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!
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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.
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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Top Performers!
By Mike Conlon | March 3, 2010
Forex System Selector (FSS) Top Performers!
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Be Careful What You Wish For!
By Mike Conlon | February 24, 2010
Today, Fed Chairman Ben Bernanke will begin 2 days of testimony on Capitol Hill regarding monetary policy. On the heels of one of the worst Consumer Confidence numbers in recent memory it will be somewhat difficult to weed through all of the political wrangling and double-talk that is bound to arise from self-serving Congress-people. That aside, pay attention to 2 things: 1) his recommendation for how to stimulate jobs growth—incidentally this is akin to Congress asking Bernanke to their job for them; and 2) any change to the language that he will keep rates at a record low for an “extended period”. At some point, he will have to move on rates and last week’s move on the discount rate may be a harbinger of things to come.
In other news, German GDP came in flat as in they had no growth—which is actually positive in that their GDP is not negative from the previous quarter and meeting analyst expectations. Asian markets were down big overnight, taking their cues from yesterday’s US stock market sell-off. Commodities are lower yet I’m seeing general US dollar weakness. So today is a mixed bag yet again.
In currencies:
Aussie (AUD): The Aussie is mixed this morning as wage growth slowed at the slowest pace in close to 10 years, up .6% vs. analyst expectations of .8%. The RBA is monitoring this figure closely to see if inflation pressures are mounting. With Chinese demand expected to pick up and Australia to benefit greatly, the RBA is not afraid to raise rates if necessary.
Kiwi (NZD): The Kiwi is down this morning in a case of “less-good” news than some of the other regions around the globe. Tomorrow we will get a reading on New Zealand business confidence so that could hint at the consumer spending numbers and GDP which will also give a clue as to inflation. While the Kiwi is “along for the ride” with the Aussie and is a destination for carry trades, its economy is not nearly as strong as its neighbor to the west.
Loonie (CAD): The Loonie is higher this morning due to “Olympic Fever” and investors starting to catch on to the economic story in Canada. Canada flies under the radar a little bit and sometimes gets too caught up in the US economy and oil correlation. Incidentally, oil is off of its lows of the morning and is just barely negative.
Euro (EUR): The Euro is bouncing back nicely from oversold conditions and is taking a break from all of the selling we’ve seen as of late. German GDP figures came in as expected, thereby not providing cannon fodder for short-sellers. Tomorrow is the real test for Germany though, as unemployment figures are due out. Unless risk-aversion comes into play later today, I expect to see the Euro remain positive.
Pound (GBP): Political uncertainties in addition to economic struggles are plaguing the Pound as of late. A UBS report claims that the market is worried that the conservatives in government will push for deficit reduction pre-maturely before the British economy is in full-blown recovery mode, thereby adding additional pressure to Sterling. In the meantime, additional bond buying has not been ruled out by the BOE—yet!
Dollar (USD): The Dollar is mixed this morning, showing neither major gains nor losses vs. other currencies. New home sales are due out this morning but at this point unless the number is ridiculously bad I can’t see it having any impact on the market. Bernanke will be testifying for the next 2 days so expect the Dollar to trade cautiously unless Big Ben says something to upset the market.
Yen (JPY): The Yen is seeing a bit on strength as of late, showing four days on gains in a row vs. USD. Recently, the government spat with the Bank of Japan may be on to something as the former claims that the latter isn’t doing enough to prevent Yen strength. As an exporting nation, we know that the Japanese want just the opposite—Yen weakness.
In overnight trading, the Asian markets were down, following the sell-off here in the US. European markets are currently higher on the German GDP news, and stock futures are higher here in the US.
It looks like oil has climbed back to near flat from being down earlier trading at just a smidge under $78, and gold is lower trading at roughly 1095, higher than its lows of the morning but now under $1100.
Look for light trading in the forex market as all ears are glued to the Bernanke testimony. As painful as it may be to listen to politicians make fools of themselves, this could be an important if indeed there is going to be a policy shift. My gut tells me it won’t be.
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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Flip Flopping on Risk!
By Mike Conlon | February 23, 2010
This morning has seen some “flip-flopping” on risk themes as the overnight session was trading on risk aversion due in part to some economic figures out of the Euro zone. However, those themes had pulled back and we actually saw some risk-taking, only to set-up for risk-aversion again! Can you say volatile?
The back and forth nature of the forex market is what traders thrive on. As of right now, we are seeing some Japanese yen strength, but not all of the risk aversion plays one might expect to see. While the Kiwi is noticeably weak, the Aussie is holding up against all but the yen. This looks like its setting up to be a back and forth day, as the market attempts to re-align itself according to risk themes. I will probably play today short-term, and wait to see what the market reaction is to the US Consumer Confidence figures due out at 10 AM EST.
While I can’t imagine that they will be “good”, one never knows how the market will react. Also to note is that the US Housing Price Index will also be out a little earlier, giving a glimpse into the whole inflation/deflation debate. Combine that with the political landscape here in the US and the malaise surrounding it; and the market could be in for a wild ride today is this could be a recipe for disaster.
In currencies:
Aussie (AUD): The Aussie is holding up surprisingly well this morning despite the general risk-aversion themes we’ve seen this morning. This is more of a case of being “less-bad” than actually good. With problems in Europe (Aussie nearing 10-year highs vs. the Euro) and the UK, investors may start catching on to the fact that owning Aussie over Euro and Pound is LESS risky regardless of what the correlations say. In my opinion, the Aussie is THE place to be for both risk-taking (commodity plays) as well as risk-aversion. Now if the market would just begin to see it. In the meantime, I will continue to buy dips.
Kiwi (NZD): While lumped in with the Aussie and Loonie as commodity currencies and known as a “risk-taking” vehicle, the Kiwi is not nearly as strong as the Aussie yet sometimes benefits from Aussie strength. Until economic conditions improve in New Zealand or rate hikes seem imminent, the Kiwi will continue to trade on risk themes as it is not strong enough on its own to “buck trends”.
Loonie (CAD): I’ve been seeing a lot more of Canada lately (probably because my wife makes me watch ice-dancing in the Olympics) but I’m starting to come around to being positive on the Loonie. Despite record low interest rates and its close ties to the US, the Canadian economy is strong and recovering much faster than the US. Because of the Loonie’s tight correlation to oil, it will continue to trade as a proxy for the commodity as the market determines whether or not recovery will drive further demand for oil. The Loonie is lower this morning.
Euro (EUR): Is anyone surprised that Business Confidence figure in Germany are down this morning? No? Me neither. In fact, this prompted German Chancellor Merkel to lash out the banks that “created the problem” for speculating in the Euro—driving it lower naturally. It looks like she’s at stage 3 (anger) in the seven stages of grief. It’s starting to look more and more like the Euro zone actually knew about the derivatives that helped Greece obfuscate its debt to the point that it was allowed to gain entry to the Euro zone. In my eyes this is akin to going to a “jackets required” restaurant jacket-less, then taking off with the loaner they give you, rather than just being denied access in the first place. Any way you slice it, the trend for the Euro is clearly down.
Pound (GBP): The Pound is lower this morning as speculation abounds that the UK will continue its bond purchase program to help keep their currency lower to stimulate their economy. People forget that the UK is still an industrial power and a BOE Deputy Governor reminded the markets of that fact when he said that a “weaker currency will boost exports”. Should the current situation continue, the Pound could be near 1.50 vs. the US dollar in no time flat. This would also represent the 61.8% Fibonacci retracement that technical analysts love so much.
Dollar (USD): Home prices in the US are expected to rise for the seventh straight month, though incrementally and down over 3% from the previous year. Should the figures meet the expectation, then expect risk-taking to pick up as this would be a sign that inflation is nowhere to be found and confirming that interest rates will most probably remain unchanged for a long time. Consumer confidence is out at 10AM, if anyone is confident in this environment, then they need to have their head examined!
Yen (JPY): The Yen is higher on risk-aversion this morning despite the fact that the Japanese government and the Bank of Japan are in dispute over what is to be done to combat the deflation they are experiencing. Not surprisingly, government wants more liquidity to encourage inflation, and the BOJ wants fiscal discipline and reduced deficits. Sound familiar?
In overnight markets, the Nikkei was down while the Hang Seng was higher. In current trading, the European markets are lower though off of their lows. US stock futures are lower, and oil is down roughly 1.25% to 79.3, with gold following suit down to 1111 and change.
With the problems facing Europe, rampant deflation in Japan, and trouble in the UK, the markets may be re-assessing which currencies are actually “risky”. In fact, the reason why I introduce the currencies in this blog in the order that I do is based on the “hierarchy” of the risk themes. As the economic recovery picture becomes clearer, I would not be surprised to see this pecking order change in the not-so-distant future.
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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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!
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US Earnings Increase World Confidence!
By Mike Conlon | February 17, 2010
US stock futures are higher this morning in the wake of a flurry of good corporate earnings reports. Of course many will tell you that “it’s easy to make money when you fire all of your employees”, but regardless of how the money was made, it bodes well for world economic growth.
This has buoyed forward further stock gains in a continuation of yesterdays market action. As a result, we are seeing further risk-taking in the markets, with world stock markets and commodities higher, and the US dollar and Japanese yen lower. Whether or not the market can hold on to these gains remains to be seen.
In world currencies:
Aussie (AUD): Predictably, the Aussie is trading higher this morning, particularly against the yen as higher risk takers seek yield. Notes from the RBA meeting referenced higher rates were only a matter of time and that they were close to pulling the trigger at the last policy meeting. Thus traders have increased their bets that this rate hike could take place in March.
Kiwi (NZD): The Kiwi is also higher on risk-taking and higher commodity prices, though the economy in New Zealand is not as strong as its neighbor Australia. Rates are seen as being stable until the second half of the year, so expect the Kiwi to continue to fluctuate on the market risk themes. New Zealand will be reporting its consumer confidence numbers tomorrow so this could give some insight into retail sales and possible inflation or lack thereof.
Loonie (CAD): The Loonie keeps chugging along near its highest level this month, helped higher by oil prices over $77 and an overall good economic picture. However, Canada eased pressure on potential rate hikes by tightening mortgage requirements, trying to prevent a housing bubble through regulation rather than interest rate hikes. If Canada can stave off further housing gains, they may be able to contain inflation without having to move on rates.
Euro (EUR): The Euro is mostly down this morning, trading higher vs. only the Japanese yen. I could continue to beat this Greece theme to death but the market will be moving in and out of confidence in the common currency as more and more “news” comes out. There is still great structural risk to the Euro, and fears of contagion to the other PIIGS countries always keep investors on their toes.
Pound (GBP): The Pound is mixed this morning, as the BOE voted unanimously to suspend its Bond-Purchase (QE) program on optimism that inflation will return to their 2% target rate. Recall that just yesterday, inflation came in hotter than expected at 3.5%. The British are famous for their “wait and see” approach and conservative measures. In the meantime, unemployment jumped to its highest level in 13 years, against an expected decline.
Dollar (USD): The dollar is showing strength this morning despite the stock futures and commodities markets trading higher. I expect some sort of “reversion to mean” to mean to take place today, with either stocks or the dollar pulling back, or a combination of both. US housing starts came in higher than expected this morning, showing that the economic recovery may be getting stronger and increased demand for housing may be picking up.
Yen (JPY): The Yen is at a 2-week low, trading at over 91 per US dollar, further cementing itself as the fuel for carry trades. The yen is down across the board ahead of tomorrow’s interest rate decision, where policy makers are expected to keep rates at .1%.
In overnight markets, Asia was up big with the Nikkei leading the way up 2.72%. European stock markets are also currently higher, all nearly posting better than 1% gains at the moment. In commodities, oil is just under $77 and gold is around $1118.
Overall, today is a bit of a mixed bag, with US dollar strength competing with the stock market for investor dollars. While risk-taking seems to be en vogue today, this could change at any point in time. While there is no real news that should derail this theme today, anything is possible.
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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Carnage to Continue?
By Mike Conlon | February 5, 2010
In the wake of yesterday’s market carnage, all eyes were on this morning’s US Non-Farm Payrolls (NFP) report. The market was praying for a decent number to justify a move to the upside, as yesterday was the biggest one day drop we’ve seen in some time. World markets got crushed to the tune of 2.5% on average, and commodities sold off as well. As I correctly called yesterday morning, “Ugly with a capital U”.
So the markets were grasping for any positive news to reverse this down-trend and they “may” have found it in this morning’s NFP report. The NFP, which measures job loss, came in at -20K. Expectations for this number were all over the place but the fact that there wasn’t job growth would normally be seen as negative. However, the ray of hope in this report is that the unemployment rate dropped to 9.7% for the month, down from 10%. Now I’m no mathematician, but it seems highly suspect to me that the unemployment rate can go down, even as we see continued job losses. But whatever, in early trading it looks the market is going to “take the ball and run with it” as futures have bounced off of their lows. It would not shock me to see the market wake up at some point and realize it didn’t get what it is looking for. Today may be a continuation of Thursday’s bloodbath.
Here’s how the currencies are doing this morning:
Aussie (AUD): The Aussie was up in early action this morning paring back some of yesterday’s losses, as the initial reaction to the NFP was positive, encouraging some risk-taking. Whether this can hold throughout the day is another story. With all of the fear and uncertainty out there, investors may flee to safety over the weekend. Contributing to Aussie strength was the RBA’s Quarterly Monetary Policy Statement that stated that “economic growth will continue to accelerate, even if the policymakers are forced to raise the benchmark interest rate by ¾ of a point.
Kiwi (NZD): The Kiwi is up this morning vs. the Dollar and Yen, as mild risk-taking is still the theme at this point in the morning. No major news out of New Zealand.
Loonie (CAD): It’s a good morning in Canada today, as the Canadian economy gained 43K jobs last month, reducing the unemployment rate to 8.3%. This makes the Canadian dollar this morning’s big winner, as it is also benefiting from mild risk-taking and the bounce in oil. It is up across the board this morning, most notably against the Japanese yen.
Euro (EUR): Yesterday was a tough day for the Euro, as the flight to safety trade sent the common currency to a 6-month low near 1.365 vs. the dollar. The Euro is also known as the “anti-dollar”, so it gets hit particularly hard when there is major risk aversion. Throw in the problems with the PIIGS countries, and it’s no wonder ECB President Trichet was out this morning trying to defend the Euro and instill confidence that the potential contagion from the Greek “tragedy” will not spread throughout the region. It looks like the Euro may re-test that low as it currently sits near that low.
Pound (GBP): The pound is down this morning against all but the yen on the risk aversion theme.
Dollar (USD): The dollar had a huge rally yesterday and is mixed this morning, down against the commodity currencies but up against the Euro, Pound, and Yen. We could continue to see some near-term dollar strength, as heightened sensitivity to risk is occurring around the globe and market trends are pointing in that direction.
Yen (JPY): The yen is also mixed this morning, following the same themes as the US dollar, though down against USD.
In world markets, the Asian stock market got clobbered and closed down.
European stock indices are currently down as are the US markets, although it looks like we may have a reversal here in the US as the media monkeys try to put as much lipstick as possible on that NFP pig!
Gold and oil are flat, waiting for stocks to decide which way they want to go. Commodities were down roughly 3% yesterday.
As you can see, there still is MAJOR fear out there as economic recovery is not taking place as quickly as anyone would like. What I really want to stress here is that on a day like yesterday, when nearly EVERYTHING was down, the only 2 places to park your money that went up were in the currency market. If you had bought dollars or yen yesterday, you were a happy camper while everyone else was crying in their coffee.
Isn’t it time you see what this market is all about?
To learn more about how you can make gains even when nearly EVERYTHING is going down, be sure to check out our affordable currency trading courses.
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Its All About Jobs!
By Mike Conlon | January 28, 2010
This morning, it looks like risk appetite has returned to the forex market after yesterday’s FOMC meeting has been fully digested. The only thing “unexpected” from the meeting was that the decision was not unanimous, as KC Fed Chief Thomas Hoenig dissented and raised concerns about possible inflation. While this view will most probably be discounted for “an extended period” to use Fed parlance, it is interesting to see someone break from the pack.
Also, additional problems from the Euro zone have increased downward pressure on the common currency, as Portugal has now joined the mix and is showing up on the watch lists as their fiscal budget is drawing attention from the ratings agencies. In light of these problems, the market is still in a risk-taking mood.
The other big news came from last night’s Presidential State of the Union Address, where the President issued a renewed commitment to fixing the employment problem here in the US and pledging to help put Americans back to work which overall is positive for economic growth. Whether or not the follow through occurs is another story, but for now, the markets are satisfied.
Here’s a look at the currencies:
Aussie (AUD): Benefitting in early trade from risk appetite, the Aussie traded as high as 90.45 vs. the US dollar. In addition, commodity prices are higher as well. There is much debate over whether or not another rate hike will be in order at the next policy meeting as inflation concerns abound. Watch out for a mid-morning reversal if equity markets sell-off.
Kiwi (NZD): Yesterday, the New Zealand Central Bank left interest rates unchanged at 2.5% as inflation is likely to stay in its target range. However, the bank is expected to move on rates sometime before mid-year. Also up this morning, but off of its highs.
Loonie (CAD): With oil prices holding above $74 (for now), the Loonie is showing decent gains this morning against the risk averse currencies. The Loonie is showing some strength today vs. the US dollar, as it bounced back against technical resistance at 1.065.
Euro (EUR): The Euro is down this morning after having broken support at 1.40 vs. the US dollar. While EC economic sentiment was up this morning vs. an expected decline, the news that the first of the PIIGS countries, Portugal, may be following Greece’s lead down the road to fiscal uncertainty. S&P is saying that Portugal’s current budget leaves the country economically “frail”. Remember that when trading often times support becomes resistance so keep that 1.40 level in mind.
Pound (GBP): The Pound is strong again this morning, extending yesterday’s gains. The prevailing thought is that interest rate hikes may be on the table for the foreseeable future.
US Dollar (USD): The dollar is down today against the commodity currencies as risk appetite has returned. US durable goods orders came in lower than expected, and initial jobless claims came in slightly more than expected. This lends credence to the FOMC stance that rates should remain low for “an extended period”, much to KC Fed Chief Hoenig’s chagrin.
Yen (JPY): The yen is down against all but the Euro currencies, as the bottom rung on the risk-taking ladder. The uptick in risk appetite as a result of the State of the Union Address last night has helped propel Asian stock markets higher last night and the yen lower.
In world markets, the Asian stock markets closed higher than 1.5% from the previous day but stocks in Europe are mostly lower with news out of the Euro Zone. US stock markets are down, and gold and oil are higher, to 1093 and 74.12 respectively.
What’s important to take away from all of this news is that no single instrument trades in a “bubble” and that news from around the globe can affect any market. By having and maintaining an understanding of global events, investors and traders can better position themselves.
To learn more about how these markets are ALL inter-related, be sure to check out our extremely affordable currency trading courses!
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Obama Spooks the Markets!
By Mike Conlon | January 22, 2010
In what can only be described as adding insult to injury, President Obama announced yesterday his plan for regulating the too-big-to-fail banks and bring back some provisions of the Glass-Steagall Act. Now don’t get me wrong, I think these banks should be reigned in and be subject to stricter regulation, but man, his timing couldn’t have been worse.
After the employment figures came out yesterday and the Philly Fed announcement, the stock market began to tank and we saw a rapid shift to risk-aversion. Combine that with the uncertainty created by Obama and we saw a volatile confluence of events. The sad part of all of this is blame game going on between Washington DC and Wall St.
The American people responded in Massachusetts by pushing back against the political machine and its a shame that the administration feels the need to pile on with the timing of this proposal. The “be careful what you wish for” line of thinking in Washington is disgusting, and the fear and bully tactics won’t gain them any political goodwill.
In general, I can’t stand politics but unfortunately this needed to be addressed as government actions can have a MAJOR effect on the market place.
This morning, I’m seeing a brief respite from yesterdays move but that doesn’t mean it won’t continue. Japanese yen (JPY) is strong this morning and the US dollar (USD) is weak.
Also this morning there was weaker than expected retail sales figures coming from both Canada and the UK. Both the Loonie (CAD) and the British pound (GBP) are down this morning. The Loonie is seeing added weakness as the price of oil has pulled back to around $76 on weak demand.
So if you’re an investor, I would lighten up on the risk-taking and keep an eye on news coming out of Washington DC. Either way expect market volatility to pick up.
To learn more about how politics and your investments are intertwined, be sure to check out our forex trading courses!
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