Trading the News: U.K. Consumer Price Index (based on dailyfx article)
A marked rebound in the U.K.’s Consumer Price Index (CPI) may pave the
way for fresh highs in the GBP/USD as it puts increased pressure on the
Bank of England (BoE) to normalize monetary policy sooner rather than
What’s Expected:Why Is This Event Important:
Indeed, the BoE Minutes may reveal a growing dissent within the Monetary
Policy Committee (MPC) as U.K. officials anticipate a stronger recovery
in 2014, and heightening price pressures may boost the bullish
sentiment surrounding the British Pound as it spurs a more material
shift in the policy outlook.The ongoing pickup in household sentiment along with the resilience in
retail sales may push U.K. firms to ramp up consumer prices, and a sharp
uptick in the headline reading for inflation should foster a bullish
reaction in the GBP/USD as it fuels interest rate expectations.
Nevertheless, efforts to cool the house paired with the persistent slack
in the real economy may continue to dampen the outlook for price
growth, and a dismal CPI print may generate a larger correction in the
GBP/USD as market participants scale back bets of seeing higher
borrowing costs ahead of schedule.
How To Trade This Event Risk
Bullish GBP Trade: U.K. CPI Climbs 1.7% or Higher
GBPUSD M5 : 60 pips price movement by GBP - CPI news event
U.K. consumer prices increased an annualized 1.6% in March after
expanding 1.7% the month prior, while the core rate of inflation grew
1.6% during the same period to match the slowest pace of growth for
2014. Despite the slowdown, the in-line CPI prints pushed the GBP/USD
back above the 1.7000, with the pair ending the day at 1.6723.
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GBPUSD Fundamentals (based on dailyfx article)
The British Pound pulled back further from multi-year highs as a drop in
UK yields and a broader US Dollar reversal produced the
second-consecutive week of GBPUSD declines. Key economic data may need
to impress to spark a larger GBP bounce.
A highly-anticipated Bank of England Inflation Report showed officials
are likely to keep interest rates unchanged for some time to come. The
disappointment sent UK yields considerably lower, and the interest
rate-sensitive GBP followed in kind.
Those same interest rate and FX traders will watch upcoming UK Consumer Price Index inflation figures, Retail Sales results, and Q1 GDP growth numbers for greater clarity on the future of domestic interest rates.
Risks to the British Pound seem weighed to the downside as the BoE
dashed hopes that strong growth figures would be enough to force the
bank into action on interest rates. And indeed short-term government
bond yields matched their largest single-week drop on the year. Given
strong correlations between interest rates and the GBP, any further
deterioration could sink the Sterling for the third-consecutive week.
Consensus forecasts for upcoming inflation, consumption, and growth
figures are relatively tame; the recent tumble in yields suggest we
need to see strongly positive surprises to force a material Sterling
bounce. From a technical perspective it’s important to note that the GBPUSD trades near pivotal support, and its next moves could guide price action for some time to come.
It’s shaping up to be an important week for the previously high-flying
GBP. And though it remains relatively close to multi-year peaks,
continued failure at these levels suggests that the uptrend may be
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GBPUSD M5 : 34 pips price movement by GBPUSD - CPI news event
Euro Rallies against the Dollar, Ending Two-Week Run of Losses (based on Forexminute article)
The euro rose against the dollar, ending two weeks of losses as
investors awaited market data that points towards monetary easing in the
The euro advanced 0.1 percent to $1.3702, ending a run of losses of more
than 1 percent over the last two weeks. The shared currency advanced to
138.99 yen before edging lower to 138.77 yen, a three-month low.
The euro has been hurt by speculation that the European Central Bank may
ease its monetary policy when it meets in June. Commodity Futures
Trading Commission’s data that was released last Friday indicated that
there were 2,175 net short contracts on the common currency in the week
ended May 13, down from net long positions of 32,551 a week earlier,
"There seems to be so many reasons to short the euro," said Bart
Wakabayashi, a Tokyo-based head of forex at State Street Global Markets.
"The ECB seems to be the one [central bank] under the most pressure to
act the soonest."
The ECB is expected to roll out a raft of measures such as a reduction
in all interest rates and policy that seeks to increase lending to
small and mid-sized enterprises. Hence traders will be keenly
monitoring purchasing managers’ surveys of the euro zone that will be
released this week.
"Given the low euro zone inflation, interest will be on the
input/output price subcomponents of the PMIs," analysts at Commonwealth
Bank told clients.
The dollar index fell to 80.017, down from last week’s peak of 80.338
that it touched on Thursday. The dollar fell 0.1 percent to 101.44 yen,
which is close to 101.31 yen, a two-month low that it also hit last
Two North Carolina Senate committees unanimously voted on Tuesday to
approve a law that will see the ban on fracking lifted in summer. The
bill is expected to be tabled before the Senate this week.
The bill will see the ban on shale gas drilling lifted on July 1, 2015,
potentially paving the way for the Department of Environment and Natural
Protection to award permits to energy firms for horizontal drilling and
fracking, reported the News & Observer.
The move was welcomed by pro-fracking activists who argue that the
method boosts local economy and creates thousands of jobs. However,
environmentalists argue that the measure goes against the promise not to
remove the fracking moratorium until the necessary safety regulations
are in place.
This is the second time that the state is attempting to remove the
moratorium, after an earlier bid to remove it collapsed in the NC House
after the public opposed the move, forcing lawmakers to promise that
they will not remove the moratorium until the necessary rules and laws
were in place.
The bill was approved by the Senate Finance Committee and the Senate
Commerce Committee. The bill was forwarded to the Senate Rules Committee
for a debate tomorrow and Thursday, before being tabled before the
House for a hearing.
Republican Sen. Buck Newton was quoted as saying that the energy
companies are waiting to see whether North Carolina is committed to
shale gas exploitation, and that he expects drilling to begin in
"We are not sure the industry will be anywhere near ready to go at
that time," Newton said. "The industry hasn't explored here yet because
we haven't finished what we're doing now."
The bill made several adjustments in order to attract energy firms,
such as lower severance taxes and a much more favorable baseline water
Trading the News: Bank of England Minutes
The Bank of England Minutes may generate a more meaningful advance in
the GBP/USD should we see a growing number of central bank officials
show a greater willingness to normalize monetary policy sooner rather
Why Is This Event Important:
The policy statement may show a growing dissent within the BoE as the
fundamental developments coming out of the U.K. raise the prospects for a
stronger recovery, and the fresh batch of central bank rhetoric may
pave the way for fresh highs in the GBP/USD should the committee adopt a
more hawkish tone for monetary policy.
Sticky price pressures paired with the ongoing pickup in private sector
activity may put increased pressure on the BoE to raise the benchmark
interest rate ahead of schedule, and the GBP/USD may continue to carve
higher highs & higher lows in the second-half of the year as the
central bank moves away from its easing cycle.
However, the persistent slack in the real economy may keep the BoE on
the sidelines as Governor Mark Carney retains a cautious outlook for the
region, and the GBP/USD may face a larger correction in the days ahead
should the policy statement drag on interest rate expectations.
How To Trade This Event Risk
Bullish GBP Trade: BoE Shows Greater Willingness to Normalize Policy
The BoE voted unanimously to retain its current policy in April as the
central bank sees a stronger recovery in 2014, but the British Pound
failed to benefit from the meeting minutes as the MPC talked down the
threat for inflation. In turn, the GBP/USD slipped back below the 1.6800
handle, with the pair trailing lower throughout the North American
trade to end the day at 1.6779.
2014-05-21 06:30 GMT (or 08:30 MQ MT5 time) | [JPY - BOJ Press Conference]
JPY BOJ Press Conference = It's among the primary methods the BOJ uses to communicate with
investors regarding monetary policy. It covers the factors that
affected the most recent interest rate decision, the overall economic
outlook, inflation, and clues regarding future monetary policy
Yep, the lad’s still at it
EUR/USD still immune for stock market volatility
On Tuesday, the eco calendar was
again thin. In Europe, equities were unable to give trading on other
markets a clear guidance. The euro remained slightly under pressure as
were peripheral bonds. However, the key 1.3643 support stayed well out
of reach. USD/JPY was initially slightly higher off Monday’s low but the
a new selling wave of US equities after the close in Europe pushed the
pair again lower in the 101.00 big figure. EUR/JPY tested again the key
138.55/70 support but a break didn’t succeed.
This morning, Asian
equities are mostly in the red except for China. However, the losses
are contained compared to the correction in the US. Yesterday evening,
Fed hawk Plosser repeated its assessment that rates may be raised sooner
rather than later. His comments might have caused some nervousness on
the US equity markets. However, they didn’t help the dollar. On the
contrary, USD/JPY is creeping back to this week’s low at 101.10. EUR/USD
is again not at all affected, not by the Fed comments and not by the
correction on the US and Asian equity markets. The BoJ as expected kept
its policy unchanged. There is no indication that the bank is preparing
for additional stimulus anytime soon. An optimistic tone from BOJ might
keep the yen well bid.
Later today, there are
again few eco data in the US and in Europe. Consumer confidence from the
European commission is expected to improve slightly from -8.6 to -8.3.
This report probably won’t be a game changer for EUR/USD trading. After a
chorus of ECB speakers recently, the focus turns to the Fed today. A
long series of Fed governors will speak and the Fed will publish the
minutes from the April meeting. Fed’s Yellen already elaborated on the
Fed decision in an appearance before the JEC of Congress earlier this
month. Even so, it will be interesting to see the thinking within the
Fed on the next steps to scale back policy stimulation. Indications that
this next step is coming closer might be slightly positive for the
dollar. Even so, currency trading will probably again be driven by technical considerations and by global sentiment on risk.
How will European markets react to the correction in the US yesterday?
Will intra-EMU spreads continue to widen? If so, it might at least
cement the topside of EUR/USD. The picture in the yen cross rates
remains very interesting, too. EUR/JPY is struggling to hold above a
first resistance (138.55/70 area). USD/JPY is testing the key
101.20/100.75 support. The process is going very slowly, but a break
below these levels would be highly significant and may also be a
negative for the euro. For now this is nothing more than an hypothesis.
After the May ECB press conference, we reinstalled a sell-on-upticks bias for EUR/USD ahead of the June ECB meeting.
Of course, the reasons for recent dollar weakness haven’t disappeared
all at once. So, the downside correction in EUR/USD will probably
develop in a gradual way. A first support at 1.3673/43 was tested last
week but no sustained break occurred. The next high profile level is the
1.3477 April correction low. We maintain a sell-on-upticks approach. A
break above 1.40 would suggest that the markets doubt the credibility of
the ECB commitment and thus warrants stop loss protection.
Hot News in Audio : Currency Markets with John Kicklighter
Chief currency strategist at DailyFX.com, John Kicklighter joins Merlin
for a look at some of the events and data impacting currencies around
the world. First comes the Euro, which has been flirting with a strong
supply level, yet unable to break! John offers his thought on the ECB’s
actions and why this is the line in the sand for the Euro. Later, the
duo breaks down the current trajectory in the Pound and the Yen, both of
which offer some great trading opportunities. Merlin also looks at some
tools, such as the SSI, which helps traders
understand where the money is flowing in a variety of instruments
USD/CAD eases up to 1-week high before Fed minutes
The U.S. dollar eased up to one-week highs against the Canadian dollar
on Wednesday as investors awaited the minutes of the Federal Reserve’s
latest meeting later in the session for fresh insight into when U.S.
borrowing costs might rise.
USD/CAD touched highs of 1.0918, the most since May 14 and was last up 0.09% to 1.0914.
The pair was likely to find support at 1.0870, Tuesday’s low and resistance at 1.0959.
were turning their attention to of the minutes from the Fed’s latest
monetary policy meeting for insight on the central bank's view of the
Recent U.S. economic reports indicating that the recovery
remains uneven have weighed on U.S. Treasury yields, pressuring the
On Tuesday, New York Fed President William Dudley
reiterated the central bank’s dovish stance, saying the pace of rate
hikes was likely to be “slow”.
Market participants were also
looking ahead to Canadian data on retail sales due for release on
Thursday and a report on consumer inflation on Friday.
Elsewhere, the loonie, as the Canadian dollar is also known, was higher against the euro, with EUR/CAD down 0.18% to 1.4915.
euro remained under pressure amid expectations that the European
Central Bank will ease monetary policy at its next meeting in June and
after data last week showing that the euro zone economy grew at a slower
than forecast rate in the first quarter.
Previously confidential correspondence between Google GOOGL +0.92%
and the SEC released this week shows the search giant has no intention
of bringing some of its overseas cash hoard back home and plans to use
up to $30 billion of its stockpile for dealmaking.
In a letter dated December 20, 2013, responding to questions from
regulators regarding its Form 10-K for fiscal 2012, Google wrote that it
expects “a significant portion of our future expansion will continue to
be driven by foreign operations outside the U.S.” For that reason,
Google expects to have capital needs of $20 to $30 billion for M&A
activity and $2 to $4 billion for capital expenditures.
Google pointed to its $1 billion acquisition of traffic Waze as one
of more than 20 strategic acquisitions it made in 2013, and one that was
funded entirely by the non-U.S. earnings piggy bank. The company also
said it was in pursuit of a $4-$5 billion overseas deal that didn’t come
The company has also used overseas cash to acquire foreign technology rights of U.S. targets, as it did when buying Motorola Mobility for $12.4 billion in 2012.
On the other spending front, Google expects to use $2-$4 billion to
add additional data center assets outside the U.S. as the business
“evolves to include more ‘cloud’ and content based offerings.” In recent
years, the company has invested billions in both new data centers and
replacements for older equipment. The company noted that it has shifted
to buying property rather than leasing, including buildings in Dublin, a
research center in France and a new office space in London.
Google’s letter makes it clear the company has no interest in
repatriating overseas cash holdings, an area of focus among regulators
given the massive foreign cash hoards companies are sitting on and
keeping out reach from U.S. taxes.
Apple AAPL -0.19%,
for instance, has opted to tap the debt market, raising tens of
billions in the last few years to fund increased share repurchases and
dividends without disturbing its massive cash pile outside the U.S.
Google has done something similar, to lesser extent, having issued $3
billion in bonds in 2011 at low interest rates and maintained a $3
billion commercial paper program to maintain liquidity in the U.S.
without tapping their overseas cash.
While the trend has certainly been on the side of Google and Apple,
not all companies are declining to repatriate foreign cash though. In
late April eBay EBAY -0.65% said it would take a $3 billion tax hit
in order to bring $6 billion of overseas cash back home. Judging from
the correspondence released this week, Google has no plans to follow
suit anytime soon.
Google shares were up 0.8% to $544.79 Wednesday morning.