Forex Blog

January 31, 2011

Egypt Erupts!

Filed under: Forex News — Tags: , , , , , , , , , , , , , , — admin @ 1:09 pm

The news that has been dominating the headlines for the past week is the uprising in Egypt that many fear may result in an uncertain outcome. This sent markets lower on Friday as well as oil spiking up $4/barrel, reminding the markets of the geo-political risks the global economy faces.There are a few takeaways that we should be looking at when we consider our overall assessment of the health of the global economy. First is that there still could be major supply shocks to oil which could potentially add to the already elevated price due to inflationary forces. While Egypt is not a major producer of oil, they control the Suez Canal which is a major conduit for shipping oil. If that closed then there could have been problems getting oil to the market.

The second fear is that these types of demonstrations spread to other Middle Eastern countries thereby causing further disruptions and also the potential for increased violence as possible new government regimes. Like it or not, the fear is that radical Islamists will takeover governments and create an entirely new hostility on the global scene. How this ultimately plays out is anyone’s guess.

In forex related news, the Kiwi is lower on New Zealand’s reduced trade balance figures, and the Euro is higher despite slowing growth projections for the Euro zone and negative German retail sales figures.

Later this morning we will get Canadian GDP figures as well as US personal income and consumption figures.

In the forex market:

Aussie (AUD): The Aussie is higher as a little bit of the risk premium going into the weekend has been reduced as no major outcome out of Egypt has caused further risk aversion. Tomorrow is the RBA rate decision and the expectation is that rates will remain unchanged.

Kiwi (NZD): The Kiwi is lower across the board as worse than expected trade balance figures showed stronger imports and building permits declined 18.6 % vs. an expected decline of 1.3%. (Click chart to enlarge)

nzdusd131.JPG

Loonie (CAD): The Loonie is mixed this morning ahead of the GDP release at 8:30AM EST and BOC honcho Carney has been attempting to jawbone the currency lower. GDP is expected to come in at .3%, and perhaps Carney’s need to talk the Loonie down means that a better number is forthcoming? (Click chart to enlarge)

usdcad0131.JPG

Euro (EUR): The Euro is higher as the Dollar has given back some of Friday’s strength despite weaker than expected German retail sales figures (-1.3% vs. an expected gain of 1.1%) and higher estimates for CPI data. Meanwhile, Ireland slashed its growth forecast to 1% from 2.4%. Thursday is the ECB rate decision, with the current expectation of no change.

Pound (GBP): The Pound is also mostly higher as a BOE policy-maker called for higher interest rates to prevent inflation from becoming entrenched in an article published earlier today.

Dollar (USD): The Dollar is mostly weaker as it has given back gains from Friday’s flight to safety trade due to the Egyptian Eruption. Personal income and spending figures are due out later this morning and Friday is the all-important Non-Farm Payrolls report.

Yen (JPY): The Yen is weaker across the board as the flight to safety trade is unwound. Industrial production figures came in better than expected, posting a monthly gain of 3.1% and a YoY gain of 4.6% vs. expectations of 2.8% and 4.4% respectively.

This past week has reminded the markets that geo-political risks are still alive and well and that it is extremely important to keep an eye on some of the peripheral countries. We sometimes become too engrossed with the Euro debt crisis or the fledgling US economy to concern ourselves with what is going on around the globe and that is a mistake.

While I am most definitely not one of those US “elites” who feels that somehow we should be involved in these issues abroad, it is important to know that the outcomes will have potential consequences, for better or for worse.

“Adapt and survive” was the motto of my old trading desks, and that’s exactly what I intend to do. I would suggest that you prepare for the same!

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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October 18, 2010

Shock and Awe the dollar is higher

Filed under: OANDA News — Tags: , , , , , , , , , , — admin @ 10:13 am

QE2 will be launched and exit strategies can now gather dust. Bernanke’s highly anticipated speech last Friday was not as dovish as the market expected. The Fed is still weighing their policy options, while admitting more policy action is needed. The large scale asset purchasing that the market has been betting on is still unresolved. We can expect changes to the FOMC statement to show that the policy makers plan to maintain low interest rates longer than the market expects. Fundamentally, there was not enough clarity for the longer end yield curve traders, the no ‘shock and awe’ has left the market dismantling a portion of their short dollar trades.

The US$ is stronger in the O/N trading session. Currently it is higher against 15 of the 16 most actively traded currencies in another ‘volatile’ trading range.

Forex heatmap

Forgetting Bernanke for a minute and if focusing on Friday’s data, it beat most of markets expectations. There are more signs that the US economy is doing better heading into the final quarter. Retail sales rose for a third consecutive month in Sept., up +0.6%. Capital market’s was expecting a rise of only +0.4%. It’s worth noting that the increase followed a revised climb for the previous month to +0.7% (the biggest increase in sales in over five months). Bernanke focused heavily on the inflation woes in his Friday’s speech. Sept.’s CPI rose +0.1%, while the core (ex-food and energy) remained unchanged. On a year-over-year basis, consumer prices are up +1.1% while the core is +0.8% higher. Bernanke summed up the situation nicely in his speech before the released data when he stated ‘in the light of the recent decline in inflation, the degree of slack in the economy, the relative stability of inflation expectations, it is reasonable to forecast the underlying inflation will be less than the Fed’s goal for some time’. The proof is in the pudding.

The USD$ is higher against the EUR -0.81%, GBP -0.80%, CHF -0.53% and lower against JPY +0.26%. The commodity currencies are weaker this morning, CAD -1.13% and AUD -0.75%. Dollar profit taking is the order of the day since Friday. It has managed to pressurize the loonie, aided by weaker commodity and equity prices. Even with the Canadian trade deficit narrowing to -$1.34b in Aug., from a revised -$2.55b in July last week, the loonie only spent a brief period above parity vs. the dollar as we wait for the BOC decision tomorrow. The market expects the currency to consolidate around these levels until after Governor Carney’s decision becomes public. The currency briefly found favor last week on the back of the MAS actions of widening their trading band, effectively tightening monetary policy. Big picture, because of the softer Canadian data this quarter and because of the strong economic ties with the US there is already much QE priced into the market. Investors and speculators alike are all partaking in the lemming one-directional short-dollar trade. On this basis we may have already seen CAD’s short term highs. Year-to-date, the CAD has appreciated +4.1% vs. its largest trading partner south of the border. Traders and investors have mostly trimmed their hike bets and will try to stay close to home.

The AUD won the battle of reaching parity, albeit briefly, and aggressively fell from its twenty-seven year high on speculation that the Fed would add less monetary stimulus than expected, damping demand for higher-yielding growth assets. Analysts note that going into next months Fed meeting’s that the ‘risks are skewed towards further disappointment’ which has the market aggressively pricing out some of the QE2 premium. Earlier last week, a rebound in Australian consumer confidence (+3.3% vs. -5%) and an unexpected increase in Japanese machinery orders (+10.1% vs. -3.7%) boosted optimism in the region’s economy. A stronger employment report down-under this month also supported the currency to print new highs vs. the greenback. Australia’s employers added +49.5k workers and the unemployment rate held at +5.1% in Sept. Month-to-date, the AUD has climbed +7.1% vs. the buck as data fueled bets that the RBA will raise interest rates before the year ends. Futures traders now see a 42% chance that the RBA will increase its target rate next month, down from 66% last week. Investors are better buyers on deeper pullbacks as the interest rate differential continues to be of appeal for alternative investments (0.9868).

Crude is lower in the O/N session ($80.74 -51c). Oil fell to its lowest level in two-weeks in the overnight session as the dollar strengthened, curbing the appeal of commodities as an alternative investment. Analysts note, that the dollar’s value is taking out any type of fundamental trading at the moment. The commodity temporarily climbed on the back of growing speculation that the Fed will give the US economy a boost, by default pushing commodity prices higher. Since the release of the FOMC minutes showing policy makers are prepared to buy more government debt, debase their currency, crude had climbed +1.2%. Now that the dollar has done an about turn, commodity prices have come under renewed pressure. Last week’s inventory report revealed a small drawdown on stocks. Crude inventories fell by -416k barrels to +360.5m, compared with the estimated increase of +1.2m barrels. Crude analysts note ‘this is currently a shoulder season for product demand ahead of the winter heating season’. Technically, we should expect inventories to gravitate towards their highs. Not to be left in the cold, gas inventories fell -1.8m barrels to +218.2m, just above the weekly estimate of a -1.4m drawdown. Distillate stocks (heating oil and diesel), fell by -255k barrels to +172.21m. Finally, the refining capacity fell by -1.2% to 81.9%. It seems that the drop in refinery runs has probably caused the drop in fuel supplies. The market remains wary that the underlying fundamentals have not changed despite prices remaining rangebound.

Gold, for a second consecutive day, has pared some of its record gains as the rise in the dollar has curbed the demand for commodities as alternative investment. For most of last week, investors traded with a distrust of currencies and gold seemed to be the only solution as investors used it as a proxy for a ‘third reservable currency’. With market confidence wavering in currency prices, and with cheap money, has been making commodities attractive on any deeper pull backs. Any time that governments are in the business of printing money then the commodity is bound to do well. To date, gold has outperformed global equities and treasuries (+23.8%), prompting record investment in gold-backed exchange-traded products. The debasing issues of the dollar, coupled with the sustainable growth issues of the US economy has investors generally seeking protection in an asset with a ‘store of value’. With the Fed on the verge of implementing further QE programs ‘tend to be supportive of asset prices and is fueling concerns about the potential longer-term inflationary affect of such measures’. The opportunity costs of holding gold are low due to low interest rates ($1,359 -$12.70c).

The Nikkei closed at 9,498 down -2. The DAX index in Europe was at 6,486 down -6; the FTSE (UK) currently is 5,688 -15. The early call for the open of key US indices is lower. The US 10-year backed up 5bp on Friday (2.53%) and is little changed in the O/N session. Long-end prices tumbled last week, pushing yields to their biggest weekly increase in over a year, on speculation that Fed’s efforts to spur the economy will reignite inflation. The market had expected to see some Japanese interest in the long bond auction, mostly on the back of a rally in the JPY would attract demand, however, this did not happen, further pressurizing the curve. The Fed has admitted to future QE2, but they will continue with caution. Until the amount is know, most likely at its next meeting, the market has product to distribute.

October 4, 2010

2-Year Treasuries Fall to Record Low

Filed under: OANDA News — Tags: , , , , , , , , , — admin @ 1:34 pm

On Friday, New York Fed president William Dudley described the current growth and unemployment outlook as “unacceptable” prompting fears that the likelihood for further intervention in the form of quantitative easing was intensifying. As a result, two-year treasury yields fell to a record low yield of 0.3987 percent and ten-year yields declined 3 basis points to 2.48 percent as of 7:30 a.m. in New York.

Source: Bloomberg

September 13, 2010

EURO-China love affair

Filed under: OANDA News — Tags: , , , , , , , , , , — admin @ 10:37 am

China has stepped up to the plate and is deemed again the savior for Capital Markets. Moving to center stage over the weekend, China has followed up last weeks strong import figures with data showing a rise in industrial production (+13.9% in Aug.) and a continued increase in consumer prices (+3.5%). This is helping to lift some of the recent global fears of achieving or creating a double-dip scenario in the US. The data is providing support for the EUR and giving a thumbs up to ‘risk-on’ trading strategies. China is the Euro-zone’s largest trading partner, +22% of German exports head to mainland China.

The US$ is weaker in the O/N trading session. Currently it is lower against 13 of the 16 most actively traded currencies in a ‘whippy’ trading range.

Forex heatmap

The greenback is under pressure from calls that the Fed should be buying more bonds, the JPY is capped ahead of tomorrows leadership election in the ruling Democratic Party. It’s all about risk and the demand for risk is very much in vogue. Growth revisions within the Euro-zone continues to provide support for the EUR. The EC this morning indicated that Europe’s economy may grow twice as fast than originally predicted this year (GDP +1.7% vs. +0.9%). The Commissioner stated that the economy is ‘clearly on a path of recovery and ‘the rebound of domestic demand bodes well for the job market’. The statement did come with a disclaimer this morning. ‘However, uncertainties remain and safeguarding financial stability and continuing fiscal consolidation remain key priorities’. With little data to chew on today, the market blindly gets to test the demand for risk from North America.

The USD$ is lower against the EUR +1.05%, GBP+0.75%, CHF +0.45% and JPY +0.13%. The commodity currencies are stronger this morning, CAD +0.44% and AUD +0.63%. The loonie advanced for a second consecutive week on Friday on the back of a BOC rate hike (+1%) and a stellar jobs report. Despite the unemployment rate edging one tick higher to +8.1%, the economy added another +36k new monthly jobs last Friday (+80k full-time and -44k part-time). Governor Carney has explained away last Wednesday’s +25bp BOC hike, by stating that higher rates are somewhat offset by lower bond yields. In his communiqué, Governor Carney signaled that Canadian policy makers may increase rates again this year as the nation’s economy continues to grow. ‘Financial conditions have tightened modestly but remain exceptionally simulative’. The market has taken this as a dovish signal to own more CAD. The loonie is receiving ‘three-prong’ support, a less dovish BOC, a currency being used as a proxy for growth and to a lesser extent a safer heaven investment. A higher percentage of speculators seem to have missed most of last weeks ‘move’, the market should expect to witness better buying of Canadian dollars in the short term.

In the O/N session the AUD has climbed to its strongest level in 5-months on signs that sustained economic growth in China and the US will continue to boost demand for higher-yielding growth assets. With China’s retail sales and industrial production reports topping analysts expectations over the weekend will have the AUD well supported on any pull backs as commodity prices advance. The market is also pricing in a good retail sales number tomorrow for a second consecutive month in the US. The currency is threatening to take out yearly highs as domestic data has also aided the currency’s climb. Employers last week added more jobs than the market had anticipated (+30.9k vs. +25k), pushing the unemployment rate lower (+5.1% vs. +5.3%). Traders are again increasing their bets that the RBA will hike at its next meeting. Futures prices are currently pricing in a +26% chance that Governor Stevens will start tightening again on Oct. 5th. Analysts believe that the market is somewhat underestimating the number of chances of further tightening over the next 6-12 months. Not helping the currency will be the forming of a minority government. PM Gillard won the backing of key independent lawmakers last week, allowing her Labor Party to retain government and pursue a ‘tax on mining companies’. Technically, ‘the fiscal outlook looks worse under a minority government and management of an economy growing at +10% in nominal-terms may increasingly rest on the RBA’ (0.9325). No matter, risk like the AUD in the short term.

Crude is higher in the O/N session ($77.30 +85c). Crude prices rose to a monthly earlier this morning as North American and Asian economic indicators restored confidence that a global recovery will stimulate overall fuel demand. Also aiding commodity prices is last week’s bullish EIA inventory report. It recorded an unexpected decline in inventories, ‘with oil supplies falling -1.85m barrels to +359.9m vs. an expected climb of +1m barrels. Not to be outdone, gas supplies declined -243k barrels to +225.2m. They did happen to beat analyst’s forecasts of a decline of -1m barrels. The 4-week average demand for gas was +1.1% higher than a year earlier, averaging nearly +9.4m barrels a day. US refineries are running at +88.2% of total capacity, up +1.2%, w/w. The market had been expecting a decline to +86.3%. Finally, distillate fuel (diesel and heating oil) fell by -400k barrels to +174.8m barrels vs. an expected increase of +940k barrels. The market is wary that the underlying situation has not changed, the overall fundamentals remain weak and stockpiles of crude and products remain close to their record highs. Analysts expect speculators to remain better sellers on up-ticks in the short term. Mind you, weaker shorts are getting nervous.

On Friday gold prices fell, capping the first weekly loss for the asset class in 7-weeks. A healthy purge has been in the cards for ‘one-directional lemming gold trading’. A rebound in global bourses has curbed the demand for the commodity as a ‘safer’ heaven asset class. The global ‘fear’ factor currently does not have the momentum to push the commodity to new yearly highs. Surprisingly stable global data of late has sped up the liquidation of risk aversion trading strategies. The market will now have to wait and see where support comes back in for the commodity before piling again into that trade. There is an over whelming consensus that the precious metal remains poised to rally to all-time high later this year. The commodity has managed to post yearly gains over the previous nine years. The opportunity costs of holding gold are low due to falling interest rates, by default, the market should expect small better buying of the metal on pull backs ($1,245 -150c).

The Nikkei closed at 9,321 up +83. The DAX index in Europe was at 6,258 up +44; the FTSE (UK) currently is 5,5547 +46. The early call for the open of key US indices is higher. The US 10-year backed up 6bp on Friday (2.79%) and another 5bp in the O/N session (2.84%). Last week, the US yield curve pushed higher, the most in 5-months, as fundamental data provided ‘some’ proof that the economy may be able to sidestep a double-dip recession. Not supporting FI prices has been the up-tick in corporate issuance of late. The private sector has been content taking advantage of these historical low yields. The 2/10’s spread has widened another 6bp to +222bp as the market again embraces risk.

August 31, 2010

FED and BOJ Losing Investors Focus

Filed under: OANDA News — Tags: , , , , , , , , , — admin @ 10:11 am

Investors continue to test the Fed’s resolve. Is helicopter Ben overly optimistic on his economic outlook? And if so, what is he going to do about it? Yesterday’s equity and bonds reaction is telling us that there is little he can do if policy makers have got it wrong. The Fed, similar to the BOJ is entering ‘no-mans land’. Markets are turning their back on Shirakawa’s emergency lending facility expansion. Even direct yen intervention is futile without the ECB and Fed’s complimentary actions. This week focus on the details. Focus on the Fed’s minutes, focus on ADP report tomorrow and focus and strap yourself in for NFP this Friday. Already this week analysts have revised the private payroll down to zero job growth!

The US$ is weaker in the O/N trading session. Currently it is higher against 11 of the 16 most actively traded currencies in a ‘whippy’ trading range.

Forex heatmap

Yesterday’s US data revealed that consumer spending continues, but, with milder gains. Headline spending happened to beat market expectations (+0.4% vs. +0.3%), with half of gain due to price effects, as real-sales grew at a slower pace than that of nominal-sales. This is definitely stronger proof of a weaker pace of consumer spending. However, with spending representing 2/3rd of the US economy and any gains, be it mild, should alleviate fears of an imminent double-dip occurring. Digging deeper, spending continues to contribute to growth, albeit mildly. Inflation adjusted, it grew at +2% in the 2nd Q. Analysts note that if the rest of the 3rd Q is flat then quarterly consumption will be up +1.3%. The personal savings rate eased 3-ticks to +5.9% in June, while the Fed’s preferred measure of inflation, core-PCE, rose +0.1%, m/m, and is +1.4% higher y/y and is certainly not deflationary from policy makers perspective. Finally, total personal income was up +0.2%, while wages and salaries advanced +0.3%. The data points again to ‘very slow growth’, which is ‘a far cry from a double-dip’ at the moment at least!
 
The USD$ is weaker against the EUR +0.17%, CHF +0.70% and JPY +0.37% and higher against GBP -0.13%. The commodity currencies are mixed this morning, CAD +0.13% and AUD -0.13%. The loonie is trying to solidify its worst monthly performance in three (-2.4%) this month. After earlier printing new monthly highs yesterday, the currency did an about turn as surprisingly weaker economic data added to the evidence the country’s recovery has indeed slowed. The data released showed that Canadian factory product prices rose less than expected (+0.1% vs. +0.5%) and the current account balance widened more than forecasted (-11b vs. -10.2b). All last week the loonie had been feeling the pain and pressure that comes with being a growth, interest rate commodity sensitive currency. With global bourses and commodity prices its two biggest supports back peddling has happened to pressurize the weaker long CAD positions. Canada is not immune to weaker data reported south of its borders. This ‘faltering economic recovery means the chances for a further BOC interest-rate increases this year weakens day over day’. OIS have moved to a 60% chance that Governor Carney goes next week. It is only natural that growth and interest rate sensitive currencies would be dumped even more aggressively. Traders are happy to play the risk-aversion card with longer term CAD bulls looking to pick up cheaper loonies on dollar rallies.

In the O/N session Australia’s current-account deficit narrowed (-5.6b vs. -6.4b) to the least in 8-years, and retail sales (+0.7% vs. +0.4%) and building approvals rebounded (+2.3% vs. -0.6%), signaling the economy is strengthening even as recoveries in Japan and the US show signs of faltering.The AUD has traded under pressure vs. the yen on speculation that the BOJ decision to expand its loan program will fail to halt the currency’s appreciation and pared its advance vs. the dollar as the size of the CBanks step disappointed investors, causing Asian bourses to unwind some of their earlier advances. On the whole, concerns that global growth is slowing has damped investor appetite for higher-yielding assets. The currency has underperformed against all of its major trading partners and is expected to do so until there is a new Government formed. The commodity rich currency is not isolated, as other growth sensitive currencies are suffering the same fate. Australia’s rate moves have helped to add a +6% gain to AUD vs. the dollar in the past year (the fourth-best performer among the world’s 16 most actively traded currencies). Net result traders are adding to their bets that the RBA will leave interest rates unchanged for the next 12-months. Interest rate differentials play a big part of the currency’s attractiveness. Risk aversion will likely force the bull’s hand, capping rallies with better sellers on up-ticks (0.8889).

Crude is lower in the O/N session ($73.51 down -119cc). Crude prices continue to soften as dealers believe that last week’s +2.5% gain from its lows was a tad over optimistic given the outlook for fuel demand in the US over recent weeks. The dollar climbing vs. the EUR has also helped to heap pressure on the commodity. The commodity continues to hover just above this months low on concerns that weaker economic data will push the US into a double-dip recession. The market should be wary that the underlying situation has not changed, the fundamentals remain very weak, demand does not look good and stockpiles of crude and products remain at a record high for a second consecutive week last week. The EIA report showed an unexpected increase for all energy products. US crude stockpiles rose by +4.1m barrels, surprising analysts who had expected a modest decline of -0.1m barrels. Gas inventories grew by +2.3m, while distillates (ex-heating oil and diesel fuel), saw inventories rise by +1.8m barrels. The market had expected gas stocks to fall by -500k and distillates to climb by +900k barrels. The data confirms that the current US supply glut continues unabated, even surpassing record levels reached this month. Analysts note that the ‘commercial supplies of oil and oil products are at the highest level in nearly 27-years, with gas stockpiles well above 5-year averages’. It’s no wonder that crude prices continue to gravitate towards the $70 psychological support level. Speculators remain better sellers on up-ticks in the short term.

Gold prices have been fluctuating in and out of positive territory, to some extent tracking global equities, as investors contemplated boosting their demand for the commodity as a safe heaven. The fact that the dollar may weaken is also aiding the precious metal as an alternative asset. All last week investors had sought sanctuary in the safer heaven asset classes on the back of global bourses. Investors are trying to put there cash somewhere more solid on mounting evidence of a US economic slowdown. Speculators again are supporting the various safe heaven assets on pullbacks, avoiding risky assets due to uncertainties in the markets. With a genuine fear for global growth, by default, should boost the demand for the metal as a protector of wealth in the grand scheme of things. With treasury yields expected to remain close to their lows, could promote a quickening inflation rate, which would promote pushing commodity prices even higher. The opportunity costs of holding gold are low due to falling interest rates ($1,236 -90c).

The Nikkei closed at 8,824 down -324. The DAX index in Europe was at 5,869 down 43; the FTSE (UK) currently is 5,159 down 42. The early call for the open of key US indices is lower. The US 10-year eased 7bp yesterday (2.55%) and another 4bp in the O/N session (2.51%). The market has taken back all and more of the product that was offloaded on Friday after Bernanke’s reassurances in Wyoming temporarily tempered speculation that the Fed will step up debt buying. Helping treasuries to maintain their bid was the BOJ’s comments highlighting uncertainty about the US economy and various analysts cutting their US GDP forecasts. The 2’s/10 spread happened to narrow 5-ticks to +205bp, again flattening the US curve. The market had become oversold on Friday’s violent move. Product again is becoming expensive on the curve, but NFP uncertainty has debt better bid on pullbacks.

August 24, 2010

Fed split on on Boosting Economy

Filed under: OANDA News — Tags: , , , , , , , , , , , , , — admin @ 1:01 pm

The Aug. 10 meeting of top Federal Reserve officials was among the most contentious in Ben Bernanke’s four-and-a-half year tenure as central bank chairman.

With the economic outlook unexpectedly darkening, the issue was a seemingly technical one: whether to alter the way the Fed manages its huge portfolio of securities.

But it had big implications: Doing so would plunge the Fed back into the markets and might be a prelude to a future easing of monetary policy, moves that divided the men and women atop the central bank.

At least seven of the 17 Fed officials gathered around the massive oval boardroom table, made of Honduran mahogany and granite, spoke against the proposal or expressed reservations. At the end of an extended debate, Mr. Bernanke settled the issue by pushing successfully to proceed with the move.

The debate over the decision to keep the Fed’s $2.05 trillion stock of mortgage debt and U.S. Treasury holdings from shrinking, described in interviews with several participants, set the stage for a more consequential discussion inside the Fed that remains very much alive: what to do next, if anything, about America’s stubbornly weak recovery and troublingly low inflation.

Mr. Bernanke gets an opportunity to elaborate on this crucial and unresolved question when he and other Fed officials gather Friday and Saturday, along with foreign counterparts and a gaggle of academic experts, at the Fed’s annual meeting in Jackson Hole, Wyo.

Wall Street Journal

July 23, 2010

Seven Euro Banks Fail Stress Tests

Filed under: OANDA News — Tags: , , , , , , , , , , , , , — admin @ 6:33 pm

When the results of the long-awaited stress tests were made public on Friday, seven of the ninety-one banks tested, were deemed to hold insufficient capital. Germany-based Hypo Real Estate Holding AG, Agricultural Bank of Greece SA and five Spanish savings banks made up the seven institutions.

Source: Bloomberg

July 16, 2010

Oil Prices Drop on Demand Concerns

Filed under: OANDA News — Tags: , , , , , , , , , , , , — admin @ 1:21 pm

A weak CPI result in the US and continuing concern over Europe’s credit woes, pushed oil prices lower on Friday. U.S. crude for August fell 39 cents to $76.23 a barrel by 12.47 GMT, while London Brent’s new front-month September crude oil futures contract was down 42 cents to $75.67.

Source: Reuters

June 30, 2010

Oil Falls Below $77

Filed under: OANDA News — Tags: , , , , , , , — admin @ 1:18 pm

Oil fell to $76.79 in Europe today following yesterday’s stock market losses. News that Germany’s jobless rate declined to 7.5 per cent helped give European stocks a much-needed boost, although most Asian stock markets fell following a 2.7 per cent drop Tuesday in the Dow Jones industrial average.

Investors are now bracing for the US Non-Farm Payroll employment report due Friday morning.

“We don’t see Friday’s jobs report saving us from what seems to be course set for a double-dip recession,” analyst Cameron Hanover said in a report.

Source: Associated Press

June 28, 2010

Much Ado About Nothing!

Filed under: Forex News — Tags: , , , , , , , , , , , , , — admin @ 1:11 pm

This weekend, the G-20 met to discuss global economic conditions but it looked as though they spent most of that time watching soccer. President Obama was unsuccessful in getting other nations to spend more, and the big take-away was that governments plan of reducing deficits rather than adding to them.

This has given world markets a boost of confidence as we are seeing mild risk-taking this morning. This morning we are waiting on the personal spending and income numbers here in the US, but the big deal this week is going to be Friday’s Non-Farm Payrolls report.

The important thing to look at is the growth (if any) of private sector jobs. Last month’s report was distorted by the hiring of census workers, and the private gains severely disappointed.

Overnight, Japanese retail sales figures came in worse than expected, and business confidence in New Zealand fell to 18-month lows.

In the forex market:

Aussie (AUD): The Aussie is higher on risk-taking and renewed confidence in the economy has come about as a result of the new Prime Minister’s stance on the mining tax which was seen as anti-business.

Kiwi (NZD): The Kiwi is lower across the board as business confidence figures came in at 18-month lows. Confidence declined as a result of the RBNZ rate hike as well as the Euro zone debt crisis which has business concerned that sales and profits will decrease.

Loonie (CAD): The Loonie is mixed this morning, trading generally higher on risk-taking after this weekend’s G-20 meeting in Toronto. Oil is edging lower as hurricane fears in the Gulf of Mexico subside., taking the Loonie slightly lower.

Euro (EUR): European stocks are higher for the first time in 5 days as the austerity vs. stimulus debate was settled at the G-20 in favor of austerity. Members committed to plans to halves deficits by 2013. German CPI data came in slightly lower than expected at .9%, showing signs of neither inflation nor deflation.

Pound (GBP): The Pound is higher as the market agrees with the austerity measures that the UK is pursuing. The Pound is now over 1.50 vs. USD.

Dollar (USD): US personal spending and income figures came in as expected with incomes slightly lower and spending slightly higher. However, all else takes a backseat to this Friday’s jobs numbers which will show whether or not there is real improvement in the economy.

Yen (JPY): The Yen appears to be gaining strength as what started out as risk-taking this morning looks like it may be flipping over to risk-aversion. Overnight, retail sales figures came in worse than expected as government stimulus is preparing to end.

There are three major problems plaguing the world economy and need to be addressed going forward. The first is global debt, which has exploded for many nations. The US plan to continue to stimulate was rebuffed at the G-20.

The next problem is the lack of domestic demand coming from other economies around the globe (particularly Germany and Japan). Because there is not a lot of demand form these large economies. The US feels the need to pick up the slack. It was apparent after this weekend’s meeting that this is not going to change any time soon.

The last problem is the Chinese currency peg, which went unaddressed this weekend, just as the Chinese had hoped by making their pre-announcement.

So as expected, this meeting was much ado about nothing. Although the near $1 billion dollar price tag to put it on will only serve to further rile up the G-20 protesters.

The big accomplishments were actually non-actions; no global bank taxes and the agreement that banks would keep more capital on hand, and that government have agreed to halve deficits by 2013, including the US.

How the US is going to halve deficits by 2013 while continuing on this spending spree is pure fantasy, and I’m sure our credibility as a nation has diminished.

Remember that the best way to take advantage of good economic policy is to invest in the countries that follow them! One of the easiest ways to do that 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!

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