The Week Ahead!
By Mike Conlon | March 15, 2010
Not much happening today except the Empire Manufacturing number and Euro zone employment figures. There is speculation in the market that the Greek Tragedy will not be voted on at the 2-day EU meeting, making today’s theme risk-aversion to start the day.
Tomorrow will be the wrap up of the second day of meetings of EU finance ministers as well as the US FOMC meeting in the afternoon. Euro zone CPI figures will be reported. Japan is also expected to announce their rate decision in the overnight session.
On Wednesday news will be dominated by the UK, as jobless claims and the unemployment rate figures are due. PPI figures in the US will also be reported, which could give a hint to how we are doing on the inflation front. Considering this comes a day AFTER the FOMC, I wouldn’t expect this to matter that much to the market.
Thursday, we get US CPI figures, which could have a major impact if the numbers are hotter than expected. Depending on what the FOMC says on Tuesday, these figures could be in direct opposition to policy and could increase the chatter for higher rates in the US. We’re also going to get initial jobless claims, which could add fuel to the fire.
On Friday, Canadian CPI figures and retail sales figures come out which could put increased pressure on the Bank of Canada to raise interest rates. The Canadian economy seems poised for the move as all signs are pointing to economic recovery.
In currencies this morning:
Aussie (AUD): There is no major news due out for the Aussie this week so expect it to trade on overall risk themes. Things are starting to heat up in the China-US currency situation so this could have an impact on global risk and Chinese exports. This could affect Aussie strength. And while nothing is expected to happen this week, traders may start positioning themselves accordingly.
Kiwi (NZD): Like its big brother the Aussie, expect the Kiki to trade on risk themes as well. We are going to get New Zealand’s Consumer Confidence figures on Wednesday which could show how the domestic economy is doing. Should a worse than expected reading come in, then we could see some Kiwi weakness.
Loonie (CAD): This is an important week for the Loonie as the CPI and retail sales figures are due out on Friday. There has been much speculation in the market that the BOC will need to move higher on rates then the July timeline put forth by Governor Carney. Should these figures coming in hotter (higher) than expected, look for market to push the Loonie closer to parity with the US dollar.
Euro (EUR): Overnight, Euro zone unemployment figures came in a little worse than expected and today marks the start of a 2-day meeting of EU finance ministers. Early word is that they will not be deciding on an aid package for Greece, which has increased the uncertainty and heightened risk in the market. CPI figures are expected tomorrow but I can’t foresee them being higher, so there should be minimal impact to the market.
Pound (GBP): The Pound is paring back gains from last week and sits just above 1.50 vs. USD as news is re-surfacing about the potential for a hung Parliament as a result of the next elections. On Wednesday we’ll get an idea of the economy is doing as jobless claims and the Bank of England policy meeting minutes will be revealed.
Dollar (USD): The Dollar is higher this morning, despite the fact that Moody’s rating agency is saying that the US and the UK are “moving closer to losing their AAA credit ratings”. I guess Moody’s doesn’t mind becoming the target of government investigations. Just kidding. This morning the Empire manufacturing numbers came in ever-so-slightly higher than the expectation, which is good news as the number is not worse. Tomorrow is the FOMC meeting, and while they are not expected to move on rates, listen for the change of “extended period” language. Wednesday is PPI figures, and Thursday is CPI figures. I would think it would make more sense to have those figures reported BEFORE the FOMC meeting, but what do I know. At this point, why should anyone think that the Fed would care about possible inflation!
Yen (JPY): Don’t look for Japan to tighten policy at this week’s meeting. In fact, look for just the opposite. The yen could weaken further against the Dollar if risk themes do not undermine BOJ resolve to further weaken the Yen to encourage exports.
So there’s a lot going on this week, and it will be interesting to see the difference between perception and reality. Perception is what the policy meetings attempt to tell us, reality is what the price index numbers tell us.
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!
Tags: account, AUD, Aussie, bank, cad, canada, China, course, currenc, currencies, currency, currency market, currency trading, decision, dollar, economic, economy, EUR, Euro, fed, free, fx, fxedu, gbp, idea, Il, index, interest, interest rate, interest rates, invest, Japan, jpy, Kiwi, live, loonie, lot, market, meeting, Mike Conlon, minutes, new zealand, news, nzd, pound, practice, practice account, rate decision, retail sales, RSI, ssi, time, trade, trader, unemployment, USD, Yen
Topics: What To Look At In The Market | No Comments »
Retail Sales Improve!
By Mike Conlon | March 12, 2010
All eyes were on the US retail sales figures, as the US consumer represents some two-thirds of US GDP. There was speculation that bad weather would affect this number, causing it to be lower than expected. Well, that hedge turned out to be unnecessary, as there was a negative expectation of -.2%. The number came in much better than expected, at + .3%, which is positive growth as opposed to a negative expectation. So expect stocks to rally higher, but be wary of the correlation of “stocks up, dollar down” as some in the market may feel that this could have a material impact on US interest rate policy.
In other news, Canadian employment figures came in better than expected and Japanese Finance Minister Kan used the dreaded “I” word—as in intervention, which readers of this blog know is not totally unexpected.
In currencies this morning:
Aussie (AUD): The Aussie is higher this morning as investors are seeking yield as economic conditions appear to be improving, particularly in the US. No real news but the Aussie has made one attempt at .92 vs. USD and could challenge 2010’s high of .932 in short order.
Kiwi (NZD): Retail sales figure came in at a better-than-expected .8%, showing signs that domestic demand in New Zealand is improving. This bodes well for their economic story but we shouldn’t expect any rate hikes until mid-year as the policy meeting told us earlier this week. However, should inflation start to pick up, we could see a surprise hike earlier than expected.
Loonie (CAD): Good news out of Canada as the jobless rate fell to a 10-month low, falling to 8.2%. The Loonie is higher across the board as hopes that economic recovery is taking hold. According to an RBC analyst, the Bank of Canada is, “running out of arguments against keeping rates low”. The Loonie currently buys 98.35 US cents, and the Loonie could be at parity with the Dollar for the first time since July 2008.
Euro (EUR): The Euro is mostly higher this morning, as European Industrial outputs expanded 1.7%, the largest gain in almost 20 years. The Euro challenged 1.38 vs. USD and EU President Junker argued that the Euro zone needs new tools to be able to combat future crises.
Pound (GBP): The Pound is higher this morning, extending yesterday’s rebound. Reports are that the sell-off in the Pound has been excessive, as house prices in the UK rose at the fastest pace in 7 years, showing that the economic recovery may be taking affect. The Pound is at 1.514 vs. USD.
Dollar (USD): The Dollar is lower vs. all but the Yen as retail sales figures came in MUCH better than expected, as I mentioned above. Consumer confidence figures are due out at 10AM EST, but don’t expect that to have a material impact on today’s action. Other reports are that President Obama wants to nominate Janet Yellen as Fed Vice Chair. Yellen is known to be dovish, meaning that she is not an inflation hawk. This could mean extended zero interest rate policy as the government attempts to inflate their way out of debt on the backs of consumers, who will be forced to pay higher prices for everything. Stay tuned.
Yen (JPY): As I’ve mentioned before, Japan is not adverse to using intervention as a tool to keep Yen from strengthening, and earlier today Finance Minister Kan confirmed this. It is likely that yen will weaken as the government hopes to stimulate exports to improve their economy. It will be interesting to see how this plays out and if the Bank of Japan has enough muscle to fend off risk-aversion plays should global economic recovery falter.
As you can see, there can be different market responses to good economic news. One could make a cogent argument for either Dollar strength or weakness based on today’s sales figures. Inflation hawks will claim this means that the Fed should be raising rates; while doves say the economy is still too fragile and investors should seek yield elsewhere.
Regardless of which way the Dollar moves and its affect on other currencies, this is good news for the US economy.
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!
Tags: account, AUD, Aussie, bank, blog, cad, canada, course, currenc, currencies, currency, currency market, currency trading, dollar, dow, economic, economy, EUR, Euro, Europe, fed, free, fx, fxedu, gbp, Il, interest, interest rate, intervention, invest, investor, Japan, jpy, Kiwi, live, loonie, lower, market, meeting, Mike Conlon, new zealand, news, nzd, pound, practice, practice account, retail sales, RSI, short, ssi, stock, stocks, time, USD, Yen
Topics: What To Look At In The Market | No Comments »
Which Way to Go?
By Mike Conlon | March 11, 2010
As I mentioned yesterday, the currencies are now seemingly beginning to shed the risk on, risk off labels and are starting to trade more on individual fundamentals. While I don’t want to completely abandon risk themes, I’m not going to be so quick to dismiss market movement as risk-taking or risk-aversion.
That makes it a little easier when we have mornings such as today which are a bit of a mixed bag. I just watched the Aussie go from slightly positive to slightly negative; and the Pound and Euro are higher.
In news that is important to the global economy, inflation in China reached a 16-month high which should cause monetary tightening. This means that there could a decrease in global demand.
As I am typing this, the US Initial Jobless Claims numbers came out and while the news was expected to have a benign market impact; it has flipped the market into risk aversion mode. Maybe those fundamentals aren’t that important after all.
Let’s take a look at the individual currencies:
Aussie (AUD): The Aussie started the morning in positive territory but then slipped to negative as risk aversion is starting to steer the market action. There was “disappointing” news earlier as Australia reported the slowest amount of job gains in 6 months and unemployment stayed steady at 5.3%. This may give the RBA a little bit of wiggle room at the next interest rate meeting and they may not have to raise rates. I think it’s slightly amusing that this news can be viewed as negative, as just about every other economy would do anything to have such a “problem”.
Kiwi (NZD): The Kiwi on the other hand started the morning negative and has stayed there now that risk aversion has been added to the mix. The central bank left rates unchanged at 2.5% as was expected, but quashed hopes of a rate hike before mid-year. Apparently falling housing prices and weak consumer spending are contributing to a slower than expected economic recovery.
Loonie (CAD): The Loonie is down this morning on what I’m going to deem the “reverse Midas touch”. Apparently the Bank of Canada appointed a Ben Bernanke disciple as deputy governor to potentially change the way the central bank looks at interest rate policy. As of right now, the bank has a mandate which attempts to keep inflation at 2%, but they may want to change to a new system that targets prices rather than inflation. All the market is seeing at this point is that Canada may get wrapped up in the nonsense that is US interest rate policy and that doesn’t bode well for higher rates. Add that to lower oil prices, down slightly from yesterday’s move to above $82, and risk aversion.
Euro (EUR): The Euro is mixed this morning as Greek labor strikes (riots) are causing a backlash against austerity measures. In the meantime, the ECB maintains a cautious outlook and reiterated that interest rates are at appropriate levels.
Pound (GBP): The Pound is higher this morning halting a three-day slide and is trading back to 1.50 vs. USD. This much needed rest from selling came about as the Bank of England’s quarterly inflation attitudes survey showed that consumer price expectations rose to 2.5%, its highest reading since 2008.
Dollar (USD): The Dollar is higher this morning after the 8:30AM Initial Jobless Claims report which came in higher than the expectation. While the number 462K vs. the 460K expectation is not that significant, the market was clearly expecting a better figure and this provides pause to the notion that the US economy is in full recovery mode. Stocks in Europe sold off on this number as traders ran to the safety of dollar and yen.
Yen (JPY): Japanese GDP was revised lower to show growth rose at 3.8%, slower than the 4.6% reported in preliminary figures last month. The Yen is higher on, yep; you guessed it, risk aversion.
As you can see from today’s entry, things in the forex can change pretty quickly. That’s why is ultra-important to be aware of news events. I should have known better than to tempt the risk gods.
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!
Tags: account, AUD, Aussie, Australia, bank, Bernanke, cad, canada, central bank, China, course, currenc, currencies, currency, currency market, currency trading, dollar, dow, economic, economy, EUR, Euro, Europe, forex, free, fundamental, fx, fxedu, gbp, Il, interest, interest rate, interest rates, Japan, jpy, Kiwi, live, loonie, lower, market, meeting, Mike Conlon, news, nzd, oil, pound, practice, practice account, RSI, ssi, stock, stocks, time, trade, trader, unemployment, USD, Yen
Topics: What To Look At In The Market | No Comments »
Risky Business!
By Mike Conlon | March 9, 2010
From an outside perspective, some might be shocked at how quickly the market can flip-flop from market euphoria to fear on what seems almost like a daily occurrence. It’s like John Kerry on steroids! I kid, I kid. But on a more serious note, the market can wipe out days of gains in a single session as risk aversion can pop up for any number of reasons. Sometimes it’s justified; at other times it isn’t.
Case in point: this morning. The market had been moving along nicely then all of a sudden decides there’s too much risk in the world economy and then wham!—you get a market sell-off! What has changed so much from last Friday, to yesterday, to today?
Frankly, not much. You see, the financial markets are much like an expedition, venturing slowly into the unknown and then quick to retreat at the first sign of trouble. So what is that trouble today?
Damned if I know. Part of the role of market pundits is to “make sense of the chaos”. Most of the time I find these attempts to be lazy and disingenuous. So the top 5 I’ve heard this morning are (in no particular order): Greece, lower stock earnings, US healthcare legislation, the push for Chinese Yuan appreciation, and UK elections. And if you don’t believe any of these, I’ve got one of my own for you: it’s a technical pullback.
So be wary of attempting to try to “figure” the market out, and be sure to trade what you see and not what you think you know.
In currencies:
Aussie (AUD): The Aussie has pulled back from near its 2010 highs as risk aversion is dominating the morning market action today. However, the sell-off is not as bad as reports came in that Australian businesses are actively looking to hire and the business confidence index came in higher, prompting the market to believe that yet another rate hike may be coming next month.
Kiwi (NZD): The Kiwi isn’t faring as well as the Aussie, as yesterday’s big winner is now one of today’s bigger losers. Tomorrow’s rate decision and language may prove to be more exciting than previously expected, as the expectation is that it is the slimmest of slim chances that they will raise rates.
Loonie (CAD): The Loonie is lower this morning primarily on lower oil prices that are down roughly 1.5%. This snaps 7 days of gains, in what can be viewed as a welcome pause. This appears to be mild risk aversion so the Loonie is mixed.
Euro (EUR): The Euro is lower this morning across the board as stock earnings are lower and the ECB is saying that it potentially could accept lower rated bonds as collateral against new loans. Also the call for regulation on credit default swaps (CDS) and the news of the “lender of last resort” card being played all highlight the problems for the Euro zone. Notice I didn’t say Greece once—oops! Just did.
Pound (GBP): The Pound is lower this morning as reports came in that the UK housing market may be slowing as fewer price gains occurred than what was expected. This comes in advance of the UK GDP estimates due out tomorrow which could set the tone for UK rate policy going forward.
Dollar (USD): The Dollar is higher this morning on risk themes as stock market futures appear to set to open lower, though it not a certainty that they will remain that way all day. Look for some volatility as the markets trade back and forth, and definitely do not a rule out a reversal to the upside for equities which could be dollar-negative.
Yen (JPY): The yen is higher this morning on general risk themes and speculation that Japanese companies are repatriating profits before the end of the Japan fiscal year which is in April. This essentially means that demand for yen is higher as companies sell foreign currencies to buy yen, thereby increasing demand. This could be the reason why the market perceives that today is a risk-aversion day.
As you can see, there can be many reasons why currencies move outside of the normal risk themes which can disguise what may be really going on in the marketplace. When traders see these anomalies, they should be prepared to react. It would not surprise me today to see US dollar weakness, even though then yen may stay strong. Whether or not that is enough to push the US stock market and commodities higher remains to be seen.
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!
Tags: account, AUD, Aussie, Australia, cad, commodities, course, currenc, currencies, currency, currency market, currency trading, decision, dollar, dow, ECB, economy, EUR, Euro, fear, financial, free, fx, fxedu, gbp, housing market, Il, index, Japan, jpy, Kiwi, lower, market, Mike Conlon, news, nzd, oil, pound, practice, practice account, rate, rate decision, RSI, ssi, stock, technical, time, trade, trader, USD, Yen
Topics: What To Look At In The Market | No Comments »
Employment Gains!
By Mike Conlon | March 5, 2010
In a scene out of the movie, Trading Places, all eyes were on the US Non-Farm Payrolls report this morning. In today’s version of the Frozen Concentrated Orange Juice crop report, the number game in at -36K jobs lost, vs. an expectation of -65K. The unemployment rate also held steady at 9.7%. So what does this mean for the market today? Well right now there is so much market volatility that it’s hard to get a good read.
This should be positive for risk-taking today as the number was just good enough to show economic progress, but not great enough to bring about talk of US interest rate hikes. However, anything can happen on NFP day so traders need to be on their toes! Just take a look at any chart at 8:30EST to see what I mean.
In currencies:
Aussie (AUD): No real news for the Aussie today as it is higher on risk themes and had a nice pop on the NFP report.
Kiwi (NZD): Same deal for the Kiwi as the Aussie, though it’s bouncing much higher as it has been a bit over-sold the last few days. Between Kiwi strength and Yen weakness, that pair is the largest gainer, up 2.18%.
Loonie (CAD): The Loonie is also higher, as the market has decided that risk-taking is the flavor of the day as the market digests the impact of the NFP report. Oil is also higher to just over 81, adding to Loonie gains.
Euro (EUR): What more can be said about the Euro at this point? The Greek crisis is center-stage, with Greek austerity measures angering its citizens, and the potential bailout and contingency plans upsetting the Germans. Quite the balancing act going on there. The Euro is down against all but the Yen.
Pound (GBP): Producer prices came in higher in the UK, and commodity prices are suggesting that they may be experiencing the start of inflation. The increase of 4.1% came in higher than the target rate of 3%, so it will be interesting to see how the BOE handles this situation. The Pound is mixed this morning.
Dollar (USD): I discussed the NFP report above but whether or not the risk-taking theme that has been pushed forward by the forex market continues will remain to be seen. Stocks are expected to see an initial bounce as the futures are higher. However, there is no improvement in the unemployment rate, so market bears may use this opportunity to establish shorts on signs that the economy may be stabilizing but is not improving.
Yen (JPY): The yen is weaker for the second day in a row as it appears as though the market believes the Bank of Japan will boost credit easing. So it appears as though the government may be winning the battle against the Bank of Japan which should weaken the Yen and make it even more attractive as the funding currency of choice for carry traders. It is down across the board this morning.
So while it appears that the market is in a risk-taking mood so far, don’t be so certain that it won’t change its tune by the end of the day. At some point, we are going to have to see actual good news, and not more “less bad”. Unemployment is still extraordinarily high, which will translate over to reduced consumer spending, which makes up some 70% of US GDP.
In my opinion, it would be a fool’s folly to continue to buy stocks and commodities on interest rate policies alone and not fundamentals. At some point this will catch up to the market. It always does.
Good weekend to all!
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!
Tags: account, AUD, Aussie, bank, cad, carry trade, commodities, commodity, course, currenc, currencies, currency, currency market, currency trading, dollar, dow, economic, economy, EUR, Euro, forex, forex market, free, fundamental, fx, fxedu, gbp, Il, interest, interest rate, Japan, jpy, Kiwi, live, loonie, market, Mike Conlon, news, nfp, nzd, oil, pair, pound, practice, practice account, RSI, short, ssi, stock, stocks, time, trade, trader, unemployment, USD, Yen
Topics: What To Look At In The Market | No Comments »
Greek Comedy or Tragedy?
By Mike Conlon | February 25, 2010
Overnight, the ratings agencies added fuel to the fire in the Euro zone by claiming that further downgrades of Greek debt could be forthcoming. In addition, the market is catching on to the fact that in the UK, the debt situation is on par with that of Greece, making it vulnerable as well. Because the UK is not governed by Euro zone policy, they have been flying under the debt radar as there are no other member states to complain about their economy.
Combine this with disappointing European consumer confidence figures and rising unemployment in Germany, and you have a potentially explosive situation.
What this all adds up to is risk-aversion, which means that we’re seeing Japanese yen and US dollar strength, to go commodity currency weakness. Equity markets are lower across the globe and both gold and oil are trading lower.
In the currency market:
Aussie (AUD): The Aussie is down this morning on risk-aversion despite the fact that business investment rose 5.5% on China demand. This bodes well for the Australian economy and has increased the chances that the RBA will hike rates again next week, marking the fourth time in 6 months they have raised. However, global risk themes are heavy today and the un-wind of carry trades has the Aussie down 2.5% vs. the Japanese yen.
Kiwi (NZD): The Kiwi is down today as well on risk even though business confidence surged to a 10-year high in February, further fueling economic recovery. Now either residents of New Zealand are completely “off their rockers” or there actually is a good growth and recovery story going on there. I’m going to go with the former. As long as the entire global financial system doesn’t collapse, I’m looking to buy Kiwi on pullbacks. It will however be a challenge to overcome global risk themes.
Loonie (CAD): Well I guess everyone’s not quite as enamored with the Loonie as I am as futures trades are indicating that the Bank of Canada may be less aggressive with its interest rate policy in light of the weakening global recovery. In addition, the Olympics end this weekend and there is usually an “economic hangover” as the stimulus provided by this one-time event is effectively removed from the Canadian economy. With oil prices lower and general risk-aversion, the Loonie is now at a two-week low. I still like the Loonie to strengthen later in the year, but we may need to deal with some global risk first. Today the Loonie buys 93.5 US cents.
Euro (EUR): The Euro is down today on German unemployment and economic sentiment, yet is higher against the commodity currencies as risk-aversion is dominating the market today. We know about Greece and I mentioned the possible downgrades above which could move them closer to default, if the Euro zone actually allows that to happen. The Euro is fast approaching 1.34 vs. USD.
Pound (GBP): The Pound is lower this morning, as deficit fears and political uncertainty are shedding light on the dire economic situation in the UK. The delicate balance between reigning in spending and stunting economic growth may too much handle going into upcoming elections. The Pound is at a 9-month low to the Dollar trading at 1.5275. There was a note out yesterday that the Pound could reach parity with the Euro if economic conditions worsen.
Dollar (USD): Thank you risk-aversion is what the US dollar is saying this morning, as unemployment came in higher than expected. The durable goods numbers came in higher, which is positive for manufacturing. However, the economic picture is still not rosy here in the US. The Dollar is higher against all but the Yen.
Yen (JPY): Demand for Yen is much higher today as carry trades are un-wound due to global fears about economic recovery. The Yen has been strengthening as of late, and it will be interesting to see what the Bank of Japan does to prevent this from getting out of hand. The Japanese are no strangers to intervention in their currency; and they will not be making any moves on interest rates anytime soon. A strong yen hurts Japanese exports, which in turn will hurt economic recovery.
Stock markets are down across the globe, gold is trading at 1093 and oil to 77.75, down roughly 2.75%.
It was only a matter of time before all of the risky elements floating around the market converged and today might be that day. While there is definite fear in the marketplace, there are some growth stories out there. So be patient, and remember that in general, you want to own the currencies of strong economies, and sell those of weaker ones.
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!
Tags: account, AUD, Aussie, Australia, bank, cad, canada, carry trade, China, commodity, course, currenc, currencies, currency, currency market, currency trading, dollar, dow, economy, EUR, Euro, fear, fx, fxedu, gbp, gold, Il, interest, interest rate, interest rates, invest, Japan, jpy, Kiwi, live, loonie, lower, market, Mike Conlon, new zealand, nzd, oil, pound, practice, practice account, RSI, sentiment, ssi, stock, time, trade, trades, unemployment, USD, Yen
Topics: What To Look At In The Market | No Comments »
Fed Surprise!
By Mike Conlon | February 19, 2010
Just when you thought the markets were starting to calm down and that the news out of the Euro zone was beginning to fade, the US Fed dropped a bombshell on world markets last night at 4:30 PM EST, just after the US stock market closed. The Fed announced to everyone’s surprise that they would be raising the rate at the Fed discount window 25bp to .75%, effectively charging banks more for Fed borrowing.
The markets immediate reaction was to buy dollars and cover dollar shorts, and stock futures tanked. Asian equity markets were down big last night and Europe looks to be bouncing back from earlier lows.
This move was the dominant theme in the overnight market, as retail sales figures in the UK and Canada are taking a back seat, as is the US CPI report which came in less than expected showing that inflation may still be at bay.
The two major things to take away from this move are: 1) the Fed is stressing that this move is not to tighten credit on consumers and businesses, but is merely trying to remove some over the overly-accommodative measures they have taken, and 2) investors need to be wary of the fact that the Fed may continue with these “sneaky” off-hours moves to try to avoid inter-day market Armageddon. It will be interesting to see how the market reacts to this move once trading begins today.
In currencies:
Aussie (AUD): The Aussie is down this morning as it is the currency that is most likely to be affected by this move, all other factors being equal. While I wouldn’t classify today as a risk-taking or aversion day, this is the third day in a row that the Aussie is down against USD.
Kiwi (NZD): Like the Aussie, the Kiwi is down 3 in a row. In addition to being affected by the discount rate hike, New Zealand has just reported the widest budget cash deficit in almost 9 years on lower tax receipts and increased government spending.
Loonie (CAD): The Loonie is lower this morning on lower commodity prices and the US discount rate hike. Also, Canadian retail sales figures came in slightly less than expected, but were at least positive. This could be a sign that economic growth is not as strong as investors may think, and everyone is anticipating the inevitable “Olympic Hangover” as the one-time economic windfall goes away.
Euro (EUR): The Euro is at nine-month low to the Dollar after the discount rate hike in addition to all of the problems coming from the Euro zone. Now speculation is heating up that perhaps Italy used the same sort of derivative maneuver to conceal debt that allowed them to enter the EU as well as Greece. There’s a lot of tension and in-fighting right now among EU members. This could put further pressure on the Euro in weeks to come.
Pound (GBP): The Pound is also at a nine-month low to the Dollar as fiscal concerns continue that the UK may need to continue accommodative measure to revive their economy. Retail sales figures came in at a disappointing -1.2% vs. and expectation of -.5%, showing further economic weakness.
Dollar (USD): It is going to be interesting to see how the market reacts to the discount rate hike today. Personally, I think that this move shows that the Fed is trying to get the market to believe that economic recovery is taking place. This move is sort of a red herring, which induced a knee-jerk reaction from the market as soon as everyone hears “rate hike”. This move does not affect the Fed Funds Rate so it shouldn’t affect either businesses or consumers. So by the end of the day I expect that we’ll see some risk-taking as economic strength in the US is good for world economies and inflation is lower as reported by the CPI.
Yen (JPY): The yen is higher on risk-aversion, however I think the market may “have it wrong” as its gotten used to the risk-on, risk-off mentality. Let’s see if the Yen gives back some gains by day’s end.
In overnight markets, the Hang Seng and Nikkei were down over 2% and European markets have reversed prior losses and are trading higher. US futures are still negative, but trading well off their lows in the overnight session. Oil has reversed earlier losses and is trading around 79.5, and gold is back to around 1115.
When I saw the charts last night immediately following the Fed move, my initial reaction was similar to that of much of the market—sell everything, buy dollars and yen. However, as I thought about the implications of the move, I’m actually quite impressed with the timing of the move and think the Fed did a great job implementing this. And I haven’t been a big fan of the Fed as of late! In my view, this is positive for world markets.
Also, watch out for volatility as today is options expiration.
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!
Tags: account, AUD, Aussie, bank, cad, canada, charts, closed, commodity, course, currenc, currencies, currency, currency market, currency trading, dollar, dow, economic, economy, EUR, Euro, fed, free, fx, fxedu, gbp, gold, Il, interest, invest, investor, IRA, jpy, Kiwi, loonie, lot, lower, market, mie, Mike Conlon, new zealand, news, nzd, oil, pound, practice, practice account, rate, retail sales, RSI, short, ssi, stock, time, USD, Yen
Topics: What To Look At In The Market | No Comments »
To Inflate or Not to Inflate?
By Mike Conlon | February 18, 2010
There are a few different economic figures coming out in different regions around the globe that all have one thing in common: prices. Prices are important to economic forecasters and finance ministers as it gives them a gauge of where their particular country is in relation to inflation. Most Central Banks around the world are mandated to control their economy’s inflation, so when these numbers come out, the market usually perks up.
This morning, we had an interest rate decision in Japan, Consumer Price Index reported in Canada, and Producer Prices Index reported here in the US. In Japan, the BOJ held interest rates steady at .1%, which was no surprise to anyone, but Canadian CPI and US PPI came in a little hotter than expected. This could signal some potential interest rate hikes here in N. America, thought the economic recovery is still fragile so it is a fine line policy makers are walking. So far this morning is showing mild risk-aversion tendencies, though that could change once the US stock markets open.
In world currencies:
Aussie (AUD): The Aussie is lower this morning on risk aversion as data from the US shows signs that the economy is heating up and that accommodative measures may be removed. There is no further news specific to Australia on tap for this week.
Kiwi (NZD): New Zealand consumer confidence came in lower this morning than last month’s reading, though the Kiwi economy is still viewed as strong. With commodities lower this morning and risk aversion, the Kiwi is down across the board.
Loonie (CAD): The Loonie is showing strength this morning as Canada reported CPI that was 1.9% higher than a year ago. This was a little higher than the expectation, but more importantly is showing economic strength which may cause the Bank of Canada to move on rates sooner than expected.
Euro (EUR): The Euro is pulling back this morning as the debate over Greece lingers over the Euro zone and is becoming a game of “pin the blame on somebody”.
Pound (GBP): The Pound is markedly lower this morning as a report came out that last month the UK ran a deficit of 4.3 billion pounds, when economists were forecasting a 2.6 billion pound surplus. This comes on the heels of yesterday’s negative employment report which contributes to the belief that economic recovery in the UK may be further away than previously thought. The Pound is down across the board.
Dollar (USD): The Dollar is higher this morning as US PPI came in higher than expected, prompting the inflation hawks to start chirping. But Initial Jobless Claims also came in higher than expected; thereby negating the thought the Fed will need to move on interest rates. The dollar is beginning to give back some of its earlier gains on the employment number, though I’m not sure how the market can see this as positive. Stock market futures are lower, as are oil and gold, though well off of their morning lows.
Yen (JPY): As expected, Japan did not change its view of interest rates remaining at .1% which is no surprise to anyone. Japan is battling some serious deflation, so any sort of inflation there would be welcome.
In overnight markets, the Nikkei was higher though the Hang Seng was lower. Europe is mixed as well with the FTSE higher on the UK deficit report, but Germany and France marginally lower. US stock futures are lower as are gold and oil though they’ve given back gains and today looks like its reverse from risk aversion to risk taking.
With the numbers reported today, it sometimes baffles me that higher unemployment and potential inflation is “good” for the market and encourages risk taking. It looks like the market is betting that the US is going to be content to let inflation occur in order to continue the monetary stimulus it believes is leading to economic recovery. However, the employment figures tell us otherwise. How this is going to play out down the road is anyone’s guess but in my mind it ain’t gonna be pretty.
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!
Tags: account, AUD, Aussie, Australia, bank, cad, canada, central bank, commodities, course, currenc, currencies, currency, currency market, currency trading, data, decision, dollar, dow, economic, economy, EUR, Euro, Europe, fed, franc, free, fx, fxedu, gbp, gold, Il, index, interest, interest rate, interest rates, Japan, jpy, Kiwi, live, loonie, lower, market, Mike Conlon, new zealand, news, nzd, oil, pound, practice, practice account, rate decision, RSI, ssi, stock, time, unemployment, USD, Yen
Topics: What To Look At In The Market | No Comments »
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.
To follow world events live and see how they affect the various currencies, get a free, real-time practice account here.
Tags: account, AUD, Aussie, Australia, bank, BOE, cad, carr, carry trade, central bank, central bankers, comments, commodity, course, currenc, currencies, currency, currency market, currency trading, dollar, dow, ECB, EUR, Euro, Europe, free, fx, fxedu, gbp, gold, home, Il, interest, jpy, Kiwi, loonie, market, meeting, mike conlon, money, news, nzd, oil, pound, practice, practice account, rate, retail sales, RSI, ssi, stock, technical, time, trade, trader, trades, USD, Yen
Topics: What To Look At In The Market | No Comments »
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!
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!
Tags: account, AUD, Aussie, Australia, bank, BOE, British, cad, commodity, course, crisis, currenc, currencies, currency, currency market, currency trading, dollar, dow, economic, economy, EUR, Euro, Europe, fx, fxedu, gbp, gold, Il, index, jpy, Kiwi, live, loonie, lower, market, Mike Conlon, new zealand, news, pound, practice, practice account, retail sales, RSI, ssi, stock, stocks, time, trade, trader, trend, unemployment, USD, Yen
Topics: What To Look At In The Market | No Comments »