The most snow that we’ve seen in the NYC area is bound to slow markets today as participants struggle to make it to work. The fact that today is a Friday doesn’t help the situation either. In fact, yours truly is working from home today as well. However, the forex market couldn’t care less as trading continues.
This morning, news out of the UK regarding their GDP figures was seen as positive by government officials but not so much by the market as the Pound is lower across the board this morning. Also this morning, the revised US GDP figures are do out as well. So keep an eye out for any downward revisions that could reverse this morning risk-taking themes.
The markets reversed nicely yesterday, turning what could have been an ugly day into nothing more than an over-reaction. Today the currency market is continuing that trend, as there is US dollar weakness.
In the currency market:
Aussie (AUD): The Aussie is higher this morning as it is the leading gainer of the morning vs. the Pound and Dollar. It is widely expected that the RBA will raise rates at next week’s meeting so barring any further risk-aversion, the Aussie should move higher. Yesterday’s dip-buying has paid off.
Kiwi (NZD): The Kiwi is also higher this morning on risk-taking as it bounces of yesterday’s lows. The good business confidence figures are contributing to this mornings Kiwi strength.
Loonie (CAD): Getting a boost from that big Women’s Hockey win over the US yesterday. Risk-taking is on this morning and oil prices are flat so the Loonie is drifting higher.
Euro (EUR): The Euro is mostly higher except against the commodity currencies but there are still concerns lingering over the common currency. Euro zone CPI figures came in as expected and are still benign enough to allow the ECB to keep rates low. This is actually seen as positive for the Euro as higher rates would exacerbate the debt problems in the PIIGS countries.
Pound (GBP): GDP figures came in this morning that showed that GDP grew from the 3rd to 4th quarters of 2009, but year over year the figure was less than expected at –3.3% vs. an expectation of 3.1%. Consumer confidence figures came in at a better than expected –14, which for those who still care is “less bad”. They still have a lot of work to do in the UK, as the market reflects this morning.
Dollar (USD): On tap this morning is both the GDP revisions and US personal consumption, the latter which could be a more prescient indicator of how the economy is faring. The Dollar is down against all but Yen as risk-taking is the theme so far today.
Yen (JPY): Japanese retail sales figures came in at a much better than expected 2.9% vs. an expectation of .3%. Japan has one of the highest savings rates in the world and so domestic spending is a good sign for the nation that relies so heavily on exports. However, deflationary pressures still weigh heavily on the Japanese economy as CPI fell 1.3%. It looks like this further the argument of the government in calling for the BOJ to do more to stimulate the economy through monetary policy. This means “game on” for carry traders.
In overnight markets, stocks were higher in Asian trading and currently in Europe. US stock futures are higher so far and gold and oil are basically flat. In other words: a classic risk-taking day.
Expect trading to be light today as the weather prevails over profit-seeking. When trading is light, you can sometimes see “break downs” in the usual correlations as the market is slow to react to the disparities.
Be safe out there and good trading to those who can!
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