Month: September 2011

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Forex: Large Currency Speculators turn bearish on Euro and British Pound Sterling

By CountingPips.com

The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that large speculators turned bearish on the euro and the British pound sterling against the US dollar last week in futures market reporting. Non-commercial futures speculators, those taken by hedge funds and large traders, added to their long positions in favor of the New Zealand dollar and the Australian dollar directly against the US dollar while decreasing their bets for the euro, Swiss franc, British pound sterling, Japanese yen, Canadian dollar and the Mexican peso, according to data on September 6th.

EuroFX: Currency speculators decreased their futures positions for the euro against the U.S. dollar and now hold an overall bearish outlook for the European currency. Euro positions dropped sharply as of September 6th to a total of 36,443 net short contracts from the previous week’s total of 2,539 net long contracts on August 30th. Euro positions are now at their lowest point since January 11th when net contracts were on the short side at -45,182.

The COT report is published every Friday by the Commodity Futures Trading Commission (CFTC) and shows futures positions as of the previous Tuesday. It can be a useful tool for traders to gauge investor sentiment and to look for potential changes in the direction of a currency or commodity. Each currency contract is a quote for that currency directly against the U.S. dollar, where as a net short amount of contracts means that more speculators are betting that currency to fall against the dollar and net long position expect that currency to rise versus the dollar. The graphs overlay the forex spot closing price of each Tuesday when COT trader positions are reported for each corresponding spot currency pair.

GBP: British pound sterling positions have now fallen for two consecutive weeks and decreased to an overall short position as speculators have gone bearish on the pound sterling. Pound positions fell to a total of 13,220 short positions following a total of 444 long positions as of August 30th.


JPY: The Japanese yen net contracts declined for the third consecutive week as of September 6th but overall remain on the bullish side against the US dollar. Yen net long positions edged lower to a total of 32,787 net long contracts reported on September 6th following a total of 41,185 net long contracts reported on August 30th.

CHF: Swiss franc long positions declined for a second consecutive week as speculators trimmed bets for the Swiss currency. Net long futures positions fell to a total of 7,549  long contracts as of September 6th following a total of 9,342 net long contracts as of August 30th. Swiss franc speculative futures positions had dropped to their lowest level in over a year on August 9th at a total of 4,655 net long contracts and could perhaps revisit that level with the recent Swiss National Bank plans to intervene in their currency and maintain a peg against the euro.

CAD: The Canadian dollar positions decreased on September 6th after rising for two consecutive weeks. CAD net contracts fell to a total of 2,081 net long contracts as of September 6th following an increase to a total of 13,939 net long contracts on August 30th.

AUD: The Australian dollar edged higher as long positions rose for a fourth consecutive week as of September 6th. AUD futures positions advanced higher to a total net amount of 48,041 long contracts as of September 6th following a total of 47,569 net long contracts reported as of August 30th.

NZD: New Zealand dollar futures positions increased after falling for four consecutive weeks. NZD futures contracts rose to a total of 17,670 net long contracts on September 6th following a decline to 16,565 net long contracts registered on August 30th.

MXN: Mexican peso long contracts continued to trend lower and fell for a sixth straight week as of September 6th. Peso positions declined to a total of 13,246 net long speculative positions as of September 6th following a total of 20,880 contracts that were reported as of August 30th. Peso positions are currently at their lowest level since September 14th of 2010 when net contracts equaled 14,957.

COT Currency Data Summary as of September 6, 2011
Large Speculators Net Positions vs. the US Dollar

EUR -36443
GBP -13220
JPY +32787
CHF +7549
CAD +2081
AUD +48041
NZD +17670
MXN +13246

 

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Charles Sizemore Discusses the Obama Jobs Plan on Straight Talk Radio

By The Sizemore Letter

This week, Charles Sizemore discusses the Obama jobs plan, opportunities in Emerging Markets, and investing in the rise of the global nouveau riche with Mike Robertson, host of the “Straight Talk About Money” radio show on Houston’s 1110AM/KTEK.

To hear the inteview, follow this link: Mike Robertson’s Straight Talk Radio

Charles Lewis Sizemore, CFA

Sizemore Insights is a free service of Sizemore Financial Publishing LLC, publisher of The Sizemore Investment Letter, a monthly subscriber-only newsletter.

SUBSCRIBE TODAY to Sizemore Insights and get access to information that is simply not available anywhere else.

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Monetary Policy Week in Review – 10 September 2011

The past week in central banking saw interest rate announcements from 17 central banks around the world.  Just 4 of those central banks announced changes to interest rates: Armenia cut by -50bps to 8.00%, Tunisia cut by -50bps to 3.50%, and Serbia cut by -50bps to 11.25%, while Uganda increased by +200bps to 16.00%.  Meanwhile those that held interest rates unchanged were: Australia 4.75%, Sweden 2.00%, Canada 1.00%, Japan 0-0.1%, ECOWAS 4.25%, Poland 4.50%, South Korea 3.25%, Indonesia 6.75%, Philippines 4.50%, Malaysia 3.00%, Peru 4.25%, United Kingdom 0.50%, and the European Union 1.50%.  The other big news in central banking was the Swiss National Bank’s move to set the EURCHF exchange rate floor of a minimum 1.20.  Also making headlines was key ECB official, Jürgen Stark, announcing his resignation.

Many central banks found themselves holding and waiting as uncertainty and financial market volatility levels remained heightened.  Indeed virtually all central banks noted the weakening growth outlook in developed markets as a key risk area.  Most cited the weakening higher frequency data and leading indicators in the US as signaling a slowdown in activity.  Arguably some banks may have continued tightening monetary policy if external conditions were more benign.

Some of the key quotes from the monetary policy press releases are listed below:
  • Bank of Uganda (increased +200bps to 16.00%): “BoU is raising interest rates in order to curb the growth in bank credit, which has expanded rapidly over the last 12 months, to encourage higher levels of saving and to provide more support to the exchange rate.” and further added that “If the inflation outlook deteriorates in the next few months, the BoU will implement further increases in the CBR.”
  • Central Bank of Tunisia (decreased -50bps to 3.50%): “To boost economic activity and the implementation of investment plans by limiting the financial burden on businesses, the Council decided to reduce, again, the rate of the BCT half a percentage point to bring it back to 3.5 percent,”. 
  • National Bank of Serbia (decreased -50bps to 11.75%): “The decision on further relaxation of monetary policy was adopted to ensure that inflation returns to the target, without major volatility. The Executive Board expects that inflation will continue to decline until the end of the year and that it will enter the target tolerance band in the first half of the next year. Future path of the key policy rate will depend on the materialisation of risks, primarily in the international environment, and those relating to fiscal policy at home.”
  • Bank of Canada (held rate at 1.00%): “In light of slowing global economic momentum and heightened financial uncertainty, the need to withdraw monetary policy stimulus has diminished.  The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary policy consistent with achieving the 2 per cent inflation target over the medium term.”
  • Bank of Japan (held rate at 0-0.10%): “The Bank commits itself to continuing the virtually zero interest rate policy until it judges that price stability is in sight on the basis of the “understanding of medium- to long-term price stability.”  In order for Japan’s economy to overcome deflation and return to a sustainable growth path with price stability, the Bank will continue to consistently make contributions as the central bank by pursuing powerful monetary easing through the comprehensive monetary easing measures…, ensuring financial market stability, and providing support to strengthen the foundations for economic growth.”
  • Bank Indonesia (held rate at 6.75%): “The decision was taken by considering the importance of maintaining macroeconomic stability amid the heighten uncertainty in the global financial system triggered by the US and Euro area debt. Although the impacts of uncertainty in the global economy on domestic economy are so far limited, Bank Indonesia continues to monitor the developments and assess their impacts on Indonesian economic performance going forward.”
  • Bank Negara Malaysia (held rate at 3.00%): “In the MPC’s assessment, while inflation remains a concern, the increased uncertainties on the global and domestic economic growth prospects and their potential consequences could have a moderating impact on inflation.”
  • European Central Bank (held rate at 1.50%): “Looking ahead, we expect the euro area economy to grow moderately, subject to particularly high uncertainty and intensified downside risks. At the same time, short-term interest rates are low. While our monetary policy stance remains accommodative, some financing conditions have tightened. It remains essential for monetary policy to focus on its mandate of maintaining price stability over the medium term, thereby ensuring that recent price developments do not give rise to broad-based inflationary pressures.”
  • Central Reserve Bank of Peru (held rate at 4.25%): “decision takes into account the slowdown observed in economic activity and the intensification of international financial risks. Should these trends continue, the Central Bank will change its monetary policy stance.”  The Bank further noted: “Some current and advanced indicators of activity show a lower pace of growth than in the first semester. Furthermore, indicators of global activity show a lower growth and increased uncertainty continues to be observed in international financial markets.”
  • Central Bank of West African States (held rate at 4.25%): “During this session, the Committee considered the economic, financial and monetary recent West African Monetary Union, including the risks to price stability and economic growth prospects in the EU. In this regard, the Committee noted a trend toward slower pace of price growth.”

Looking at the central bank calendar, next week will be relatively quiet with just three major central banks scheduled to review monetary policy settings.  Also on the calendar is the Bank of Japan’s monetary policy meeting minutes on Monday from the 4-5th August meeting, and the ECB’s monthly bulletin on Thursday.
  • NZD – New Zealand (RBNZ) – expected to hold at 2.50% on the 15th of Sep
  • CHF – Switzerland (Swiss National Bank) – expected to hold at 0-0.25% on the 16th of Sep
  • INR – India (Reserve Bank of India) – expected to hold at 8.00% on the 16th of Sep

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Jürgen Stark Resigns From Position at ECB

The European Central Bank (ECB) has announced the resignation of key ECB official, Jürgen Stark.  The Bank said in the announcement: “Today, Jürgen Stark, Member of the Executive Board and Governing Council of the European Central Bank (ECB), informed President Jean-Claude Trichet that, for personal reasons, he will resign from his position prior to the end of his term of office on 31 May 2014. Mr Stark will stay on in his current position until a successor is appointed, which, according to the appointment procedure, will be by the end of this year. He has been a Member of the Executive Board and Governing Council since 1 June 2006.”


ECB President, Jean-Claude Trichet, noted Stark’s service to the ECB and the EU: “Having been informed by Jürgen Stark of his decision to resign for personal reasons, President Jean-Claude Trichet thanks him wholeheartedly for his outstanding contribution to European unity over many years. Having worked with Jürgen Stark for almost 20 years, he expresses particular gratitude for his exceptional and unwavering dedication as a member of the Executive Board and Governing Council for more than five years.”

Stark was the key member of the Executive Board responsible for Economics and Monetary Analysis at the ECB (known as the ECB’s unofficial chief economist).  Reportedly (WSJ) (NYT) Stark’s resignation was driven by frustration over the ECB’s bond buying programs and it’s expanding role in propping up troubled Eurozone economies such as Greece, Portugal, Ireland, Spain and Italy.

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European Central Bank Holds Refinancing Rate at 1.50%

The European Central Bank (ECB) maintained the Main refinancing operations rate unchanged at 1.50%, the Marginal lending facility at 2.25% and Deposit facility at 0.75%.  The Bank said: “Looking ahead, we expect the euro area economy to grow moderately, subject to particularly high uncertainty and intensified downside risks. At the same time, short-term interest rates are low. While our monetary policy stance remains accommodative, some financing conditions have tightened. It remains essential for monetary policy to focus on its mandate of maintaining price stability over the medium term, thereby ensuring that recent price developments do not give rise to broad-based inflationary pressures… Inflation expectations in the euro area must remain firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term. Such anchoring is a prerequisite for monetary policy to make its contribution towards supporting economic growth and job creation in the euro area. We will continue to monitor very closely all developments.”

The ECB last increased the interest rates by 25 basis points at its July meeting; pausing in May and June, after raising the rate by 25 basis points to 1.25% in April this year.  The Euro Area reported annual HICP inflation of 2.5% in August and July, compared to 2.7% in June (same as May), 2.8% in April, and 2.7% in March, and above the Bank’s inflation target of maintaining inflation below, but close to, 2% over the medium term.  The Euro Area reported quarterly GDP growth in the June quarter of 0.2%, following a 0.8% increase in the March quarter, and a 0.3% increase in the December quarter of 2010.  The Euro (EUR) last traded around 0.73 against the US dollar, having gained about 4% against the USD this year.

In August the ECB stayed firmly in the headlines as it announced a resumption of its bond buying program (SMP – Securities Market Program) at its previous meeting, which initially did not include Spain or Italy, which caused a significant elevation in uncertainty.  The ECB then signaled it would in fact expand the purview of that program, and made significant purchases (22 billion in the first week of renewed buying, and 14 billion in the subsequent week).  The ECB also just announced the resignation of key board member, Jürgen Stark.

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Bank of England Keeps Bank Rate at 0.50%

The Bank of England (BoE) kept its official Bank Rate, which is paid on commercial bank reserves, at a record low stimulatory level of 0.50%.  The BoE also made no changes to its 200 billion pound asset purchase program (also known as quantitative easing).  The Bank does not supply commentary with its monetary policy decisions, however the minutes of the monetary policy committee meeting will be published at 9.30am on Wednesday the 21st of September 2011, according to the Bank’s announcement.  The Bank next meets on the 6th of October.

The Bank also held the official Bank Rate unchanged at 0.50% at its August meeting this year; the rate has remained on hold since March 2009, when the Bank reduced the interest rate by 50 basis points to 0.50%.  The United Kingdom reported annual consumer price inflation of 4.4% in July, compared to 4.2% in June, 4.50% in May and April, and 4.00% in March, and still above the Bank’s inflation target of 2.00%.  The UK saw quarterly GDP growth of 0.2% in Q2 this year (0.5% in Q1), while annual economic growth was reported at 0.7% (1.6% previously).  The pound (GBP) last traded around 0.63 against the US dollar, having gained 3% so far this year.

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Robertson Says Euro Zone May Head Toward a Fiscal Union

Sept. 9 (Bloomberg) — Charlie Robertson, global chief economist at Renaissance Capital LLC, talks about the European debt crisis, challenges facing the global economy and President Barack Obama’s speech on U.S. job creation. He speaks with Linzie Janis on Bloomberg Television’s “Countdown.” (Source: Bloomberg)

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Obama Job Plan Focuses on Middle and Lower Class

Source: ForexYard

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Thursday’s job speech by US President Barack Obama is being called one of several defining moments of his presidency as the run-up to the 2012 presidential election gets underway. The focus of his new plan appeared to be three-fold, first was a repeated call for action by Congress, reflecting the impatient mood felt across America, with his repetitive statement for leaders to act “right away.”

Secondly, and perhaps most important, was his overriding emphasis on lower and middle class jobs in areas such as construction and teaching. A harkening towards the days of President Abraham Lincoln was intoned with a comment that America was one nation of rugged individualism that worked best on cooperative efforts, with emphasis on the latter. Noting that America was falling behind China in the construction of national infrastructure such as airports, highways and high speed rail lines, President Obama stated that such projects needed to become a priority in the months and years ahead.

The third aspect was a compromising note on tax cuts which saw Obama proposing a heavy emphasis on tax cuts for the middle class and tax breaks for businesses hiring individuals who had been unemployed for more than six months. A call to lift the Bush-era tax cuts on the super-wealthy was put forth, with hominy paid to the notion of fairness.

Overall, Obama’s speech seemed to begin slowly and reluctantly, with a sense of dragging on through his repeated calls for action, but it picked up towards the end as he tried to embody the message of past presidents. Whether successful or not will depend on the specifics of his plan and whether an agreement on it can be reached. Additionally, how financial markets have responded to this message appears mixed. With many other global factors coming into play, it is tough to tell what derives from Obama’s message and what is occurring as a result of today’s G7 Summit and other economic data releases.

Read more forex trading news on our forex blog.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

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Canadian Employment Sees Sharp Contraction

Source: ForexYard

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The data released by Statistics Canada this morning highlighted the first contraction in Canadian employment since March, underscoring the structural deficits emerging in many Western nations. A volatile shift towards safety is leading to rugged declines in manufacturing and industry worldwide which is beginning to drag heavily on employment numbers.

The focus on jobs in the United States was also brought sharply into view Thursday with President Obama’s jobs speech in Washington, D.C. The data surrounding employment has drawn a bleak picture for future growth is measures are not taken to address the weaknesses in basic core jobs across many countries.

Read more forex trading news on our forex blog.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.