Tradervox.com - News and Analysis for the Forex Market - page 4

New comment
 

BOE Expected to Expand Stimulus as GDP Shrinks; Pound Dips

Tradervox.com (Dublin) – Speculation Bank of England will expand its stimulus program again rose after UK’s Gross Domestic Product shrunk more than the market was expecting. On announcement, the pound fell to its weakest in six months against the euro as investor searched for safety. The report also resulted to a decline in two-year gilt yields to a new low. Another report from the Confederation of British Industry indicated the UK manufacturing confidence dropped in July pushing the sterling pound lower against most of its major trading peers.

Nick Parsons, who is the head of research for Europe and UK at National Australia Bank Ltd, said that despite the market being prepared for a poor number in UK GDP, the data was dreadful. He predicted that there will be more interest rates cut before the end of this year and confirmed the need for more quantitative easing. The UK GDP shrunk by 0.7 percent from its previous reading when it shrunk by 0.3 percent according to the Office for National Statistics report. The market was expecting a decline of 0.2 percent. According to CBI, the gauge of factory optimism showed a decline to negative 6 from a reading of 22 in April while the hiring intentions dropped from 16 to minus 2, which is the lowest reading since October.

The sterling pound which dropped by 0.4 percent last week, dipped 0.7 percent against the euro to trade at 78.35 pence per euro at the close of day in London yesterday. The currency had earlier fallen by 1 percent during intraday trading. Against the dollar the sterling lost 0.3 percent against the dollar to trade at $1.5467. The greenback gained 0.9 percent last week while the yen climbed 1.7 percent.

Valentin Marinov who is the head of Group of 10 Foreign Exchange strategy in London at Citigroup Inc said that the poor UK data will continue to weaken the sterling pound. He noted that the reason investors were buying UK’s gilts was because of its AAA rating and since this has been reviewed downwards, the sterling is in a precarious position.

Source: BOE Expected to Expand Stimulus as GDP Shrinks; Pound Dips | Tradervox

 

ECB Will Preserve the Euro By All Means

Tradervox.com (Dublin) – Mario Draghi, the European Central Bank President, indicated in a speech yesterday in London at Global Investment Conference, that the ECB official will do whatever is necessary to preserve the euro. He suggested that the ECB would take measures to intervene in the bond market which has threatened the fourth largest economy in the region. Draghi said that the size of these sovereign debts is hampering the functioning of the monetary policy transmission channel which then put the sovereign debt crisis in countries such as Italy and Spain within the bank’s mandate. The financial market has surged on these comments.

Draghi’s comments have increased the risk appetite in the market pushing commodity related currencies higher against peers. Further, the speech has added on speculations that European Central Bank will act to lower the borrowing cost in Spain after the nation’s bonds rose past 7 percent level, which prompted other nations such as Greece, Portugal and Ireland to seek bailout in the past. The ECB is expected to step up is bond purchasing program which it started in August last year, where it reluctantly bought Spanish and Italian bonds and latter suspended the program in March citing minimal impacts.

According to Chris Scicluna who is the head of Economic Research at Daiwa Capital Markets in Europe said that Draghi comments indicates that bond purchases is on the table for discussion, but noted that any Italian or Spanish bond buying program put in place would be temporary and limited until after the right policies are established. Draghi’s comments sent the Spanish yields higher than 7 percent to 7.69 percent before retreating to 6.91 percent. The euro also increased against the dollar to $1.2318 and the global stocks and commodities increased after Draghi’s speech.

Chris Rupkey who is the Chief Financial Economist in New York at Bank of Tokyo-Mitsubishi Ltd termed this as the “light at the end of the tunnel” as he expressed confidence in Draghi’s speech and the ECB ability to do what Draghi had indicated.

Source: ECB Will Preserve the Euro By All Means | Tradervox

 

Canadian Dollar advances on Draghi Remarks

Tradervox.com (Dublin) – The Canadian dollar climbed to its strongest in more than two months against the greenback after the European Central Bank president Mario Draghi indicated that the central bank would do everything possible to protect the euro, sparking demand for riskier assets. Further, the increase came as world commodities including stocks and crude oil prices increased. The Canadian dollar is set to record a weekly gain against the US dollar this week.

The market has been moved by Draghi’s comment today, which is something Ravi Bharadwaj, a market analyst in Washington at Western Union Business Solution noted in an interview today. He also added that the risk appetite, which is propelling the Canadian dollar, may recede if the ECB fails to back up Draghi’s comments. The Canadian dollar also moved up as the Standard & poor’s 500 Index advanced to by 1.7 percent while crude oil for September delivery increased by the same margin to settle at $90.47 per barrel in New York. Stocks and crude oil are some of the commodities related to the Canadian dollar. Crude oil is Canada’s largest export commodity to the US.

However, as the Canadian dollar was increasing, the Government bonds dropped for a second day, while the ten-year yields increased by six basis points to 1.65 percent. The Canadian dollar, which has risen by 2 percent this year, strengthened past the 50-, 100-, and 200-day moving averages leading to option traders paying less for the protection against the currency declines versus the US counterpart. In analyzing the currency movements, Jeremy Stretch who is the Chief Currency Strategist in London at Canadian Imperial Bank of Commerce, noted that the 100-moving average of C$1.0087 has been a significant level to the market than the 200-day moving average.

The Canadian dollar increased by 0.9 percent against the dollar to trade at C$1.0102 at the close of trading yesterday in Toronto, which is its strongest since May 16.

 

Dollar Trades Low versus Euro Prior to US GDP Report

Tradervox.com (Dublin) – The US dollar was near two-week low against the euro prior to a report expected to show that US economy expanded slowest in a year. Dollar’s demand was also clipped by the gains in global stock yesterday, which increased the demand for riskier assets. The dollar was also down as speculations of a third round of quantitative easing rose in the market. The euro strengthened for the third day against the dollar and the Japanese currency as European Central Bank President Mario Draghi indicated that the bank will do whatever is necessary to protect the euro.

Robert Rennie who is the Chief Currency Strategist in Sydney at Westpac Banking Corp indicated that the market might be headed for a short term risk-on period as there are signs of combined additional stimulus from the Fed and the ECB. The continued release of poor data from the US, has spurred speculations of QE3 while ECB council member has hinted that there are arguments in favor of giving ESM a banking license which would give it unlimited firepower to fight euro zone debt crisis. In addition, Draghi’s comment on commitment to fighting the euro crisis comes just a week after Fed Chairman Ben S. Bernanke indicated that the Fed is looking for ways to address weaknesses in the US economy.

The US Gross Domestic Product report, which shows the value of goods and services produced by the US, is projected to have expanded by 1.4 percent in the second quarter down from 1.9 expansion in the first quarter of the year. The dollar closed the day yesterday in New York at $1.2330 against the euro, which is the weakest it has been since July 10. It was trading at $1.2281 against the euro during the Tokyo trading session today. The dollar is set for a weekly drop against the euro as it has fallen one percent this week. Against the yen, the greenback was little changed at 78.23 from 78.21 yen, it has fallen by 0.3 percent against the yen this week.

Source: Dollar Trades Low versus Euro Prior to US GDP Report | Tradervox

 

South Pacific Currencies Rise on Draghi Sentiments

Tradervox.com (Dublin) – The south pacific currencies increased the most this month against the US dollar after the European Central Bank President Mario Draghi indicated that policy makers will do everything possible to quell the preserve the euro, boosting demand for commodity related currencies. The two south pacific dollars increased as investors increased their bets central bank officials will act by intervening in the bond market to stop the high borrowing cost in countries such as Spain. Spanish two-, five-, ten-, and 30-year yields soured beyond 7 percent yesterday. The Aussie and Kiwi also rose as global stocks and commodities advanced.

Ravi Bharadwaj noted that the considerable gain experienced by the New Zealand dollar is as a result of the risk-on mood sparked by Draghi’s comments. Ravi is a market analyst at Western Union Business Solutions, which is a unit of Western Union Co in Washington. Apart from Draghi’s comments, the south pacific currencies also rose as Standard & Poor’s 500 Index increased by 1.9 percent and the MSCI Asia Pacific Index increased by 0.8 percent. Spanish 10-yar yields rose to a record 7.75 percent, increasing the pressure on ECB to intervene in the bond market.

As Draghi Spoke in the Global Investment Conference in London yesterday, he said that the increasing sovereign-bond yields may drop within the European Central Bank jurisdiction following its intended intervention. He promised that the bank’s interventions will work. The Australian dollar, nicknamed Aussie, surged 1.1 percent against the US dollar to trade at $1.0402 yesterday in New York and later closed lower at $1.0397 which is a 0.9 percent higher than the previous day’s close. The Aussie rose by 0.9 percent against the yen to exchange at 81.32 yen per Australian dollar. The New Zealand dollar was up by 1.8 percent against the US dollar after Draghi’s comment, to 80.30 US cents and closed the day lower at 80.19 cents, which is a 1.6 percent increment from previous day close. The kiwi climbed by 1.7 percent against the yen to trade at 62.72 yen.

 

US Dollar Drops on Risk Appetite Demand

Tradervox.com (Dublin) – The greenback dropped against most of its major peers as risk appetite rose in the market. This was triggered by the Germany’s support of the European Central Bank’s decision to incorporate bond-buying into its efforts to fight debt crisis in the region. The US dollar fell against the yen as a report from the Bank of Japan signaled that the bank may refrain from additional stimulus when they meet this week. The New Zealand dollar rose against the US currency as stocks rose. The Standard & Poor’s 500 Index reached its highest level since May.

According to Michael Woolfolk, the risk-off trading environment is diminishing and investors are comfortable holding higher yielding assets. Woolfolk, who is a Senior Currency Strategist at Bank of New York Mellon Corp in New York, added that the market is already very short euros and overly long dollars. However, the Australian dollar has remained unchanged at $1.0569 as investors wait for the Reserve Bank of Australia decision tomorrow. The market expects the RBA officials to keep the interest rates at 3.5 percent as the economy seems to savor through the current turmoil. The Standard & Poor’s Index rose by 0.6 percent while the MSCI World Index of stocks increased by 0.9 percent.

The greenback dropped by 0.3 percent against the yen to trade at 78.25 at the close of trading yesterday in New York, while it declined by 0.1 percent against the euro to exchange at $1.2401; it had dropped earlier by 0.5 percent to trade at $1.2444, which is the weakest it has been in a month. However, the euro was down by 0.2 percent against the yen to trade at 97.03 after it touched 97.80, its strongest since July 2. The New Zealand dollar rose against the greenback to exchange at 82.24 US cents. This is its strongest since April 30. The kiwi then dropped slightly to trade at 0.1 percent up at 82 cents.

Source: US Dollar Drops on Risk Appetite Demand | Tradervox

 

Yen Remains Strong Prior To BOJ Meeting

Tradervox.com (Dublin) – The yen continued to strengthen against most of its major counterparts as stocks made a global rally, spurring speculation that the Bank of Japan will refrain from embarking on a bond-purchases program when the officials meet tomorrow. The euro increased in demand as Angela Merkel, the German Chancellor, indicated that her government would support the European Central Bank decision to establish a bond buying program to curb crisis in the euro region. In the meantime, the Italian Prime Minister Mario Monti urged the officials to act with urgency to lower the borrowing costs which is threatening Spanish and Italian economies. The Australian dollar also rose to its highest in four months prior to RBA decision where it is expected to keep interest rate at 3.5 percent.

Mike Jones, who is a Currency Strategist in Wellington at the Bank of New Zealand noted that the Bank of Japan is set to keep the policy unchanged. He also added that if the Bank of Japan does not intervene, the dollar-yen pair will continue with a gradual decline in the coming sessions and months. Marc Chandler, who is the Global Head of Currency Strategy at Brown Brothers Harriman & Co, suggested that the BOJ will take a wait and see stance which is also expected to be adopted by the RBA. He noted that the two new board members in the BOJ board will attend their first meeting tomorrow and they are expected to advocate for more unconventional easing programs.

The Japanese currency increased by 0.3 percent yesterday, but has remained unchanged today during the Tokyo trading at 78.27. The yen traded at 97.06 against the euro from 97.03 earlier yesterday. The Australian dollar increased by 0.1 percent against the US dollar to trade at $1.0581; it had reached 1.0593 yesterday, its highest level since March 20. The rise in Australian dollar came as global stocks rose, with MSI Asia Pacific Index rising by 0.5 percent while Japan’s Nikkei 225 Stock Average added 0.7 percent.

Source: Yen Remains Strong Prior To BOJ Meeting | Tradervox

 

Loonie Rises To Three Months High

Tradervox.com (Dublin) – The Canadian dollar was pushed by the rising risk appetite spurred by stocks and crude oil rising prices. The loonie increased to the highest since May against the US dollar as the Canadian business spending advanced more than the market had predicted. Further, the loonie increased as Boston Federal Reserve Bank President Eric Rosengren said that the central bank should take an “open-ended” quantitative easing. The gain also came as Angela Merkel Government indicated that it would support the European Central Bank decision to embark on a bond-buying program as a measure to curb the rising borrowing cost in major economies in the 17-nation trading block.

Talking about the rising investor sentiments, Joe Manimbo who is a Market Analyst at Western Union Co. in Washington said that it has been boosted strong showing in the US economy and speculations that the ECB will soon make a move to quell the debt crisis in euro zone. The Canadian currency also rose as government bonds fell for the second day. The 10-year yield went up by 0.09 percentage point to settle at 1.84 percent. The implied volatility on the dollar-loonie pair rose to 6.36 after it had declined to 6.22 percent on July 20, which is the lowest level it has been since 2007.

According to Camilla Sutton, who is the Chief Currency Strategist in Toronto at the Bank of Nova Scotia said that the announcement by the ECB President Mario Draghi last week has pushed volatility lower. She added that when the risk is a low as it is now, the market is on a risk-on mood and commodity related currencies tend to strengthen against major peers.

The Canadian dollar strengthened by 0.3 percent against the greenback at the close of trading in Toronto yesterday to close the day at 99.70 US cents; it had earlier touched its strongest since May 11 during intraday trading of 99.63 cents.

Source: http://www.tradervox.com/fundamental-analysis/080812/Loonie-Rises-To-Three-Months-High-as-Risk-Appetite

 

New Job Positions in US Increased to 4-Year High in June

Tradervox.com (Dublin) – Job opening in the United States increased to four-year high in June, signaling a that employment in the world’s largest economy may accelerate in the third and fourth quarter of the year. The number of available job positions waiting to be filled climbed to 1.76 million from 105,000, registering the biggest number since July 2008 according to a report from Labor Department released yesterday. The rising need for employees expressed by employers indicates an improvement in company sales, which is a stable ground for increased hiring in the second half of the year. Increased hiring will result to higher consumer spending. According to a Labor Department report last week, payrolls rose in July, more than it had been forecasted while the unemployment in the country rose to five-month high.

Henry Mo, who is a Senior Economist in New York at Credit Suisse, the US economy is growing steadily hence the growing labor demand in the market. He suggested that the economy will grow better when employers convert their intentions to buy into action, which will boost the economy in the second half. The US currency fell against most peers as the risk appetite grew in the market with Standard & Poor’s 500 Index rising higher for the third day straight. The index rose 0.7 percent t0 1,403.41 just before noon in New York yesterday.

The risk appetite in the market has been spurred by positive reports from Australian where the Reserve Bank of Australia held its interest rates at 3.5 percent. Further, the Swiss National Bank indicated that its foreign reserve has grown in July as policy makers took new steps to enforce the euro cap.

The Job Openings report released yesterday shed some light on how the monthly employment figures will look like this month. The report indicated that there were more openings in leisure and hospitality industry such as hotels and restaurants, but manufacturing and health services also increased steadily.

Source: New Job Positions in US Increased to 4-Year High in June | Tradervox

 

Euro Down as Speculation of Contagion Rises

Tradervox.com (Dublin) – The 17-nation currency has weakened against most majors following a drop in German Industrial production and poor UK growth forecasts. In addition, Spain and Italy were lowered in their credit ratings hence causing concerns that the debt crisis is spreading.

The Great Britain pound advanced against the euro to a more than a month high after Marvyn King, the Bank of England Governor, indicated that cutting the interest rates may be counterproductive. This dampened speculations that the BOE would reduce borrowing cost to boost economic growth in the country. Talking about the euro, Brian Kim, a Currency Strategist in Stamford, Connecticut at Royal Bank of Scotland Group Plc said that the looking at the euro from a medium-term point of view, people are looking for economic divergence between Europe and the rest of the world which is keeping the market negative about the euro. He predicted that this might continue for the next three quarters. According to Kathleen Brooks, who is a Research Director at Forex.com in London, the euro might drop to as low as $1.2280 in the coming week.

These comments have come at a time when the euro dropped by 0.3 percent against the dollar at the close of trading in New York to trade at $1.2365, the 17-nation currency had advanced to $1.2444 on August 6, which is the strongest it has been since July 5. The euro also depreciated by 0.5 percent against the yen to exchange at 96.97 yen. The Japanese currency climbed against the dollar to trade at 78.43 per dollar, which is 0.2 percent higher than it close the previous day.

Neil Jones, who is the head of European hedge-fund sales at Mizuho Corporate Bank Ltd have forecasted doom for the euro, saying that it may drop to parity in the next one year. Another currency strategist Neils Christensen noted that there is a lot of focus on safe haven currencies which is leading to a weak euro. Neils indicated that investors are choosing safe haven currencies.

Source: Euro Down as Speculation of Contagion Rises | Tradervox

12345
New comment
Reason: