FED Stimulus on the Way; USD Weakens Across FX

December 12, 2012 By Leave a Comment

Global markets take a breath ahead of statements in the US shortly, in which analysts expect the introduction of additional stimulus.

Global equity markets rallied and currencies steadied their position against the USD today ahead of statements from the FOMC later this evening. Analysts are confident in further stimulus being added, with recent stimulus having a positive impact on the economy over the year. Poised in a difficult place, the USD continues to look vulnerable to losing ground as the fiscal cliff blocks the longer-term outlook. There is always room for disappointment with such a build-up and the USD sell-off could open the door for an aggressive retracement.

Unemployment figures in the UK came in surprisingly better than expected, so much so that data released today showed that unemployment in the UK fell by 82,000. It’s a positive figure for the UK, but shouldn’t distract from the greater issues at hand. Incoming governor, Mark Carney, today indicated that his focus would be on the growth of the economy, at the cost of inflation if manageable. The BoE has always focused on the 2% inflation target; something which the incomer appears to be less concerned about.

The USD is looking a little slippery as the FED tries to make Christmas that little bit merrier. (JKM)

Filed Under: 2012, December 2012, JKM, Market Wraps Tagged With: , , , , , , , ,

Forex Market Takes a Breath Ahead of a Critical Trading Week… From German Data to a Japanese Election and Everything In-between.

December 10, 2012 By Leave a Comment

The markets had an opportunity for a breather today, ahead of what will be another week in the US, UK and Europe, not to mention a Japanese Election.

Worrying news out of Italy affected the Euro as Mario Monti prepared to leave office after losing support of the house. He hasn’t done much wrong, in fact he has done well to give Italy certainty in the Eurozone and implement various changes to the Eurozone. His loss of powers comes from the backers of Berlusconi who are now preparing to support him in his bid to return to office. Berlusconi’s pledge is to withdraw austerity measures from the Euro Zone, although the EU responded stating that Italy does not have the option to withdraw. Another case of politics beating economics in the Eurozone.

What is the market waiting for? We have German Key Data over the next couple of days, which will underline the impact of the Eurozone on the once glorious economy. We have jobless claims in the UK following non-Farm Payrolls in the US last week, we have the FOMC meeting on Wednesday evening to hear the Feds view on interest rates and stimulus, Thursday sees US Retail Sales, Swiss interest rate decisions as well as Japanese manufacturers outlook. If that isn’t enough, European CPI, USD CPI, US Industrial production on Friday with a Japanese election means it is all to trade for!

 

Its almost like this week is a Christmas gift to forex traders. (JKM)

Filed Under: 2012, JKM, Market Wraps, November Tagged With: , , , , , , , , , , , ,

Greek Bailout Agreed

November 27, 2012 By Leave a Comment

The UK economy remains ‘neutral’ today as the Bank of England prepares for a new Chancellor. In the Eurozone, things are looking slightly more upbeat as a Greek bailout is agreed.

Everyone is talking about the Greek bailout, hailing it as an achievement that will save the Eurozone. It takes a lot to convince everyone that the Eurozone has made a turn for the better, particularly as economic data remains poor in its outlook. The Euro rallied early on in the session, as did most equities; however, this all changed through the day as the novelty and excitement wore out and the reality that the Eurozone is in a bad place came through. German data early tomorrow is sure to add to the pressure in the Eurozone, as the once stalwart of the Euro now struggles to stay in the green.

Mervyn King has pointed a ‘neutral’ outlook on the UK economy for 2013, saying that the threat of the Eurozone is still real and present, but that the UK economy should manage to stay afloat for 2013 before growth prospects return in 2014.  UK GDP figure earlier this morning showed a 1% growth which will support a view that sterling is relatively safe.

I can see this being an exciting December – JPY, EUR, CHF, USD…all to play for. (JKM)

Filed Under: 2012, JKM, Market Wraps, November Tagged With: , , , , , , , , , ,

USD Holds Strong in a Week of Turmoil

November 9, 2012 By Leave a Comment

The end of an eventful week. The highlight of the week was undoubtedly the US election; with it came the realisation that, although all looks great in the US, it isn’t a bed of roses.

The US faces an incredible fiscal cliff, with debt and deficit spiralling out of control. Markets were sold comprehensively, as investors began to doubt if the US economy could overcome this challenge, with gold gaining on fair value. The USD held strong, which was a little surprising but perhaps does show how important a role the FOMC has played with stimulus.

The JPY should kick off the trading week on Monday, with JPY GDP out overnight on Sunday. It should be a good week of data, with enough opportunity to make up for slow trading days around the election and hurricane Sandy.

Enjoy the weekend! (JKM)

 

Filed Under: 2012, JKM, Market Wraps, November Tagged With: , , , , , , , , , ,

Central Banks keep Easing and Rates on Standby…

November 8, 2012 By Leave a Comment

The MPC today decided to leave rates on hold and not to extend easing, much like the ECB. It appears that perhaps the Central Banks have lost confidence, unless they know something we don’t…

The MPC today voted against extending the QE programme, a move which saw sterling gather some strength. 3 months ago, loud cries could be heard asking the MPC to vote in favour of further easing as the UK economy was in desperate need of an injection. Mervyn King decided to introduce stimulus by means of cheap liquidity, to be directly injected into banks and credit markets. This did the trick and the UK economy posted enough growth to get out of a technical recession. The MPC vote today supported this approach, although economists still feel that further easing could be on the way in early 2013.

The ECB also held interest rates today, which surprised some as the Eurozone continues to struggle with high borrowing costs. Bond markets continue to escalate as Greece and Spain both near further bailouts. Mario Draghi was pretty clear about his view of the Eurozone economy; ‘economic activity in the euro area is expected to remain weak…’. The Eurozone is in a worse state than it was last Christmas, this year we have just learnt to live with it.

Has the ECB and Eurozone lost faith in itself? (JKM)

Filed Under: 2012, JKM, Market Wraps, November Tagged With: , , , , , , , , , , , , ,

Perhaps the Eurozone Needs an Obama of Its Own?

November 7, 2012 By Leave a Comment

After a Presidential Election that was fought on the economy, it is slightly worrying to note that the first day back for President Obama is marked by a weaker outlook.

There was a sense of calm across the markets this morning, with investors fairly content that the US election passed by without too much of an impact. This sense of calm, of course, refers to the election only and not to the decline of the markets today. Obama back in power means he will return to face an economy that, although showing signs of health, still has a huge financial cliff in front of it, and it’s going to take much more than election rhetoric to return a sense of happiness to the US Economy.

The Eurozone sure knows how to spoil a party. We had mentioned that perhaps poor Eurozone data was being held back ahead of the US election. The events of today may support that. Major equity markets, CL-Oil and other commodities finished lower as the outlook for the Eurozone through 2013 and into 2014 looks poor. Germany continued to weaken as Industrial Production came in lower whilst Retails Sales across the Eurozone were poor as well. Spain is now unlikely to meet its austerity and deficit targets as their economy declines 1.2% a year.

The euro looked like it had an element of a ‘Romney-esque’ performance today; at one stage it looked like it could’ve been a lot worse! (JKM)

Filed Under: 2012, JKM, Market Wraps, November Tagged With: , , , , , , , , ,

US Election and MPC QE Voting

November 6, 2012 By Leave a Comment

Voting takes centre-stage as the US go to the polls, with results from the Presidential Election expected to come through overnight. In England, the MPC meeting to vote on further QE draws closer. Both have become too close to call.

The Bank of England is due to meet on Thursday and vote on a continuation of easing policies. Three months ago, it was almost a foregone conclusion that by November the MPC would vote for further easing; so much so, this had been priced into sterling. We have since, however, seen positive economic data with the UK exiting the ‘technical recession’. The Bank of England, under the guidance of Mervyn ‘the magician’ King, has engaged in other forms of stimulus which have eased liquidity in the credit markets. This has helped consumers spend more, which has nudged the economy in the right direction again. Thursday’s meeting will keep sterling on a knife edge, with a decision not to extend easing becoming more and more probable.

The US will be on their feet today as they vote for their President. From outside, President Obama looks the likely winner and the polls have him at a slight advantage. Traders will be ‘trigger-ready’ come the result.

The effect of the election on the USD? Well, I’m just not allowed to say! (JKM)

Filed Under: 2012, JKM, Market Wraps, November Tagged With: , , , , , , , , , , , ,

Eurozone Shrinks Whilst US Economy goes on the Rampage

November 2, 2012 By Leave a Comment

The US economy demonstrated US-type optimism when it made a U-turn after Fed stimulus just weeks ago. The impressive US figures were topped off with Non-Farm Payrolls today, which showed that 171k more people are now in employment in the US, which will only add to further positive retail sales and US GDP. The USD has surged ahead in the Forex markets and set the scene for what looks like an extremely close US Presidential election next week. Obama should be buoyed by the recent economic data, although an election fought on economic data will also support Romney’s view that Obama has just not done enough.

The Eurozone, however, has continued to shrink for 15 consecutive months. News out of the Eurozone has become a tale of ‘how bad will it be?’, with PMI figures showing further contractions in output and new orders. This has opened the door to further speculation from the ECB, something that will show further downside for the Euro. The Eurozone is focused on its political battles, which have disillusioned the economy and investments. Contagion continues to spread, as is seen in Japan where they’ve had to engage in easing to assist the Yen after Japanese exports to the Eurozone declined sharply.

All focus next week will be on the US Presidential campaign, what an affair that could be. Have a good weekend. (JKM)

Filed Under: 2012, JKM, Market Wraps, November Tagged With: , , , , , , , , , , , , , , ,

BoJ Fails to Shock as Investors see Beyond Short-Term Stimulus

October 30, 2012 By Leave a Comment

As the US markets remain closed, Japan presses forward with stimulus in a week that should have been dominated by the USD.

It is hard to concentrate on the financial markets with Hurricane Sandy dominating most news fronts as it blows through NY and surrounding areas, leaving one of the most developed places on the planet on its knees. US markets have been closed the past couple of days, although it is possible that they will reopen for trading tomorrow. We have seen oil fall, partially due to the Hurricane, and the USD has lost some of its edge in a quiet market with some ‘extremely risk-adverse’ investors pulling away. With US Consumer Confidence, Manufacturing and Non-Farm payrolls at the end of the week, we expect Forex to be at full pace shortly.

European figures look worse, as expected with German unemployment and Eurozone confidence weakening.  There is Canadian GDP out tomorrow, with the forecast showing a slightly softer number than previously reported. The BoJ and Japanese Government have begun various stimuli to kick-start Japanese exports, which has brought the Yen back into the spotlight. Many expect to see the Yen weaken, although we all know how resilient the East can be.

Thoughts are still with those in NY as they now face the challenges of repairing what Sandy has left behind. (JKM)

Filed Under: 2012, JKM, Market Wraps, October 2012 Tagged With: , , , , , , , , , , , , , ,

The Big Greek Tale and GDP…a Tale of Two Economies

October 24, 2012 By Leave a Comment

Greece claims they struck a deal with the Eurozone to extend its bailout targets for another 2 years. New home sales rise to support a positive move in the US economy.

There were announcements today that Greece has agreed a deal to extend its bailout targets by 2 years, which came as a surprise to virtually everybody. Needless to say Angela Merkel, Mario Draghi and others in the Eurozone dismissed such claims, stating that no such deal can be made unless agreed by the Troika and the ECB. Nobody is too sure where the statement came from or what the intent is. If anything, it is likely to further irritate Eurozone leaders, Merkel in particular.

New home sales in the US reached its highest level in over 2 years, as the FED’s move to engage in stimulus has seen the US economy push forward into positive territory. Tonight the FOMC will meet to make a rate decision and discuss stimulus further. Whilst an interest rates cut is unlikely, the US have made clear its intention to maintain its position of stimulus for as long as the economy requires it. Mervyn King supported such views, stating the Bank of England will engage in stimulus and easing if required to support the economy. All this being said and done ahead of GDP figures in the UK tomorrow and the US the day after.

It’s all heating up in the US Presidential Elections. I wonder how much the election is influencing the global economy… (JKM)

Filed Under: 2012, JKM, Market Wraps, October 2012 Tagged With: , , , , , , , , , , , ,
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