Month: October 2011

Source: ForexYard

The early afternoon release of housing data from the Canadian economy yesterday gave several investors reason to buy into the Canadian dollar (CAD), known colloquially as the Loonie. Housing reports out of Canada have shown steady increases, with construction levels climbing and prices ascending as well, the time may be ripe for investing in Canadian assets.

Yesterday’s report, released by the Canada Mortgage and Housing Corporation (CMHC), shined light on the 206,000 housing starts in September. Canadians appear to be regaining confidence in the mortgage and housing markets, and banks across Canada appear more willing to lend for such investments. So far the impact has been overshadowed by poor data elsewhere, but Canada’s currency has weathered the storm rather well despite these overtones.

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.

Source: ForexYard

In a sign that a recently weakened US dollar (USD) is perhaps aiding the US economy’s growth, today’s trade balance figure came in just slightly lower than the forecasted deficit. Though not an entirely positive signal, the trade deficit grew by only $45.6B instead of the anticipated $46.0B.

Weakening the value of the USD both increases the ability of American firms to export goods while simultaneously reducing America’s buying power abroad (i.e. reducing imports). The expected result is a less-than-stellar, but better-than-forecast widening of the trade deficit, which should help improve America’s standing in the global arena.

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.

Source: ForexYard

The value of the Australian dollar (AUD) made a jump in today’s early trading following reports from the Australian Bureau of Statistics that employment saw modest growth in September. The Employment Change figure was forecast to see an expansion of roughly 10,100 jobs; the results were more than double.

A surprise expansion of nearly 20,400 jobs in September has generated some reflections that the Aussie economy is actually regaining its foothold after a series of poor reports. The unemployment rate also decreased from 5.3% to 5.2% this month. The AUD is gaining value and could enter a longer-term uptrend if things remain bullish.

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.

London Gold Market Report
from Ben Traynor
BullionVault
Thursday 13 October, 08:30 EDT

WHOLESALE prices to buy gold dropped to $1667 an ounce Thursday morning London time – a 1.3% fall from the week’s high set yesterday – while stocks and commodities also fell and US Treasury bonds rose following news that European banks may have to raise fresh capital.

Prices to buy silver dropped to $31.93 – still a 2.5% gain for the week so far.

“Physical interest evaporates at current price levels,” said one gold dealer in Hong Kong this morning.

“Enthusiasm for precious metals began to ebb after the New York open yesterday,” adds Marc Ground, commodities strategist at Standard Bank – referring to a period Wednesday that saw the price to buy gold fall 1% in four hours.

“Perhaps investors were emboldened by the apparent realization of European leaders that aggressive action needs to be taken…however, the situation remains far from resolved, and markets may be getting a bit ahead of themselves in hoping that decisive action is imminent.”

Europe’s banking sector may need to raise an extra €200 billion if recommendations by the European Banking Authority are adopted, the BBC’s Robert Peston reported Thursday.

Each bank would have to raise its Tier 1 Capital ratio – its core capital as a ratio of total risk-weighted assets – to between 9% and 10%.

Banks currently need a Tier 1 ratio of 4% to comply with Basel II – the set of accords published by the Basel Committee on Banking Supervision in 2004 – while the EBA’s stress tests of July this year were based on a ratio of 5%.

“It’s fundamentally wrong to increase capital at the moment,” one senior banker told today’s Financial Times.

“Deleveraging needs to happen.”

The FT reports that some banks may attempt to raise their capital ratios by selling off risk-weighted assets rather than seeking to raise fresh capital from nervous markets.

“It is not the capital position which is the problem,” Deutsche Bank chief executive Josef Ackermann, speaking told a conference in Berlin today.

“[It’s]the fact that sovereign debt as an asset class has lost its risk-free status…the key to the solution is therefore in the hands of governments, to restore confidence in the solidity of state finances.”

Deutsche Bank has lost €400 million this year on Greek government debt, Ackermann said.

If the EBA’s recommendations were adopted, Deutsche Bank would need to raise €9 billion in additional capital, news agency Reuters reports, quoting people familiar with the bank’s finances.

The European Central Bank meantime has repeated its assertion that private creditors should not be compelled to take losses on sovereign debt holdings.

Losses on privately-held debt would have “direct negative effects on the banking sector across the Euro area,” it said in its October Monthly Bulletin, published this morning.

“The ECB has strongly advised against all concepts that are not purely voluntary or that have elements of compulsion, and has called for the avoidance of any credit events and selective default or default.”

In the US meantime, Wednesday’s publication of the latest Federal Open Market Committee minutes reveal disagreement on the merits of so-called quantitative easing.

“A number of participants saw large-scale asset purchases [QE] as potentially a more potent tool that should be retained as an option in the event that further policy action to support a stronger economic recovery was warranted,” the minutes report.

By contrast, “some judged that large-scale asset purchases and the resulting expansion of the Federal Reserve’s balance sheet would be more likely to raise inflation and inflation expectations than to stimulate economic activity.”

China – the world’s second-largest source of private gold demand – saw its trade surplus fall 18% month-on-month in September to $14.5 billion, data published on Thursday show. Exports – in particular exports to Europe – showed a slowdown in growth.

In Dubai meantime, many of those who buy gold have switched their buying patterns towards bullion investment products, the Wall Street Journal reports.

“Earlier while women would buy gold in the form of jewelry, now one can see men, finding themselves with a bit of spare cash, go into a jewelry shop and buying ten-tola [3.75 ounces] bars,” says Pradeep Unni, senior relationship manager at Richcomm Global Services, adding that sales of gold coins and ten-tola bars are up 30-40% from this time last year.

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Slovakia will hold a “do-over” vote later this week where it is expected to now vote in favor of a scheme to address the escalating Eurozone debt crisis. The Slovakian Parliament earlier rejected the proposal and was the lone holdout of the 17 Eurozone member nations. With this final approval expected to be in place by the end of the week, the last obstacle to the plan put forward by the “troika” comprised of the European Union, the European Central Bank, and the International Monetary Fund will be set aside.

Eurozone leaders are scheduled to meet on October 23^rd to finalize the details of the plan. Speculation continues to surround the centerpiece of the agreement which calls for private investors to accept a repayment “haircut” to lighten Greece’s debt obligations and avoid an outright default.

Earlier this year, financial institutions had been asked to take a 21 percent loss as part of the discussions leading to the second bailout for Greece. It appears that the actual haircut could be considerable greater with losses of between 30 and 50 percent now being suggested.

As part of the plan championed by France and Germany, banks will receive financial support to ensure these forced losses do not endanger the banking system. Coincidently, these two countries are home to the banks most heavily exposed to Greece’s debt and have the most to lose as part of a forced recapitalization.

Despite being under orders to reign its deficit, Greece’s budget shortfalls continued to widen in the first nine months of the year. By the end of 2011, Greece’s total debt is expected to rise to 357 billion euros ($487 billion) – this level of debt represents 162 percent of the country’s total Gross Domestic Product.

Scott Boyd is a currency analyst and a regular contributor to the OANDA MarketPulse FX blog

By The Sizemore Letter

You can’t turn on a TV or pick up a newspaper without seeing a mention of the Occupy Wall Street protests that are being held across the country.  Yet as often as the protests are mentioned, there is surprisingly little information about who these protesters are—and who they are not—and what exactly it is that they want.

The movement has been compared to the Arab Spring and particularly to the Tahrir Square Egyptian protests that brought down the regime of Hosni Mubarak.  It’s also been called a “Tea Party for the Left,” in a nod to the original Tea Party movement that has now become a powerful fixture in the Republican Party.

It’s easy to see why.  Camped out in tents and demanding radical change, the Wall Street Occupiers look like the Tahrir Square protesters, at least on the surface.  And somewhat paradoxically, given that the Occupy Wall Street crowd hails mostly from the political left, they share many of the same complaints voiced by the Tea Party—disgust with the bailout culture, revulsion at the influence that Wall Street has on both political parties, indignation at taxpayer money being used (at least indirectly) to pay banker bonuses, etc.

But beyond these superficialities, Occupy Wall Street has little else in common with either Tahrir Square or the Tea Party.

Who Are They?

The bulk of Occupy Wall Street fit the typical demographic of political protestors—young, white, relatively affluent, idealistic and politically left-leaning—the basic demographic you would expect to see a Berkeley political rally.   But the movement also includes its share of socialists, communists, radical libertarians, anarchists, union members and even a small contingent of conservatives.   And more recently, organized labor unions have joined the fray.

New York Magazine did a survey of political views among the protesters and found that:

• 37 percent believe that capitalism “can’t be saved; it’s inherently evil.” (46 percent took the softer view that, while not “evil,” it needed to be regulated)
• 40 percent “Believed in President Obama” but “he let them down.”
• 34 percent agree with Noam Chomsky that the U.S. government is “no better than Al Qaeda.”

(View New York Magazine story here)

What Do They Want?

This is a surprisingly difficult question to answer.  With no official leadership and no single organization in control, the broader demands range from removing the influence of money on politics to the abolition of capitalism itself.  Specific demands have included everything from raising taxes on the rich to strengthening organized labor to abolishing the Federal Reserve.

Should Investors Be Concerned?

In short, no.  Though the movement appears intimidating on TV, the protesters have had practically no effect on the day-to-day operations of Wall Street.  Unless you live in New York City and have had your daily commute disrupted, Occupy Wall Street is unlikely to affect your life or investments.

What Happens Now?

The protest will meet its end one of two ways:

1. The public and media will lose interest, depriving the movement of the publicity it needs to sustain itself.  The protesters themselves—a demographic not known for having a long attention span—will get bored and go home.
2. President Obama, a group of prominent congressional Democrats, or the Democratic Party as a whole will pay enough lip service to Occupy Wall Street to coopt it the same way that the Republican Party largely did the Tea Party.

Of these two scenarios, the first is far more likely.  It would be extraordinarily difficult for the Democrats to embrace the Occupy Wall Street movement—complete with its red Che Guevara flags—and still appeal to centrist voters.  If President Obama hopes to get reelected, he has to project himself as a moderate voice of reason in a world gone mad.  Embracing Occupy Wall Street will clearly not do that.

The Republicans know a little something about this.  Every Republican candidate for president is facing the difficult balancing act of placating the Tea Party while still appealing to moderate voters.  But while the Tea Party may be a little too extreme for many Americans, its patriotic, clean-cut image is generally going to be more palatable than a mob of grungy student protestors.

My prediction?  At the first cold snap of the New York winter, the Occupy Wall Street movement packs up and goes home.

If you liked this article by Sizemore Insights, you’d probably enjoy The Sizemore Investment Letter, our premium members-only newsletter. Click here for more information.

By Mike Conlon, ForexNews.com on Oct 12, 2011

This morning has started with risk appetite driving markets higher, with Dollar and Yen weakness acting as either a by-product or catalyst of the move. Regardless of who or what is leading the charge, a sense of calm is starting to return to the markets and they looked poised for a 4th quarter rally into the end of the year.

Positive sentiment surrounding the resolution of the debt crisis has not been derailed by Slovakia delaying their vote on the EFSF expansion agreed to in principle on July 21st as the market believes that the Franco-Prussian solution which Sarkozy and Merkel have promised is coming in early November will like supercede that package. The “Troika” has already agreed to Greece receiving the next tranche of money despite the uncertainty surrounding the vote of whether Greece has done enough to receive it, with the hope that whatever is offered in early November is enough to wipe the whole slate clean.

So the pressure is on to come up with a resolution that not only deals with the problem but is also something that is agreeable to all of the Euro zone members as well as the markets in general. Call me skeptical but I’m not certain if such a solution exists. Today a plan to re-capitalize European banks will be proffered which is a step in the right direction.

Meanwhile in the UK, policy-maker Posen has claimed that the BOE is prepared to ease further and the unemployment rate has ticked higher to 8.1% from 7.9% and an 8% expectation, yet the Pound is trading higher and hit our last week’s target of 1.57 vs. USD and then some. GDP estimates came in better than expected for September calling for .5% for last month vs. .2% for the previous month. Also to note is that even though the official unemployment rate rose, the number of new jobless claims came in lower than expected at 17.5K vs. an expected 24K.

Both the Aussie and the Kiwi are tracking higher with the former trading back above parity vs. USD. Related home sales and price figures show that there is moderate growth, and Australian consumer confidence figures came in better than expected. Australian employment figures are due out tomorrow.

Also adding to the risk trade is the machine orders figures that were reported by Japan that came in much better than expected, showing a monthly gain of 11% vs. an expected 3.9%. This has helped rally the Nikkei and caused some Yen selling and tonight’s release of the BOJ meeting minutes may show how close they are to intervening in the currency which could provide for additional risk taking.

Speaking of meeting minutes, the release of the September FOMC will be out later today and will definitely show how close Bernanke and Co. are to QE3. While he floated the idea at the JEC briefing earlier this month, it may have been in response to tanking markets and not any serious policy discussion. If on the other hand they are close to QE3, then this could push markets higher on the free-money trade.

US corporate earnings season is upon us and was kicked off by worse than expected numbers out of Alcoa, yet the S&P 500 has rallied to above 1200. The bar has been set so low for many of these companies that the beats should be more than the misses.

Also to note is that the Senate did not pass Obama’s “jobs bill” which was a more of political statement than a credible plan. This means that more money is not added to the deficit and taxes are not raised in the near-term, and we are likely to have to wait for the deficit reduction committee to take action before anything gets done.

Yet the mood surrounding the markets appears to be positive and I think we will definitely see that 4th quarter rally that investors desire. Business can only sit on the sidelines for so long and if they start to believe that there may be a change in Washington DC in the next election cycle to more pro-business policies, then they may start to invest.

While I don’t think this will solve our unemployment problem in the near-term, if we can get the needle moving in the right direction then that could instill some confidence which is ultimately what this economy is sorely lacking.

So keep an eye out for the Fed release later today as it has the ability to create volatility as the market dissects the Feds intentions. Any hint at the “free money” trade could send markets even higher!

Regards,

Mike Conlon
Senior Forex Mentor
www.forexnews.com

By ForexYard

Global reports on the trade activity and budgeting will be released today from several major economies. News of this kind tends to have a delayed effect, but volume should be heightened in today’s later trading sessions. On tap for these reports is the trade balance figure from China, Great Britain, Canada, and the United States, in that order.

Economic News

CAD – Canadian Dollar Falls ahead of Trade Balance Data

The Canadian dollar (CAD) was seen moving lightly bearish late Wednesday as investors fled the higher yielding assets from speculation on a market downturn following recent releases on manufacturing. A weaker-than-forecast uptick in US private sector employment last week added to risk sensitivity for many investors, leading some to await today’s news before entering more strongly.

The Bank of Canada (BOC) also held rates steady in its latest decision, along with every other major economy announcing a rate decision, but talk was slightly more optimistic in the northern giant’s economy than elsewhere. The downtick seen in the Loonie was significantly milder than in other currencies. This may be partially due to the CAD’s disconnect from some of the market turmoil, but it could also be from some optimistic data emerging from the economy lately.

Most significant on today’s calendar will be the Canadian publication of its employment change data and unemployment rate. Should today’s news foreshadow a modest growth in the Canadian economy’s employment sector, an assessment that does, however, seem less likely from data released these past few weeks, there is a possibility that more investment will get pushed towards the higher yielding abilities of the European currencies as investors seek to diversify their portfolios, which could also support the CAD in short term trading.

GBP – GBP Moving Bullish as Data Supports Growth

The Great Britain pound (GBP) is expected to be seen trading with bullish results this week ahead of a slew of reports on the country’s manufacturing, housing, and service sectors. Against the US dollar (USD) the pound has actually been trending upwards despite the greenback’s bullish moves against its other currency rivals.

A mildly pessimistic sentiment towards investing in the euro at the moment has many investors on edge when considering regional investments. An embattled euro zone is sending financial ripples through its neighbors and some are concerned it could pull growth down across the entire continent. With yesterday’s inflationary data out of Britain, this doesn’t seem to be the case, at least for the island economy north of Western Europe. Housing data seemed a bit pessimistic, but consumer prices are indeed growing at a healthy rate in the UK.

Sentiment across the region may have turned negative, with many analysts and economists expecting moves towards safety by traders this week, but the GBP could see a solid weathering of this financial storm so long as data remains bullish. Great Britain appears positioned for a relatively better quarter than its southerly neighbors. The pound could see some bullish movement this week as a result of this overall sentiment.

AUD – Australian Data Expected to be Bearish

The Australian dollar (AUD) was weighed down yesterday, as market reports showed contraction across the boards. Piling atop recent reports on Australia’s slowly stabilizing housing sector, today’s publication of Australian employment shows a broadening contraction striking several sectors of Australia’s economy.

Expectations for today’s reports have been for a modest growth from last month’s poor numbers. The actual reports may lead many investors to push slowly back into the Australian dollar (AUD). National data on housing and employment may also have driven many investors away from the once-burgeoning AUD. This data, combined with dismal HPI and building approvals reports, has so far dragged the Aussie lower and looks to continue doing so this week.

Oil – Oil Sees Uptick after Inventory Report Expected to Rise

Crude Oil prices found support Wednesday, moving towards $91 a barrel in late trading as sentiment appeared to shift in favor of a price increase following news that supply in the United States may increase by 0.4 million barrels this week. With supply holding and manufacturing and industry in decline, the balance between supply and demand appear to be reaching agreement as the value of oil seems to be leveling out in recent trading, despite the recent swings in currency values.

As investors seek shelter from recent market uncertainty, the value of crude oil, which was seen holding steady all week, may see additional gains before today’s close. A sudden jump in dollar values due to a sudden return to risk aversion, as was expected following the recent interest rate announcements, could drive many investors into lower investments on physical assets; driving oil prices back downward by the middle of next week.

Technical News

EUR/USD

The price of this pair appears to be floating in the over-bought territory on the8-hour chart’s RSI indicating a downward correction may be imminent. The downward direction on the hourly chart’s Momentum oscillator also supports this notion. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.

GBP/USD

The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the 8-hour chart’s RSI signals that a bearish reversal is imminent. A downward trend today is also supported by the daily chart’s Slow Stochastic. Going short with tight stops may turn out to pay off today.

USD/JPY

The pair has been range-trading for a while now, with no specific direction. The Daily chart’s Slow Stochastic providing us with mixed signals. The 4 hour charts do not provide a clear direction as well. Waiting for a clearer sign on the hourlies chart might be a good strategy today.

USD/CHF

The typical range trading on the hourly chart continues. The daily chart RSI is floating in neutral territory. However, the pair currently sits near the bottom border of the 8-hour chart’s RSI, suggesting an upward correction may be imminent. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.

The Wild Card

AUD/USD

This pair’s sustained upward movement has finally pushed its price into the over-bought territory on the 4-hour chart’s RSI. Not only that, but there actually appears to be a bearish cross on the Slow Stochastic pointing to an imminent downward correction. Forex traders have the opportunity to wait for the downward breach on the hourlies and go short in order to ride out the impending wave.

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.

The Bank of Mozambique kept its standing facility lending interest rate at 16.00%.  The Bank said [translated]: “the main economic indicators evolve positively, in line with plans for this year, highlighting the components of the external sector and inflation projections, short and medium term; although risks remain to be taken into account. It is essential in this time of year to enhance coordination of policies aimed at consolidating macroeconomic stability and recommended both to the private sector and the economic agents in general, in a framework of exchange rate stability in the country, to ensure the timely supply to market of commodities.

Previously the Bank cut held its interest rate unchanged, after raising key lending rate by 50bps to 16.00% at its August meeting, after raising the rate by 100 basis points to 16.5% at its January meeting this year, where it also raised the interest rate paid on deposits by 100 basis points to 5%, and lifted the required reserve rate by 25 basis points to 9%.  

Mozambique saw inflation in it’s largest city, Maputo, of 7.8% in September, compared to 7.9% in August, 7.7% in July, and lower than 9.3% in June.  Mozambique’s economy expanded 6.8% in the June quarter, compared to GDP growth of 8.1% in the March quarter, meanwhile the IMF is forecasting economic growth of 7.5% in 2011 and 7.8% in 2012.  

Mozambique’s 3-month Treasury bills traded at 14.20% on the 6th of October.  Mozambique’s currency, the Metical (MZN) last traded around 26.7 against the US dollar.

The Bank of Korea maintained its 7-day repurchase rate unchanged at 3.25%.  The Bank said: “Based on currently available information, the Committee considers that, while emerging market economies have shown favorable performances, major advanced economies have exhibited signs of sluggishness. Going forward the Committee forecasts that the global economy will show a recovery, albeit a moderate one; nevertheless, the Committee judges that downside risks to growth have expanded.”

At its September meeting this year the Bank of Korea also held the interest rate unchanged at 3.25%, after increasing the 7-day repurchase rate by 25 basis points to 3.25% at its June meeting.  South Korea reported annual consumer price inflation of 4.3% in September, compared to 5.3% in August, 4.7% in July 4.4% in June, 4.1% in May, and 4.2% in April. 

The inflation rate is currently just above the Bank’s inflation target of 2%-4% through 2012.  The South Korean Won (KRW) has weakened by about 4% so far this year, while the USDKRW exchange rate last traded around 1,155.