Month: August 2011

Speculation in the media and comments from the Italian Economy Minister fueled speculation for a potential Eurobond discussion but the idea was quickly shot down as Schaeuble told Der Spiegel weekly “I rule out euro bonds for as long as member states conduct their own financial policies, and we need differing interest rates so that there are possibilities of incentives and sanctions to force fiscal solidity.”

Most likely we will see statement of solidarity between the two nations supporting the previously agreed upon terms from the July 21st meeting. The two leaders will likely address Italy and Spain as the nations’ sovereign bonds have come under pressure the last two weeks with yields on the 10-year bonds rising above 6% before the ECB stepped in with its bond purchases.

ECB bond purchases were expected to range between EUR 10-15 bn though the ECB looks to have come in above forecasts with EUR 22 bn. This shows the market the ECB was serious when entering the sovereign bond market to support Italian and Spanish debt.

Tomorrow euro zone flash GDP will be released with estimates of 0.3% growth for Q2 in contrast to the 0.8% Q1 data. According to the most recent PMI surveys growth is expected to slow both in peripheral Europe and in Germany. French Q2 GDP released on Friday was flat.

Given market positioning from the most recent IMM Commitment of Traders Report the EUR seems ill positioned for a rally with speculators relatively flat and open interest continuing to fall. Though as this is being penned the EUR/USD has rallied sharply past the initial 1.4450 resistance level and is testing the consolidation pattern from the May high. The next resistance is found 1.4535 and 1.4580 with support back at 1.4450 and 1.4130.

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Aug. 15 (Bloomberg) — Naohiko Baba, chief Japan economist at Goldman Sachs Group Inc., discusses the yen and the outlook for the Japanese economy. He speaks from Tokyo with Linzie Janis on Bloomberg Television’s “Countdown.”

Although Japan’s preliminary gross domestic product (GDP) data for the second quarter of 2011 revealed mild contraction, its GDP Price Index underscored sharp declines in prices across the island economy. The data, presented in an annualized format, revealed a 2.2% reduction in prices from this time last year.

Used as a primary measure of inflation by the Bank of Japan (BOJ) the GDP Price Index is one of the broadest measures of the nation’s inflationary growth or contraction. This month’s report revealed significant contraction in inflationary growth, which may lead to a deflationary trap if measures are not taken. Traders will want to watch the BOJ in the coming days as strong moves should be expected.

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The balance between foreign investment in American assets and American investment in foreign assets was seen to be approaching parity in July according to the publication of the TIC Long-Term Purchases report this afternoon. Additionally, New York’s manufacturing index revealed sudden and sharp contraction throughout the previous month.

These two reports in tandem paint a dire picture for an American economy recently struck by a ratings downgrade from Standard & Poor’s. The inability to attract foreign investment will likely result in sharp downturns in the value of the US dollar (USD) this week as speculators price in reduced currency demand. Sluggish manufacturing growth will also begin to gouge currency values as limited growth pulls down on the appeal of US assets.

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A report by the Australian Bureau of Statistics this morning revealed solid growth in the purchase of new motor vehicles. Last month’s adjusted value of this same report showed mild growth in such spending by approximately 1.9%. But this month’s report surprised even skeptics.

The indicator, published at 2:30 GMT Monday, highlighted a strong surge in consumer purchases of new motor vehicles by approximately 8.6% in July. Released 20 days after the end of the month means this report carries less impact than others of its kind, but it does carry a direct correlation to consumer confidence and outlook. The Australian dollar (AUD) may see some upward growth this week, but its gains will likely be limited and strongly affected by global events.

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August 15 (Bloomberg) — Thomas Haerter, chief strategist at Swisscanto Asset Management AG, talks about the outlook for the Swiss franc. He speaks from Zurich with Linzie Janis on Bloomberg Television’s “First Look.” (Source: Bloomberg)

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

The Japanese economy continues to improve following better than expected Q2 GDP. The data had little impact on the yen but Asian equities finished broadly higher in a quiet much less volatile European trading session. Japan will likely continue to struggle with JPY strength given the actions taken by the SNB to weaken the Swiss franc and the commitment by the Fed to keep US interest rates at ultra-low levels. This will either require further intervention from the Ministry of Finance or a compromise by Japanese Industry to thrive in an environment of a strong JPY.

Q2 Japanese GDP fell -0.3% but the outcome was rosier than the headline portrays. Consensus expectations were for a decline of -0.6%. On an annualized basis GDP dropped -1.3% on expectations of -2.5%. Exports accounted for a majority of the weak GDP numbers but stronger than expected consumption, higher business inventories, and a bump up in construction spending after the earthquake/tsunami were enough to close the gap with markets’ expectations. The data is encouraging given last week’s better Tertiary Industry Activity (1.9% on expectations of 1.1%) and stronger core machinery orders (7.7% on expectations of 1.9%).

The better than expected GDP data comes at a time when the Japanese government could use the increased tax revenues that follow higher growth. The current administration is teetering on the edge of losing its AAA rating. Analysts from Rating & Investment Information, one of Japan’s two major rating agencies says the nation could lose its top rating unless the government reigns in its budget deficit and addresses the political instability of a revolving door at the Prime Minister’s office.

External forces are currently in favor of an appreciating Japanese yen. The Swiss National Bank looks to be taking further action to stem the tide of a strengthening Swiss franc. The SNB is in discussions to set a lower limit for the EUR/CHF above 1.10. This follows previous attempts to weaken the CHF via increased swap agreements with other European central banks, additional sight deposits, and negative interest rates. The moves by the SNB make the JPY the most likely candidate for real money safe haven flows.

Although Fed Funds futures showed the market’s expectations for a US rate hike were in not until winter of 2012, last week’s announcement by the Fed to keep interest rates near zero until mid-2013 might offer further USD weakness in the near term. Given the additional easing of US monetary policy put in place by Bernanke and the Fed, it will be a long uphill battle to book any gains in the USD/JPY.

The question is now how will Japan respond? After embarking on an estimated $50bn FX market intervention to stem the tide of a rising yen the MoF has only responded with tough talk and no follow up action. Japanese finance minister Yoshihiko Noda was quoted as saying, “As foreign exchange market matters are my prerogative, I will continue to closely watch the markets and take bold action if it becomes necessary.” This lends to the idea that further intervention in the forex market may be on the way.

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By Jojo Mathew

People interested in world affairs would know of China`s influence on currency rates – especially the United States. In recent years, the Chinese have receives a lot of criticism for its economic policies. Though topic has surfaced in numerous shapes, the basic message is that the Chinese currency is artificially undervalued to improve their global competitiveness.

Now recovering from recession the US economy is under much more stress. Many economists attribute the slower recovery of the US economy on China. Treasury Secretary Timothy F. Geithner warned Congress that these barriers will continue to affect recovery plans at home. China has been accused of practices such as buying 100s on millions, even billions of dollars one day and dumping them another day to manipulate the currency pairs trade value.

On the contrary the Chinese government said that there will not be a significant impact on the trade deficit that United States has even if the Chinese Yuan is corrected.Politician and economists are not the only one asking for action – corporations have also joined the bandwagon. Unlike the congress corporations seem to be more cautious because a Chinse retaliation would worsen the situation.

Forex trade is a limiting factor. However, excessive pressure could force a reaction form the Chinese government (like the incident with Google, where the search engine was banned from the country for a few weeks). Many multinationals rightly worry about their operations in China being affected by improper political actions. This will be detrimental for manufacturing giants who have tens of factories and entire production lines across China.

World politics and economic circumstances have for the longest time played an important role in the status quo of foreign exchange. Recently other attributes such as M&A have also begunimpacting currency prices. It shows how much say private companies have in today`s globalsubjects. Many are well equipped to impact government actions. While this article looks into interplay between two countries, the economic situation within a country largely impacts the interest and {thus|hence| its currency trading value.

The forex trading system outlined in the Tradeveb.com tutorial clearly explain the impact of such global events. It is necessary to remember the various factors that influence the currency fluctuations in a day to day trade. True that it’s not humanly possible to go through all the relevant news and information before every transaction. Nevertheless it is prudent to take a quick look to see if any major events have occurred. That would be the first step.

After taking an overview of the economic landscape, you must work towards a indepth understanding of online forex indicators and signals that provide a comprehensive summary of the near future. You can complement this with some advanced concepts. This will definitely increase chances of your success.

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Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.