Usd | Forex Blog

February 2, 2012

Market Outlook for February 2, 2012

Filed under: Forex News — Tags: aud, energy, europe, facebook, financial, fire, gold, greece, guide, jpy, person, personal, possibility, united-kingdom, usd — admin @ 6:42 am

Recap of the Latest Global News
By Cory Vi & Andrew Su on Feb 2, 2012

Yesterday, manufacturing strength around the globe from prompted a rally in the markets as investor focus was diverted from the European debt focus. Manufacturing data in the US grew at the fastest rate in seven months while manufacturing in the United Kingdom rose to an eight month high. Gauges of manufacturing in China also improved and manufacturing in Europe contracted less than expected. Manufacturing in China showed a modest expansion beating market expectations of a contraction. The USD weakened across the board and Treasuries stopped a five day rise. with The EUR is trading at 1.3130 while the GBP is currently trading at 1.5830.

Further aiding the positive market sentiment is the expectation that the Greek private sector debt swap deal and the nation’s second financing deal will be completed in the next few days. However, the longer the negotiations drag on, the greater the likelihood of an extended fall in the Euro. The strongest performers yesterday were the risk currencies. The Australian dollar has surged past 1.0700 while the Canadian dollar is once again trading above parity against the USD.

Equity markets powered ahead yesterday spurred by signs of manufacturing strength globally. The S&P 500 closed 0.9% higher at 1,394 with financial and commodity stocks leading the gains. Morgan Stanley rose more than 5% on news that it had won the lead manager role for the upcoming Facebook initial public offering. The appliance maker, Whirlpool, rose almost 20% as it projected higher than expected earnings. Asian stocks gained with the Hang Seng rising 2%. European stocks have lost earlier gains, falling from 6 month highs, as oil producers fell

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EUR at NFPs Mercy?

Filed under: OANDA News — Tags: a-new-yearly, aud, before-the-boj, cad, disgruntled, market pulse, markets, usd — admin @ 4:38 am

The biggest fear this morning was not a rumor that China may ease their RRR or the imminent possibility of Cbank intervention in yen, nope, it was Deutche banks forex outage (it seems to have come with their profit outage)! The worlds largest currency player experienced a brief disconnect on ‘Autobahn’ forcing them to experience the old ways and provide voice broking for a full 10-minutes. This certainly highlight the importance of this institutions presence in the FX game or are investors that bored with the same recycled reasons for market movements this week? The closer we get to NFP market positioning will get more interesting.

There are reports now that the PSI deal is being held up by differences between Germany and the IMF. We can assume when the collective actions clauses are being enforced we will get to hear more from the disgruntled creditors. The various posturing by interested parties is in danger of making this the worlds longest ‘expected’ announcement! For now, little news is keeping trading ranges intact.

The overnight rumor of a RRR cut from the PBoC is nothing new, and its something that the market will have to live with until its done. The prospect of a cut was raised ahead of the Lunar New Year, however, data since supported the prospect of monetary easing. Analysts now feel that a rate cut is unlikely for a few months, but manipulating the reserve ratios is a strong alternative. With global growth under immense pressure, a reserve move gives us a shiny ‘Red Knight.’ Perception is everything. However, in this risk on environment their gesture could becomes diluted.

On the other hand, the BoJ presence is much more pressing. Comments from Japanese officials overnight will unlikely halt the yen gains anytime soon. JPY is one of the most liquid currencies in the world and is been seen as a sound alternative to the two prime reserve currencies, EUR and USD. Their stability and debt-led debasement issues are to blame. This would suggest that its only a matter of time before the BoJ appears in the markets directly. A similar storyline is being played out in Europe with the SNB.

This mornings decline in the Euro-zones December Producer Prices (-0.2%, m/m and up +4.3% on the year) will be welcome news for the ECB. Along with positive market sentiment is helping to push Euro periphery yields much lower and aid them in their refunding requirements. Spain this morning was the latest winning candidate, its yields are being pushed to a new yearly ‘floor.’ With risk, offers in the higher 1.31’s are expected to weigh on the EUR’s rebound and keep the market focused on support ahead of 1.31 directly.

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Fed’s Near-Zero Interest Rate Policy a Failure?

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February 1, 2012

Fed’s Near-Zero Interest Rate Policy a Failure?

Filed under: OANDA News — Tags: central bank watch, federal-funds, federal-reserve, help-businesses, kansas, largest-central, most, most-aggressive, record-low-rate, thomas-hoenig, usd — admin @ 1:31 pm

The world’s largest central banks continue to follow a low interest rate policy first implemented to deal with the 2008 recession. The argument for adopting the record-low rate was that deep cuts to the lending rate would help ensure sufficient liquidity within the financial system and encourage spending and growth promotion.

In this regard, the U.S. Federal Reserve was the most aggressive of the major central banks. After a quick succession of rate cuts, the Fed took less than a year to chop the benchmark lending rate from 5.25 percent, to a maximum of 0.25 percent as of December, 2008. Now, more than three years later, the lending rate remains zero bound; a fact that has some critics suggesting the Fed’s policy has failed to accomplish its stated goals.

One of the most vocal opponent’s of the Fed’s approach is himself a Federal Reserve Bank President. Thomas Hoenig, President of the Federal Reserve Bank of Kansas City has, on several occasions now, spoken out against the continuation of near-zero interest rates.

Referring to the current Federal Funds rate as a “subsidy” for the banking industry, it is Hoenig’s assertion that while banks are indeed taking advantage of the “cheap” money available from the Fed, funds are not being made available for commercial and retail lending. The banks are instead simply investing the cash directly into higher yielding bonds including U.S. government treasuries. As of Wednesday morning, the benchmark 10-year yield on U.S. debt was 1.82 percent.

Using money from the Fed to buy higher yielding securities may make it possible for institutions to profit on the positive interest rate carry, but does little to help businesses acquire capital to expand and help get Americans back to work. It can also be argued that this policy has actually reduced liquidity.

With the ability to profit on higher-yielding bonds as described, banks have become even more selective to whom they provide loans. Banks can simply shun all but the top-tier ventures representing the least amount of risk. The result, according to Hoenig, is that rather than encourage lending to support growth, the Fed’s policy has actually made it more difficult for smaller companies and private individuals to gain access to the Fed’s liquidity.

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ADP Payroll Report Indicates 170,000 New US Jobs Created

Filed under: OANDA News — Tags: adp, for-the, forex round up, january, jobs-were, month, monthly-employment, payroll-services, report-issued, somewhat-lower, suggests-170, taken-from, usd — admin @ 7:11 am

The monthly employment report issued by payroll services company ADP suggests 170,000 new jobs were created in the U.S. for the month of January. This is somewhat lower than the 182,000 average taken from a survey of 40 economists.

Source: Reuters

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Market Outlook for February 1, 2012

Filed under: Forex News — Tags: advice, czech, czech-republic, financial, fire, gold, japan, person, possibility, report, top stories, usd — admin @ 6:42 am

Recap of the Latest Global News
By Cory Vi & Andrew Su on Feb 1, 2012

Yet again markets were gripped by ‘europhoria’ surrounding the latest EU summit and more announcements surrounding plans to save Europe. European Union leaders meeting in Brussels have agreed on a fiscal treaty that will allow for action against high deficit states and calls for members to introduce legislation to limit budget deficits. Markets rallied on the news even though these reforms actually do nothing to resolve the current debt crisis. Britain and the Czech Republic have declined to sign the pact. After having rallied to above 1.3200 yesterday, the Euro gains evaporated before once again rising in Europe today.

The Dollar Index rose yesterday by 0.2% yesterday as the USD gained across the majors. USDJPY continues to hover dangerously close to post war lows but is still managing to hold above 76.00. The inevitable sabre rattling and war cries from the Bank of Japan will intensify over the next few trading sessions but the question will be is “anyone listening and does anyone care?” In Europe, the dollar is falling as equity markets rise.

Yesterday, equity markets were soft. The S&P 500 closed 0.05% lower for its fourth consecutive loss, albeit small, as economic data failed to meet expectations. Consumer confidence came in lower than expected while the ISM business activity index came in lower than even the most pessimistic forecasts. Exxon Mobil fell more than 2% after reported sales trailed estimates and Amazon will open significantly lower today after profits fell more than 50%. European bourses are higher by almost 2% as manufacturing data from the US to China looks positive.

Equity markets have recovered from a soft start to the week with Asian shares rising on optimism surrounding the latest EU summit. After falling yesterday over Greek resistance to outside influence in its budgetary affairs, rising bond yields and the collapse of Spanair, European bourses are now higher by 1% mid session today. After losing ground yesterday for the third day as European leaders lectured to Greece over the nation’s second rescue package, S&P 500 futures are signalling a rise in trade today.

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January 30, 2012

More EUR Concessions Required

Filed under: OANDA News — Tags: a-credit-rating, a-near-term, belgium, chf, dean's fx, eur, gbp, greece, into-the-figure, italy, single, single-currency, uncertainty, usd — admin @ 4:40 am

The 1.32 EUR handle is in danger of becoming a distant past. Today’s Euro summit could fail to appease investors concerns about the fiscal outlook of Greece. If that is the case, then the single currency price action is on the verge of repeating itself; a pattern of pre-summit gains and post-summit losses.

The Greek economy is only “one” of the Euro peripheries on the brink of deteriorating further into the abyss near term. The country’s own officials are pushing back on Germany’s proposal for Greece to cede control over its budget in return for aid. Without aid from the IMF and EU, a Greek private sector involvement deal is in danger of collapsing this week. Everyday the market is warned of this pending deal, a deal that was supposed to be concluded weeks ago, a deal that still has some Euro-euphoria premium priced in. Further uncertainty will convince the optimists that a near term EUR top may have been already been established last Friday.

The Fitch credit downgrading last week does not make it any easier for some of the struggling Euro nations to come to the table to raise cash. Auctions this week will be the biggest test of sentiment so far this year. This morning, the Italian auction cleared well, with Italy selling +7.5b of bonds out of a total of +8b. However, the ECB were seen post-results; not necessarily good. Italy, Belgium and Spain sell no less than +EUR22b’s worth of debt amongst a credit rating poisoned atmosphere. The pending issues will be somewhat of a litmus test at these much lower-than-before yield levels. The Italian benchmark 10’s (+5.90%) had only recently traded above the markets +7% default barometer.

The Euro-zone economic sentiment rising to 93.4 from 92.8 has only been capable of offering the single currency slight short-term support. The currency seems to want to check out further, the stop-loss orders touted below the bids into the figure at 1.31 option expiry fame. The economic sentiment indicator along with other Euro surveys may persuade Draghi and company to leave monetary policy unchanged at next months meeting as they look to see if the Euro-zone economic activity is stabilizing. Is the EUR top in for now?

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January 27, 2012

US 4th Quarter Growth Falls Below Expectations

Filed under: OANDA News — Tags: analytics, composition, economists-had, forex round up, fourth, not-favorable, pennsylvania-, previous, quarter, rebuilding, since-the-third, temporary-boost, the-fastest, third, usd — admin @ 7:09 am

Despite expanding at the fastest rate in over a year, U.S. 4th quarter growth fell short of the 3.0 percent expansion economists had predicted. Still, the 2.8 percent annualized increase was a strong improvement over the 1.8 percent recorded in the previous quarter.

However, there are concerns that given the main areas responsible for driving growth for the quarter, the rate of expansion cannot be sustained.

“The economy ended 2011 on a fairly positive note, but the composition of growth in the last quarter is not favorable for growth early this year,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.

Growth in the fourth quarter got a temporary boost from the rebuilding of business inventories, which was the fastest since the third quarter of 2010, after they declined in the third-quarter for the first time since late 2009.

Source: Reuters

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January 26, 2012

Market Outlook for January 26, 2012

Filed under: Forex News — Tags: fundamentally, higher, information, japan, jpy, north, nzd, price, seen-the-high, sold-off-across, survey-market, time, usd — admin @ 8:36 am

Recap of the Latest Global News

After the U.S. Dollar sold off across the board late in North American trading yesterday, it appeared that some relief was on the horizon, with the Greenback clawing back in early Asian trading on Thursday. This was merely a short-term correction, and by the time European markets opened up, the higher yielding currencies continued to surge.

Ahead of yesterday, the U.S. Dollar was primed for a strong year; after the ill-advised policy decision, one that does little more than buy time for banks to shore up their balance sheets, the U.S. Dollar is poised to be one of the worst performing majors in 2012. The implications of the Fed’s decision go beyond this year, however. Now, with low rates indicated for the next two years, the groundwork for the American Lost Decade – no different than Japan’s – has been laid.

Of interest has been the price action displayed by gold, which has surged through the $1700 per ounce mark and maintained its gains ahead of trading in New York. To me, this is a clear indication that market participants are worried about the U.S. Dollar losing its value substantially over the next few months. The key to watch would be the short-end of the U.S. Treasury yield curve: if these rates turn negative, the demand for precious metals will pick up.

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Euro gains to fresh 2012 highs against Dollar after Fed statement

Filed under: OANDA News — Tags: aud, cad, chf, eur, forex round up, gbp, jpy, usd — admin @ 7:29 am

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Fed Extends Near-Zero Rate Pledge; Hints at More Bond Buying

Filed under: OANDA News — Tags: bbc, federal, market-committee, monetary, said-yesterday-, the-resumption, usd, weighing-down, words — admin @ 7:20 am

Yesterday, the Federal Open Market Committee (FOMC) statement extended the current near-zero interest rate policy another year to the middle of 2014. The FOMC also addressed the resumption of the Fed’s bond buying program.

The Federal Open Market Committee “recognizes the hardships imposed by high and persistent unemployment in an underperforming economy, and it is prepared to provide further monetary accommodation,” Bernanke said yesterday at a press conference in Washington.

Source: Bloomberg

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