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
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Top Performers!
By Mike Conlon | March 3, 2010
Forex System Selector (FSS) Top Performers!
When considering any automated forex system providers, not only is it important to have good strategies, but also it is equally important to have a good platform. FSS has you covered on both fronts!
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Here’s a look at our top 5 performing systems from last month:
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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!
Tags: account, AUD, Aussie, Australia, bank, Bernanke, cad, canada, carry trade, commodities, course, currenc, currencies, currency, currency market, currency trading, dollar, dow, economy, EUR, Euro, Europe, fed, forex, forex market, free, fx, fxedu, gbp, gold, Il, invest, investor, Japan, jpy, Kiwi, live, lower, market, new zealand, news, nzd, oil, pound, practice, practice account, rate, short, ssi, stock, time, trade, trades, unemployment, USD, Yen
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No News Is Good News!
By Mike Conlon | February 22, 2010
A quiet start to the week is just what the doctor ordered for world markets. After last week’s holiday schedule and an array of news, markets are seemingly ready for a reprieve from high drama. There is no real news of any significance due out today, and the world’s banking system didn’t collapse over the weekend. Options expiration last Friday went off without a hitch, and the market is now looking to take a “wait and see” approach.
Later this week we are going to see some figures out of France and Germany, as well as British and US GDP at the end of the week. There’s always some new twist in the Euro situation, and I can’t tell if this is going to play out as a Greek comedy or tragedy. One thing for certain is that investors will be keeping an eye out for Euro zone contagion, waiting for the next debt crisis to emerge from one of the other PIIGS.
In the currency market:
Aussie (AUD): The Aussie is slightly lower this morning, pulling back from good gains from last week. While global stock markets are higher so far, today can’t really be described as risk-taking. Commodities are slightly higher and the “Chinese Tiger” is back, after celebrating New Year last week. I’m expecting the Aussie to reverse losses and trade higher by the end of trading.
Kiwi (NZD): The kiwi is higher this morning, having benefited from risk taking last week but not nearly to the same degree as the Aussie. Thus the Kiwi is higher vs. the Aussie so far, even though New Zealand economic recovery trails Australia by far.
Loonie (CAD): The Loonie has been showing major strength vs. the Dollar as Olympic-fever has investors focused on the nation to the North. The economy in Canada appears to be in good shape and investors are starting to catch on to the notion that Canada may be the next nation to raise rates. The Loonie had a nice against the dollar last week, down from 1.05 levels and approaching 103.5 USD as oil prices have generally been higher.
Euro (EUR): This week we are going to see French CPI data and German GDP, CPI, and employment figures. As these two countries are the strength of the Euro zone economically speaking, investors will be watching to see if economic recovery in the two powers will be enough to offset the fallout from the PIIGS. If these numbers come in weaker than expected, then the Euro could revisit last week’s low of 1.345 and beyond. The Euro is down across the board.
Pound (GBP): On Friday, UK GDP is on tap and investors are hoping that growth remains positive in light of the awful economic figures from last week. The Pound got hammered last week and the UK economy is on thin ice in the eyes of investors who are starting to think that the UK economy more closely resembles Greece than Germany.
Dollar (USD): The dollar is mixed this morning trading a bit higher on technical bounces against the Loonie and Aussie and of course the Euro. The pound is slightly higher vs. the Dollar. Tomorrow we’re going to get US Consumer Confidence figures and then GDP later in the week. Inflation hawks will be watching these figures, to see if there is any indication that last week’s Fed discount rate hike is a harbinger of inflation in the US.
Yen (JPY): On Thursday, Japan will unveil its CPI figures and the expectation is for deflation. This should help buoy the carry trade as there is no expectation that Japan will moving on rates any time soon.
In overnight markets, the Nikkei and Hang Seng were up big, posting roughly 2.5% gains on the session. This is probably due in part to resumption of activity from the Chinese, as well as general risk-taking. In Europe, stocks are slightly higher so far. US equity futures are higher and oil is nearing $80, with gold at 1120 and change.
This week will give us a better idea of where the Euro zone and US economic recovery are within the framework of the global economy. If US figures come in higher than expected, then it could bring out the Fed rate-hike crowd and we could see some Dollar strength.
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, cad, course, currenc, currency, currency trading, dollar, dow, economy, EUR, Euro, fx, fxedu, gbp, Il, invest, Japan, Mike Conlon, nzd, practice, rate, ssi, time, trade, USD, Yen
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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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No Holiday in Europe!
By Mike Conlon | February 15, 2010
Today is President’s Day here in the US, which is a bank and stock market holiday. As a result, the markets are slow today with a mild risk-taking theme taking place. All eyes are on Europe for the details of the rescue plan for Greece. Later today, Euro zone finance ministers will be meeting and European stock indices are higher in anticipation.
Also, Chinese New Year is being celebrated to mark the Year of the Tiger, so Asian markets (that were open) closed lower. The Chinese have much to celebrate this year as their economy is expected to continue to grow at a double-digit rate despite the government’s efforts to slow it down by curbing lending. One of the other ways China can attempt to slow its growth is by letting its currency appreciate, according to Goldman Sachs economist Jim O’Neill who claims that, “something’s brewing”.
Here’s how the currencies are faring this morning:
Aussie (AUD): The Aussie is up on risk-taking and the China growth story in addition to reduced fears out of the euro zone. In addition, news out of Japan that the economy grew more than expected is good for the region’s recovery prospects.
Kiwi (NZD): Like the Aussie, the Kiwi is benefitting from improved risk outlooks primarily from Japan. The Kiwi has been one of the worst performers vs. the US dollar over the last month as risk appetite decreased due to the Greek situation.
Loonie (CAD): The Canadian dollar is higher this morning as risk themes are playing out and a boost from the Olympics which started this weekend. Investors gave the Loonie a vote of confidence as Bank of Canada Governor Mark Carney spoke this weekend about maintaining fiscal prudence and highlighting the fact the Canada has the lowest debt-to-GDP ratio of all of the G-7 countries.
Euro (EUR): The Euro is down this morning going in to the meeting to take place in Brussels later today. The market is expecting more details over how the rescue plan that was announced last week is going to work. The European stock markets are currently higher as risk-taking investors seek gains.
Pound (GBP): The Pound is lower this morning ahead of a slew of economic data due out tomorrow and on the heels of a worse than expected CPI data from last week. The UK has its own set of financial problems which have largely been overshadowed by Greece and the Euro.
Dollar (USD): The Dollar is mixed this morning, as light volume and mild risk-taking are moving the currency. With markets closed here in the US, less inter-market activity means lower volumes which decrease both supply and demand for long or short positions. Expect volume to pick up tomorrow when the markets resume normal trading.
Yen (JPY): The yen is performing as expected today, with risk-taking dominating trading. Japan reported better than expected GDP figures, showing annualized GDP grew at 4.6% vs. the expectation of 3.5%. This is good for stability in the world economy and has lessened the impact of the negative news out of the Euro zone.
Tomorrow could be a more volatile day as more markets re-open after the long weekend and the news out of the Euro zone meeting. Watch for the economic data out of the UK for any signs that the recovery may be weaker than expected. Absent of that, I expect investors to proceed cautiously as they gain confidence and resume risk-taking.
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, cad, course, currenc, currencies, currency, currency trading, dollar, dow, economy, EUR, Euro, fx, fxedu, gbp, Il, invest, Japan, jpy, market, Mike Conlon, news, nzd, practice, rate, ssi, time, USD, Yen
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Snowed In!
By Mike Conlon | February 10, 2010
Snowed In!
As major snowstorms move across the US, the forex market keeps chugging along. In what’s likely to be a low volume day today, we are seeing some mild risk-aversion this morning. Earlier, reports out of the UK show lower than expected inflation and a lower revision to GDP, as the retail sales figures accurately predicted yesterday.
This morning, both equity futures and commodities are giving back overnight gains, which may mean a lower opening in the US. Today could be volatile if traders in the US are enjoying the snow and not the “order flow”. With the only major news out of the way already today, the persistent theme of Euro zone uncertainty could also come into play.
On to the currencies:
Aussie (AUD): Trading lower on risk-aversion themes. Tomorrow Australia reports their employment figures so this could be the gauge that the markets have been looking for if the number comes out better than expected. The Australian economy has by far been the strongest throughout the Great Recession, so any weakness could trigger risk-aversion trades.
Kiwi (NZD): Trading lower with the Aussie on risk aversion and flat commodity process.
Loonie (CAD): Down as well, but showing some strength against the Euro and Pound.
Euro (EUR): The proposed bailout of Greece has lead to speculation over the size and scope of the plan and whether or not contagion will occur with the other PIIGS nations.
Pound (GBP): The Pound is the big loser this morning, most notably against the Yen and USD. As previously mentioned, UK inflation is forecast to come in short of the BOE’s target of 2%, and now GDP is predicted to be lower, taking monetary tightening off the table for perhaps the rest of the year. Translated: no rate hikes. Definitely a pound-negative report.
Dollar (USD): Trading higher on risk-aversion as would be expected. The trade deficit figures came in a little larger than expected, but nothing earth-shattering. Tomorrow retails sales figures come out which should foreshadow GDP figures, as the US consumer makes up some 70% of US GDP.
Yen (JPY): The yen is higher on yep– you guessed it—risk aversion themes and carry trade unwinds ahead of tomorrow’s Australian employment report.
Overnight, equity markets were up in Asia and are currently up in Europe. US stock futures are trading slightly lower pre-open.
Oil and gold are flat today, and it’s interesting to note that Wednesday’s usual API oil inventories report had been pushed to Friday because of the weather. Amateur oil traders may presume that the snowstorm here in the US will mean increased demand for oil, but today’s delay of the report may push any temporary strength off until Friday.
To learn more about the forex market, be sure to check out our currency trading courses!
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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.
To follow world events live and see how they affect the various currencies, get a free, real-time practice account here.
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Global Recovery Under Way?
By Mike Conlon | February 1, 2010
All eyes are on the US ISM Manufacturing number due out this morning at 10AM EST. The market is hoping to see a rise in this number as that would indicate business activity is picking up. So far this morning, we are seeing mild risk-taking as the Euro has rebounded from 4 days of selling.
US stock market futures are up as are gold and oil.
Let’s examine how this is affecting world currencies:
Aussie (AUD): The Aussie is currently trading down this morning despite the risk-taking tone this morning as traders are gearing up for the RBA rate decision due out overnight. The market is expecting a 25 basis point hike to 4%, but this could trigger a bearish scenario. If they do raise rates, it is extremely likely that they will take another rate hike off of the table going forward. There is also a chance that they don’t raise rates this time, as news that China is paring back economic stimulus could affect the Australian economy.
Kiwi (NZD): The Kiwi is up slightly this morning benefitting from the risk trade.
Loonie (CAD): The Loonie is up this morning as oil prices recover and stabilize as well as a general risk-taking mood this morning. The market is waiting for confirmation from the ISM data so it trading in a tight range until that release. The Loonie should strengthen today if the number comes in better than expected.
Euro (EUR): The Euro is the biggest gainer this morning as it rebounds from 4 days of weakening. The market is gaining confidence that the plan to manage the debt crisis in Greece is acceptable and plausible which generally ties in to the risk-taking trade this morning. Over the last four days, the thought that Euro could serve as an alternative to the US dollar as a reserve currency was largely debunked as Central banks pulled cash out of the Euro at a record pace.
Pound (GBP): The pound is down this morning against all but the Japanese yen as housing prices slid in the UK and banks granted fewer mortgage applications last month. The Bank of England rate decision is on tap next week but traders are more interested to see if they continue with their quantitative easing program.
Dollar (USD): The US dollar is down this morning as part of the risk-taking trade. Stock market futures are up as are commodities and all eyes are on the ISM Manufacturing number. There are some figures out this morning that show that US personal incomes are up slightly, and personal spending is higher than the prior reading but missing expectations by just .1%.
Yen (JPY): The yen is down across the board this morning as the BOJ’s top economist said that Japan’s economy is far from “achieving self-sustaining growth” as their export led recovery failed to induce consumer spending. This also falls in line with ministers calls last week for a weaker yen.
As we can see the big news of the day is ISM Manufacturing number which will be viewed as a proxy for global economic recovery. The only currency that is trading “out of the ordinary” is the Aussie, as the market prepares for the rate decision.
In global markets, stocks in Asia closed generally higher and Europe is higher at the moment. US stock markets futures are higher pre-open and oil is up to 73.47, with gold slightly higher to 1088.
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Canada CPI, Risk Aversion Rule!
By Mike Conlon | January 20, 2010
This morning, Canada reported its CPI number which came in at -.3% for December and the year over year number at 1.3%, both of which were less than expected. This is significant because the CPI is a measure of inflation, and this number is much less than the Bank of Canada’s inflation target of 2%.
What this means is that it is highly doubtful that that the Bank of Canada will raise rates anytime soon. As I mentioned yesterday, this all but takes a rate hike off of the table until at least the second half of the year. As a result, the Canadian dollar (CAD) is down the most today, especially against the US dollar (USD) and the Japanese yen (JPY) -1.7% and 1.3% respectively.
Also to note is that today is a risk-aversion day. News out of China that they are going to restrict bank lending is a sign that they may be trying to slow down growth and are growing concerned about a potential real estate bubble. As a result, both the Aussie (AUD) and the Kiwi (NZD) are down as well.
The US stock market is also down on China fears, as is both oil and gold. So the Loonie is getting hit with the “triple whammy” today between risk aversion AND CPI numbers.
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