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British Pound Short Trade Held into BOE Rate Decision
The monetary policy announcement from the Bank of England headlines the economic calendar in European trading hours. Mervyn King and company are forecast to the size of the asset-purchase program unchanged at 375 billion. UK economic news-flow has cautiously improved relative to economists’ expectations since April’s sit-down of the rate-setting MPC committee. Furthermore the Bank extended its Funding for Lending (FLS) scheme late last month, limiting the scope for further action in the near term. A status-quo result seems firmly entrenched in investors’ baseline outlook however, meaning such an outcome unlikely to yield a dramatic response from the British Pound. With that in mind, we remain short GBPUSD.
Results of 9 round of "Master Scalper"
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[TD]6 [TD]2702466 [TD]svetljaxok [TD]2 335.69[TR]
[TD]7 [TD]2702154 [TD]Alkhabbaz [TD]1 973.52[TR]
[TD]8 [TD]2702840 [TD]PANAMA [TD]1 883.29[TR]
[TD]9 [TD]2702155 [TD]wored1 [TD]1 880.96[TR]
[TD]10 [TD]2702451 [TD]kozim1 [TD]1 860.14March, 8 2013. 15:00 terminal time - Demo
US Dollar Rally Unfazed by a Japan GDP Beat
The US Dollar has continued to rally in the Asian and European sessions, and the main victims of the USD rally have been the New Zealand and Australian Dollar. However, there was no obvious new catalyst to provide reasons for NZD/USD and AUD/USD declines.
Overnight, we found out that the Japanese gross domestic product rose 0.9% in the first quarter of 2013, beating expectations for the GDP to only rise 0.7% and up from the revised 0.3% economic expansion seen in Q4. However, the Yen continues to hover near 102.50 against the US Dollar, which was cr
Euro Falters as 1Q GDP Disappoints, Pound Rebounds on BoE
Euro: EZ 1Q GDP Disappoints, H&S Continues to Pan Out
The Euro slid to a fresh monthly low of 1.2874 as the region’s 1Q GDP report showed the growth rate contracting 0.3% versus forecasts for a 0.1% decline, and the prolonged recession may continue to drag on the exchange rate as it fuels speculation for additional monetary support.
As the euro-area struggles to return to growth, the European Central Bank (ECB) may come under increased pressure to further embark on its easing cycle, and we may see a growing argument to purchase Asset-Backed Securities (ABS) in an effort to encourage a stronger recovery. At the same time, negative interest rates may also turn into a real option for the Governing Council amid the ongoing turmoil in the periphery countries, and the central bank may continue to push into uncharted territory as the governments operating under the single currency become increasingly reliant on monetary support.
Forex: Dollar Avoids Tumble but Market More Critical of Fed’s QE3 Talk
There was a bevy of Fed speakers this past session, but growing support of ‘tapering’ the central bank’s stimulus program (QE3) didn’t seem to generate much additional strength for the greenback. While speculators are certainly tuned into the serious consequences should the policy authority turn the boat around, we may have reached a saturation level where the dollar bulls and risk bears need a material escalation of this threat / opportunity. Looking over the highlights from the newswires Thursday, we see clear support for pulling back on the stimulus that has spurred moral hazard and watered down the value of the greenback. The Fed’s Plosser called for an easing of the purchases starting in June and full stop by year end, Williams echoed those sentiments and Fisher took it further discussing the risks the program was inviting. These are compelling comments. The only problem is that these FOMC members aren’t voters. They can only influence from the sidelines. The majority of those that are weighing in on US monetary policy are far more reserved and neutral. Should a key ‘fence-sitter’ like Bernanke, Dudley or Yellen support the cause; it would probably represent the kind of escalation that finally cracks moral hazard in benchmarks like the S&P 500.
Euro Finds Strength Despite Significant Decline in Construction Output
The US Dollar rally has continued for another day, again finding the most strength against the risk correlated Australian Dollar and New Zealand Dollar. However, the Euro is trading higher against the green back at the time of this writing, following three days of EUR/USD declines.
The most optimistic news out of Europe today was the announcement that EU new car registrations rose 1.7% in April, which was the first rise in car sales in nineteen months. However, on a more pessimistic note, construction output in March declined by 1.7% (seasonally adjusted), following the 0.3% in decline in February. Neither release seemed to have a significant effect on Forex trading.
Euro Euphoria to Fizzle on ECB- EU Looks to Buy More Time
Euro: EU Pledges to Combat Unemployment, ECB to Remain Accommodative
The Euro climbed to an overnight high of 1.2954 asEuropean Union Economic and Monetary Affairs Commissioner Olli Rehn pledged to do whatever it takes to combat record-high unemployment, but it seems as though the European Central Bank (ECB) will come under increased pressure to further support the monetary union as Mr. Rehn anticipates monetary policy to remain accommodative.
However, German Finance Minister Wolfgang Schaeuble argued that the Governing Council should not keep interest rates low for an extended period of timeas the governments operating under the single currency become increasingly reliant on monetary support, and we may see the EU make further attempts to buy more time as the group struggles to meet on common ground.
Gold May Rise as Fed Dents QE3 Reduction Bets
Gold Technical Analysis (Spot) - Prices broke above resistance in the 1375.16-77.33 area and completed a Bullish Engulfing candlestick pattern, hinting at further gains ahead. Initial resistance is at 1401.63, with a break above that targeting 1421.26. Alternatively, a reversal back beneath 1375.16 exposes 1340.31.
While the Fed is not in close proximity to the thresholds it set on unemployment and inflation expectations in December, concerns about the market structure implications of a buying $85 billion in paper each month have started to seep into official commentary.
Yen to Extend Gains as US Data Underpins QE3 Reduction Bets
The Japanese Yen soared in overnight trade, adding as much as 2.1 percent on average against its leading counterparts, as risk aversion gripped Asian stock exchanges and prompted an unwinding of carry trades funded in the perennially low-yielding currency. The MSCI Asia Pacific regional benchmark index slid 3.6 percent in a move the newswires chalked up to hints of near-term QE3 reduction from Fed Chairman Ben Bernanke and a disappointing Chinese Manufacturing PMI report. Figures from HSBC suggested factory-sector activity unexpectedly contracted for the first time in seven months in the world’s second-largest economy.
Dollar Rallies after Fed Talks QE3 Exit, Will EUR/USD Break 1.2800?
The markets have sought out guidance on the future of the Federal Reserve’s QE3 plans to shape their speculation, and that is exactly what Fed Chairman Ben Bernanke and the FOMC minutes offered. Tentative but tangible commentary about the eventual reduction in the current $85 billion-per-month program spurred the traditional ‘risk aversion’ move from the capital markets. For the S&P 500, an intraday reversal tore the index from fresh record highs to a dangerous shift in momentum that threatens a deeper rollover. Leading the safe havens – and a direct victim of the supply-and-demand elements of the US money supply – the Dow Jones FXCM Dollar (ticker = USDollar) surged above 10,850 to its highest level since July 2010. These are both meaningful developments, but they don’t exactly confirm conviction just yet. Just like a technical breakout does not necessarily guarantee a lasting trend, a fundamental volatility swell does not ensure a systemic shift in capital.