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November 22, 2011

Forex Market Outlook 11/22/11

Filed under: Forex News — Tags: australia, china, commodity, forex market, france, interest, loonie, pound, practice, top stories, trade — admin @ 7:03 am

It’s a slow day in the marketplace this morning and we’re seeing a bit of a rebound after yesterday’s sell-off. The “Super-Failure” of the debt reduction committee was extremely disappointing to the markets yesterday, though it always baffles me how the markets could have thought they could succeed in the first place as it was set up to fail.

However the markets got an early pop as the fear of another US credit rating downgrade never materialized as the ratings agencies re-affirmed the current level despite the failure to act. This basically is setting up for a year-long battle of blame-game politics heading into the 2012 elections. I just may have to throw away my TV.

Despite the failure though not much has changed for the average American who is slowly seeing their prospects of a better life diminished. Automatic cuts will be made to the deficit, though they come largely from defense spending and domestic programs, like education. So now we are less safe and dumber to boot—just awesome!

But seriously, economic conditions slowly continue to deteriorate and the 3Q GDP figure (revised) came in this morning and was revised lower to 2% from an expected 2.5%. That is a huge miss and indicative that the economy is not getting better but worsening. Personal consumption figures came in slightly lower than expected at 2.3% vs. 2.4%.

Later today the Fed minutes will be released which should show a continued willingness to ease monetary policy. With today’s floundering GDP figure, that easing could come much sooner than expected.

Other news on the docket showed that the budget deficit in the UK came in lower than expected due largely in part to the government austerity measures. However with that austerity, economic activity has decreased and we will know just how far on Thursday when the UK reports their GDP figures. Tomorrow though we will get the release of the minutes from the BOE rate policy meeting which will show just how dovish they have become in light of the expectations for economic growth and the stubbornly high 5% inflation they have in the UK.

In Canada, retail sales figures for last month came in better than expected posting a gain of 1% vs. an expectation of .5%.

And not to forget about our friends in Europe, bond yields continue to rise (especially in Spain where they had to pay double the yield on short-term debt) and there is now concern that France could be close to a credit rating downgrade. Germany continues to back away from the idea that the ECB needs to become the lender of last resort which may be the only hope the Euro zone has to remain in its current form.

So what started out as a mild risk-taking morning has reversed course and is leaning back toward risk aversion after the horrible GDP figures that were reported here in the US. Perhaps the Fed minutes can save the day for market bulls later today but it is unlikely that Bernanke can be any more dovish than the market expects him to be.

With the Thanksgiving holiday a few days away, there is seemingly little in the economy or in the government to be thankful for. Perhaps the only thing to be thankful for is that 2012 is an election year and we can vote them all out office.

That and that Europe has imploded yet.

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November 10, 2011

Forex Market Outlook 11/10/11

Filed under: Forex News — Tags: a-small-sense, a-tick-higher-, australia, decision, economy, emerging-as-the, fear, forex market, franc, gold, jpy, mike conlon, morning, safety, trend — admin @ 7:06 am

There is a small sense of relief in the markets today after yesterday’s sell-off due to bond yields rising in Italy to above 7%. Italy was able to get off their bond auction which shows that they still have the ability to fund themselves, though higher yields will make it much harder for them to service their debt which could eventually lead to them having to tap the EFSF.

However, the EFSF is not big enough to bailout Italy should that become necessary so they need to move quickly to attempt to start reigning in deficits through austerity measures in order to set the economy on the path to fiscal health. One of the issues yesterday was that there was some fear that Berlusconi would somehow manage to survive and be able to drag out and remain in power though now this is looking highly unlikely and the word is that he will be out by next week. This begs the question of who will take over and at this point it appears as though Monti is emerging as the potential successor.

The situation in Italy has masked the situation in Greece as political infighting there dragged out the process of who would succeed Papandreou for four days. However this morning we have the answer, as Papademos has been tabbed. It should be noted that he has a tremendous business and banking background having been with the ECB previously.

So there is definitely a push to have more business and banking experienced politicians coming into power to help navigate the Euro situation and the bailouts and debt crisis.

This morning there is a lot more economic data then yesterday, and in the Euro zone it wasn’t particularly bad or good. German CPI data came in slightly higher than expected, and French industrial production figures were lower than expected. In addition, the ECB released its economic forecast for the region and they lowered forecasts to reflect the slowing economy as a result of the debt crisis.

In the UK, the BOE left interest rates and its asset purchase program unchanged, at .5% and 275 billion respectively. While they were not expected to move after last month’s increase in the asset purchase program, they will likely take a “wait and see” approach and watch what is happening in Europe. Their next move though is likely to be on the side of easing if the economy continues to flounder.

In Australia, 10K jobs were added as expected, but the unemployment rate remained steady at 5.2% even though there was an expectation of a tick higher. This could be the result of much higher than expected Chinese import figures, which grew by 28.7% vs. an expected 22% which helped push the Chinese trade surplus lower than expectations. Reduced exports were also an issue. Also to note is that Japan and New Zealand’s consumer confidence figures came in lower than expected which is not surprising given the state of the Euro zone.

And speaking of unemployment, initial jobless claims here in the US came in better than expected showing that only 390K lost jobs last week vs. the usual 400K we have been seeing. This is a step in the right direction and I hope this trend continues but at this point it is woefully short of what’s needed.

In Switzerland, calls to weaken the franc further are not being heeded by the SNB as businesses are concerned about declining exports and want the floor on the franc raised from 1.20 vs. Euro. This is unlikely to occur with pressure on the Euro due to the debt crisis and risk in the markets.

But this morning, risk appetite has returned for now as global stocks and commodities are largely higher, though the risk in the Euro zone still remains. While no on expects Italy to solve their problems overnight, getting a new government in place would be a good start. With new leaders focused on debt reduction and managing the economies, there may be hope that the market will ease up on the rates demanded to buy their debt, thereby making it easier for them to service it.

At least that’s the hope.

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November 4, 2011

Forex Market Outlook 11/4/11

Filed under: Forex News — Tags: currency market, dow, forex market, interest, interest-rates-, jpy, live, mike conlon, rate-decision, trend, unemployment — admin @ 7:01 am

Today is “jobs Friday” as we are awaiting the Non-Farm Payrolls report which is expected to show that the economy added 100K jobs, 125K in the private sector and the unemployment rate to remain steady at 9.1%. These are hardly attractive numbers, yet anything remotely close to these will be seen as positive by the markets.

What might be a decent (but unfortunate) prognostication of our jobs figures is the Canadian employment report that came out earlier this morning. Canada produced dismal numbers, showing that they lost 54K jobs when they were expected to have added 15K, and the unemployment rate moved higher to 7.3% vs. an expected 7.1%. This is certainly not good at a time when global recession fears are increasing. Take a look at the chart of the day to see how the market reacted to the Loonie.

The only positive about “jobs Friday” is that it momentarily takes our attention away from the Euro zone debacle. Yesterday as I noted in an update, new ECB chief Draghi reduced interest rates by 25bp in his first official act, preferring to battle economic woes through rate policy rather than quantitative easing.

However it was his speech following the announcement that caused the Euro to tank as he said that the Euro was definitely facing a “mild recession” which could be construed that he sees big problems on the horizon. This assertion could be confirmed by the release of Euro zone PMI figures that all came in lower than expected. In addition Germany, the stalwart economy of the Euro zone, showed that factory orders fell 4.3% vs. an expectation of a gain of .1%. This pushed the YoY figure down to 2.4% from an expected 7.5%. That’s a pretty big miss.

This sentiment is also not lost on the RBA in Australia, who just reduced their growth targets after lowering interest rates earlier this week.

While the economic landscape may be deteriorating, the G-20 is doing its part to hold things together. The undressing of Papandreou caused him to back away from the referendum on the debt deal, but he and his government still face the confidence vote later today. There is all kinds of speculation about what may occur, from his resignation regardless of vote to a new transitory coalition being formed.

One thing though that is certain after all of this political quagmire: Greece does not want to leave the Euro zone. While I have been calling his moves “idiotic” over the past few days, they may turn out to be pretty shrewd after all is said and done. While the game of chicken he played was rather crazy, he essentially is making Greeks decide what it is they really want. While no one over there likes the austerity that is required to remain in the Euro zone, the alternative is far worse. It probably would have been better though had he given EU leaders advance notice of his intentions.

**Update** Non-Farm Payrolls just came in showing a gain of 80K, 104K in the private sector but the unemployment rate ticked lower to 9%. The market is reacting somewhat favorably to these figures as I mentioned that it just needed to be close this morning. Whether or not this is enough to sustain a rally into the close is another story entirely.

For it may be difficult to take risk into the weekend ahead of the Greek confidence vote as the scenario is unlikely and even if Papandreou wins, there’s no telling what may happen over the weekend, including his resignation.

With a recent weak Dollar and interest rate reductions around the globe, inflation fears are starting to increase. Gold shot up yesterday on the Euro rate reduction and may be invoking some of its inflationary hedge properties rather than its risk vehicle status.

With the overhang of risk in the markets emanating from both the Euro debt crisis and the US debt debate, my opinion is that markets are trading lower on fear alone. With the flush of cash moving around the globe, we would be a lot higher if not for these crises.

The US debt commission has largely escaped notice but lets not forget that they have a dead-line of roughly two weeks to get a deal done and if they can’t come to an agreement, automatic cuts kick in and another potential credit downgrade could be forthcoming.

So my bias is definitely to the upside, though I will proceed cautiously as one never knows what politicians may do. If you don’t believe me, look no further than Greece.

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October 31, 2011

Forex Market Outlook 10/31/11

Filed under: Forex News — Tags: china, chinese, currencies, currency, euro, forex market, fundamental, government, interest-rates-, japanese, point, trend, yen — admin @ 7:04 am

This Halloween is turning out to be more trick than treat as the market digests the events of the past week, particularly the Euro debt resolution. This week is starting out in risk aversion mode with US dollar strength and stock market and commodities weakness.

One of the “tricks” from over the weekend was the unilateral currency intervention by the Ministry of Finance in Japan, who took action to weaken the Yen citing excessive speculation and one-sided moves that don’t reflect the underlying economic fundamentals. This has caused the Yen to fall some 4% vs. USD and is the third intervention this year undertaken by the Japanese. It must be noted, however, that this intervention was taken by the government itself and not the Bank of Japan.

So this week has started out with a bang in what is going to be a heavy week for economic data around the globe. A G-20 meeting, Central bank decisions, GDP figures, and employment numbers all can move markets so this week is likely to see some volatility which is great for the shorter-term traders. Let’s start with the highlights region by region from around the globe and discuss the potential data moving events taking place this week.

In Australia, tomorrow’s RBA rate policy decision will be significant if they lower rates by 25bp as some are expecting, though the overall consensus is still for no change. This means that the statement will likely be dovish as inflation concerns are less important than the global growth story. This announcement will be preceded by Chinese PMI manufacturing figures which may be more impactful as it gives a gauge of Chinese growth which ultimately is a proxy for the Australian economy.

In New Zealand, building permits plunged by some 17% although gains of 2% were expected and Wednesday’s unemployment rate is expected to improve to 6.4%.

In the Euro zone, there are still many questions to be answered with regard to the details of the resolution and now it looks like banks want to use accounting gimmicks to re-capitalize rather than raise private funding. CPI data came in slightly higher than expected, showing inflation at 3% vs. the 2.9% expectation. This is unlikely to impact Thursday’s rate decision, though the ECB may attempt to come off hawkish to prove they are sticking with their mandate. German retail sales figures came in lower than expected and their unemployment figures are due out on Wednesday.

The Pound is lower as home price figures came in lower than expected and tomorrow’s GDP figures are expected to showing slow growth, though it must be noted that the decline in government spending may be responsible. Various PMI figures are spread out along the week so these may be better barometers of the health of UK business and industry.

In Canada, GDP figures came in better than expected this morning, showing a YoY figure of 2.4% vs. the expectation of 2.2% with the quarterly figure higher by .1%. Raw materials and producer prices were also higher so there may be signs that inflation is starting to pick up. Friday’s employment report is expected to show 15K jobs added and the unemployment rate to remain steady at 7.1%.

And finally here in the US, this Friday’s NFP is expected to show a gain of 95K jobs and the unemployment rate to remain steady at 9.1%, though those estimates can change in the ensuing days. Wednesday’s FOMC meeting may be significant if Bernanke hints at further monetary easing or QE3. While corporate earnings have been good, unemployment has been stubbornly high and the Fed chief just can’t help himself and see the need to tinker with policy as if it makes a difference. At this point he is likely pushing on a string and money can’t get much cheaper—its up to fiscal policy now to determine the fate of the economy and whether or not confidence will be instilled.

The deficit super-committee is charged with finding an answer and at this point the prospects don’t look good. Add in a G-20 meeting this week which may show how much IMF involvement (read US taxpayer) is included in the Euro debt deal and we will see some volatility.

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October 28, 2011

Forex Market Outlook 10/28/11

Filed under: Forex News — Tags: a-released-here, commodities, currency-pairs, economic, europe, forex market, fundamental, ireland, monetary, oil, practice account, top stories, trades, while-the-boj, yen — admin @ 7:05 am

Yesterday’s meteoric ride higher in risk assets is emblematic of the overall state of the global economy in that it is government and not business that is holding us back. With the “resolution” of the Euro debt crisis having been established, let’s not forget that the debt problem is not going to go away, but rather now they have a coherent plan to deal with it. That is, until something happens.

Part of the problem with the plan laid out yesterday is that it did not address the debt problems in the other four periphery countries and while Greece may live to see another day, the people of Italy, Ireland, Portugal, and Spain may take issue that they did not receive debt forgiveness. So this situation is far from over, and it will be interesting to see what happens when the it comes time to actually follow through on these plans if necessary.

So the major risk appetite from yesterday has abated some today as we some profit-taking in the markets ahead of the weekend. Risk assets are slightly lower to start the morning, but not enough to show a reversal of sentiment. Moves like yesterday’s are rarely one-day phenomena so it seems likely that barring some extremely bad news, markets particularly US stocks should move higher. The Dow climbed above 12000 and corporate earnings have continued to impress.

This rise in stocks yesterday was both accompanied and caused by US dollar selling, as the Dollar experienced a broad-based sell-off and commodities were higher as well. Economic data has been slightly better of late, but it will be interesting to see if this is sustainable with the potential inflation on the horizon.

There was no significant news out of Europe this morning, but overnight in Japan the jobless rate came in much better than expected, posting a 4.1% figure vs. an expectation of 4.5%. Household spending also decreased by less than expected, and CPI data showed continued deflation. Industrial production figures however were worse than expected.

So the story in Japan is one of an improving economic picture despite the recent Yen strength which is at an all-time high vs. USD.

Economic data released here in the US missed expectations slightly with Personal Income showing a .1% gain vs. the expected .3%, though personal spending increased .6% as was expected. Later this morning the U of Michigan consumer confidence figure will be released and is unlikely to bet expectations.

Today is setting up to be an inside day which is not surprising given yesterday’s massive move. Essentially this means that we won’t be making new highs or new lows. These types of pauses are generally necessary as it gives the markets time to fully digest the impact of the change in sentiment and determine if the move is warranted.

In this case I think it is, not because the economic fundamentals looks so good, but because there really is no place else to go. With bonds paying little interest, the value of the Dollar declining, and global growth uncertain, stocks are a pretty good place to be. The rationale behind it is that companies can maneuver more quickly than governments and can maintain earnings but cutting spending if need be. With valuations fairly low historically, dividend yields are higher making stocks an attractive bet.

But what’s even a better bet are the commodity currencies in my opinion as dividends are paid quarterly in stocks; in currencies interest is paid daily. So you don’t have to try to pick individual winners like in stocks or get locked up for months waiting for dividends. You can get in and out in a moments notice and get your interest daily.

In addition, if the Dollar continues to weaken with the threats of QE3 on the horizon, then other currencies are going to look more attractive. That’s what makes the currency market the market of choice for these uncertain times!

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October 27, 2011

Forex Market Outlook 10/27/11

Filed under: Forex News — Tags: announcement, australia, currencies, economic, europe, forex market, japan, news, nzd, rate-decision, with-continued, yen — admin @ 7:17 am

Well the Euro debt crisis is finally over, or is it? So what happens next? That folks, is the million dollar question but first we should take a look at the events of the last 24-hours and what was revealed as the definitive resolution.

Yesterday there was some market volatility and initial risk aversion as the rumors were making the rounds and we were expecting the announcement to take place some time near the end of yesterday’s trading session. When it appeared as thought this process would be delayed into late last night, the markets reversed and risk appetite increased in anticipation of the announcement.

The announcement finally came late last night and here are the highlights of the plan of action:

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October 19, 2011

Forex Market Outlook 10/19/11

Filed under: Forex News — Tags: aussie, commodities, currency trading, economic, forex market, fundamental, loonie, trader, trades, trend — admin @ 7:15 am

Yesterday’s market turn-around exemplifies the type of market action we may continue to see until the Euro debt crisis is finally resolved to the satisfaction of the world. Yes, I said the world. Markets yesterday were selling off on lowered expectations that this weekend’s European summit would produce that resolution, but a rumor hit the tape from a newspaper in Euro that said that France and Germany had agreed to expand the size of the ESFS to 2 trillion euros, much larger than had been previously agreed upon.

This sent markets screaming higher into the close as it was risk-on again and the correlations not only held up but also lead the way. This kicked the weaker economic data to the back again as the hope of a credible deal left markets wanting more. Moody’s attempted to rain on the risk appetite parade by downgrading Spain again but the markets will have none of it. Riots in Greece make the Occupy Wall St. crowd look like rank amateurs as the new austerity measures are announced.

So we have the carry-over affects this morning taking place, and better than expected economic data from today’s docket has confirmed the move. US corporate stock earnings are starting to look better, though Apple missed earnings for the first time in 4 years last night. The markets seemingly want to go higher if not for the specter of risk hanging over them in the form of the Euro debt crisis.

In the UK, the BOE released the minutes to their most recent rate policy meeting which showed a unanimous vote to expand their QE program by 75 billion pounds, even though yesterday’s inflation data pushed above 5% for the first time in 3 years. BOE policy-makers believe this to be a temporary spike, but that remains to be seen. Especially if a Euro debt resolution allows markets (including commodities) to fly again.

Here in the US, CPI data came in as expected and slightly lower which some might find surprising after yesterdays higher than expected PPI data. Core CPI came in at 2% vs. an expected 2.1% and the headline number came in at 3.9% as expected. Indeed the Fed is dodging bullets as the money-pump continues. My feeling is that it is just a matter of time before inflation rears its ugly head and when it does it will be fast and furious.

But the best news of the morning may be the housing starts figures which show a gain of 15% vs. an expected 3.3%. Recent lousy weather may have distorted those figures as housing starts were delayed, but nevertheless it is an impressive number. Building permits came in lower than expected, posting a decline of 5% vs. an expected decline of 2.4%.

It will be interesting to see how the rest of the day plays out as stocks here in the US are set to open higher and risk appetite is also increased. However, a closer inspection of the numbers and rumors may prove to warrant a more reserved position as perhaps the market is getting a bit ahead of itself.

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October 7, 2011

Forex Market Outlook 10/07/11

Filed under: Forex News — Tags: account, bank, china, fear, forex market, fundamental, interest, loonie, lower, markets, party, within-the-next — admin @ 7:05 am

All eyes are on this month’s Non-Farm Payrolls report which is expected to show a gain of 60K, with a private sector gain of around 90K. Unemployment is expected to remain at 9.1%. While this is one of the most important data releases, the overall risk themes in the marketplace have held markets back. Economic data has been mildly weak of late, which I think is a positive given the risk environment.

One sign that we may see better numbers is the earlier employment report out of Canada, who reported a gain of 61K jobs vs. an expected 15K and the unemployment rate ticked down to 7.1% from 7.3%.

**Update** NFP has come in showing a gain of 103K jobs, better than the expected 60K estimate. Private sector jobs added was 137K, better than the 90K expected. Last month’s NFP was revised higher to show 57K jobs added vs. the reported 0. Unemployment rate remains steady at 9.1%.

The markets have used this opportunity to increase risk appetite, though today’s better than expected numbers may reduce the chance of QE3 from Bernanke and the Fed. While overall that would be a good thing, the markets may be slightly disappointed in that prospect.

There is an interesting dynamic taking place in the US economy and the “Wall St. Occupation” protests may be the sign that we have hit bottom. We know about the gridlock in Washington DC and the Euro debt crisis, but markets have been looking to move higher for some time. This may be a situation where the markets can no longer wait around for politicians to get their acts together so business may take the bull by the horns and run with it.

While this number does not change the economic malaise we are feeling overnight, it a step in the right direction. Should we get some sound economic policies here in the US, then we might actually see some improvement in confidence which in turn would help the economy recover. Not higher taxes, not more government spending, not more free Fed money. Confidence.

Meanwhile confidence has increased that Euro zone leaders may be getting it together as they are finally discussing the potential re-capitalization of banks. European bank exposure to sovereign debt is a major problem and the UK bank exposure was likely a reason that the BOE chose to increase QE to add further liquidity if the problems in the Europe got worse.

This prompted Moody’s to downgrade the UK banks (they’re always late to the party, aren’t they) and yet the Pound has rallied off of yesterday’s knee-jerk reaction the saw the Pound sell-off. As a mentioned yesterday, I thought the market got it wrong initially and indeed I was right. So risk appetite trumped QE in the UK and the markets are moving higher. PPI figures also came in slightly higher than expected showing signs that inflation is still a problem, but the BOE may be willing to deal with issue as the economy recovers.

Lost in the mix of what has been taking place in Europe, the Japanese interest rate decision came out last night to little fan-fare as it produced no change in policy. While this is exactly what was expected, there has been some hope that the BOJ might intervene in their currency as recent Yen strength could be extremely detrimental to Japanese exports and thus the economy. Last night’s meeting might seem like an obvious place to launch intervention, but my feeling is that the BOJ has been trying to do the unexpected. So if any intervention is coming, it would most likely occur on Sunday night when the Asian markets open.

Outside of this, the attention should return to the Euro debt crisis. There is hope that some sort of agreement can be reached within the next few weeks. While there is still risk in the markets, today’s report can give us hope that better times may be coming.

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September 22, 2011

Forex Market Outlook 9/22/11

Filed under: Forex News — Tags: a-bottoming-out, above-the-2011, dow, economy, europe, forex market, fxedu, interest-rate, kiwi, lower, twist, unemployment — admin @ 7:13 am

The markets have been tanking for the last 18 hours as Bernanke unleashed “Operation Twist” on the marketplace. Perhaps this should be called “Operation Disaster”. What he has essentially done is tanked markets in the short-term in favor of potential longer-term gains. With the Euro debt crisis worsening every day, the timing is less than ideal.

The last time this obscure policy measure was used was in the early 1960’s and though the intended effects are happening—to lower yields on longer-term maturities—the immediate impact has not been well-received by the markets. At some point all of this Fed tinkering and tweaking is bound to produce a problem and yesterday’s move may be it.

Since yesterday’s announcement, the Euro has fallen nearly 4 cents, or 400 pips in forex parlance. The Aussie has experienced a similar move and is now trading under parity with USD to .98. If you follow our “chart of the day” section below, I also called the move on the Loonie and Pound from the last two days. Monday’s short call on EUR/USD is still in play with a longer-term target of 1.30.

Global stock markets are also retreating, with the Dow Futures off 200+ points today after selling off over 250 points yesterday. Asian markets were down overnight in the 2-4% range, and European stock markets are down close to 5% across the board. Oil is also lower to an 81 handle, and gold is off $75 to around $1730.

So if the twist was intended to induce US Dollar weakness, it is failing miserably and the correlative effects of a strong dollar is taking world markets lower. I’m sure Bernanke’s intention is to get people out of bonds and into stocks, commodities, and possibly housing to encourage inflation, but in the near-term this has backfired. Risk aversion has picked up to the point where this policy mistake may not be reversible.

This brings us back to the Euro zone, which is still under pressure to figure out the debt crisis. The Greece situation is becoming more and more unsustainable as time goes on and a potential default could send world markets spiraling lower out of control.

Lower manufacturing in both China and Europe (for the first time in 2 years) reflect a slowing global economy, but the debt crisis in Europe and the threat of contagion from Greece to other countries is a ticking time-bomb.

Politicians both in Europe and in the US are way out of their depth and lack the ability to make the tough choices necessary to right the ship. The last few years of extend and pretend has finally come home to roost and the lack of action has brought us to this uncomfortable place.

US initial jobless claims rose slightly but that was to be expected, and at this point there is no economic data that can paint a rosy enough picture to induce risk-taking. So markets may continue to fall, though where that bottom may be is anyone’s guess. In the long-term “Operation Twist” should be US dollar negative and eventually money will have to go somewhere, most likely to dividend paying stocks as yields there improve with lower prices. Or perhaps Bernanke will embark on more quantitative easing. One of the things to note about the “Twist” is that it did nothing to expand the money supply, but rather just re-shuffled the Fed’s holdings.

And this also does nothing for Main St. here in the US as confidence is near all-time lows and improvement is nowhere in sight. Until the Fed gets some help form the fiscal side of the ledger, they may be all out of bullets and further action is losing its effectiveness.

These are uncertain times right now and the uncertainty causes fear, which in turn causes risk aversion. The pressure is on global leaders to find credible solutions to the global economic downturn otherwise we may continue to slide toward further recession or possibly depression.

Until these solutions emerge in Europe with the debt crisis and in the US with the economy in general, the trend will remain to the downside. Perhaps a bottoming out process is necessary to get things moving again, but the pain experienced along the way may cause irreparable harm.

There is ample opportunity in the forex market to take advantage of this volatility, but don’t get caught in losing positions!

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September 15, 2011

Forex Market Outlook 9/15/11

Filed under: Forex News — Tags: forex market, invest, jpy, lower, mike conlon, news, spain, time, trader — admin @ 7:18 am

The markets this morning are feeling a lot better about the investing climate after both Germany and France asserted their support for Greece as a member of the Euro zone. While these statements of confidence are, for lack of a better word “nice”, they do nothing toward fixing the problems Greece is facing.

Euro zone inaction has helped put Greece in an almost untenable position of having to deal with rising yields in the face of austerity measures and without a comprehensive plan to give them some breathing room, it is just a matter of time before they suffocate. Rumors that a Eurobond offering could materialize proved unfounded and essentially nothing has changed from earlier in the week.

Yet this all of the markets need to return to risk appetite, as investors are dipping their toe back into risky assets. It will be interesting to see if the markets will continue in this mode for the rest of today’s session.

Yesterday, the RBNZ in New Zealand left interest rates unchanged at 2.5% citing a weak global economy as the reasoning and said that they are in no rush to hike rates at this time. Nevertheless, the Kiwi traded higher on the rising tide of risk appetite in the Asian session as stocks were higher.

Earlier this morning, the SNB also kept rates unchanged at 0% after last month’s cut and re-iterated their commitment to weakening the Swiss franc as the target vs. Euro at 1.20 is still in tact. Industrial production figures came in better than expected, posting a gain of 3.6% vs. an expectation of 3%.

In the Euro zone, CPI data came in as expected with the core number at 1.2% and the headline figures at 2.5%, which means that the ECB can shelve inflation worries for now, though any action based on these figures and not the overall debt crisis would be ludicrous at this point. Spain was able to get off a successful bond auction.

In the UK, retail sales figures came in slightly better than expected, though the numbers are still weak. This is a “win” for the UK in that the numbers are not worse than expected and even though the data has been worsening, it is doing so at a slower pace. BOE accommodative policy has partially offset government austerity measures, though inflation remains high.

Here in the US, CPI data came in largely as expected with the core figure showing .2%. However, the headline figures were higher than expected showing .4% vs. an also expected .2%. Initial jobless claims came in higher than expected at 428K and while not too aberrant from previous readings, is ticking in the wrong direction. Empire manufacturing number came in worse than expected as well.

With these figures, the markets are giving back some earlier gains and gold is now trading below $1800 to roughly $1780 as USD is strengthening. Stock futures in the US are also pulling back as the correlative effects of a stronger Dollar are taking some risk off of the table.

Bernanke is speaking somewhere this morning and that could produce volatility if he doesn’t stick to the playbook.

As the numbers slowly get worse, the markets are lacking confidence in our political leaders to right the ship. As we continue to double-down on bad economic policy, there is no catalyst to get things moving again.

Increases in government spending though more borrowing and higher taxes is merely re-distribution of a shrinking pie, and while I also believe that the income disparity here in the US is alarming, we need to put people back to work by whatever means necessary.

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