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December 6, 2011

Forex Market Outlook 12/06/11

Filed under: Forex News — Tags: cad, economy, establishment, fxedu, interest, invest, japan, morning, practice, sentiment — admin @ 6:42 am

Well it looks like S&P is at it again, reversing yesterday’s promising start to the US trading session by putting 15 Euro zone countries on negative credit watch, including France and Germany based on the potential non-actions of the EU leaders summit at the end of the week. This is similar to the actions they took against the US with issuing the warning shot, though they did actually follow through with the downgrade based on Washington political ineptitude.

However this could be more problematic for the Euro zone as yields had been declining which would help them in debt service relief. This comes on the heels of the Merkozy announcement yesterday which is attempting to provide a stronger European fiscal union by requiring countries to have a balanced budget, then imposing sanctions against those who don’t comply. They are also looking to speed up the establishment of the ESM, in addition to a change in the Basel rules over what type of assets banks can hold.

None of this is ground-breaking stuff and the S&P downgrade is essentially saying that they need to do more. Apparently they haven’t been watching the scene unfold over there and the pace at which things get done. US Treasury Secretary Geithner is over there this week to try to force action. My sense is that this meeting like the others will be more of the same.

The data in the Euro zone did look promising though, as GDP figures came in as expected showing a gain of 1.4%. More importantly, German factory orders came in much better than expected posting a quarterly gain of 5.2% vs. an expected .9%. The ECB rate decision on Thursday is expected to reveal a 25bp reduction to 1%.

Contrary to my speculation yesterday (see chart of the day) the RBA reduced interest rates 25bp to 4.25% citing global recession concerns and the problems in the Euro zone. Australian GDP figures are due out tomorrow, followed by employment figures on Thursday.

Later this morning, the Bank of Canada will release its rate policy decision and are expected to remain steady at 1%.

In Switzerland, CPI data showed a decline in prices of .5%, the most in nearly 2 years and lower than the consensus estimate of a decline of .3%. This is worrisome for the SNB who have struggled to weaken the Swiss franc to help with exports so they are considering further action, including lower the target area vs. Euro from 1.20 to 1.30 or even going so far as to make interest rates negative. Should the problems in the Euro zone exacerbate, they may be fighting an uphill battle.

As a result, we are seeing some Japanese yen strength which has received some money flows from the other safe havens on risk aversion and unwind of carry trades from the Australian interest rate reduction.

Not much happening in the UK today, with home prices coming in lower than expected. The pound has been trading in a “middle ground” somewhere between the Euro risk appetite and the Swissie risk aversion. Industrial and manufacturing production figures will be out tomorrow, followed by the BOE rate decision on Thursday where no change is expected.

There is little news expected out of the US for the rest of the week so all eyes are on Europe. This morning’s mild risk appetite has just flipped to risk aversion so we are seeing some early selling after some overnight gains. If we can make it through the first half of the US session without some Euro negativity, then we could see a late-day rally.

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December 1, 2011

Forex Market Outlook 12/1/11

Filed under: Forex News — Tags: australia, cad, carry trade, china, course, interest, power, practice, rate-decision, top stories, unemployment — admin @ 6:51 am

Well yesterday’s news did not disappoint, with the markets remaining near highs into the close. Today will most likely be an “inside day”, providing neither new highs nor lows. This is to be expected with a move as big as the one we saw yesterday.

But what does this all mean? Truthfully, not much. Essentially yesterday’s coordinated action makes inter-bank lending cheaper. That’s it. It doesn’t solve the problems of the Euro zone, nor does it change the political dynamic in the US. These are the things holding us back and markets could do a lot better if there was more political courage in the world.

But there isn’t. Germany still refuses to acknowledge the tremendous benefit they’ve received through their Euro zone participation and are steadfast in their opposition to helping anyone that doesn’t behave exactly as they do. There are big changes that need to made in Europe obviously, but the entire world economy is basically being held hostage by the European political process.

The economic data continues to come in as a mixed bag. Yesterday’s perfect storm showed that there are times when economies look like they are performing well; today, not so much.

For starters, in Australia retail sales figures came in lower than expected showing a gain of .2% vs. an expected .4%. Building approvals were also lower. China’s PMI manufacturing figures came in at a 2-year low, which may be part of the reason why they reduced reserve requirements yesterday.

In the Euro zone PMI manufacturing figures came in as expected but in the UK they were better than expected, which is why the Pound is tracking higher this morning.

Here in the US, initial jobless claims came in worse than expected, but the expectation was for improvement from the pretty standard 400K that has been the average for some time. Later this morning we will get ISM manufacturing figures which could reverse the mild selling we are seeing this morning.

But for now, the bigger story is the money pump into the financial system that only will serve to buy time for those that are troubled. Until solutions are found, it will be more of the same. There is still great risk in the market and it will take a tremendous effort and leap of faith for the Euro zone to solve their debt crisis.

The beginning of the “Santa Claus Rally” that we are seeing now is a welcome event, but don’t get lulled into believing that things are just peachy. Yesterday’s action occurred because someone, somewhere was in trouble and the threat of global market instability was too great for Central bankers to bear. And it also goes to show the power that these bankers can wield when things aren’t going exactly as planned.

For example, nearly everyone is shocked that the Euro is trading at current levels despite the huge mess they are experiencing. Yet when you compare it to the US dollar and the easy money policies we have, it pales in comparison.

Yesterday was also a reminder that inflation is on the horizon. The only thing keeping us back from hyper-inflation is the fact that the US housing market continues to flounder. Case in point: I was speaking with a friend last night who confided that she was terrified of buying a home despite the fact that she and her husband have good jobs and are financially responsible people.

The uncertainty that hangs over the markets and the lack of confidence surrounding the current environment will continue to hold us back regardless of what the actual data tells us. Therefore I will continue to trade this market in the short-term, taking advantage of moves like the one that occurred yesterday.

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November 29, 2011

Forex Market Outlook 11/29/11

Filed under: Forex News — Tags: commodity, europe, finance, forex trading, fxedu, live, practice, usd — admin @ 6:57 am

This morning has started out with the same vigor as yesterday’s market posting early gains on the news of a successful Italian bond auction and riding what looks to at least initially be two days of gains in a row. Global stocks and commodities are higher to start the day, with US dollar weakness.

In Italy, 3-year notes had a bid to cover of roughly 1.5x meaning that there was good demand for the debt contrasted with last week’s German auction that was only 65% subscribed. It should be noted that the yield on the Italian debt was close to 8%, which is a Euro-era high and nearly twice what it was as early as 2 months ago.

What does this tell us? Well, a couple of things. For starters, it shows that the markets have some confidence that Italy will not default and that there may be an increased pace of getting the plans in place to combat this crisis. If the market feels that they can pick up some short-term debt at high yields before credible actions begin to reduce those yields, then that’s a pretty good trade.

But it also tells us that Germany may have some funding problems going forward, as the market deems yields too low to justify the “safe haven” of the Bund, which may not actually be that safe when Germany’s exposure to the rest of Euro zone debt is taken into consideration. In other words, why receive 2% in Germany when you can receive 8% in Italy for nearly the same outcome. If Italy goes down, it would likely take Germany down as well so it’s better to be compensated at a higher level.

Today begins a two-day meeting of EU Finance Ministers that is expected to produce an agreement on how to leverage the ESFS and the actions that will be permitted at the ECB. After pressure from the Obama administration, the need to act for Europe is now.

On the data front, economic confidence figures in the Euro zone came in lower than expected, but wasn’t that expected? So overall, the Euro is pulling back from earlier highs and our chart of the day from yesterday is still in tact, with EUR/USD having held that 1.3430 level.

Overnight in Japan, retail trade figures came in better than expected, showing a gain of 1.9% vs. an expected gain of .7% and household spending decreased just .4% which is better than the decrease of 1.5% that was expected. Perhaps that had to do with the jobless rate which came in worse than expected, showing 4.5% vs. an expected 4.2% which incidentally is half of what the US jobless rate is. Friday’s NFP numbers here should confirm the continued bad news of 9% unemployment unless discouraged worker have left the workforce.

In the UK, home prices came in higher than expected showing that inflation may remain stubbornly high despite the protestations of the BOE who claim that prices will magically fall back to their 2% target within the next year from the current 5% they are experiencing. While this expectation is the justification for monetary easing, the hard data suggests otherwise. Mortgage approvals came in higher than expected.

And lastly here in the US, home price figures will be do out later this morning are expected to show modest declines and consumer confidence figures are expected to show gains from last month but are still near historic lows. I suppose the news of the better than expected “Black Friday” sales and yesterdays “Cyber Monday” sales which also came in better than expected (up 18% from last year) belie those figures. Or it could just be boredom.

Fitch ratings agency finally acted on the Super committee’s failure on debt reduction and moved the US outlook to negative, which means that there is now a 50% of a US credit downgrade within 2 years. Yay for politics!

Meanwhile the markets are giving back earlier gains but are likely to rebound if we can get through the remainder of the Euro session without any negative news from the Finance Ministers meeting. So it looks like we’ll continue to trade the range, albeit a larger one.

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November 25, 2011

Forex Market Outlook 11/25/11

Filed under: Forex News — Tags: a-quick-recap, currency market, currency-pairs, economic, euro, europe, forex, market, not-surprising, oil, practice, time, usd, with-the-short, yen — admin @ 6:56 am

I hope everyone here in the US had a great Thanksgiving yesterday, though the same can’t be said for the markets. We are still in risk aversion mode as the Euro debt crisis continues to plague the global economy so the US dollar has been the favored investment vehicle of choice.

Today is a shortened session here in the US with the stock market open for a half-day session. There is likely to be little action for stocks so the correlative effects of market movements will be minimal. However, it must be noted that with decreased volume there is sometimes increased volatility.

While there is no news due out for the US session, a quick recap of this morning’s news shows that confidence figures in the Euro zone came in worse than expected. While this is not surprising, yesterday’s reports of German GDP and confidence figures were positive. GDP in Germany was 2.5% YoY, as expected. IFO confidence figures all cam e in better than expected which shows that Germany is still moving along, despite the bond auction disaster from earlier this week,

In the UK, GDP figures also came in as expected, showing .5% growth which is not a great figure. It is for this reason that the BOE has been ultra-accommodative despite the high inflation they are experiencing.

Also in the Euro zone, Portugal had their credit rating reduced to junk status, and they have been all but an afterthought as the markets have focused on the Spanish banks and Italy’s government debt.

The picture continues to worsen in the Euro zone and the push for a Euro bond is picking up traction, for those who still want to see the Euro succeed. As this situation drags out, the global economy will continue to suffer and a solution will not be forthcoming overnight.

But we are seeing a bit of a morning bounce here as perhaps some of the selling was overblown. Risk still remains at heightened levels so I’m going to continue with the short-term trading themes until more clarity emerges.

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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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October 12, 2011

Forex Market Outlook 10/12/11

Filed under: Forex News — Tags: currency trading, currency-pairs, fear, free, fundamental, japan, lower, markets, new zealand, practice, rsi, stock, vote — admin @ 7:21 am

This morning has started with risk appetite driving markets higher, with Dollar and Yen weakness acting as either a by-product or catalyst of the move. Regardless of who or what is leading the charge, a sense of calm is starting to return to the markets and they looked poised for a 4^th quarter rally into the end of the year.

Positive sentiment surrounding the resolution of the debt crisis has not been derailed by Slovakia delaying their vote on the EFSF expansion agreed to in principle on July 21^st as the market believes that the Franco-Prussian solution which Sarkozy and Merkel have promised is coming in early November will like supercede that package. The “Troika” has already agreed to Greece receiving the next tranche of money despite the uncertainty surrounding the vote of whether Greece has done enough to receive it, with the hope that whatever is offered in early November is enough to wipe the whole slate clean.

So the pressure is on to come up with a resolution that not only deals with the problem but is also something that is agreeable to all of the Euro zone members as well as the markets in general. Call me skeptical but I’m not certain if such a solution exists. Today a plan to re-capitalize European banks will be proffered which is a step in the right direction.

Meanwhile in the UK, policy-maker Posen has claimed that the BOE is prepared to ease further and the unemployment rate has ticked higher to 8.1% from 7.9% and an 8% expectation, yet the Pound is trading higher and hit our last week’s target of 1.57 vs. USD and then some. GDP estimates came in better than expected for September calling for .5% for last month vs. .2% for the previous month. Also to note is that even though the official unemployment rate rose, the number of new jobless claims came in lower than expected at 17.5K vs. an expected 24K.

Both the Aussie and the Kiwi are tracking higher with the former trading back above parity vs. USD. Related home sales and price figures show that there is moderate growth, and Australian consumer confidence figures came in better than expected. Australian employment figures are due out tomorrow.

Also adding to the risk trade is the machine orders figures that were reported by Japan that came in much better than expected, showing a monthly gain of 11% vs. an expected 3.9%. This has helped rally the Nikkei and caused some Yen selling and tonight’s release of the BOJ meeting minutes may show how close they are to intervening in the currency which could provide for additional risk taking.

Speaking of meeting minutes, the release of the September FOMC will be out later today and will definitely show how close Bernanke and Co. are to QE3. While he floated the idea at the JEC briefing earlier this month, it may have been in response to tanking markets and not any serious policy discussion. If on the other hand they are close to QE3, then this could push markets higher on the free-money trade.

US corporate earnings season is upon us and was kicked off by worse than expected numbers out of Alcoa, yet the S&P 500 has rallied to above 1200. The bar has been set so low for many of these companies that the beats should be more than the misses.

Also to note is that the Senate did not pass Obama’s “jobs bill” which was a more of political statement than a credible plan. This means that more money is not added to the deficit and taxes are not raised in the near-term, and we are likely to have to wait for the deficit reduction committee to take action before anything gets done.

Yet the mood surrounding the markets appears to be positive and I think we will definitely see that 4^th quarter rally that investors desire. Business can only sit on the sidelines for so long and if they start to believe that there may be a change in Washington DC in the next election cycle to more pro-business policies, then they may start to invest.

While I don’t think this will solve our unemployment problem in the near-term, if we can get the needle moving in the right direction then that could instill some confidence which is ultimately what this economy is sorely lacking.

So keep an eye out for the Fed release later today as it has the ability to create volatility as the market dissects the Feds intentions. Any hint at the “free money” trade could send markets even higher!

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October 10, 2011

Forex Market Outlook 10/10/11

Filed under: Forex News — Tags: account, aud, business, china, currency, currency market, live, lower, market, nzd, pound, practice, sentiment, usd — admin @ 7:21 am

This morning confidence has returned to the markets and we are starting out in risk-taking mode with global stocks and commodities higher to start the US session. News out of the Euro zone that a Merkel-Sarkozy meeting over the weekend solidified agreement on what they are going to do about the debt crisis and the problems plaguing the shared currency—yet no concrete plans were laid out. Again. What they did do is set a deadline for a deal at the end of the month, essentially buying themselves more time.

But we’ve seen this all before. A plan to make a plan. Market credibility is important at this stage of the game and if the two can’t deliver then this could ugly pretty quickly. One of the major points mentioned though was an agreement that the European banks need to be re-capitalized to increase liquidity and offset potential losses due to sovereign debt exposure.

This however begs the question of how the Greek debt issue will be handled, and it seems as though they may require a further haircut from private investors, as I mentioned last week. Other questions to ask are whether or not any restructuring would constitute a default and trigger credit default swap payments and will the potential losses create a world-wide panic? So it seems as though they are starting to prepare for a negative scenario. While the markets appreciate the unified statement that a plan will be forthcoming, the devil is always in the details and the to-be-agreed-upon measures may be negative.

Meanwhile, they still haven’t fully ratified the July 21^st agreement which is now seen as thoroughly insufficient, though it is expected to be approved this week.

News coming out this week is what I would consider “second tier”, highlighted by Euro zone CPI, Australian employment figures, and US advance retail sales.

The markets seemingly would like to take risk as we have seen increased sell over the last few months and the Euro debt crisis has been the major impediment to risk appetite. While the global economic picture is not terribly rosy, you have to remember that markets are forward-looking so its not so much about what is going on right now but what may happen in the near future.

This is exemplified by the debate over economic direction here in the US and while things haven’t been great, I get the feeling that activity is ready to explode if we can just get the politicians out of the way. While the business climate is negative right now, these are the times that you have to invest whether you are a business or an individual as you want to be in to catch the upturn when/if it happens.

There is also news coming out of China this week that may give a perspective on how the biggest engine of global economic growth is faring and should they seem to be flat to slightly better than it could set the stage for a 4^th quarter rally.

So the data this week needs to be examined as parts of the whole and though there may be some volatility, it is important to get the overall picture. Data has been pretty good in my estimation despite investor sentiment and considering the massive selling we’ve seen of late, one might expect that the global economy would be a lot worse.

But it isn’t. While things aren’t great, they’re not horrible either. Unemployment is high, but there are pockets of strength. The longer this economic malaise continues to drag out, the impatience with the lack of productivity will increase and businesses sitting on so much cash might have to deploy capital for lack of anything better to do. Even in this ugly business climate with regulatory and tax uncertainty, and the overhang of further crises in the Euro zone.

If these two issues can be put to rest and the markets re-gain some confidence, then we could see some dramatic moves to the upside.

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October 3, 2011

Forex Market Outlook 10/3/11

Filed under: Forex News — Tags: china, currency trading, economy, finance, greece, loonie, practice, sentiment, stock, unemployment — admin @ 7:29 am

The start of the 4^th quarter is not looking so rosy this morning as a continuation of last week’s selling has risk aversion heightened to start off the week. And though it has abated a bit, it is possible that we can see a market turn-around as the US session begins as this has become a little bit of a familiar pattern.

There is a lot of fundamental news out this week that will share the spotlight with the Euro debt crisis, including Central bank rate decisions, employment figures and manufacturing numbers. It’s probably best to describe the news that is significant in each region, followed by its overall impact in the market in general.

For starters, in the Euro zone EU Finance Ministers are meeting today to discuss the Greek bailout and debt crisis and possible solutions. While no one is expecting anything different from what we have seen of late, if Greece does receive the next tranche of bailout money, then what? There is still no credible plan moving forward and this is bound to play out over the ensuing months. Greece has made the necessary cuts to receive the funds, now it is up to the voting powers to follow through with the agreed upon measures.

PMI figures came in for various regions in the Euro zone and were better than expected, and Wednesday will bring PPI data that may show the level of expectations for inflation. Thursday will be the ECB interest rate policy decision and while there is little expectation that they will reduce the rate, there is speculation that they may increase bond purchase in a form of quantitative easing.

In the UK, home price figures continue to fall though PMI figures came in better than expected. Wednesday’s GDP figures could keep the BOE at bay if they come in better than expected. The BOE rate decision also on Thursday is not expected to reduce the rate either, but like the ECB, there could be some further bond purchases introduced. As the data continues to weaken, the BOE may feel the need to act even though inflation is fairly high.

The RBA interest rate decision on Tuesday is expected to produce no change, though they may remain dovish and show flexibility to go either way should global economic conditions warrant a change. Keep an eye on PMI figures coming from China, as a slowdown there will affect Australia. And of course watch the overall market risk themes.

Lost in the mix of this week’s data is Friday’s Non-Farm Payrolls (NFP) here in the US. The unemployment rate is expected to hold steady at 9.1% and the number of jobs added is at 50K. Personal Incomes declined last week so a weak jobs report will not help the economy and could add further risk to the markets. The US dollar has been the top performer of late so there could be continued strength if risk appetite deteriorates further. Wednesday’s ADP employment change may be a harbinger of Friday’s NFP, but be aware that there is no correlation between the two figures.

The Japanese rate decision is also due out on Thursday, and don’t expect any formal change to policy. The Tankan business sentiment surveys came in better than expected, though they have not returned to pre-tsunami levels. Should the Yen continue to strengthen on risk aversion, the BOJ may be inclined to intervene. The key level to watch is USD/JPY at 76 and it should be noted that they said last week that they have expanded their “intervention warchest”.

While last week was pretty light on news, this week is equally heavy. We are bound to see increased volatility as the various data points to different economic outcomes. This all happens with the specter of the Euro debt crisis hanging over the market and ready to reverse any positive news should we get any.

Should Greece receive the next tranche of bailout funding, it will be important to hear what the next steps will be. Without a credible plan going forward, this may just continue the market uncertainty for some time. And should they not receive the next round of funding, then lookout below! So there is clearly great risk in the market, with a downside bias winning at this point.

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September 19, 2011

Forex Market Outlook 9/19/11

Filed under: Forex News — Tags: a-little-more, a-move-lower, carry trade, china, commodities, finance, killed-the-only, nzd, practice, practice account, usd, will — admin @ 7:04 am

The more things change, the more they stay the same in the Euro zone. This weekend produced further non-action on the part of EU Finance ministers and ECB officials, and the markets are voicing their displeasure by selling off this morning.

This morning, there is further question over whether or not Greece will receive its next tranche of bailout funding and a conference call that was supposed to take place today has been postponed for unknown reasons. This situation has been horribly mismanaged by European banking and finance officials and it remains to be seen if Greece can avoid default.

But with every passing day, the public anger increases and the will to resolve becomes weaker so if this can’t be resolved shortly it may not ever be. This comes ahead of the vote to ratify the new EFSF agreement that was made back in July, though this may change the dynamic of that agreement if Greece defaults. Now there is talk of a possibility of Greece defaulting AND remaining in the Euro zone, though I think that is highly unlikely.

Today is a day devoid of economic data, not that it matters much anyway when the overwhelming theme of the markets is the Euro debt crisis. So it will be difficult to turn the markets around unless we get some sort of comments from the Fed. Later this morning, President Obama will be speaking about the US debt problem, though that speech is more likely to set the stage for the 2012 election that offer any credible solutions to our problems.

On Wednesday, the FOMC meeting is expected to produce some further “help”, if you can call it that, to the markets in the form of “Operation Twist” whereby the Fed buys longer term Treasuries as opposed to the shorter term in an attempt to dive interest rates even lower.

Part of the problem is that what is going on here in the US is not because interest rates are too high, but rather because the economic climate is so bad that the uncertainty is causing business to shy away from the free money. The only place it really goes is to Wall St., who then use it to finance speculating activities that are likely to induce inflation, if they have any impact at all.

And inflation is something that Bernanke would love to see at this point, as it would mean a pick-up in demand. But demand won’t pick up unless people get back to work and unemployment comes down, though that seems unlikely with the current tax, regulation, and healthcare regime.

By demonizing the job creators, the government has effectively killed the only hope they have of seeing an economic turn-around in the US. This morning at the President’s speech we will see how serious they are about fixing the economy. Or will it be more about political preservation?

The news this week is likely to be secondary to Euro debt crisis, but we will get the minutes from both the RBA and BOE rate policy meetings. The BOE minutes are a little more significant as they do no issue a statement when they issue their policy decision. Recent events have left them more dovish than hawkish, though it may not matter much if the problems in the Euro zone get worse.

So the markets are in risk aversion mode this morning, with Dollar and Yen strength and stocks and commodities lower. With Euro trading at 1.3650 vs. USD we could see another move lower to 1.35 in short order. This will have the ancillary effects of pulling both the Aussie and the Loonie closer to parity with USD, though those areas of psychological support may present buying opportunities.

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August 1, 2011

Forex Outlook 8/1/11

Filed under: Forex News — Tags: carry trade, commodities, currency-pairs, forex trading, from-the-rba, fundamental, fxedu, nzd, picture, practice, practice account, stock, unemployment, week — admin @ 6:53 am

I’m back from vacation this week and boy did I pick a good time to get away! Well not really, but it was nice anyway. The insanity that is taking place in Washington DC looks like it may be coming to an end, but let’s remember that while a deal has been reached, it has not been voted through just yet.

There still is some safe-haven rotation going today with Yen and Swiss franc strength, yet gold is pulling back from all-time nominal highs. A “relief rally” is underway in the equity markets with global stocks and oil higher, but after last week’s carnage this was to be expected.

Despite the general sigh of relief in the markets, this does not feel like classic risk appetite has returned to the markets, but rather US dollar weakness, perhaps on the notion that QE3 may be around the corner. Last week’s dismal GDP report and the potential for this week’s Non-Farm Payrolls report to get worse may bring the Fed back into the picture.

This week will also bring rate policy decisions from the RBA in Australia tomorrow, and the ECB, BOE, and BOJ on Thursday. While no change is expected, the BOE will be the only Central bank not issuing an accompanying statement. Inflation expectations have risen, but look to these banks to try their best to avoid looking hawkish. BOJ intervention hopefuls are waiting for action, but it may not be forthcoming.

Volatility still abounds in the markets, and this debt ceiling agreement is not a done-deal just yet.

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