Forex Blog

July 18, 2011

No Stress Relief!

Filed under: Forex News — Tags: , , , , , , , , , , , , — admin @ 6:49 am

Last Friday’s Euro Bank Stress Tests have come and gone and have the left the markets feeling unsatisfied as fears have not been assuaged. The major problem of how a sovereign default would affect these banks has been largely ignored, which means that the tests are ineffective.

Meanwhile, we are no further along in the debt ceiling talks here in the US, which adds additional uncertainty to the mix and makes for a risk-averse investing environment. As we would expect in a risk-averse environment, gold is reaching new nominal all-time highs, trading over $1600, as the additional threat of QE3 has the inflation hawks squawking.

The Swiss franc, US dollar, and Japanese yen are all higher as well, with oil and the commodity currencies trading lower, as well as stock markets around the globe.

Two countries moving in seemingly different directions with regard to inflation are New Zealand and the UK. In New Zealand, CPI data came in hotter than expected, showing inflation of 5.3% vs. an expectation of 5.1%, and in the UK, home prices fell 1.6% last month.This means that there is the possibility that the RBNZ may have to “normalize” interest rates (hike), while the BOE is content to do nothing. If QE3 pops up here in the US though, look out!In the forex market:

Aussie (AUD): The Aussie is mostly lower on risk aversion as world markets are lower to start the day ahead of tomorrow’s release of the RBA rate policy meeting minutes. The market expects the next move in Australia to be a rate reduction, rather than a hike at this point in time.

Kiwi (NZD): The Kiwi is mostly lower though seeing some strength as CPI data came in hotter than expected. In addition, the Performance of Services figure also came in better than last month showing signs that the NZ economy is improving and that a return to “normalized” rates may be necessary to thwart inflation after the RBNZ lowered more recently in response to the devastating earthquakes.

Loonie (CAD): Tomorrow’s rate policy decision is expected to produce no change to interest rates, leaving them steady at 1%. Wednesday’s monetary policy report could give some further clarity, but expect the Loonie to trade on risk themes and with oil prices, as well as US economic data. CPI data is due out on Friday.

Euro (EUR): While there is some ancillary data due out this week on manufacturing, we all know that the market will be focused on the bond yields of the periphery countries and whether contagion spreads to Spain and Italy in a big way.

Pound (GBP): The Pound is mostly lower after house prices came in lower than expected, but the big news this week will be the release of the BOE rate policy meeting minutes which will show if they have any concern about inflation at all, or if they will continue to allow austerity alone to hopefully bring prices lower. Retail sales figures on Thursday will show how citizens are responding to the economic times. (Click chart to enlarge)

gbpusd0718.JPG

Swissie (CHF): The Swissie continues to be the safe haven currency of choice for the moment, and new highs vs. the Euro at 1.14 have already induced the calls for parity and SNB intervention. Economic expectations figures are due out on Thursday. (Click chart to enlarge)

usdchf0718.JPG

Dollar (USD): The Dollar is higher on risk aversion though overall sentiment is for weakness with the debt ceiling debate and the possibility of QE3 on the table. There is a slew of housing data due out this week which is likely to show continued weakness, but US corporate stock earning have been coming in better than expected which could balance out the weaker economic data.

Yen (JPY): Congrats to Japan for winning the women’s World Cup, though that happiness may be short-lived if the Yen continues to strengthen. Expect the Yen to continue to trade as a proxy for risk, and for BOJ officials to try to jawbone it lower if given the chance.

This week is apparently setting up as just more of the same. Euro bank stress tests from last week were essentially a joke, and the US is no closer to a debt ceiling resolution as the clock continues to tick.

Meanwhile, corporate stock earnings here in the US have been pretty good to start out and with week monetary policy in place markets could rally if either the US or Euro zone can get their house in order.

While no one is expecting a solution to either problem to happen overnight, meaningful progress needs to be made to show the markets that solutions do indeed exist and that they may actually happen despite the political climate.

Otherwise, these politicians will be fighting over smoking embers as the whole system will come crashing down!

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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March 11, 2011

Japanese Devastation!

Filed under: Forex News — Tags: , , , , , , , , , , , , , — admin @ 2:10 pm

Overnight Japan was rocked with an 8.9 magnitude earthquake AND a tsunami that has caused major destruction in the island nation. This is an extremely large earthquake for a country that is used to earthquakes; and this has caused tsunami warnings as far away as the West coast of the US.

This has induced some risk aversion, with oil prices pulling back to just above $100, and causing major strength in the Japanese yen as investors flee the equity markets. It is times like these when both the individual fundamentals and technicals can be thrown out the window as all bets are off. It is rumored that the BOJ will be holding an emergency meeting and will announce some type of monetary stimulus to help aid the economy, though that may be short-lived.

The death toll is rising and there is no telling what the aftermath of these natural disasters may hold.

How different currencies are reacting to this situation is indicative of some of the fundamental drivers, however.

The Pound is weaker across the board as PPI data came in lower than expected perhaps providing some relief form inflation. This would allow the BOE to maintain current accommodative policy.

The Loonie is also lower as crude oil has pulled back and the Canadian employment report showed a gain of 15K jobs vs. an expectation of 26K and the unemployment rate came in higher than expected to 7.8%.

US retail sales figures and confidence numbers are due out later this morning. Sales are expected to increase 1% and confidence is expected to come in slightly lower than last month.

In the forex market:

Aussie (AUD): The Aussie is mostly lower on risk taking this morning though there is some life in the currency as Chinese economic data came in slightly better than expected.

Kiwi (NZD): The Kiwi is actually higher against all but the Yen as the market is taking the long- term view that further rate reductions will not be forthcoming in New Zealand. It is also receiving money flows from the Loonie.

Loonie (CAD): The Loonie is lower across the board as oil prices have now dipped below $100 and the employment report came in worse than expected. (Click chart to enlarge)

usdcad0311.JPG

Euro (EUR): The Euro is also lower as German CPI data came in as expected but apparently a showdown is in the making between Germany and the debt-laden countries of the Euro zone over the terms of the rescue package. This situation is far from over.

Pound (GBP): The Pound is also lower on PPI data which showed some relief from inflation by coming in less than expectations. Perhaps the BOE plan of waiting out the inflation may be working.

Dollar (USD): The Dollar is mostly higher on risk aversion and retail sales figures did indeed come in as expected at 1%, a 4-month high. Lost in all of the news about Japan is the Euro debt crisis and the situation in Libya and the potential contagion. Risk is still high despite equities markets trudging higher as there is no better investment alternative.

Yen (JPY): The Yen is higher across the board as money is re-patriated to Japan and demand will remain high once the rebuilding process begins. While it is difficult to know what the economic impact will be at this time, don’t be surprised to see the BOJ act swiftly to make money more readily available. (Click chart to enlarge)

usdjpy0311.JPG

Natural disasters such as this one remind us of our own humanity. Just in the time it has taken me to write this article, the death toll has risen to 300+.

From an economic standpoint, sometimes these events can change trends that were beginning to emerge or delay movement that we may have been expecting. Japan as a country is used to dealing with earthquakes so hopefully the devastation can be mitigated through their experience.

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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November 11, 2010

Happy Veteran’s Day!

Filed under: Forex News — Tags: , , , , , , , , , , , — admin @ 4:30 pm

Here in the US we have a government holiday today honoring veterans who have fought in previous wars to protect our freedom and way of life.  So banks and the bond markets are closed today which means there is no economic news to speak of in the US.

However, the G-20 meeting is taking place right now and early reports indicate more of the same.  Long talk, short action.  It will be interesting to see if any specific policy is agreed to by the end of the meeting.  My guess is there won’t be.

Nevertheless, the return of the Euro debt crisis has been putting additional pressure on the Euro, with the focus now turning toward Spanish and Portuguese bonds, after both Irish and Greek bonds got hammered.  This in part comes from the plan put forth by Germany and now backed by France which includes “restructuring” of debt.  This could potentially put bondholders on the hook for losses.  I guess in today’s world of credit default swaps, losses on bonds are unheard of.

Overnight, Australia reported a surprise jump in their unemployment rate, as more people entered the workforce.  They did however beat expectations in the number of jobs created.

In China, CPI figures soared showing an increase of 4.4%.  It will be difficult for them to keep their currency subdued in the face of these economic figures.  But somehow they will manage to do so and the world will continue to allow it to happen.

In the US, stocks are lower so the Dollar is stronger and this is encouraging a bit of risk aversion in the markets.  Without any significant news to move the markets, this trend could continue throughout the day.

In the forex market:

Aussie (AUD):   The unemployment rate jumped up to 5.4% vs. an expected decline to 5% as the participation rate climbed to a historic high.  This eases pressure on any potential wage inflation, which could quell overall inflation and allow the RBA to pause on the next rate hike which is expected early next year.  (Click chart to enlarge)

audusd1111.JPG

Kiwi (NZD):  The kiwi is mostly higher despite the fact that home prices fell for the second month and house sales declined 36%.  However, it should be noted that the Kiwifruit scare will not cause the US and Japan to ban imports, so NZ exports may hold up.  A sluggish economy may cause the RBNZ to leave rates steady well into 2011, provided inflation does not pick up significantly.

Loonie (CAD):   The Loonie is mixed after yesterday’s trade balance report came in worse than expected.  However, oil has traded higher to an 88 handle, as the Chinese economy shows little sign of slowdown and QE2 continuing to push commodities higher.

Euro (EUR):   The Euro is lower across the board as the major focus of the global marketplace has returned to the debt crisis.  Both Irish and Greek bonds have been punished and now the market is turning on Spanish and Portuguese bonds.  Much of this stems from bondholder fear that they may have to participate in the losses if any of these countries need to restructure their debt.  (Click chart to enlarge)

eurusd11111.JPG

Pound (GBP):  The Pound is higher across the board after the most recent inflation report showed that continued inflation would be an “obstruction” to further QE, according to the BOE Governor.  Inflation has persisted outside of the 2% target for some time and until it pulls backs may make it nearly impossible for the BOE to ease further.

Dollar (USD):   The Dollar is stronger today as US equities are selling off after some corporate earnings disappointments.  Both banks and the bond markets here in the US are closed, so there is no news driving the Dollar other than risk aversion coming from the EU.

Yen (JPY):   The Yen is also mixed today gaining some strength from risk aversion and receiving some weakness from both a higher stock prices and reports that machine orders fell the most in nearly 2 years.

As the G-20 continues and leaders attempt to come to some sort of agreement, the only thing that can be certain is the near impossibility of this happening.  The global economy is a series of give and takes and the sooner world leader realize this, the better.  Some of these guys would rather cut off their nose to spite their face.  More directly, I’m talking about China.

The Chinese economy is booming as the rest of the world struggles.  It wouldn’t be so bad if they were a freely floating currency but they are not.  Everyone claims that even if the Yuan was allowed to float if wouldn’t fix what ails the global economy.

I say hogwash.  The Chinese are no longer an emerging economy.  They have been allowed to succeed through unfair practices for so long that they now have the moral high ground when it comes to currency manipulation.  If politicians can’t force change, then we as consumers need to take action.

Through all of the economic turmoil the US has been through, where is the “Buy American” sentiment?  Why aren’t consumers boycotting cheap Chinese goods in favor of spending a bit more to put Americans back to work?  I get the whole free trade argument and the idea that I can have cheap stuff by exploiting cheap labor abroad.  But I would much rather pay a little more for goods made here in the US if it will put people back to work.  Because at the end of the day that is one less person who needs public support which ultimately raises deficits which cause my taxes to go higher.

This should be a conscious choice of all.  Isn’t the unemployed guy who buys cheap stuff at Wal-Mart just perpetuating his own economic degradation?
Until the Chinese join every other nation around the globe in allowing their currency to float freely, then those who continue to support this are ultimately responsible for their own economic decline.

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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November 3, 2010

One Down, One To Go!

Filed under: Forex News — Tags: , , , , , , , , , , , — admin @ 1:58 pm

Yesterday’s elections have come and gone without any major surprises which have provided the markets with confidence as the balance of power has shifted in the House of Representatives which represents some opposition to the current direction the government has taken.  Checks and balances are an important part of a functioning government and now that some of the anti-business sentiment has been removed from the market, we may begin to see a turn-around assuming elected officials intend to listen to the People and put aside their partisan bickering.

However, we are not out of the woods yet.  More important than yesterday’s elections is today’s FOMC meeting, where the Fed will embark on further monetary easing, the size of which is unknown.   However, the most common expectation I have heard is that the market is expecting a total of around $500 billion, spread out over the course of 5 or 6 months.  If we start with this as the expectation, then there are two scenarios where the Dollar may strengthen:  if the actual figure is less than that amount, or if the actual amount is in-line with that amount.  However, should the number come in larger than expected, then we could see additional Dollar weakness which has been the case over the course of the last 2 months.  These are the short-term implications and there is bound to be increased volatility surrounding the release of the decision.

The long-term ramifications of QE2 may be quite different though.  With the expectation that the change in political landscape will impact government spending, the focus now will be on jobs.  Friday’s NFP report will be too soon to see if the elections have any impact, but because this has always been about confidence there should be a reasonable expectation that those figures will improve going forward.

So the market has started the day with continued risk appetite as both stocks and commodities are higher.  Whether or not this lasts today will remain to be seen.  There is noticeable weakness coming from the Aussie, as there is a sentiment that the RBA may have over-reached with its latest rate hike.

In the forex market:

Aussie (AUD):   The Aussie is mostly lower as building approvals came in much lower than expected.  There is also speculation that the RBA may have been too aggressive with its recent rate hike as the expected inflation as a result of QE2 may be priced in already.  Of course if QE2 comes in larger than expected, then the Aussie could reverse in a heartbeat.

Kiwi (NZD):  With the Aussie subdued, the Kiwi is leading the pack today as general risk appetite is pushing markets higher.  With no news to speak of, the Kiwi will trade opposite the Dollar today.

Loonie (CAD):   The Loonie is also higher as oil is trading just below $85.  There is a sense that QE2 will push commodities higher regardless of size, as inflation if not seen here, may be felt around the globe.  The Loonie is near a 2-week high.  (Click chart to enlarge)

usdcad1103.JPG

Euro (EUR):  The Euro is slightly lower vs. the Dollar but still above the 1.40 level as the FOMC has diverted attention away from the Euro debt problems.  For now.  Tomorrow the ECB will have its rate policy meeting and while no change is expected, the statement will be important going forward.

Pound (GBP):   The Pound is tracking higher as the BOE rate policy meeting is expected to produce no change in policy.  However, should the FOMC meeting come in much larger than expected, than the BOE may become reactionary.

Dollar (USD):   The Dollar is lower as would be expected when the market assumes that the Fed is going to flood the market with an additional $500 billion.  I’ve laid out the possible scenarios above for what may happen leading to the FOMC.  Expect volatility.  The ADP employment change showed better than expected jobs growth.

Yen (JPY):  The Yen is lower across the board as risk appetite has induced Yen selling.  The Yen has moved higher vs. USD at around the same time as the ADP report.  I wonder if it had any “help” from the BOJ?  (Click chart to enlarge)

usdjpy1103.JPG

Yesterday’s elections were a step in the right direction to getting government spending under control.  However we still have a long way to go to get back to economic health.  While QE2 is going to have an impact on the Dollar, it’s not going to be the end of the world.

Getting back to financial responsibility is paramount to a healthy economy and hopefully politicians can put their differences aside to accomplish that goal.

So keep an eye out for the volatility which is bound to pick up both before and after the 2:15EST FOMC announcement, and be sure to trade cautiously!

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 12, 2010

Fed Mystery?

Filed under: Forex News — Tags: , , , , , , , , — admin @ 1:43 pm

Today we are seeing US dollar strength as risk aversion has picked up due to mildly hawkish comments yesterday from various Fed officials.  This has induced some short-covering ahead of today’s FOMC meeting as QE2 may not be the slam dunk that everyone has been anticipating.

I mentioned last week that the Fed may have accomplished it’s job of lowering the value of the Dollar with the threat of QE2 which may buy them some more time before it becomes necessary (in their minds) again.   After all, it would seem highly hypocritical to condemn China for currency manipulation and then go ahead and ease further.  Yes, quantitative easing is a form of currency manipulation.

In the EU, German CPI figures came in as expected which means that the ECB is likely on the sidelines for the rest of the year as no change to rate policy will be necessary.

In the UK, CPI came in as expected slightly higher than the BOE target band and core CPI figures are declining which is as the BOE had hoped, leaving the door open for a more dovish stance if economic data continues to weaken.

But today, all eyes are on the Fed as risk aversion has started the morning as the QE2 expectation has lessened going into today’s session.  Equity indices are lower, as are commodity prices and the commodity currencies, except the Kiwi, which is showing unusual strength so far.

If the Fed backs away from QE2 than we could see a major short-covering rally, with stocks and commodities selling off as the recent moves higher may have moved too far, too fast.  However, overall I do not think that this would necessarily be a negative, though the markets will perceive it that way because of the tsunami of liquidity they were expecting has gone away.  Expect major volatility either way.

In the forex market:

Aussie (AUD):   The Aussie I slower this morning as risk aversion is ruling the session ahead of today’s FOMC meeting.   Business confidence figures slipped slightly, though have remained near a 4-month high.

Kiwi (NZD):   I have been searching high and low to figure out why the Kiwi is higher this morning despite the risk aversion in the market.   I don’t have any specific news not have I seen any commentary which would explain this market anomaly.  When in doubt, blame China. (Click chart to enlarge)

 eurusd1012.JPG

Loonie (CAD):   The Loonie is also showing some strength as it is mixed this morning as well.  Though oil prices are marginally lower, the market is betting that the BOC will stop raising rates at its next meeting as declines in housing and jobs growth may induce caution.

Euro (EUR):   The Euro is lower as CPI figures in Germany came in as expected which will allow the ECB to maintain interest rates at current levels.  In addition, strikes in France have disrupted commerce as labor unions are not in favor of the pension overhaul proposals.  (Click chart to enlarge)

nzdusd1012.JPG

Pound (GBP):   The Pound is also lower as speculation of further asset purchases picks up due to declining house price figures.   CPI data came in as expected and as the BOE had hoped, showing gradual declines.  A BOE policy-maker stated that they may have to ignore their sub 3% inflation mandate as a removal of stimulus could halt the recovery.

Dollar (USD):   The Dollar is showing some strength today as yesterday’s hawkish comments may have tipped off the markets that the Fed is going to back away from QE2.  Recent Dollar weakness and the correlative effects it has had on other markets may reverse some, or the Fed could announce further easing which would send the Dollar lower.  Stay tuned at 2:15 EST!

Yen (JPY):   The Yen is showing some strength today as the Nikkei sold off 2% last night.  In addition, consumer confidence fell for the third straight month, yet the Japanese PM stated that they are ready to take “bold action” if the Yen reaches a new 15-year high, though his idle threats may be falling on deaf ears.

So what will the Fed do?  My initial gut feeling is that they will back away from further QE and will make no changes to policy.  We may hear some dovish comments, but the market may cover positions as it is looking for action NOW.  This could send stocks and commodities lower as the recent moves have induced both over-bought and over-sold conditions.

The problem in the US isn’t that there isn’t enough liquidity; the problem is that people and business don’t want to borrow money as they fear that current government policy is not good for economic growth.  Would you expand your balance sheet if you didn’t know what the future held?  Neither would I.

The negative effects of QE2 in the long run far outweigh the short-term gains, and I don’t think even Bernanke will cave in to political pressure to pump markets higher going into the elections.  Yesterday’s hawkish tone from Fed officials may confirm this.

So keep an eye out for the FOMC meeting as volatility is sure to ensue, and remember to trade what you see and not what you think should happen!

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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September 27, 2010

Focus On Franc!

Filed under: Forex News — Tags: , , , , , , , , — admin @ 1:29 pm

Here is Abe Cofnas’ weekly outlook for the Swiss franc:

With the recent very bearish news on the US Dollar Index, it’s a good opportunity to see if there is a contrarian move shaping up.  I think there is.  First look at the US Dollar Index and the USDCHF charts.  They are very much co-movers and in sync.   However, there is a bounce shaping in the USDCHF. (Click chart to enlarge)

abe10927.JPG

More specifically the USDCHF 4 Hour chart has the pair probing the 23.6% Fib line (0.9874).  The play shaping up is a buy at the market with a target to 0.9933.  This is a classic Fib bounce play.   Stops can be at 0.9779.   If your entry is above 0.9874 the stop can be placed right below the 23.6% fib line if the move doesn’t work out.  (Click chart to enlarge)

abe20927.JPG

This morning is pretty devoid of news so the forex market is opening slowly and is expected to trade on risk themes.

In the forex market:

Aussie (AUD):   The Aussie put in a two-year high vs. USD on increased risk-appetite and overall USD weakness.  This week is light on news for Australia with some manufacturing and housing figures due out later this week.

Kiwi (NZD):   No news is good news for the Kiwi, as they attempt to recover from the worst earthquake to shock the country in nearly 80 years.  While the Kiwi is starting the day slightly lower, expect it to trade on risk themes this week.

Loonie (CAD):   The Loonie is trading at 6-week highs to USD, having been buoyed higher by increasing stock and oil prices.  Canadian GDP is due out on Thursday.

Euro (EUR):  The Euro is mixed this morning as the old banking fears came back into play over the weekend.  However, the Euro is trading just under 1.35 vs. USD, a level it hasn’t seen in almost 6 months.

Pound (GBP):   Home prices in the UK fell the most in nearly 18 months which is hopefully going to bring inflation back to within the BOE’s target range of less than 3%, thereby allowing them to maintain accommodative monetary policy as their austerity measures begin to kick in.  While these figures might normally be Pound negative, the market is showing confidence in the UK plan.

Dollar (USD):   The Dollar is weaker across the board as mild risk taking is taking place this morning.  All eyes are on the US economy this week, as additional declining economic data could re-enforce the notion of another round of quantitative easing (QE2).

Yen (JPY):   The Yen is mostly weaker as export growth slowed due to the dual factors of reduced global demand and a higher valued Yen.  Exports grew at the slowest pace all year and could threaten economic recovery.  This could prompt the Bank of Japan to continue to add liquidity to the economy through further intervention and money printing.

This week is largely devoid of news so keep an eye on risk themes in the market.  The battle shaping up between Japan and the US in the “race to the bottom” could keep the markets on edge.  Throw increased back-and-forth between the US and China over their currency valuation into the mix and you have some potential market movers right there.

Meanwhile the Pound and the Euro keep chugging along.

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

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

Tags: account, AUD, Aussie, Australia, bank, blog, BOE, cad, charts, CHF, China, course, currenc, currency, currency market, currency trading, data, dollar, economic, economy, EUR, Euro, fear, forex, forex market, forextrading, franc, free, fx, fxedu, gbp, home, Il, index, intervention, Japan, jpy, Kiwi, live, loonie, lower, market, money, news, nzd, oil, pair, pound, practice, practice account, ssi, stock, Swiss, time, trade, USD, Yen

August 26, 2010

August 6, 2010

Bye-Bye Dollar!

Filed under: Forex News — Tags: , , , , , , , , , , , , , , — admin @ 3:15 pm

This morning’s much anticipated Non Farm Payrolls report disappointed the market which sent the US dollar careening lower. While the unemployment rate held steady at 9.5%, this is probably more of a function of discouraged workers leaving the workforce. For the month of July, the US economy lost 131K jobs, nearly twice the expectation of a 65K loss.

In addition, the revisions to last month’s data came in nearly twice as bad as reported in what is becoming a familiar pattern. But the US isn’t the only country with bad employment figures today.

In Canada, the unemployment rate rose .1% to 8% as the Canadian economy lost 9.3K jobs, which is the first loss in 2010.

This report sent equity index futures and commodities lower, as well as the US dollar. Under a “normal” risk-aversion scenario, one might expect Dollar strength. However, there may be a “silver lining” in this jobs report, as the creation of private sector jobs came in higher.

So what started out as risk aversion, may be flipping around to risk appetite due to Dollar weakness.

In the forex market:

Aussie (AUD): The Aussie is actually higher after the initial downturn due to risk aversion, but now Dollar weakness is driving the market. (click chart to enlarge)

audusd0806.JPG

Kiwi (NZD): The Kiwi is taking back some of yesterday’s losses after their bad employment figures. Money that flowed from the Kiwi to the Loonie is slowly making its way back. (click chart to enlarge)

audnzd.JPG

Loonie (CAD): The Loonie is the biggest loser this morning as they lost jobs last month for the first time all year. As seen in the above chart, the Loonie benefited yesterday from Kiwi weakness, but is now giving it all back as the situation looks weaker in North America. Adding to Loonie weakness is lower oil prices, though it is rebounding as I write.

Euro (EUR):  The Euro started the morning session somewhat weaker but quickly grabbed a bid on the NFP report and is now higher. German industrial production figures came in lower than expected, but that news quickly took a back seat to Dollar weakness.

Pound (GBP):  The pound is trading much like the Euro this morning after the UK reported their own weaker industrial production figures.

Dollar (USD): If it weren’t for the Loonie, the Dollar would be the worst performer this morning. Keep in mind that as the US economy weakens, so will the Canadian economy as the US is the largest importer of Canadian goods and services. NFP data was disappointing, but the silver lining I mentioned above could provide hope.

Yen (JPY): The Yen is the strongest pair today as risk aversion and Dollar weakness is driving the markets. USD/JPY is approaching the 85 “line in the sand” level—the place most think will encourage intervention.

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As you can tell, the jobs reports in the US and around the globe are important drivers of economic growth and the picture is beginning to look more bleak as uncertainty over government decisions has induced hesitancy.

Until we adopt pro-business policies here in the US, it’s going to get worse. Just as the Treasury Secretary “predicted” the other day. This is akin to jumping off a building and stating, “this might hurt”.

However, there is still some good economic news around the globe, and in the end, the fiscally responsible will be rewarded. If the US doesn’t want to be the recipient of it, so be it.

Thankfully, the forex market allows me to move money quickly to those regions that deserve it!

Tags: AUD, Aussie, blog, cad, dollar, dow, economic, economy, EUR, Euro, forex, forex market, forextrading, gbp, Il, jpy, Kiwi, loonie, lower, news, nzd, oil, pair, pound, rate, ssi, time, USD, Yen

June 24, 2010

June 23, 2010

BOE Not Unanimous!

Filed under: Forex News — Tags: , , , , , , , , , , , — admin @ 1:12 pm

Minutes released from the Bank of England’s rate policy meeting showed that the vote was not unanimous to keep rates unchanged at .5%, for the first time in nearly 7 months.  Inflation concerns were the cause of the dissenting vote, as CPI figures in the UK have been above targets.  While the BOE expects inflation to subside in the ensuing months, that may not necessarily be the case.

This comes a day after the emergency budget which was announced yesterday, calling for a reduction in spending and an increase in taxes.

In the US, the FOMC rate decision is due out later today, so expect to see some volatility in dollar-related pairs.  It is widely held that there will not be a change in policy, but some market participants are betting that we may see a change in the language regarding policy.  This would give credence to the rising sentiment that the Fed may raise rates later this year.  Personally, I don’t see this happening and I think the Fed will be on hold for the remainder of the year.
Yesterday’s abysmal housing data confirmed that deflationary forces in the housing market may be the start of another leg down.

In the Euro zone, German consumer confidence came in slightly better than expected and PMI figures were largely in line.  However, concerns over Greek debt have perked up again.

Overnight, the Yen was higher as the Nikkei was down taking its cues from yesterday’s sell-off in the US stock market.

This morning will bring US new home sales figures as well as Canadian retail sales figures.  Any major deviations could send the respective currencies lower.

But expect volatility going into the FOMC announcement at 2:15 EST.

In the forex market:

Aussie (AUD):  The Aussie is lower as stocks sold-off in the overnight session but it is gaining back some ground heading into the US session.  Risk aversion has driven the Aussie lower, and there is some concern that Chinese demand for metals and energy is causing a rift in the Australian economy.

Kiwi (NZD):  The Kiwi is higher this morning in anticipation of GDP figures which are due out later tonight.  The expectation of .5% growth will likely be exceeded as demand from China for raw materials has the NZ economy picking up steam.  Should the number best expectations, then the likelihood of a rate increase at July’s policy meeting will increase.

Loonie (CAD):  The Loonie is lower this morning as oil prices are pulling back from the $78 level, and retail sales figures came in worse than expected.  Analysts were expecting a decline of .4% and the figure showed a decline of 2.2%, a big miss.  Canada is to the US what Australia and New Zealand are to China.  If recovery here in the US is floundering, then it may not bode well for the Loonie and the Canadian economy in general.

Euro (EUR):   The Euro is a mixed bag this morning, as it is up against the North American currencies but down against the rest.  The EU is considering a bond levy on countries that don’t adhere to debt-to-GDP guidelines which of course brings the Greek debt crisis back to center stage.  In addition, business confidence was down in France, though consumer confidence was higher in Germany.  Go figure.

Pound (GBP):  The Pound is higher across the board, giving a vote of confidence to both the government for their budget and the BOE.  The lone dissenter in the rate policy meeting is concerned about inflation, as growth targets may exceed expectations.  That’s a “nice” problem to have, considering the economic condition of the US.

Dollar (USD):   The Dollar is mostly lower prior to today’s FOMC meeting.  Yesterday’s poor housing data sent stocks lower, and today’s new home sales aren’t expected to be much better.  This should be enough to keep the Fed unchanged in both language and policy, and the market is starting to catch on to the fact that the smoke and mirrors of government spending may not be enough to stoke the economy.  Go back and take a look at my discussion of biflation from a few days ago.

Yen (JPY):  The Yen is mixed as well, trading higher vs. USD and CAD (both showing weakness) and the Euro (debt concerns) but lower vs. GBP, AUD, and NZD.  So today can neither be classified as risk-taking or risk-aversion, but much of the yen strength was derived from weakness in the Nikkei, which sold off following the US stock market decline.

I think today really shows the difference to how the market reacts to different policy pursuits from around the globe heading into this weekend’s G-20 meeting.  On the one hand, you have the EU and the UK who are committed to reducing deficits and trying not to raise taxes too much to discourage business (in fact the corporate tax rate was lowered in the UK), and the policies taken by the US.

The US is going the other way, expanding deficits and throwing good money after bad at our financial problems which can only result in higher taxes when it comes time to pay the piper.  President Obama was rebuffed by Chancellor Merkel of Germany with regard to how to best combat the global financial crisis, and it appears as though the market agrees with the EU.

Weak housing data here in the US show that the stimulative effects of government spending may have slowed a decline in the economy, but have not fixed the problem.  Now taxpayers (and their children and grandchildren) face an enormous burden for what adds up to temporary conditions.

The change people voted for was for less government spending and indeed we’re seeing change—even more and more spending!  Hopefully this course can be reversed before it’s too late.  I never thought I’d say this but now is the time we should be taking our economic cues from Europe, and not their prior policies that landed them in this mess.

Those who don’t learn from the past are doomed to repeat it.

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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