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Wednesday update… Forex volatility continues in the doldrums

April 18, 2012 Daily Comment No Comments

Apparently forex trading is not yet ready to join the party and with equity markets much more buoyant currency markets remained lacklustre. The US dollar refused to buckle much and EUR/USD which had previously found life under 1.30 very short was the same over 1.3150 although we did hit 1.3174 as a few stops were triggered. Even Spanish bonds played their part ,yields back under 6% for 10 years following an ok short term auction. This morning we are back at 1.31 with slightly weaker European shares a good excuse. There seems to be plenty of business its just two way at the moment. With little else to believe in we will stick with the view that when it comes, the big move will be down.

USD/JPY has been the biggest mover overnight, the Yen weaker by 0.5% at USD/JPY 81.30 helped by the Nikkei stock index, up over 2% as a follow on to US and European markets.

It seems that the ECB is beginning to get some pressure put on it ahead of G 20 meetings. German press reports French socialist Hollande calling for more scope for ECB actions and the IMFs Lagarde arguing the ECB has scope to aid growth ( says they could cut rates and use unconventional methods). Scope seeming to be the in word but it remains doubtful that the ECB and particularly the Germans will allow any deviation from the set ECB mandate. This morning Sarkozy ( who will lose) is calling for a lower Euro and Hollande has reiterated his commitment to renegotiate the EU budget compact. No real effect on forex markets but it seems that Spain ,Italy and a new French government may form quite a lobby to ease up on austerity in the months ahead. That has big potential for problems with core EZ countries ( I exclude France) and the ECB. Surely a big Euro negative.

Absolutely no ideas for todays trading so maybe I should head for the beach. Oh bother its raining in Spain

Headlines

Spain.. 1 year and 18 month auction ok but at higher rates. Problems within Spain continue. Cuts to regional education budgets are being challenged with the Catalan government threatening to go to the constitutional court. With 2 children at school I welcome that.
IMF… Plenty of comment from Mme Lagarde as she hopes to raise an additional $400 billion for the IMF. It seems clear that there still remains a reluctance to give more ( particularly the US) while the Eurozone has failed to stump up a meaningful firewall itself.
UK… March CPI + 0.3 (YoY 3.5%) as expected
Germany..ZEW April German economic sentiment index 23.4, ( expected 20.0) .. They believe things are stabilizing, well in Germany they may be.
US… Industrial production flat, +0.3% expected.
Australia..According to the IMF Australia will be the star performer of Industrialised countries for the next 2 years. AUD/USD holds near 1.04 up against the Yen
Canada..Bank of Canada keeps rates unchanged but thinks rate hike may become appropriate.. Its got to be Canada or Australia if you are leaving Europe for a job
Japan..Bank of Japan deputy governor says BOJ will take additional steps if needed.. Well do something

Footnote…

My 83 year old mother who lives in England tells me she is not voting in up and coming local elections. The first time in 62 years she finds she cannot put a cross next to any party. Its a reflection how politicains in the whole of Europe ( add US & Japan) have let voters down. Whats more there is no end in sight to the massive problems that exist.

Thursday update… Weaker equities halt dollar and Yen sell-off

March 29, 2012 Daily Comment No Comments

With stocks softer again yesterday and overnight and little else to excite markets the US dollar and Yen recovered. Nothing spectacular again but a few lower days in a row for equities. Of course everything gets blamed on month end book adjustments so we will see. There has been nothing in the way of a good shake out which might play a bigger part in forex markets.

The upshot was EUR/USD drifted lower most of the day to 1.3277 before bouncing to 1.3330 where we are now. The Japanese Yen has seen more action overnight strengthening against all to USD/JPY 82.40 from 83 and back under 110 against the Euro. Asian trade also saw Australian dollar selling against the Yen.

So no great clues today what fails to go up may go down or vice versa which is my way of saying clueless. If you can eak 50 pips out of the day then well done.

Expecting more from the EZ as discussion on the ´firewall`increases. Germany still makes all the calls despite a chorus from others to beef up the fund. They still bang the drum on deficit cutting in preference which as we know is sapping the life out of southern Med countries

US durable goods orders at +2.2 vs. +3 expected sent equities lower yesterday but generally US data remains the best site for any good news.

Headlines

Greece… We miss you…. IMF Thomson says Greece has done well on structural reforms and thinks there is no more scope for austerity measures. He reiterated that it could take 10 years or more to adjust. Standard & Poor’s thinks Greece will face another credit event.
Spain.. Oh dear..Confirmation from the Spanish economy minister that Q1 growth will be negative, following a negative Q4 of 2011.. And a National Strike today. I know of a crowd of Irish golfers due in Spain today now losing a days drinking,partying and golfing is no good for anyone.
BRICs.. The so called BRIC countries ( Brazil, Russia, China & India) together with other emerging countries are holding their 3rd annual conference. They have taken to lecturing the West on many things not least currency manipulation… Well they should know on that one.
EU.. A draft statement says firewall to grow to 940 billion although its seems that will be from the 700 billion base the rest will be done by mirrors and string I guess
Japan.. Retail sales +3.5% against 1.3% expected.. That’s pretty punchy maybe the Japanese are getting fed up with the 0.5% the Japanese government pays them on bonds

Volatility is sliding in forex markets but something will turn up for sure.. We head towards elections in Greece and France so that’s going to be fun