No Interest Rate Hikes!
By Mike Conlon | March 4, 2010
As expected, neither the BOE nor the ECB raised interest rates today with the ECB citing fiscal problems in Greece and the BOE putting a hold on further quantitative easing to see if previous measures have been enough.
In other news, US initial jobless claims came in as expected, though all eyes are on tomorrow’s Non-Farm Payrolls report. I’m seeing some mild risk aversion this morning, and again am seeing Canadian dollar strength. Commodities are flat after seeing some gains from the previous days.
In currencies:
Aussie (AUD): The Aussie was down earlier but looks like a rebound may happen today, as news of a narrowing trade deficit and an expected US employment report may outweigh concerns out of the UK and Euro zone.
Kiwi (NZD): The Kiwi is lower this morning as it looks like carry traders are dumping the Kiwi in favor of the Loonie in addition to mild risk-aversion.
Loonie (CAD): The Loonie continues to advance as traders speculate that the economic situation in Canada is in good enough to begin raising rates. The Loonie is fast approaching the 1.02 level to USD and we could see parity by mid-year if interest rates begin to rise in Canada.
Euro (EUR): The sale of Greek bonds is going well this morning as higher yields are attracting investors and the issue is over-subscribed. In the meantime, there is equal outrage in both Greece and Germany although the Germans haven’t taken to streets like the Greeks have—yet. What is happening in Greece is a perfect example of what happens when a government grants its citizens entitlements and then has to take them away because they can’t afford it. I hope the US administration is taking note. Interest rates were held steady and the ECB has decided to not remove economic stimulus at this time.
Pound (GBP): Interest rates have been held steady at .5%, which comes as no surprise to the market. The BOE did make it clear that they will not increase bond-buying to help stimulate the economy. It is clear that the UK sees the need for deficit reduction so the BOE is content to play the “wait and see” game to see if earlier measure have taken hold. There is still increased fear that the UK could be headed for a slide back into recession, and the spring elections are also lingering as fears of a “hung parliament” could cause political non-action.
Dollar (USD): Initial jobless claims came this morning as expected and pending home sales are due out later this morning. We could see some volatility as traders position themselves for tomorrow’s NFP report. The Dollar is mixed this morning.
Yen (JPY): The yen is down across the board this morning as there is talk about a potential sales-tax increase coming from Finance Minister Kan. This would be the first increase in over 10 years and could be a sign that the fiscal situation in Japan is worse than expected. However, this may be a ploy to put pressure on the BOJ to increase bond-buying. Any way you slice it, the Japanese would like to have a weak currency to help exports, and the Yen has been on a tear as of late.
So European themes are dominating the market right now; and Japan is trying to keep the Yen from strengthening. Tomorrow’s NFP report is usually the biggest event for the currency market, as this will give clues as to where the US economy is or may be going, and what the economic response is going to be as a result. This could affect the risk outlook for the rest of the month for as the Dollar is the world’s reserve currency.
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Greek Revival?
By Mike Conlon | March 3, 2010
No I’m not talking architecture this morning; I’m talking about the austerity measures Greece is proposing to undertake in order to satisfy the French and the Germans. Now if they can just keep their citizens from rioting in the streets they might just be able to pull this off. Meanwhile, the Euro is higher to 1.365 vs. USD.
Also higher this morning is the British pound, which is bucking a 6-day slide. Sort of like God, on the seventh day it rested! The Canadian dollar is higher in a continuation of yesterday’s news.
So this morning is sort of a mixed bag. More news driven than risk-oriented, it will be interesting to see if the currencies fall back in line.
In currencies:
Aussie (AUD): Australian GDP came in this morning a little bit higher year over year, though not gangbusters as we may have been lead to believe. While the economy has been moving along nicely and is well-positioned for growth, the lack of explosive growth means that we could see a pause to near-term rate hikes. The forex market can be so greedy at times! The Aussie is mixed this morning.
Kiwi (NZD): The kiwi is down today across the board and is trading near a 10-year low to the Aussie. It looks as though the market is attempting to re-define the Kiwi’s place in the “risk totem pole”. Nevertheless, the Kiwi economy is still on track and they do provide 2.5% interest, making it a good destination for carry trades. I think the market realizes that the economies of Australia and New Zealand are quite different, and the Loonie looks poised to replace the Kiwi, as traders speculate that rate hikes may be coming sooner in Canada then in New Zealand. This makes the Kiwi/Loonie pair the largest loser of the morning, down some 1.15%.
Loonie (CAD): The Loonie is benefitting this morning from yesterdays interest rate decision as the market is now starting to believe that Canada may be the next to raise interest rates. The Loonie is up across the board this morning.
Euro (EUR): The Euro is higher against all but the Loonie and Pound, as proposed Greek austerity measure are giving hope that the debt problem won’t spiral out of control. This is coming ahead of the Euro zone GDP report and interest rate decision due out tomorrow. Rates are not expected to change and any surprise to the upside on GDP would be viewed as positive by the market.
Pound (GBP): The Pound is higher this morning after consumer confidence figures came in better than expected. I’m not so sure why they are so confident but to each their own. Tomorrow is the BOE’s decision on interest rates and quantitative easing. Deficit reduction is a major priority in the UK so it will be interesting to see if they need to continue to stimulate the economy at the expense of increasing debt. Stay tuned!
Dollar (USD): The Dollar is down against all but the Kiwi as job cuts have fallen to their lowest levels since 2006. All this means is that employers plan on firing less people. They are still not in “hiring mode” so the “jobless recovery” continues as political uncertainty and Friday’s Non-Farm Payrolls report loom heavily over the market.
Yen (JPY): The Yen is mixed this morning, giving back some gains against the European currencies yet higher vs. the Aussie and Kiwi. As no real risk themes are presenting themselves today, the yen is benefiting from a little bit of carry trade unwind and it looks like some of that carry trade money is going toward the Loonie. No real news out of the region today besides a reading of higher worker earnings, which could help push domestic demand.
The markets aren’t always dominated by risk themes so it is really important to pay attention to the overall economic news for the most widely traded currencies. Slight changes can have large effects in individual currencies which can “break out” of the usual order. In these situations, there is great opportunity as sometimes the market is slow to catch on. My trumpeting of the Loonie over the last few weeks is one such example.
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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Risk Appetite Returns!
By Mike Conlon | February 16, 2010
The markets are back to “normal” after some being closed for various holidays. Risk appetite is the play today, as the Euro is rebounding against the dollar on thoughts that the Euro may have slid “too far, too fast”. Also, news out of Australia from the Reserve Bank minutes hinted that further rate hikes were in order should the Australian economy extend its recovery.
Also to note is that commodity prices are higher as which is consistent with an increase in risk appetite.
On to the currencies:
Aussie (AUD): The Aussie is higher on new from the RBA minutes. Analyst expectations are for the Aussie to gain to .91 vs. USD by the end of March. Should the economy continue to expand, then further rate hikes could be in order. The current benchmark rate is at 3.75%, making the Aussie a popular destination for carry trades.
Kiwi (NZD): The Kiwi is moving in tandem with its South Pacific partner the Aussie. While growth has not been as robust in New Zealand, the Kiwi will also benefit from increased commodity prices and a higher benchmark interest rate as well. That rate is currently 2.5%.
Loonie (CAD): The Loonie is trading higher this morning on the risk trade as well as the fact that oil is back over $75. Canada is in the spotlight right now as host of the 2010 winter Olympics as sometimes they get lost in the shuffle in the risk trade hierarchy. The Loonie is up to 1.043 vs. USD this morning, its highest level this month.
Euro (EUR): The Euro is higher against all but the commodity currencies, paring back some of its losses from the previous week. There is tough talk coming from the EU finance ministers regarding Greece, as news has surfaced that Greece may have used derivatives to “fudge the numbers” in order to gain entry to the EU. The fact that Goldman Sachs was involved should come as a shock to no one. Also contributing to the Euro gains this morning is the reading from the German Sentiment Index this morning which was lower than previously reported, but ahead of analyst expectations which net-net is positive for the Euro.
Pound (GBP): The Pound is lower this morning across the board as consumer prices rose 3.5% from a year earlier. A deviation of more than 1% from the target rate of inflation (2%) requires a letter from BOE Governor King as to how he intends to get back to the goal rate. Inflation volatility is to be expected, and this reading was not a surprise to analysts. This could put more Quantitative Easing back on the table for the UK, which would be Pound negative.
Dollar (USD): The Dollar is down this morning as risk-taking is the flavor of the day and stock futures and commodities are higher. The dollar is down 1% vs. the Kiwi and Aussie.
Yen (JPY): As is expected on a risk-taking day, the Yen is down against all but the Pound as the threat of deflation keeps rate hikes off of the table and provides the fuel for carry trades in Aussie and Kiwi despite the good GDP numbers from yesterday.
In overnight markets, the Nikkei closed higher but the Hang Seng closed lower. European markets are higher as are US stock market futures. Oil is back over $75.25 (+1.5%) and gold is up to around 1115 (+1.38%).
As you can see, there is always something happening in the currency market that can influence sentiment and thus market direction. Following the news is extremely important in understanding how market participants view world events.
Do you want to be a market participant? Get started today!
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Possible Greek Bailout?
By Mike Conlon | February 9, 2010
So much for trading sideways yesterday. What started out as a quiet start to trading ended up with a continuation of last week’s sell-offs in the stock market, as the Dow closed below 10K for the first time this year. However, both gold and oil were up slightly yesterday, showing signs that some of the correlations that we often speak of may be breaking down.
This morning, markets are trading higher as hope is coming out of the Euro zone that the other European nations may be coming to help Greece in tackling their budget deficit. As you would expect, this is causing some risk-taking this morning.
Let’s look at what this means for the currencies:
Aussie (AUD): In addition to general risk themes this morning, the Aussie is trading higher as comments from the RBA’s Governor Stevens said that keeping rates low “may help cause bubbles and credit booms.” Also to note that Central bankers from around the globe are meeting in Australia to discuss the fallout from the credit crisis and to proceed going forward. It will be interesting to see if anything of substance comes out of this meeting, or is more of just a show.
Kiwi (NZD): The Kiwi is the largest gainer this morning, up 1.4% vs. JPY and 1.15% vs. USD. Higher commodity prices and risk-taking are fueling buying in the Kiwi. The Kiwi was also one of the biggest losers last week so it is also benefiting from some technical buying, as it holds near-tern support at .68 vs. USD.
Loonie (CAD): As mentioned yesterday, the Loonie is going to trade primarily on risk themes and commodity prices and today is the day that higher prices are lifting the Loonie, which is up against all but the Kiwi and Aussie, assuming its position of “3rd rung” on the risk-taking ladder.
Euro (EUR): The Euro is higher this morning on speculation that Greece is going to be bailed out by the rest of the Euro zone countries. Apparently ECB President Jean-Claude Trichet has left the policy meeting taking place in Australia to return home to conduct EU business. This has lead to traders bidding up the Euro in anticipation of a solution being realized. Also the Euro is benefiting from its status as the “anti-dollar”, which is down today.
Pound (GBP): The bound is down this morning on a weak retail sales report that climbed at its slowest pace in almost 15 years. Traders are positioning themselves ahead of the UK inflation report due out tomorrow which could be weaker than expected if the retail sales figures are indicative of slow UK growth, keeping inflation tame and not giving the BOE any reason to raise rates in the near future.
Dollar (USD): The Dollar is giving back some gains after a going on a four-day tear as the risk aversion was the dominant theme last week. The Dollar is down vs. all but the Yen, and could strengthen to 90 vs. JPY is risk themes hold up today.
Yen (JPY): The Yen is the biggest loser this morning as risk appetite is driving carry trades this morning. Should any news come out of the Euro zone regarding a solution for Greece, then we could see some further depreciation as it would be “game on” for further risk-taking.
This morning is going to be a big open as US stock market futures are significantly higher. The Dow could open up some 100 points and oil and gold are also trading higher, with oil at 72.5 and gold at 1075.
In overnight markets, Asia was up primarily with the exception of the Nikkei which was down slightly, and Europe is currently up across the board on Greece bailout hopes.
Should the market hold onto and not give back gains, then I expect to see further dollar and yen weakness.
To learn more about how you can make money in the currency market, be sure to check out our affordable currency trading courses.
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Quiet Start to the Week!
By Mike Conlon | February 8, 2010
This week is starting out kind of quiet, perhaps recovering from Super Bowl hangovers and the carnage from the end of last week. There’s no real earth-shattering news on tap until the end of the week, when all eyes will be on Europe. This is exactly what the markets need; a chance to rest and re-evaluate. I’m seeing some mild risk-taking and US dollar weakness this morning.
On to the currencies:
Aussie (AUD): No real news on tap until the end of the week when Australia reports its employment figures. Look for the Aussie to trade solely on risk themes and commodity prices this week. The Aussie is up across the board.
Kiwi (NZD): Expect the Kiwi to trade in similar fashion to the Aussie. New Zealand’s economy is still “fragile”, according Reserve Bank Governor Bollard in response to last week’s unemployment figures. There will be some figures coming out later this week that may help gauge inflation, but don’t expect any major moves outside of risk themes.
Loonie (CAD): Canadian housing starts came in better than expected this morning, but expect the Loonie to trade more on US themes and commodity (particularly oil prices) this week. No other news this week.
Euro (EUR): By now if you’re not aware of the pending debt crisis in Greece, then you’ve had your head in the sand for some time! Seriously, reports coming out of Greece suggest labor strikes as unions are dead-set against the government’s debt reduction plans. In the past, these strikes have become violent which could further highlight the problems and decrease confidence. On tap this week is Germany’s Consumer Price Index and at the end of the week we get Euro zone GDP figures. The trends on the chart clearly look down and we could see the Euro test 1.35 vs. USD. Stay tuned!
Pound (GBP): The Pound is down again after surveys showed the opposition party’s lead over the incumbent party narrowing, which would result in an election to be held in June. Furthermore, British GDP and the BOE quarterly inflation report are on tap, which could show weaker than expected growth. The pound is just under 1.56 vs. USD.
Dollar (USD): The Dollar is weak this morning, paring back after gains last week from risk-aversion themes. Toward the end of the week retail sales will be reported which should be a gauge of how recovery is going. The consumer in the US represents some 70% of GDP so weaker sales could foreshadow slower growth. Friday is the UM Consumer confidence number.
Yen (JPY): The yen is weak today mainly on risk-taking and a pullback from strength last week. Economic slowdowns are predicted as problems in the Euro zone hurt exports and the Toyota recalls hurting the economy in general.
After last week’s scare, expect the market to trade some sideways as market capitulation digests the news. Barring any major economic “disasters”, expect traders to dip their toes back into the risk trade very slowly. However, if stocks continue to sell of today, then we could be in for more dollar strength.
Overnight, Asian markets are down while they are trading higher in Europe. US market futures are down, and oil is up slightly to 71.25, with a better rebound in gold, up 1.25% to 1065.
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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Quiet Morning Reveals Mixed Bag!
By Mike Conlon | February 3, 2010
Quiet Morning Reveals Mixed Bag!
This morning the markets can’t seem to decide which way they want to go. News out of the Euro Zone that Greece’s debt reduction plan has been accepted caused the Euro to rise above 1.40, though it has backed off and is now trading below. The US ADP Jobs report came out this AM, showing better than expected job loss numbers, yet the stock market futures sold off and the dollar advanced.
Tomorrow’s big news is from across the pond, with both the UK and the EU coming out with their interest rate decisions.
Here’s how the individual currencies are faring this morning:
Aussie (AUD): The Aussie is up this morning vs. all currencies, as mild risk-taking is the general theme this morning, despite a bit of US dollar strength.
Kiwi (NZD): The Kiwi is mixed this morning, down against the Dollar and Loonie, but up against Japanese yen.
Loonie (CAD): The Loonie is showing a bit of weakness, paring back recent gains as commodities, particularly oil, traded higher.
Euro (EUR): As mentioned earlier, the Euro is showing strength as the Greek debt reduction plan was viewed as acceptable. However, rumors still persist that a bailout may be forth-coming, which is preventing institutions from flocking back as an alternate to the Dollar.
Pound (GBP): The pound is trading down slightly as all eyes will be on the rate decision tomorrow as well as the BOE’s actions regarding its quantitative easing program.
Dollar (USD): The Dollar is showing mild strength on the heels of the ADP jobs report. Stock futures are down, high-lighting the inverse relationship.
Yen (JPY): The yen is weak this morning across the board, as risk-aversion is abating and yen carry trades are in higher demand.
So expect sideways trading throughout the day as the market oscillates back and forth waiting for the next piece of news that will cause one risk theme to dominate the other.
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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Pound Gains!
By Mike Conlon | January 13, 2010
The British pound (GBP) is trading higher after a BOE policy maker stated that interest rates in the UK may need to rise this year. This could signal the end to the Quantitative Easing (QE) policy the UK had undertaken to stimulate its economy.
So what’s left to do?
Sit back and wait.
This is a refreshing stance in world where instant and immediate gratification need to happen to keep the public at bay. What this policy-maker is essentially saying is that its OK to let market forces happen and to see how the policies they put in place will work out. All too often governments are quick to react to any negative news regarding their economic situation and are always trying to “tinker’ with policy, rates, statements, intervention, etc.
I’m not certain where they dig up some of these people charged with setting policy, but its almost as if they have completely forgotten that economies move in cycles. What goes up, must come down. Basic laws of gravity. The fable of the Ant and the Grasshopper. I could go on and on.
So kudos to Andrew Sentance, BOE policy maker for keeping it real. While the UK is not yet back on firm ground economically, the “wait and see” approach is better than the overkill that we see here in the US.
So let’s take a quick look at a chart of the British pound vs. the US dollar (GBP/USD): (click chart to enlarge)
As you can see from the chart, the pound has been up for the last four days in a row for the first time since last November since we’ve seen dollar strength in December. 1.59 is a good support level. As this pair has broken through the 38.2% fibo retracement level, it looks like the next stop could be 1.636 at the 50% retracement level. This could happen sooner than later as the US CPI numbers come out on Friday. If this figure comes in lower than expected, then that could send this pair higher on dollar weakness. So I expect we will be at the 1.64 level in short time.
If we should breach that 50% fibo level, then I would move my stop up to the 23.6% fibo level at 1.612 for those who are long this pair. While it is important to find trades that look like they are at the start of a trend or in a trend, it is equally important to know how to manage trades and place stops to limit losses.
Happy Trading to all!
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Currency Markets Return to “Normal”!
By Mike Conlon | November 30, 2009
In the wake of the Dubai debt crisis from last week, the currency markets are attempting to return to normal, whatever that is. While the risk to overall markets have been heightened, there doesn’t seem to be a dominant theme either way. It appears as though we are taking a “breather”– that is a pause before the market decides what it wants to do.
Aside from the usual risk taking/ risk aversion trades, there are 2 important pieces of news to be aware of:
1. Canadian dollar (CAD) strength- Canada reported 3rd quarter GDP growth, indicating that they are exiting their recession.
2. British pound (GBP) weakness- British consumer confidence weakened and the BOE has left the door open for further quantitative easing if their economy doesn’t pick up.
So I’m keeping my “eye on Dubai’ (yes I’m a poet and know it!) and looking to see if there is any fall-out or contagion from it. If the situation looks contained, then I would expect the risk taking trades to be back on the table as the long-term trends dictate.
However, I wouldn’t be surprised to see if any more “bad” news comes out this week. No one wants to be seen as piling on, but we could see some dollar strength if there are some hidden time-bombs out there. Better to get them out now then let them fester and explode later.
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Tags: BOE, British, cad, canada, course, crisis, currenc, currency, currency market, dollar, Dubai, economy, fx, fxedu, gbp, Il, Mike Conlon, news, pound, recession, RSI, ssi, time, trade, trades, trend
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GDP Tanks GBP!
By Mike Conlon | October 23, 2009
The British pound is taking a spanking this morning, down across the board to all major currencies as a result of its horrible GDP number. GDP dropped .4% vs. a .2% rise expected from analysts surveyed. This means that the BOE may need to extend quantitative easing to prevent the British economy from falling further into recession.
As a result, the AUD/GBP trade I’ve been in for the last few days is still hanging on by a thread and about to get stopped out. But I wanted to just show on the chart how picking out points of technical significance can help you place stops that will allow you to stay in trades longer. Let’s look at the chart from this morning (click chart to enlarge).
By placing your stop just below technical support, you give the trade a better chance to succeed.
**edit** trade stopped out.
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Alert: BOE holds rates unchanged at .50%! Pound rallies!
By Sean Hyman | July 9, 2009
Alert: BOE holds rates unchanged at .50%! Pound rallies! GBP/USD up about 75 pips within minutes!
Tags: alert, BOE, dollar, fxedu, gbp, Hyman, minutes, mywealth, pip, pips, pound, rate, Sean, Sean Hyman, USD
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