Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook
Last week before the Thanksgiving holiday, we wrote that the Fed gave the market an excuse to sell dollars by speaking of the US dollar’s decline as “orderly.” It’s not clear (and probably never will be) whether the Fed actively wants a lower dollar or was simply accepting a fact of life - that until it raises rates, the US dollar rate will fall. To give the Fed its due, it was probably unhappy about the dollar becoming a safe-haven play last week and Fed officials no doubt huddled with BoJ officials and their Treasury - MoF counterparts on whether to intervene. It seems clear from the incoherent and inconsistent statements from Japanese officials that the US declined to participate.
It’s hard to say whether the Dubai story will become a bigger contaminant of all emerging markets or a one-time aberration. At a guess, it’s a one-time thing and the UAE, which has ambitious plans for the region to become a financial center rivaling New York and London, will fix it quickly and quietly, and we can all go back to worrying about China. Dow Jones has a story that the UAE may guarantee the Dubai World debt, all of it. This would be better than the bank liquidity plan already offered. If so, safe-haven flows into the yen will be short-lived, too.
The Dubai saga reminds us once again that the world can always deliver a Shock and on the whole, Shocks are US dollar exchange rate -favorable because they inspire an emotional safe-haven impulse. Something that is a lot less clear is the effect of underlying fundamentals on trading activity. We tend to complain that traders are short-sighted and interested only in their own bottom line, not first-class economic analysis (which is why first-class economists are lousy forecasters and worse traders). But foreign exchange traders have one characteristic that puts them back in the real economic world, and that is penchant for pointing out that the emperor is not wearing any clothes. In today’s market, we say the naked emperor is the Swiss franc, which breached parity last
Wednesday before the holiday at 0.9911. On Friday it bounced, hard, to 1.0076 and this morning it’s back to 0.9990. As we have noted before, Switzerland is always more expensive than its neighbors, but parity with the dollar is, economically, ridiculous. At some point the Swiss franc will be seen as overbought and then watch out.
This week is full of scheduled events, including retailers reporting on Black Friday, vehicle sales, the Bernanke hearing, another 10-year auction announcement, and more - but the biggie, as always, is payrolls on Friday. We don’t have forecasts yet but they will start coming today and up to Wednesday’s ADP Macro release for the private sector. With the UK fretting about a double-dip recession, should the US be fretting, too? Probably not, because there is still plenty of undisbursed stimulus money to be spent, even if Q3 GDP data still overstates the recovery so far, as most economists think.
Some politically-minded analysts say the Obama administration has until March to get employment up or the mood will turn decisively down, and mood counts. We are not so sure, since all the forecasts are for employment to keep falling for longer than March. So, perhaps the payrolls report will not have as big an effect this time, and retail sales will be a bigger factor. So far we know more people went shopping but they spent less per head than last year, not a big help, analytically. Clothes are not of interest but electronics and toys are hot. We continue to find it really weird that the US shopper is setting the tone for the global economy.
At a guess, the US dollar rates will resume its downtrend and the biggest winners will be the currencies that got the knee-jerk sell-off, especially the New Zealand Dollars and the Australian Dollars, but the charts are very scary. We could issue a sell signal in the Australian Dollars to Japanese Yen, for example, based on our rules. We didn’t do it because the end of last week was extraordinary, but were the market darlings to lose favor, we could get a re-shuffling of the deck that could (at least temporarily) favor buying US dollars.
Bye for Now
Barbara Rockefeller
Foreign Exchange Trading
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Monday, November 30, 2009
Thursday, November 12, 2009
We consider the Australian Dollar exchange rate outlook the canary in the coal mine,
Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook
The euro exchange rate is falling this morning from yesterday's high at 1.5050, which was hit ahead of the US open. We can see on the charts that many currencies, including the euro, closed down yesterday from the open and well off the high, with the euro rate and Swiss franc actually closing at the low or near it. This was a warning sign for today, and sure enough, the euro exchange rates has dipped so far to 1.4918 (at 7:30 am ET).
One report says that a large amount of euro to us dollars options at 1.5000 are due to expire today and players are pushing the euro down to avoid paying out. Market News reports that slipping European stocks this morning took the edge off the euro, while the euro also "came under pressure from Russian sales which helped to knock the pair down around 80-points to lows under $1.4930." Market News also names "East Europeans" as sellers with German names adding weight before running into Asian demand during the European morning.
Explanations for the euros downmove range from the mundane (the options) to the sublime (Chinese revaluation, oil prices).
At a guess, this is a consolidative move rather than an outright reversal, but there are some worrying aspects to it. For one thing, the high yesterday failed to match, surpass and hold the high at 1.5063 from Oct 25. Thirteen points isn't much of a shortfall but it’s still a "failure." Another issue is that so many traders like Fibonacci numbers that it would be negligent not to calculate them. On the 6-hour chart, we get a 50% retracement to 1.4840 and a worst-case 62% retracement at 1.4789. These levels could be reached without scaring the horses but any more would create a new environment.
The trigger for such a new environment might be the Chinese actually changing from the de facto dollar peg to a basket, as suggested in yesterday's People's Bank report. Most commentary says this is not a realistic expectation until the middle of next year, but the probability is not zero for such an Announcement at the APEC summit or next week after the Obama visit. Obama has said he is taking the currency issue very seriously and it will be discussed directly (along with other trade and finance issues).
A second idea is that when we get the US oil inventory report today, foreign exchange traders will take seriously that the risk of rising oil is so dire for economic recovery that some government somewhere may do something about oil becoming a "security" and alternative asset. We have a fresh warning from the International Energy Agency to that effect, with some additional analysts saying the price of oil is the whole ballgame for recovery. A return to bubble levels would stop the recovery dead in its tracks. This argument has a lot of emotional appeal and has the added virtue of being largely correct. The question is whether government interference is realistic (it’s not) or that enough speculators think it might be (possible).
But real economic events are still drivers, too. The Australian dollar jumped over 100 points to 0.9371 on release of the employment report (a rise of 24,500 when a drop of 10,000 had been forecast). Foreign Exchange Traders immediately jumped the conclusion that the RBA can raise rates a third time in December, even though it has never done three in a row before. It’s interesting that the Aussie Dollar has now given back all of the gain and lost a bit more from the US close yesterday. We consider the Australian Dollar exchange rate outlook the canary in the coal mine, leading the euro for reasons we have never nailed down.
The pound remains under pressure, evidently on BoE Gov King talking it down yesterday. The yen rose against everything as a bit of a safe-haven after Chinese Premier Wen Jiabao said “The worst is over. The global economy is starting to recover but a total recovery will be a slow and bumpy process.” According to Bloomberg, among others, this was taken to mean a safe haven might be needed. One analyst (Mitsubishi) says the yen is headed straight for 85 again, but this source has a tendency to draw straight lines off the smallest of moves. The latest weekly capital flow report from the Japanese MoF shows that Japanese investors are buying foreign bonds and equities for a total of ¥332.1 billion) while foreigners were net sellers of Japanese bonds and equities but buyers of money market instruments for a new outflow of ¥431.3 billion.
This doesn’t support a rising yen but it’s for last week, not this one.
Bye for Now
Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial
Buying Euros? Buy Euros at the best euro Rates! Get a quote for Buying Euros now!
Buying Dollars? Buy US Dollars at the Best Dollar Rates! Get a quote for Buying Dollars Now!Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates! Get a quote for Buying Australian Dollars Now!
Need to Buy Holiday Money? Buy Travel money at the best exchange rates visit http://www.travelfx.co.uk/ and save on your travel and holiday money needs
Contact IMS Foreign Exchange + 44 207 183 2790
The euro exchange rate is falling this morning from yesterday's high at 1.5050, which was hit ahead of the US open. We can see on the charts that many currencies, including the euro, closed down yesterday from the open and well off the high, with the euro rate and Swiss franc actually closing at the low or near it. This was a warning sign for today, and sure enough, the euro exchange rates has dipped so far to 1.4918 (at 7:30 am ET).
One report says that a large amount of euro to us dollars options at 1.5000 are due to expire today and players are pushing the euro down to avoid paying out. Market News reports that slipping European stocks this morning took the edge off the euro, while the euro also "came under pressure from Russian sales which helped to knock the pair down around 80-points to lows under $1.4930." Market News also names "East Europeans" as sellers with German names adding weight before running into Asian demand during the European morning.
Explanations for the euros downmove range from the mundane (the options) to the sublime (Chinese revaluation, oil prices).
At a guess, this is a consolidative move rather than an outright reversal, but there are some worrying aspects to it. For one thing, the high yesterday failed to match, surpass and hold the high at 1.5063 from Oct 25. Thirteen points isn't much of a shortfall but it’s still a "failure." Another issue is that so many traders like Fibonacci numbers that it would be negligent not to calculate them. On the 6-hour chart, we get a 50% retracement to 1.4840 and a worst-case 62% retracement at 1.4789. These levels could be reached without scaring the horses but any more would create a new environment.
The trigger for such a new environment might be the Chinese actually changing from the de facto dollar peg to a basket, as suggested in yesterday's People's Bank report. Most commentary says this is not a realistic expectation until the middle of next year, but the probability is not zero for such an Announcement at the APEC summit or next week after the Obama visit. Obama has said he is taking the currency issue very seriously and it will be discussed directly (along with other trade and finance issues).
A second idea is that when we get the US oil inventory report today, foreign exchange traders will take seriously that the risk of rising oil is so dire for economic recovery that some government somewhere may do something about oil becoming a "security" and alternative asset. We have a fresh warning from the International Energy Agency to that effect, with some additional analysts saying the price of oil is the whole ballgame for recovery. A return to bubble levels would stop the recovery dead in its tracks. This argument has a lot of emotional appeal and has the added virtue of being largely correct. The question is whether government interference is realistic (it’s not) or that enough speculators think it might be (possible).
But real economic events are still drivers, too. The Australian dollar jumped over 100 points to 0.9371 on release of the employment report (a rise of 24,500 when a drop of 10,000 had been forecast). Foreign Exchange Traders immediately jumped the conclusion that the RBA can raise rates a third time in December, even though it has never done three in a row before. It’s interesting that the Aussie Dollar has now given back all of the gain and lost a bit more from the US close yesterday. We consider the Australian Dollar exchange rate outlook the canary in the coal mine, leading the euro for reasons we have never nailed down.
The pound remains under pressure, evidently on BoE Gov King talking it down yesterday. The yen rose against everything as a bit of a safe-haven after Chinese Premier Wen Jiabao said “The worst is over. The global economy is starting to recover but a total recovery will be a slow and bumpy process.” According to Bloomberg, among others, this was taken to mean a safe haven might be needed. One analyst (Mitsubishi) says the yen is headed straight for 85 again, but this source has a tendency to draw straight lines off the smallest of moves. The latest weekly capital flow report from the Japanese MoF shows that Japanese investors are buying foreign bonds and equities for a total of ¥332.1 billion) while foreigners were net sellers of Japanese bonds and equities but buyers of money market instruments for a new outflow of ¥431.3 billion.
This doesn’t support a rising yen but it’s for last week, not this one.
Bye for Now
Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial
Buying Euros? Buy Euros at the best euro Rates! Get a quote for Buying Euros now!
Buying Dollars? Buy US Dollars at the Best Dollar Rates! Get a quote for Buying Dollars Now!Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates! Get a quote for Buying Australian Dollars Now!
Need to Buy Holiday Money? Buy Travel money at the best exchange rates visit http://www.travelfx.co.uk/ and save on your travel and holiday money needs
Contact IMS Foreign Exchange + 44 207 183 2790
Wednesday, November 11, 2009
foreign exchange traders is out gunning for Pounds sterling
Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook
The euro exchange rate closed yesterday just under the magic round number at 1.4991 after hitting the high at 1.5021 before the US open, suggesting US traders were slow to jump on the bandwagon. The best euro rate made a new high at 1.5050, again overnight, on good data from Japan and China and despite a strong dollar policy statement in Tokyo from Treas Sec Geithner.
The change in attitude toward gold is interesting. You can’t follow currencies without knowing something about gold, and the only time when it was not dominated by ideologues and true believers was the run-up to over $800 in 1979 and 1980. Speculators joined the party then and are joining it again now, although this time gold is "just another commodity." According ot the FT, spot gold prices rose as high as $1117 before falling back.
Another curious development is in Pounds sterling exchange rates, which fell from 1.6754 to 1.6599 in a single hour yesterday on the news that Fitch sees the UK as potentially facing a sovcereign ratings downgrade (but probably escaping that fate upon fixing the deficit after the spring election). Pound to us dollars recovered yesterday after that shock and rose steadily, spiking to a level higher than the pre-Fitch level at 1.6799. But then it put in a giant downmove, again in a single hour, to 1.6625. Find an hourly chart if you can. Seldom can we see so clearly when a gang of foreign exchange traders is out gunning for sterling.
But the news from the UK is mixed. Job losses were less than expected, which was sterling-favorable. The Bank of England’s Quarterly Inflation Report said the CPI will average about 1.6% for the next two years, interpreted as meaning the Bank will keep rates on hold all year next year - and sterling-negative. But near-term, the BoE inflation forecast is for a possible pop over target. By now the market was weary of lobbing balls back and forth, and then Gov King spoke about 27 topics, among which was the observation that a weak currency has been of benefit to the economy, and that was the only thing the market heard.
Bye for Now
Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial
Buying Euros? Buy Euros at the best euro Rates! Get a quote for Buying Euros now!
Buying Dollars? Buy US Dollars at the Best Dollar Rates! Get a quote for Buying Dollars Now!Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates! Get a quote for Buying Australian Dollars Now!
Need to Buy Holiday Money? Buy Travel money at the best exchange rates visit http://www.travelfx.co.uk/ and save on your travel and holiday money needs
Contact IMS Foreign Exchange + 44 207 183 2790
The euro exchange rate closed yesterday just under the magic round number at 1.4991 after hitting the high at 1.5021 before the US open, suggesting US traders were slow to jump on the bandwagon. The best euro rate made a new high at 1.5050, again overnight, on good data from Japan and China and despite a strong dollar policy statement in Tokyo from Treas Sec Geithner.
The change in attitude toward gold is interesting. You can’t follow currencies without knowing something about gold, and the only time when it was not dominated by ideologues and true believers was the run-up to over $800 in 1979 and 1980. Speculators joined the party then and are joining it again now, although this time gold is "just another commodity." According ot the FT, spot gold prices rose as high as $1117 before falling back.
Another curious development is in Pounds sterling exchange rates, which fell from 1.6754 to 1.6599 in a single hour yesterday on the news that Fitch sees the UK as potentially facing a sovcereign ratings downgrade (but probably escaping that fate upon fixing the deficit after the spring election). Pound to us dollars recovered yesterday after that shock and rose steadily, spiking to a level higher than the pre-Fitch level at 1.6799. But then it put in a giant downmove, again in a single hour, to 1.6625. Find an hourly chart if you can. Seldom can we see so clearly when a gang of foreign exchange traders is out gunning for sterling.
But the news from the UK is mixed. Job losses were less than expected, which was sterling-favorable. The Bank of England’s Quarterly Inflation Report said the CPI will average about 1.6% for the next two years, interpreted as meaning the Bank will keep rates on hold all year next year - and sterling-negative. But near-term, the BoE inflation forecast is for a possible pop over target. By now the market was weary of lobbing balls back and forth, and then Gov King spoke about 27 topics, among which was the observation that a weak currency has been of benefit to the economy, and that was the only thing the market heard.
Bye for Now
Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial
Buying Euros? Buy Euros at the best euro Rates! Get a quote for Buying Euros now!
Buying Dollars? Buy US Dollars at the Best Dollar Rates! Get a quote for Buying Dollars Now!Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates! Get a quote for Buying Australian Dollars Now!
Need to Buy Holiday Money? Buy Travel money at the best exchange rates visit http://www.travelfx.co.uk/ and save on your travel and holiday money needs
Contact IMS Foreign Exchange + 44 207 183 2790
Monday, November 9, 2009
Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook
Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook
The euro exchange rate rose over 1.5000 around 5 am ET today for the first time since Oct 26 as the market voted with its feet on the unemployment rate Friday and the failure of G20 even to mention Foreign Exchange and specifically the yuan. Reuters says "G20 leaves door open for fresh pressure on dollar rate," pointing out that Brazil (and Canada) had said ahead of the summit that they would bring it up.
The euro exchange rate rose over 1.5000 around 5 am ET today for the first time since Oct 26 as the market voted with its feet on the unemployment rate Friday and the failure of G20 even to mention Foreign Exchange and specifically the yuan. Reuters says "G20 leaves door open for fresh pressure on dollar rate," pointing out that Brazil (and Canada) had said ahead of the summit that they would bring it up.
The FT says "Furthermore, a report from the International Monetary Fund also weighed on the US dollar rate as it named the US unit as the currency of choice for funding carry trades, in which low-yielding currencies are sold to fund the purchase of riskier, higher-yielding assets elsewhere. The report said that while the dollar had depreciated in recent months, it still remained on the ‘strong’ side.”
Bloomberg elaborates a bit more on the IMF report, which was published just as G20 was meeting. “There are indications that the U.S. dollar is now serving as the funding currency for carry trades. These trades may be contributing to upward pressure on the euro and some emerging-economy currencies.” Bloomberg reports "While the dollar [in real effective terms]'has moved closer to medium-run equilibrium,' it is still 'on the strong side.'"
The IMF also says the euro exchange rate “is on the strong side of its equilibrium.” Hello? How can the dollar be on the strong side and the euro be on the strong side, too? The IMF doesn’t view the ever-changing market price of the euro/dollar as the benchmark and is using other measures, based on baskets, to derive “real effective terms.” This may be fine for ivory-tower economists but is not at all good for an agency that should have a higher sensitivity to the real world. Finally, the IMF said the yuan “has depreciated in real effective terms in tandem with the U.S. dollar and remains significantly undervalued from a medium-term perspective.”
In a word, bah.
Pounds Sterling exchange rate is rising strongly this morning, to over 1.6800, on a story that Kraft has until 5 pm ET today to increase its offer for Cadbury. M&A has often been a driver of the pound in the past. In dollar/yen, though, Friday’s big drop (from 90.75 to 89.59) has not been matched so far today. Still, it’s a breakout under the previous intermediate lows and we now await whether it also surpasses the Nov 1 low at 89.17.
Bye for Now
IMSFX and Travel FX
Buying Euros? Buy Euros at the best euro Rates! Get a quote for Buying Euros now!
Buying Dollars? Buy US Dollars at the Best Dollar Rates! Get a quote for Buying Dollars Now!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates! Get a quote for Buying Australian Dollars Now!
Need to Buy Holiday Money? Buy Travel money at the best exchange rates visit
www.travelfx.co.uk and save on your travel and holiday money needs
Contact IMS Foreign Exchange + 44 207 183 2790
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