percent plan to curb household expenses after the sales tax increase, while 33.0 percent do not plan to do so.

The poll also found 65.9 percent of respondents said they oppose a further sales tax increase to 10 percent, expected to be implemented in October 2015, against 28.6 percent who expressed support.

On the government’s controversial policy of lifting the self-imposed ban on the use of the right to collective self-defense by changing the constitutional interpretation, 57.7 percent said they oppose it, up 6.7 points from the previous survey a month ago, while 33.9 percent said they support it, down 5.0 points.

For decades, the government has maintained that Japan has the right to collective self-defense but cannot exercise it due to limits imposed by Article 9 of the pacifist Constitution, which forbids the use of force to settle international disputes, because doing so would go beyond the minimum necessary to defend the country.

Meanwhile, the approval rate for the Cabinet of Prime Minister Shinzo Abe came to 56.9 percent, up 3.0 points from the previous survey in late February. The disapproval rating was 30.1 percent, up 0.4 point.

via Mainichi

The post Japanese Survey Shows 76.5 Percent Worried After Post Sales Tax Economy appeared first on MarketPulse.

February 25, 2014

ECB Does Not See Risk of Deflation

The European Central Bank sees no current risk of deflation nor signs of people delaying purchases, policymaker Peter Praet said in a newspaper interview published on Tuesday.

Praet, who holds the economics portfolio on the ECB’s Executive Board, told Belgian newspaper De Standaard that persistently low inflation would represent a risk.

But this was at the moment being mainly driven by subdued food and energy costs. Energy prices are highly volatile.

“Weak demand and high unemployment could also be playing a role,” he said.

The ECB’s mandate is to deliver price stability, which it defines as inflation of close to but below 2 percent over the medium term.

Euro zone inflation is currently running at just 0.8 percent – well below target. “We accept that price developments are weak and that the weakness is continuing in the medium term,” Praet said.

ECB President Mario Draghi said the central bank had not changed interest rates this month because of the need for more information about the economic recovery, putting markets on alert for a possible move in March, when the region’s updated inflation outlook is due.

The ECB holds its next policy meeting on March 6.

via Reuters

The post ECB Does Not See Risk of Deflation appeared first on MarketPulse.

July 22, 2013

G-20 Concerned Over Premature QE Tapering

Global finance chiefs sought to buttress the global economic recovery with pledges to avoid spooking markets as China moved to scrap a lending rule that had constrained its banks.

Group of 20 nations will pursue “carefully calibrated and clearly communicated” policy moves so that the U.S. and Japan don’t cause cross-border damage when they start rolling back stimulus, they said after a two-day meeting of finance chiefs in Moscow. They will move “more rapidly” toward market-determined exchange rate systems, following China’s internal banking change, according to a July 20 statement.

“China’s action is probably the one thing that will help markets,” Lena Komileva, chief economist at G+ Economics in London, said in a July 20 telephone interview. “Global markets are dominated by a butterfly effect. If the Fed is to change domestic policy in response to U.S. economic conditions, it’s going to have global consequences.”

The G-20 heeded calls from emerging-market countries to guard against shockwaves when U.S. growth is secure enough for the Federal Reserve to cut back on its bond buying, according to the statement. It also repeated that nations should avoid competitive currency devaluations.

Speculation about developed economies scaling back their unprecedented monetary easing has roiled emerging-market currencies and bonds since G-20 finance chiefs last met in April. The dollar fell for a second week versus most major peers.

Bloomberg

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.

Strong June US Home Sales Expected

In an effort to calm down nervous members of Congress, Federal Reserve Chairman Ben Bernanke promised last week to do regular check-ups of the housing market to make sure higher mortgage rates were not damaging the recovery.

This week, Dr. Bernanke will find the vital signs in home sales remain strong, economists said. But it will be months before the patient can be given a clean bill of health.
Enlarge Image

The rate on a 30-year fixed mortgage has risen above 4% this summer for the first time in a year. Rates slipped to 4.37% in the week ended July 18 from 4.51% in the prior week. They were 3.45% in April.

“It will take a while to know for sure if housing can handle the spike in rates. The numbers will be noisy for a month or so,” said Millan Mulraine, director of U.S. research and strategy at TD Securities.

Mortgage purchase applications rose 2% over the course of June, despite the higher mortgage rates, noted Michelle Meyer, economist at Bank of America Merrill Lynch.

Bernanke said that financial conditions would be a factor in the timing and pace of the reduction in the central bank’s $85 billion-a-month bond-buying program. Many analysts said the tapering could begin as early as September.

On Monday morning, the National Association of Realtors is likely to report that existing home sales rose 1.9% in June to a seasonally adjusted rate of 5.28 million, according to economists polled by MarketWatch.

MarketWatch

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.

Older Posts »

Powered by Efacilitators Hosting