« Risk Appetite Returns- For Now! | Home | Yen in Focus! »
All Eyes On Jackson!
By Mike Conlon | August 27, 2010
As in Jackson Hole, WY, where the annual KC Fed Meeting is taking place and where Fed Chairman Bernanke is due to speak at 10AM EST. So the markets have been trading in a bit of a range going into that meeting and the revised US GDP figures, which are due out at 8:30 AM EST.
Earlier in the UK, revised GDP figures came in slightly higher than expected and growing the most since 2001, as construction spending was higher. However, there is some thought that this is due largely in part to government spending, which is due to expire as austerity measures go into effect.
Overnight in Japan, CPI data showed that prices fell for the 17th straight month and bond prices fell as speculation of currency intervention and further quantitative easing is markedly higher. Japanese PM Kan weighed in on the situation, saying that the government is prepared to take “bold action”. Surprisingly, the unemployment rate ticked down to 5.2% from 5.3% expectations.
So we’ve been seeing some risk taking this morning as Yen weakness has encouraged yield seeking, which also pushed the Nikkei average higher overnight though European stocks are flat to start the US session, as are commodities. So it looks like we are going to play the waiting game until 10, with a possible hiccup at 8:30 if US GDP figures deviate too much from expectations.
In the forex market:
Aussie (AUD): The Aussie is mostly higher as Yen weakness has encouraged some reluctant risk taking and benefiting from higher Asian equity markets.
Kiwi (NZD): The Kiwi is also higher for the same reasons as the Aussie, yet is performing better than it’s neighboring currency as the Kiwi had been most oversold to start the week on lower than expected inflation projections.
Loonie (CAD): The Loonie is mostly lower as the market as it looks like the market is predicting doom and gloom for the US economy. Because of Canada’s close ties to the US, the market reads US economic weakness as Canadian market weakness, rightly or wrongly. (Click chart to enlarge)
Euro (EUR): The Euro is mixed this morning as the market is waiting for Bernanke’s speech on the state of the US economy. There is a stark contrast between the Euro zone and US policy over how to best return to global growth and this could be highlighted by market reaction. (Click chart to enlarge)
Pound (GBP): The pound is mostly lower despite better than expected revised GDP figures. The market believes that the driver of that growth was mostly likely government spending which is due to expire as austerity kicks in. A RICS survey showed that rents were higher which could foreshadow rising inflation.
Dollar (USD): Revised GDP figures came in showing a gain of 1.6% which was better than the expectation of 1.4% but down from the last reading of 2.4%. This has encouraged some major risk taking as markets have woken up from its range-bound action.
Yen (JPY): The Yen is now selling off further as better than expected GDP figures have brought about risk taking. Factor in prior Yen weakness due to increased intervention chatter and continued deflation and it all adds up to a weaker Yen. (Click chart to enlarge)
One of the nice things about writing at the start of the US session is that I get to document market action as it occurs live. What started off the morning as mild risk taking due to Yen weakness has totally turned into major risk taking as the US GDP figures show there’s still some life in the US economy.
However, not to play Debbie Downer, but Bernanke will be speaking later this morning and the tone of his speech could affect the markets. I highly doubt that he will intentionally spook the markets, but one never knows for certain.
But for now, the market appears to have shrugged off this week’s horrible housing data and is content to party some more. Hopefully Big Ben doesn’t take the punchbowl away!
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, blog, cad, course, currenc, currency, currency market, currency trading, dollar, dow, economy, EUR, Euro, forextrading, free, fx, fxedu, gbp, Il, jpy, mike conlon, nzd, practice, ssi, time, USD, Yen
Topics: What To Look At In The Market | No Comments »