Posts Tagged ‘Global Recovery’
Forex Market Update – USD Rebounds on Dovish ECB Rumor, Weaker Commodities
Thursday, January 14th, 2010USD Rebounds on Dovish ECB Rumor, Weaker Commodities
- USD: Mixed, China’s reserve rate hike seen as minimal threat to global growth
- JPY: Lower, BOJ may succumb to government pressure to ease monetary policy further in 2010
- EUR: Higher, Greek finance minister says Greece will not need a bailout from the EU or IMF
- GBP: Higher, BOE Sentance says interest rates may have to rise this year, industrial production rises
- CAD and AUD: AUD & CAD higher, rebound in risk appetite as concern about China tightening fades
Overview
USD traded lower Wednesday pressured diminished fear that Tuesday’s tightening in China will derail the global recovery. Equity markets stabilized in the US and Europe which contributed to a slight improvement in risk appetite and a rewind of carry trades. The pace of the withdrawal of liquidity in China will be key to the outlook for growth and risk appetite. So far Chinese tightening has been limited. An official at China’s central bank said that monetary policy remains reasonably loose. His comments helped to dampen fears that China’s tightening will derail the global recovery. GBP was supported by BOE rate hike speculation. The BOE’s Sentance said that the central bank may have to increase interest rates this year. EUR was supported by Asian central bank demand and a pledge from Greek officials that they will take action on the deficit. Greece’s finance minister said that Greece will not need an IMF or EU bailout. Commodity currencies rebounded supported by stable equity market trade. JPY traded lower pressured by diminished risk aversion and BOJ ease speculation. JPY was supported Tuesday by safe haven demand and unwind of carry trades. Wednesday finds a modest rebound in carry trades as the impact of China’s tightening fades. There was limited reaction to a statement from the Fed’s Plosser that he sees the economy emerging from recession and the Fed may begin to tighten even with jobless rate high. Plosser said that he does not see inflation pressures presently but that keeping interest rates too low too long could lead to a burst of inflation or sow the seeds for the next crisis. Plosser is a policy hawk and his views may not be representative of the majority of the FOMC. USD rebounded midsession as commodity prices declined and reaction to a rumor that the ECB may signal a dovish policy bias at tomorrow’s meeting. (more…)
Forex Fundamental Outlook – Preview of BOE & ECB meetings
Wednesday, November 4th, 2009Preview of Thursday’s BOE & ECB meetings
The Bank of England (BOE) will hold a policy meeting on Thursday November 5th. At the October policy meeting the BOE elected to maintain the current level of interest rates at a record low 0.5% and asset purchases at £175bln. The BOE indicated that they would keep the scale of the asset purchase plan under review. Two recent UK economic reports generated concern about the outlook for the UK economy and may encourage the BOE to expand its asset purchase plan at the November policy meeting. UK Q3 GDP posted an unexpected 0.4% decline.
The trade had expected a rise of 0.2% for Q3 GDP. The decline in GDP suggests that the BOE asset purchase plan has yet to boost the UK economy out of recession. UK manufacturing output fell by 1.8% in August. The decline in manufacturing output adds additional doubt about the UK economic recovery. The BOE must also take in consideration today’s report of continued UK bank troubles. The UK government announced Tuesday that it will take a bigger stake in RBS and Lloyds Bank. It is not clear if he BOE will hold its asset purchase plan unchanged or elect to expand the purchase plan by £25bln or £50bln at Thursday’s policy meeting. Today’s Wall Street Journal reports that a majority of economists expect the BOE to hold policy steady and expand its asset purchase plan by £25bln. Based on the UK Q3 GDP report it may be difficult for the BOE to refrain from adding additional stimulus. Recent GBP price action has found that the GBP benefits from BOE decision to hold the level of asset purchases and weakens when the BOE elects to expand quantitative ease. Monday, the BOE’s Blanchflower said that the BOE may expand its asset purchase program by another £50bln. The Sunday Times however carried a piece warning the BOE not to panic over the Q3 GDP report. GDP is seen as a lagging indicator.
Forex Fundamental Analysis – Global Recession – Is it really Over?
Wednesday, August 26th, 2009US Dollar Touches 2009 Low vs. Currency Basket
Wednesday, August 5th, 2009The Greenback fell to its lowest levels this year on Monday after the Institute for Supply Management’s index on U.S. manufacturing improved more than expected in July. Along with some better earnings reports from foreign banks, the data supported equity markets and spelled trouble for the U.S. currency because investors no longer desire its safe-haven status. (more…)
Stock markets are rising? Look at the Big Picture!
Tuesday, July 28th, 2009
With many of the primary stock markets reaching yearly highs, it would appear that optimism about the prospects for a global recovery is high. The increase in overall risk appetite in the Forex and the jump in stocks have been incredibly impressive.According to the news reports, these shifts in sentiment have been driven higher by better than expected corporate earnings out of the US along with good economic data. But something is just not adding up for me, and I am not quite sure where to place my disbelief.
It is odd that just as the markets are flying, bond yields for the major economic countries, the US, Japan, England etc, are going higher. Now obviously this is due in part to trader speculation that once the recovery takes hold, these countries will have no choice but to start raising their low rates.
But what concerns me is the effect of quantitative easing that many of these countries employed. Funnelling money into the system at such a large rate as many of these countries had, will no doubt cause mild to moderate inflation – which would require lower rates. So what is going on?
Last week gave us a clue that all is not so rosy though. England reported a weaker-than-expected GDP figures for the second quarter – much weaker than expected to be specific.
Perhaps the Brits are not fudging their numbers like the Americans are – not that I know anything for a fact, but it wont surprise me to find that out in a few months.
This week’s vast amount of economic data coming out of Europe and the US should help paint a better picture. I fully expect sugar-coating, but I know that the Forex traders will be keen to pick up on that.
Among the core numbers to look for this week are the US GDP and the Chicago Purchasing Managers Index. Consumer Confidence and Housing Prices along with New Home Sales numbers are important, but this is where my scepticism is most pronounced as we have seen anomalies in these numbers in recent months and they are easier to manipulate – so keep a sharp eye out there.
I expect the general tone of this week’s data to support the recent signs of improvement. It remains to be seen, however, whether the outturns will be sufficient to maintain the bullish momentum as we head into August. Short of very strong numbers, I doubt it will happen.
Look for a weaker week in the Dollar and look for the Aussie and Kiwi to be the beneficiaries of that.
Forex Market News – Dollar Weakness
Wednesday, April 2nd, 2008U.S. Market Update
Dow +150 S&P +18 NASDAQ +37.5
US equity indices opened higher for a second consecutive morning today and gained steadily in early trading. Dollar weakness is feeding into the picture, as the greenback continues to absorb fallout from the UK Independent’s sensational (and now mostly discredited) claims about major industrial and crude producing nations dumping the dollar for oil trading. Spot gold shot above its all-time highs of $1,032.40 before the open, to trade around $1,041 in mid-morning action. Australia became the first major nation to raise interest rates, as the RBA said it was time to begin withdrawing monetary stimulus ahead of the global economic recovery. Front-month crude is strong on all the optimism, with the contract trading just shy of $72 this morning. Treasury prices are a bit softer ahead of this afternoon’s $39B 3-year note offering. The 10-year yield has returned to 3.25% while the long bond has climbed back above 4%.
The regional banks are making steady gains hand in hand with everybody else, with the notable exception of Marshall Ilseley, which warned investors that its Q3 loss would be nearly twice the expected amount. MI’s CEO said that while the firm is seeing some improvement in credit quality, it still assumes the recession will be a big factor for several more months. Shares of MI were up 6% on improving credit quality metrics included with the guidance call, but have fallen to around even in early trade. (more…)
