Euro exchange rate needs to match and hold the end-Oct high at 1.3300 to believe that the dollar rally is really over

Foreign Exchange Outlook : The US dollar is starting to make some gains this morning after losing 648 points in the euro exchange rate from last week to yesterday morning (1.2433 last Friday to 1.3081 at 9 am yesterday). This could be a function of the foreign exchange traders buying euros to an overbought level ("too far, too fast"), in which case it’s a correction that reaches support around 1.2860 and a 50% retracement around 1.2760.

That’s if the euro rate upside breakout is the real deal, which is the outcome we get in two of three model systems.

If the euro move up was itself a correction of the bigger and longer-lasting euro downtrend, we may have seen the end of the correction. How you see it depends on the timeframe of the chart you are looking at. In the model system shown in the charts in this report, we do not yet have a true upside euro breakout, although it’s pretty scary. Looking beyond the euro, we see prices crossing over the short-term moving average, linear regression, or previous intermediate high in many cases.

One thing that a lot of analysts agree on-we need to see the euro exchange rate match and hold the end-Oct high at 1.3300 to believe that the dollar rally is really over. The high yesterday was 1.3081, or about 220 points under the benchmark. We would need to see it get hit and held before next Monday, which is going to make the rest of this week and Sunday night a fingernail-chewing, hand-wringing ordeal. The US closes shop early today for the Thanksgiving Day holiday tomorrow and while banks are open on Friday, it’s another short day. So here’s the question: do the Asian and European markets have the guts to set the trend in the absence of the US?

Market News sums up the situation neatly: "Foreign exchange market players do not trust the stock market rally seen last Friday and Monday, and therefore have little faith that the gains seen this week in the euro, sterling, Australian Dollars and Canadian dollars will be sustainable. The rise in stocks was being viewed as a "bear market correction," with renewed equity slippage likely when the rally has ended." According, the dollar exchange rate should come back up when these markets fall back down.

A second factor is emerging - old-fashioned fundamentals. For once we are seeing the Foreign Exchange market react to economic data and institutional responses to the economic crisis and not only knee-jerk reactions to developments in related markets like stocks, the so-called risk aversion theory of exchange rate determination. Pounds Sterling, for example, is well down from its high of 1.5534 yesterday to a low of 1.5290 so far on the 0.5% drop in Q3 GDP and associated gloomy data that reinforces the prospect of some big rate cuts to come.

Risk aversion still has a good grip, though, and as usual, it can be seen best in the Japanese yen. Dollar vs Japanese yen slumped from the Monday high at 97.42 to 95.45 at the US close yesterday and thence to 94.69 overnight, although it’s bouncing upward ahead of the US open. Sterling to Japanese yen is right on its hand-drawn support line on the hourly chart and probably breaking it today. A 50% retracement would take sterling down to 143,10 from the high of 148.61 yesterday. Euro to Japanese yen is also floppy, having run up from 116.39 last week to 126.24 on Monday. So far it has touched the 38% retracement at 122.48 and may do it again today, in which case the expectation would be for a further correction to 121.32 (50%).

This doesn’t make the Japanese yen a runaway or a screaming buy. If Foreign Exchange Traders like what they see as a necessary and sufficient government response to crisis - i.e., if confidence is at least partly restored, the US dollar will be rejected as the safe haven as Forex traders feel comfortable taking on more risk. The yen will get sold as the other half of carry trades into the higher yielders.

But Market News Asia reports this morning that "The failure of Asian stocks to continue their recent rally led to concerns among investors, who then cut positions inyen crosses. UBS said "At present we continue to see firm market demand forsafe-havens and the general flight to liquidity remains intact and there doesnot appear to be any shift in the perception of U.S. paper to serve this purpose. In addition, the overwhelming force of de-leveraging is firmly in place,especially in a weak growth environment."

Confused? You’re not alone.

Seeing the dollar/yen or any other yen cross rates a barometer of risk aversion or risk appetite is not working out too wellthese days.

Bye For NowBarbara Rockefeller
Foreign Exchange Trading
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Berlusconi government will announce a €80 billion stimulus package

Euros Exchange Rate Outlook: German import prices fell 3.6% m/m in Oct, the most since records began in 1962. Import price inflation is just 2.9% y/y, the lowest in a year.

The EU is going to reveal a region-wide stimulus plan today, but the FT carries a confusing story on it that doesn’t contain any hard information other than that the EU will not follow the UK in cutting VAT. Bits and pieces are dribbling out. On Friday, the Berlusconi government will announce a €80 billion stimulus package, with an emphasis on employment. This week Sarkozy promised the French auto industry that he wouldn’t let them down.

French consumer confidence rose today while business confidence crashed yesterday. INSEE’s French revised consumer confidence index rose to -43 from -46 in Oct, a 6-month high. The Italian business confidence index dropped to 72.2 from a revised 76.9 in Oct, a 15-year low.

Euro Pounds exchange rate currently 0.8400

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Bank of England will cut interest rates to 2.5% at the Dec 4 policy meeting

Pound Sterling Exchange Rate Outlook : GDP fell 0.5% in Q3 from Q2, the fist drop in 16 years, although as expected. Consumer spending led the way, down 0.2% (the most since 1995) and fixed investment fell a whopping 2.4%. On the year-over-year basis, consumer spending rose 1.1%, though. This is the least since 1995 but not negative. The GDP report results in revisions to previously reported data like industrial production, now seen down 1.1%, and manufacturing, down 1.3%, in both cases worse than –1% initially reported. Construction fell 0.7%, less bad than -0.8% in the initial report.

Bloomberg points out that unemployment rose at the fastest pace in 16 years in Oct and jobless benefits are being paid to the highest number of people since 2001, while inflation fell the most in 11 years (to 4.5%). Therefore, the BoE will cut rates to 2.5% at the Dec 4 policy meeting, according to the consensus forecast.

Pounds to Euros 1.1905
Pounds to Dollars 1.5348
Pounds to Australian Dollars 2.3440

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Barbara Rockefeller
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Spanish and French Interest Rates to Fall by 1 percent?

Euro Exchange Rate Outlook : The IFO Nov index of the business climate fell more than forecast to 85.8 from 90.2 in Oct, the lowest in nearly 16 years (Feb 1993). The “current assessment” fell to 94.8 from 99.9 in Oct, while "business expectations" fell to 77.6 from 81.4 in Oct. IFO’s Nerb said he doesn’t expect a rapid increase in unemployment, although there will be some, and he expects the ECB to interest cut rates by 100 bp.

In economic data, eurozone new industrial orders for Sept fell 3.9% m/m and 1.1% y/y.

On Friday, the flash estimate of manufacturing PMI fell to 36.2 in November from 41.1 in Oct and an estimate of 40.5. Today Bini-Smaghi said the eurozone was holding up pretty well and the new euro exchange rates level was pretty good for exports.

We don’t quite know what to make of such remarks.

Barbara Rockefeller
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Foreign Exchange Outlook for the Pound Sterling

Foreign Exchange Outlook for the Pound Sterling : PM Brown has said monetary policy is not the only tool and it’s time to engage fiscal policy. The FT has a hysterical headline about Chancellor of the Exchequer Darling targeting the rich with a new 45% top tax rate to offset what will be massive government spending, together with a cut in the VAT of £12.5 billion to goose consumer spending. Darling presents a “pre-budget report” to Parliament today. Bloomberg says it will entail new bond issuance of £138.1 billion (an all-time high).

The NIESR says the UK economy will grow only 0.8% this year and will shrink by 1.5% in 2009 for 6 consecutive quarters of contraction. It recommends injecting around 10% of GDP into the banking sector (from 2.5% so far) and cut rates by 100 bp (or more). It advises a stimulus boost of £30 billion, or 2% Of GDP.

Pounds to Euros last 1.1720
Pounds to us dollars last 1.5098
Pounds to Australian Dollars last 2.3300

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Spanish Mortgage Rates to fall?

Euro Exchange Rate Outlook : It’s not clear that the ECB is on board with the themes of the day (deleveraging, deflation and downsizing). Yesterday Trichet said "I do not exclude that we will continue to decrease euro interest rates, if we have confirmation of the alleviation of risks to price stability." In other wrods, he wants everybody to think inflation is still the top priority and the bank needs proof it is falling before it will cut rates. Is now the right time to be trumpeting price stability as the only priority? The WSJ cites several foreign exchange analysts who say the ECB is moving too slowly. The Fed and Bank of England have moved much faster ,which is deemed appropriate for recession conditions. But the ECB points out that with the interbank market seized up, a cut doesn’t have much effect on activity. Still, the bank is expected to cut the first week of December by 50 bp to 2.75% and by as much as 75 bp by end-March.

Pounds to Euros currently 1.1950 to buy euros

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Barbara Rockefeller
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US dollar exchange rate is a little stronger against the pound and euro

Foreign Exchange Outlook : The US dollar exchange rate is a little stronger against the majors but continuing to slide against the japanese yen, albeit not yet to the crash-scenario level. The euro rose yesterday morning to a peak of 1.2761 around noon, but fell back into the close to 1.2641 and to 1.2570 overnight. Market News reports that a “major Dutch name” was behind the drop. Then the rest of Europe came in this morning around 4 am EST and pushed it up a bit.

More interesting is the US dollar to Japanese yen. From just over 100 near the beginning of the month (Nov 4), the US dollar to Japanese yen has slid progressively lower to 95.98 at 7 am this morning, punctuated by a spike to 94.44 last week. Conventional wisdom has it that the Japanese yen is destined to return to the low and beyond it to 90 or 85. The reason is that the Japanese yen is a safe haven for those to whom the yen is the home currency and those who seek refuge from riskier and higher yielding currencies/assets. Some currency analysts also hold the view that Japan will outperform the US and Europe in the current crisis, which is the triumph of hope over experience. The government said today that it will consider a bigger, second stimulus (when we don’t have clarity on the first stimulus plan).

But near-term, we see a hand drawn technical support line at 94.64 on the hourly chart, so we are in “prove-it” mode. Another facto rears its ugly head intervention by the BoJ, which some observers expect with full confidence if the yen hits 90. If the BoJ were not to sterilize intervention proceeds, money supply would rise, which is probably not a bad thing in the context of Japan’s contracting economy.

Pound Sterling continues to get a lift from profit-taking and some buying Pound Euros on the sense that it had been terribly oversold, but it lacks any real momentum in its own right. As for the oversold story, consider that it was at 2.0150 in July and fell to the new lowest low of 1.4555 last Thursday. A rebound to just over 1.5000 is not abnormal in light of such a crash, even if unsupported by the bad data released yesterday and universal expectations of huge rate cuts yet to come, perhaps another 200 bp. Market News notes that sterling buyers yesterday included Asian central banks. But a technical rebound has technical boundaries. Sure enough, the pound peaked right at the linear regression trendline on the hourly chart overnight (1.5090) and may be dipping now.

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Barbara Rockefeller
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More Interest Rate Cuts for the UK as deflation takes hold

Pound Sterling Outlook : The deflation scare is upon us, perhaps a little ahead of schedule. The UK reported that Oct CPI fell 0.7% m/m to an annualized 4.5%--from 5.2% in September. The retail price index (includes mortgage costs) also fell from 5% annualized to 4.2%. A RBC Capital currency analyst quoted in the FT says inflation has turned the corner and is now so accerlated that the UK risks CPI under 1% by the second half of next year. “With the risk of outright deflation therefore on the rise, we continue to see further imminent aggressive rate reductions on the part of the BoE. Our base case remains that of four back-to-back 50 bp cuts with rates falling to 1.0% by the end of the first quarter of 2009.” And a bigger cut at the Dec 4 meeting is still a possibility, too.

Bye for Now

Barbara Rockefeller
Forex Trading Reports

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Stark saying things are worse than we think in Europe

Pound Sterling is fascinating these days, first rising yesterday morning from 1.5598 at midnight to 1.6097 around noon, or 499 points in 12 hours - but then falling back to 1.5747 in the next 12 hours, only to bounce to 1.6047 again so far today.

What is causing these wild currency swings?

The reason seems to be that really bad data releases (see below) are inspiring forecasts of bigger-than-expected rate cuts tomorrow, maybe as much as 100 bp.

These days a big fat interest rate cut is currency-supportive (see Australian Dollar). Well, with Stark saying things are worse than we think in Europe, why isn’t the euro exchange rate getting the same boost? Possibly because nobody thinks the ECB would do anything as outrageous as surprise the market with a European interest rate cut of more than 50 bp tomorrow, and maybe not even that.

Maybe if the ECB cuts interest rates by 1pc we may see Spanish and French banks willing to issue spanish and french mortgages

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Barbara Rockefeller
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ECB expected to cut interest rates tomorrow

Foreign Exchange Technical Analyst Outlook : The move in the Canadian dollar is starting to look like a reversal move, even though we don’t have a moving average crossover (which lags). Momentum, breaking the old low and other indications all point to a foray to the channel bottom, if not beyond. The upmove in the Australian Dollar is similarly strong. Remember, for reasons nobody understands, the Australian Dollar often leads the euro so soon you can see foreign exchange traders buy euros. If we were to superimpose a chart of oil and/or the commodity index on the Australian Dollar, we’d probably see a pretty good apparent correlation.

On the euros to dollars chart, we are going to fall back on the old adage that it’s still a downtrend until a key level is taken out. We judge that to be 1.3102, the midpoint of the breakout bar on 10/30, and the highest high in the current swing, 1.3298. With the ECB expected to cut interest rates tomorrow, this seems unlikely unless the market perversely rewards the ECB for doing the right thing economically. The probability is not zero - see the Australian Dollar again. We also have a really bad US payrolls number due on Friday.

Is it already priced in?

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Barbara Rockefeller
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Bank of England to cut interest rates by 1 percent?

Pound Outlook : Ahead of the Bank of England action tomorrow, UK data continues to disappoint. Factory production fell 0.8% m/m in Sept for the biggest drop in 19 months. Output has fallen for 7 months for the longest losing streak since Thatcher (1980). Factory production is down 2.3% y/y. On the quarterly basis, output fell 1.3 q/q, the biggest drop since Q2 2001, which came right after 9/11.

In addition, the CIPS index of services fell from 46 in Sept to 42 in Oct, the lowest ever. The employment sub-index fell to the lowest since the survey began, according to Bloomberg. “Expectations” also fell to a record low, 50.8 from 58.2 in Sept. Some foreign exchange analysts say these terrible numbers will prompt a rate cut of more than 50 bp.

Pounds to Euros currently 1.2346
Pounds to Dollars currently 1.6180
Pounds to Australian Dollars currently 2.3288

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Barbara Rockefeller
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contact IMS foreign Exchange + 44 207 183 2790

The US dollar put in some solid gains yesterday during the US session, reversing an early rise in the euro exchange rate

Euro Exchange Rate Outlook :

The US dollar put in some solid gains yesterday during the US session, reversing an early rise in the euro exchange rate to 1.2893 to a low of 1.2572 by 6 pm. Market News says the market was exceptionally thin. But in Asia and Europe so far today, the euro rate is coming back up off the low to retrace about 75% of yesterday’s drop and we are suddenly newly wary of breaking yesterday’s high.

While we always have to be ready for a big countertrend moves, this one comes out of left field and we can’t find a decent explanation. Market News and Bloomberg both suggest that falling interest rate spreads and rising equity markets in Europe for the 6th day are a cause for acceptance of risk. But only yesterday the European Commission confirmed a diagnosis of recession. The ECB is expected to cut euro mortgage rates on Thursday. The US election will likely return a dollar exchange rate friendly Obama, although the prospect of a disputed vote may be causing harm, however small the probability of that outcome. To buy euros on rising stock markets seems a frivolous thing, doesn’t it? Calling it a "perception of risk reduction" is just putting semantic lipstick on what is still a pig.

The dollar to japanese yen is breaking yesterday’s high of 99.64 but only by a little. It’s a minor move up off the low late last night at 98.48, and barely worth mentioning except this is also the high from last week, and a higher high is always notable, even if the move lacks momentum. Many observers forecast a rise to the high before that at 103, and that would be a true breakout. Remember, a drop in risk aversion and embrace of risk is the only reason to believe in this scenario, and therefore a big new risk Event could reverse it in minutes. We say the market for yen crosses is not acknowledging the depth of the economic trouble to come.

The NKS has a story today on demand for "cheap euros" from Japanese retail investors. This accounts for a very big amount, unlike in the US. “The European common currency traded above 160 yen until late August, but it slumped to the 113 yen range on Oct. 24, when a deepening financial crisis in the eurozone sparked panic selling. The sharp fall prompted many Japanese individuals to buy euros for yen. Some were planning to make a trip to Europe in the near future, but many others were looking to lock in forex gains, apparently in the belief that the euro will recover its value against the Japanese yen sooner than later. Some of these investors formed a long line at a foreign-exchange corner of a major bank here last week. Demand for the euro was so strong that the currency remained in short supply at the branch throughout the week." The writer of the article disapprovingly adds, "In any event, the fact that many Japanese are opting to hold their assets in cash, albeit in foreign currency, appears to demonstrate a serius loss of investor confidence resulting from the ongoing financial crisis."

Pounds to Euros currently 1.2300

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Barbara Rockefeller
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Euro Exchange Rate : The European Commission said growth will slump to 0.1% next year

Euro Exchange Rate : The European Commission said growth will slump to 0.1% next year, having entered recession this year. It’s the worst growth picture since 1993. GDP will contract for three consecutive quarters this year for a full-year total of 1.2%, European finmins are meeting today in Brussels to try to figure out what to do. Bloomberg notes that “While France and Germany led European governments in committing a combined $1.7 trillion to protect the region's banks, and the European Central Bank now offers unlimited loans in an attempt to get credit moving, there has been no unified government response.”

EU Commissioner Almunia said the EU needs better coordination in some areas. The situation is "precarious" as demand from emerging markets is easing (goodbye., exports), although inflation pressure is also easing. The euro exchange rate is closer to fundamentals and the eurozone economy will reach bottom in mid-2009. Seven members will reach deficits breaking Maastricht/Stability Pact with deficits over 3% in 2009. In fact, the Commission will start the "excessive deficit procedure" against Ireland. Oh, and the EU will not allow any new members in until after spring 2010 - they might want some money.

In hard data, the eurozone October manufacturing PMI fell to 41.1 from 41.3 in the flash estimate and 45 in Sept, the lowest ever. In Germany, the October manufacturing PMI fell to 42.9 from 43.3 in the flash and 47.4 in Sept. It was worse in France--40.6 compared to 43 in Sept. Italy had the worst manufacturing PMI ever at 39.7, from 44.4 in Sept. A number under 50 means contraction.

Best Euro rate to buy euros currently 1.2400

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Barbara Rockefeller
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In fact, the weak pound has already delivered the equivalent of a rate cut.

Pound Outlook : head of the expected Bank of England interest rate cut this Thursday, the FT has a really interesting story on UK companies actually benefiting from the drop in the pound. If the Bank of England were to cut by more than the built-in 50 bp, it would boost stocks because of a currency effect. In fact, the weak pound has already delivered the equivalent of a rate cut. “A rough yardstick suggests that every 10 per cent fall in the pound against the US dollar exchange rate equates to 25 basis points in monetary easing due to the beneficial effect on exporters and the pressure it takes off domestic manufacturers at home.”

An astounding 41% of the FTSE 100 (market cap) report earnings in dollars, incuding oil companies, minign companies, banks and some pharmaceuticals. “Calculating an Foreign exchange related rule of thumb for earnings is tricky, given the lack of information about the denomination of companies’ cost bases and financing requirements. However, for dividends it is much more straightforward: every 10 per cent fall in the value of the pound to dollars adds nearly 4 per cent to UK dividend growth, all other things being equal. “

On the other hands, “JPMorgan estimates that adverse foreign exchange movements have pushed annual UK retail inflation up from 7.7 per cent in June to 10.5 per cent. Retailers may try to pass on these increases to maintain margins. However there is every chance that, in a deflationary world, consumers will respond by trading down or buying less. This puts retailers such as Next in the firing line due to the comparatively high prices they charge. However, on balance, sterling’s weakness should be a boon for UK stocks, albeit a limited one given the air of gloom surrounding global asset markets.”

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Barbara Rockefeller
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UK interest rates need to fall a lot and need to fall soon to avert a deep and lasting recession

Bank of England policy member Blanchflower said UK interest rates need to fall a lot and need to fall soon to avert a deep and lasting recession. Blanchflower has been the sole voice on the MPC calling for rate cuts over the past year. He says growth will contract this year and next, with inflation falling to under 1% and perhaps even going negative - a wild statement in light of inflation at 5.2% in Sept. Blanchflower blames the Lehman bankruptcy for intensifying the credit squeeze. It has yet to really hit companies and households.

Blanchflower makes the most important comment with this: “The key economic policy over the last decade has been the unsustainable rise in asset and equity prices and the associated credit boom. Does mainstream theory have an adequate explanation of why things have gone so badly wrong? It is not clear that it does. It may well be time for a rethink.'' Chancellor of the Exchequer Darling agreed that upcoming stimulative actions can be taken without fear of igniting inflation.

In hard data, Nationwide reports UK house prices house prices fell by 1.4% m/m in Oct, for the 12th monthly drop and 14.6% y/y. The average UK house price is now £30,000 lower than it was a year ago but still around £30,000 higher than it was five years ago. We have no idea what this means.

Pounds to Euros Exchange rate to buy euros last at 1.2684

Pounds to Australian Dollars currently 2.4100

Pounds to US Dollars currently 1.6420

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Barbara Rockefeller
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Reserve Bank of Australia confirmed that it is Buying Australian Dollars

The Reserve Bank of Australia confirmed that it intervened for a third day today by buying Australian Dollars. The Australian Dollar is up about 150 points from the US close yesterday.

Buy Australian Dollars at 2.4750

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the ECB will cut rates next week

Euro Exchange Rate Outlook:

ECB chief Trichet did hint yesterday that the ECB will cut rates next week-it’s possible, he said. The market took no notice. This is the dog that didn’t bark in the night. For Trichet to say such a thing and the foreign exchange market not to move is remarkable. One foreign exchange trader said Trichet has been marginalized by events. We can’t buy that. Institutional events like central bank interest rate cuts are the top factor in short-term moves. What is going on? We deduce that either it was expected and so already built in, or that the unwinding of euro to japanese yen carry trades is a bigger force and since Trichet’s comment was “with the wind,” it was absorbed without the need for comment.

Pounds to euros currently 1.2520

Euros to pounds currently 0.7979

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Barbara Rockefeller
Forex Trading Reports

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Euro Exchange Rate falling to a low of 1.2330

The US dollar continues to gain across the board, with the euro exchange rate falling to a low of 1.2330 around 5-6 am from 1.2622 at the close on Friday and the bounce up to 1.3007 last Wednesday. Sterling fell to 1.5274 in early European trading, nearly matching Friday’s lowest low at 1.5259. The Other Dollars are much lower, including the Australian Dollar, despite two interventions (Friday and today) by the Reserve Bank.

The real action is Japanese yen action. The yen has risen to a bit over 90 on Friday from 110.67 on August 15. Against the euro exchange rate, the yen has gained from 169.44 to 114.38 or 33%, in under three months (Aug 7 to today). Bloomberg says that in just the past month, the Japanese Yen has jumped 15% against the US dollar, 35% against the euro, 58% against the Australian dollar and 46% against the New Zealand dollar as foreign exchange traders slash carry trades.

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Barbara Rockefeller
Forex Trading Reports

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Sterling tumbles as 'currency market tsunami' sweeps markets

Sterling tumbled another two cents against the dollar on Monday and weakened against the euro exchange rate as foreign exchange traders speculated the Bank of England may deliver an emergency cut in interest rates and as investor’s poured money into the US dollar.
By Rosie Murray-West and Jamie DunkleyLast Updated: 7:29AM GMT 27 Oct 2008
Full story visit The Telegraph

The pound to dollars fell to almost $1.56 in early trading and slid to almost 80p versus Europe's common currency as what one expert called a "currency market tsunami" continued to sweep the foreign exchange markets.

The weakness in sterling leaves the currency 13pc lower against the dollar this month alone as expectations that the UK economy is now facing a severe recession becomes the mainstream view. News on Friday the economy contracted 0.5pc in the three months to September sent the currency tumbling almost 9 cents at one point.

The increasingly bleak news from the economy is putting pressure on the Bank of England to cut interest rates before its schedule meeting next month.

Dr Lyons, chief economist at Standard Chartered, said: “The economic data available to us shows that the UK economy is crying out for a further cut in the rate of interest. Mervyn King’s comments last week suggest that the Bank of England will do that at its next meeting, but I think action needs to be taken immediately.

However he added: “I don’t expect this to happen, though, and think we will need to wait until the Monetary Policy Committee’s next meeting in November.”

Pounds to Euros currently 1.2400
Pounds to US Dollars currently 1.5418
Pounds to Australian Dollars currently 2.5283

Bid-offer spreads have widened dramatically and the amounts that can be done at even widened spreads have shrunk

Hi All,

We asked the meaning of the phrase “dire liquidity” in a Market News report yesterday, and Market News obliged with a full report on worsening conditions in the supposedly liquid Foreign Exchange market. Bid-offer spreads have widened dramatically and the amounts that can be done at even widened spreads have shrunk. This phenomenon is across the board from majors to emerging market currencies. In the Mexican peso, the usual spread was 15 points and good for $5 to $10 million. Now it’s 100 points wide and good for only $1-2 million. In the Australian Dollar exchange rate, the normal 1-point spread used to be good for $10 million, but now it’s good only for $1 million. If a client wants AUDUSD 100 million, the spread goes from 9-10 points to 40-50 points. In the euro exchange rate, the spread for €50 million used to be 3 points and now its 5-7 points. Market News goes on to cite reports showing a big and steady unwinding of unhedged long-term investment positions in emerging markets -and also in Europe.

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Barbara Rockefeller
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We remain astonished that what started as $200 billion in failed US subprime mortgages could have turned into $3 trillion in global losses

Foreign Exchange Outlook : The global financial system is under severe stress, and so is the global economy. Ripple effects are only just now starting to appear in places like China, which was partly insulated from the free-market world but can’t hide forever. It’s interesting that the richest entities are the ones in the most denial that everything has changed-the oil producing Middle East as well as China. OPEC is busy trying to raise prices in a world of falling demand, which seems particularly foolish. Of course, these are the very countries that are getting richer by the minute as their dollar reserve values go up, but these reserves may be needed for domestic spending if their exports, whether oil or socks, start falling apart.

We remain astonished that what started as $200 billion in failed US subprime mortgages could have turned into $3 trillion in global losses, showing that even financial professionals are having a hard time grasping the extent of the leverage that was out there and still remains. It’s easy to see how nonprofessionals are bewildered by the collapse of pyramid-upon-pyramid, including our presidential candidates. We think only two things are clear;

1. the bottom will come only when US housing bottoms, no matter the state of deleveraging at the time.
2. And the US economy will survive, however tattered. It is literally too big to fail. But other sovereigns are not too big to fail.

We already have Iceland and Argentina. Well, Argentina is too easy a target for sarcasm. It always fails the minute the wind blows. The most interesting aspect of this whole debacle is that not one single analyst or commentator is calling on G7 or the new summit group (that will include China) to deliver a global rescue. Everyone seems to assume that no major Bretton Woods-level response is likely or maybe even possible. That’s because you need capital controls to enforce such things, and the US is against capital controls.

At some point in this trend the currencies will bounce up and at some point the trend will reverse, but in the meanwhile, keep the faith—the US dollar is the safe place to be.

Buy for Now

Barbara Rockefeller

Forex Trading Reports - Click her for a free trial

Buying Euros? Buying Dollars - Need to Buy Australian Dollars?

Contact IMS Foreign Exchange +44 207 183 2790 for the best exchange rates

New Zealand Dollar strengths as RBNZ cuts Rates - No further Rates Cuts is the current Outlook

Hi All,

the Reserve Bank of New Zealand cut rates by 100 bp to 6.5% yesterday, with Gov Bollard
saying it’s a “frontloading” of future interest rate cuts. "One should not necessarily expect or build in further cuts of this magnitude. We've done quite a lot right now to try to get rates re-calibrated right down to where we think they should be. One should not assume we would continue in such radical fashion."

The Reserve Bank has meets scheduled for Dec 4 and Jan 29.

The Pounds to New Zealand Dollar Exchange Rate went from 2.76 to 2.71 and you can buy New Zealand Dollars at the moment at 2.7250

Buy For Now

Barbara Rockefeller
Forex Trading Reports - click here for a free trial

The euro exchange rate should fall to 1.28 by year-end and lower in 2009

In Foreign Exchange Markets Yesterday in the New York morning, the US Dollar Exchange Rate broke out of the sideways range (of 1.3343 to 1.3538) from last Thursday. It sank under the previous intermediate low to 1.3286, crawled along sideways for the rest of the day, then put in another breakout move to a new low of 1.3205 so far this morning.

Foreign Exchange Analysts have come up with numerous explanations. The FT says "hedge funds were liquidating long positions in riskier assets funded by selling US dollars and returning to cash in anticipation of massive investor withdrawals." Also, according to the FT, the US dollar was supported by Bernanke’s support of a second fiscal stimulus, despite the hit to the deficit--foreign exchange traders like a pro-active stance instead of dithering. Bloomberg says Citibank analysts are encouraging euro sales on the grounds that the euro exchange rate is in for a perfect storm as the ECB cuts rates toward 2.5% on slowing growth. The euro exchange rate should fall to 1.28 by year-end and lower in 2009. Even the IMF is saying the ECB has room to cuts interest rates further (in association with its new lower growth forecast for the eurozone).

We say the Foreign Exchange market is not only buying dollars because US dollars are in authentic demand for transaction purposes, but also selling euros because of greater uncertainties in Europe than in the US. We simply do not know the extent of bad loans and investments. The ECB recently tightened colalteral rules but the suspicion runs high that the quality of European bank balance sheets (including stupid investments in toxic US paper) is lower than the quality of bank balance sheets in the US.

This reflects the bigger perspective that the US may have generated bad loans but then dumped them on unwitting foreigners.

This is somewhat parallel to selling Rockefeller Center to the Japanese.

This time the fear arises because today is settlement day for some Lehman CDS paper, an issue we don’t understand. Surely derivative paper comes nearly last on the recoverable list of a bankrupt entity and anyone holding it is screwed.

And interest rates do count, even if we don’t buy the argument that the ECB will stop being a one-note Johnny. In Australia, the Australian Dollar took a nosedive on release of the latest RBA minutes. This was the early Oct meeting at which the RBA decided to cut australian interest rates by 100 bp, and in the discussion, the policy committee determined that growth was getting so weak that inflation would subside faster than previously thought. The consensus is not that the RBA will cut aggressivley by another 50 bp and maybe 75 bp by year-end - wow.

(Pounds to australian Dollar exchange rate currently 2.5000. The Outlook for the Australian Dollar suggest that there may be further opportunities to buy australian dollars over 2.6000)

The Japanese Yen is quite confusing, having softened from the high last week under 100 to 102.42 early yesterday but now rising again to 100.73. We are talking about the Japanese yen exchange rate and not the dollars to yen exchange rate because the market is thinking about the yen as the bellwether for risk aversion/risk preference, and noting that it has been tightly linked to equities.

Really?

We say the relationship is sometimes very strong but lacks logic to forecast the yen based on what equities are doing.

It’s like forecasting the US dollar up because oil is down.

Buy For Now

Barbara Rockefeller
Forex Trading Reports - click here for free trial

Buy Australian Dollars at best exchange rates - call IMS Foreign Exchange for a free quote
+44 207 183 2790

French banks were unwilling to tap the government fund in case it made them look weak

Euro Exchange Rate Outlook : The French government shoved €10.5 billion of its €40 billion rescue plan down the throats of the 6 biggest French banks today, a bit like food down the gullet of a goose. Until the government forced the issue, French banks were unwilling to tap the government fund in case it made them look weak. The stocks of all the banks rose on the announcement that Credit Agricole will get €3 billion, BNP Paribas will get €2.55 billion, SocGen will get €1.7 billion, and so on.

It’s interesting that the form of the capital injection is not preferred shares, as elsewhere, but subordinated loans at the base rate plus 400 bp. According to the FT, “the loans are repayable after other debts have been met, do not dilute existing shareholders and do not require a change in dividend policy. Nevertheless, subordinated debt can nonetheless be used to increase the banks’ tier one capital ratios, a main measure of balance sheet strength.

The Euro exchange rate today is still very weak as a result and the pounds to euros exchange rate is currently 1.2900

Buy For Now

Barbara Rockefeller
Forex Trading Reports - click here for a free trial

Buy Euros at the best euro exchange rates

call IMS Foreign Exchange for a free quote +44 207 183 2790

This is puzzling - how can Europe’s biggest economy avoid recession while the rest fall into it?

Euro Exchange Rate Outlook: The German Econ Minister, Mr Glos, praised the newly weaker euro exchange rate as a good thing for exports. Most commentary continues to deny that Germany will fall into recession, even if the eurozone does, as is highly likely, having already marked one quarter of negative growth. This is puzzling - how can Europe’s biggest economy (40%) avoid recession while the rest fall into it?

Eurostat reported that construction activity inched up in August by 0.1%, the same July, for a quarterly drop of 3.5% q/q. Year-over-year, Aug was sown 2.5%, which is better than 03.3% in July.

In trade, the eurozone Aug deficit was €6.1 billion after €6.7 billion (revised) in July, with imports down 1% and exports down less, 0.6%. We remain a little confused about why Europe has a trade deficit at all.

Exchange rate to buy euros today against the Pounds is currently 1.2852

Buy for now

Barbara Rockefeller
Forex Trading Reports

Buying Euros - Best exchange rates call IMS Foreign Exchange +44 207 183 2790

Average Property Prices in Australia Fall

Hi All,

Thought i havent been here for a while and point out a new opportunity. The credit crunch and global meltdown has presented a very unique opportunity;

Australian Property.

The pound to australian dollar exchange rate has risen by more than 27% and you can now buy australian dollars at 2.6500+.This means an average priced australian property would have cost $300,000 australian dollars in July this year would have cost in;

US Dollars - $288,000.00
Euros - E191,000.00
Pounds - £150,000.00

Today the costUS Dollars - $195,000.00 saving 93k us dollars
Euro - E144,000.00 saving 46k euros
Pounds - £113,000.00 saving 37k pounds.

this could be a brilliant opportunity for the australian property market and especially since you can still get a decent range of australian mortgages. Also the fact that rental prices are soaring in sydney to a rental property shortages make the opportunity all the more tempting.so if you need to have a look start at Real Estate, Property, Land and Homes for Sale, lease and rent - realestate.com.au

Buy for now

call if you need to buy australian dollars

Buying Euros - watch the 1.3650 pivot against the US Dollar Exchange Rate

Euro Exchange Rate Outlook : The US dollar appears a little stronger this morning against the majors, with the euro exchange rate having dipped to 1.3347 from 1.3624 at 6 am ET yesterday. But this disguises a lot of choppiness. After the close yesterday, the euro rose from 1.3440 to 1.3517 and then fell again during Asian hours to 1.3343-only to rise back to 1.3518 by 7:40 am ET. This surpasses the interim high late yesterday and so is cause for concern, although we won’t get worried until the euro exchange rate matches a pivot level around 1.3650.

The US dollar to Japanese Yen is also soft as the US day begins, having firmed yesterday from 101.12 to 99.24 overnight. Fear of today’s US data and stock market are pressuring the dollar to Japanes yen higher 100.77 so far today, seemingly on the idea that the US stock index futures, which are rising this morning, will lead the dollar. This may be correct - currency traders are in thrall to global stock indices these days. Bloomberg says “The Japanese Yen weakened on speculation that investors will slow carry trade reversals.” That takes a minute to digest. Sterling, likewise, looks heavy on the re-emergence of risk aversion ands presumably the unwinding of quickie carry trades. Exchange Rate for buying euros against the pound is currently 1.2800

Buy For Now

Barbara Rockefeller
Forex Trading Reports

Buying Euros, Buy Euros at the Best Exchange Rates call

IMS Foreign Exchange for a free quote +44 207 183 2790

Slowing economies and falling oil will help - ECB to Cut Interest Rates - Yes

Euro Exchange Rate News The ZEW index of professional financial confidence slipped to –63 from –41.1 in September, although it’s a hair better than –63.9 in July. Bloomberg reports that economists had forecast a drop to only –51, so –63 is worse.

Market News reports that the Germany's leading economic research institutes cut their joint GDP forecast today from 1.4% to 0.2% for 2009. The 2008 forecast remains at 1.8%. Germany is on the brink of recession, they say, expecting a contraction of 0.7% in the first half of next year. They still say, all these years later, that private domestic consumption will pick up.

Separately, ECB official Stark told the press that inflation in the eurozone will fall to the ECB target of 2% by the second half of next year. Slowing economies and falling oil will help. Does this mean the ECB can cut again? Yes, although we are not yet to the point of forecasting it for the Nov 6 policy meeting.

Bye For Now

Barbara Rockefeller - Forex Trading Reports

Buy Euros, Pounds to Euros at the Best Euro Exchange Rate - IMS Foreign Exchange

Why are the ECB and the Euro Exchange Rates not being punished for foolish policy choices?

Foreign Exchange Outlook : The IMF chief economist said this is the greatest shock since the 1930’s but should not turn into another Great Depression because the policy response this time will be the right one. The major countries will not raise interest rates and has instead cut them, trade protectionism will be resisted, and so on. But what about the public’s response? Is it possible that governments can do the right things and we get a Great Depression anyway? Bloomberg points out that yesterday the VIX, a measure of fear in the stock market, reached an intraday record high of 59.06.

Stock markets are not economies but have many of the same participants. Stock market participation in the US is exceptionally high, with well over 60% of individuals having some association with it, if only through a pension fund or IRA. At what point does the government, any government, intervene in the stock market to boost confidence? It is seldom done-the number of instances can be counted on the fingers of one hand (Hong Kong during the Asian crisis, Japan via state-owned entities at various times). We doubt that the US would do it-Congress would scream-but hey, you never know.

This is a new form of moral hazard-that once the Treasury decides it can buy preferred shares, it selects its investment targets according to the free-market fortunes of certain stocks. This would be truly awful and raise all kinds of questions about insider trading, stock price manipulation, backdoor deals, and so on.

The US reputation for honesty and transparency has already taken near-fatal stabs to the heart by Enron, WorldCom, various option pricing scandals, executive pay, and so on.

How much more can it take?

We agree that preferred shares are a better fix than buying toxic paper and praying, but it must be handled with kid gloves and in the middle of a well-lit stage.

Anyone pinning hopes on G7 tomorrow and Saturday is making a mistake. Treasury Sec Paulson said yesterday that "When we look at the G-7, we have very different countries, economies of different sizes, financial systems with different needs. And so it would not make sense to have identical policies." What he really means is that monetary policy has little to contribute now-although the coordinated action yesterday had a good effect and gave a nice appearance, as though somebody is in charge-but fiscal policy and institutional change are now the keys to a real and lasting fix. As noted before, the eurozone doesn’t have a joint fiscal position. There is no federal budget of any consequence. Therefore, it’s up to each country to fund their bailouts as best they can, and national differences and quirks are only to be expected.

Does this mean the euro-zone is in a weaker position than the US? Not necessarily. These guys are not second-raters. They have already accepted that budget deficit constraints (3% of GDP) need to be thrown out the window. What else do we need? Each country’s plan doesn’t have to be coordinated with everyone else’s plan to be effective. The real problem lies with the big multinationals that have fingers in every country, like ABN Amro, ING, Deutsche Bank and the British banks. As we saw with Iceland, we could end up with governments suing each other. Iceland doesn’t have the cash reserves but most EMU countries do, or the capability to tax it into existence. This will be fun but not fatal if it’s the UK suing (say) France, but it will be less fun if it’s Poland suing (say) Germany. We have no evidence that this will be the outcome, but it’s an interesting idea. More interesting is how Europe is going to reduce leverage without triggering failures. This is still under the radar but it seems obvious that leverage of 50x is a fire waiting for a match.

Meanwhile, European banks are still bidding like mad for dollar funding from the ECB at rates reaching 10% yesterday, although it was down to 5% today. With Fed funds at 1.5%, this is an extraordinary premium. Usually overnight money is cheaper (due to the absence of reserve requirements), not more expensive. We will know that trust and confidence has returned to European banking when these rates come down. What if they do not come down? At a guess, it means the European banking crisis has further to go. European banks are almost certainly in worse shape than US banks at this point.

What does this have to do with the level of the euro exchange rate? It’s murky. The rising euro rate is a sign of confidence in European institutions, including especially the ECB. We find this mysterious, since the ECB raised rates only in July, evidently not having read Mr. Bernanke’s book on the Great Depression, which repeats the accepted wisdom that the Fed raising rates in 1930 was precisely the wrong thing to do. Why are the ECB and the Euro Exchange Rates not being punished for foolish policy choices?

If and when the US and UK do these things, the pound and dollar exchange rates get punished.

Well, it’s the Teflon euro.

We see this effect repeatedly. For example, money supply growth never once hit ECB targets during the entire life of the ECB but the euro dollar didn’t get sold off because of it. We offer only the idea that the idea of monetary union is such a fine one for countties that had spent 1000 years fighting wars against one another that the markets are willing to overlook little things like 50x leverage. Does this make sense? No. But it’s a lesson in why Big Picture macroeconomic analysis doesn’t help much in forecasting exchange rates.

Charts are more realiable. This time the chart is saying that the pullback in the euro is just that-a corrective pullback. We will not Buy Euros into it as a reversal for hundreds of points more, probably not until it breaks the channel top resistance over 1.4200 or 1.4300. We can try to buy the euro correction, but beware-it can spit in your face. As for the Japanese Yen, the US dollar got a boost on short-covering on the Paulson announcement that the Treasury can do preferred shares-but Japanese companies are still planning as though the break below 100 is the real deal and they are in for an ordeal. Euro to Japanese yen is going to be very interesting-what is the real driver?

Buy For Now

Barbara Rockefeller - Forex Trading Reports

Buy Euros at Best Exchange Rates - Call IMS Foreign Exchange +44 207 183 2790

European Banking Crisis - US is entirely at fault for the global crisis due to irresponsible lending

European Banking Crisis : Britain’s PM Brown said the US is entirely at fault for the global crisis due to irresponsible lending. “We have led the world today with a proposal to restructure our banking system. We are taking the steps that I believe other countries will take in the future.” The three-part UK plan announced today entails £200 billion in a “Special Liquidity Scheme,” £50 billion in direct investment in 8 banks, probably in the form of preferred shares, and a guarantee of bank bond issuance of £250 billion. It might well be called a 4-point plan since it includes menacing remarks about executive compensation. There was no favorable announcement effect, which must gall Brown and Darling-stocks continued to fall, including bank stocks, and the pound to us dollars bounced only to 1.7665 before falling back (from the low of 1.7315 yesterday). But on the face of it, it’s a better plan than the Paulson plan—more encompassing.

The Swedish Riksbank said it will lend up to SKr 5 billion to Iceland’s biggest bank, Kaupthing, to help it avoid “liquidity problems” (and protect Swedish depositors). In Spain, the government said it will inject €30-50 billion into the banks (buying up paper) and also raise the guarantee for bank deposits from €20,000 to €100,000.

The EU finance minsiters meeting yesterday agreed that bank deposits should be guaranteed up to €50,000 and on “joint principles to guide bank bailouts,” according to the WSJ. The orientation is to invest in the banks themselves rather than to buy their paper, the US solution.

The ministers noted the European approach is cheaper.

In the money market—where the real action is—today the ECB allotted $70 billion in a 1-day US dollar facility to eurozone financial institutions at a marginal lending rate of 9.5%. Not a typo, 9.5%. Market News reports that “The operation, which had a pre-set maximum allotment volume of $70 billion, received 69 bids and the total bid volume was $122.03 billion. 96.04% of bids were allotted at the marginal lending rate, the ECB said. Today was the first time the ECB's applied a multiple rate auction method. The change from the single rate method means that "the auction method will be the same for the overnight US dollar operations and for the Eurosystem's euro credit operations," the ECB said yesterday. This is the 16th overnight U.S. dollar funding operation conducted by the ECB” since the agreement on Sept 18.

Separately, the Bank of England allotted $8.564 billion in overnight money at a lowest accepted rate of 1.010%, and covered 0.86 times. The weighted average rate was 3.592%. It also allotted $12.49 billion in 1-week money at a lowest accepted rate of 1.210%, and covered 1.01 times. The weighted average rate was 3.286%. These numbers suggest that the stress in the UK system is a lot less than in the eurozone system.

And the US is doing even better, perhaps. Market News reports that the 85-day Term Auction Facility offered more money than the banks needed. The cover ratio was only 0.92, meaning banks bid for 92% of the $150 billion on offer. Well, maybe. The previous TAF was much smaller, $25 billion, and bank stocks still fell even with guaranteed funding.

Buy for now

Barbara Rockefeller - forex trading reports

Need to Buy Australian dollars or exchanging Pounds to Euros - Call IMS Foreign Exchange on 0207 183 2790 for a free Quote

Banks predicting a interest rate cut in Europe before the end of the year

The ECB meets today and all eyes are on the Trichet press conference, as usual. The rate decision was made at 7:45 am ET but as of 8:30, we can’t find the news. This happens every time—and we wonder why it’s not available in Reuters, Market News, Bloomberg, et al.

Bloomberg reports that all 58 of the economists it surveys say the ECB will keep rates on hold, with Trichet not heeding the wake-up call of bank failures this week. But economists at Deutsche Bank, Goldman Sachs, and JPMorgan Chase “this week followed Citigroup in predicting a interest rate cut in Europe before the end of the year.”

Yesterday the head of the pan-EU employers' federation BusinessEurope said the ECB should loosen monetary policy in the early part of 2009 since inflation and growth are set to slow markedly in the coming months. How sedate.

In economic data, EMU industrial producer prices fell 0.5% in Aug from a rise of 1.3% in July (revised). The rise is 8.5% y/y for Aug after 9.2% in July.

UK House Prices continue to fall as Outlook is Bleak

Housing lender Nationwide reports its house price index fell 1.7% m/m in Sept for a 12.4% drop y/y, the steepest y/y since 1991. It’s the 11th month of decline. On the quarter-by-quarter basis, house prices are down 4.6% in the latest quarter. But the price drop is stabilizing, not accelerating. The Nationwide economist told the FT “that current conditions were in stark contrast with those of a year ago, when UK house prices were rising at an annual rate of 9 per cent and nearly 40 per cent of first-time buyers were borrowing more than 100 per cent of the purchase price of their home.” But long-term cycles do exist in housing. She said “Price movements from the peak to a trough of a cycle simply show the extent of the volatility in prices around the trend rather than anything more meaningful about their future path.

The long-run trend growth in real house prices in the UK is around 2.7 per cent per annum and there is no reason to expect that over the longer term house prices should not continue to go up in real terms, even if we are going through a sharp correction now.”

Buy For Now

Barbara Rockefeller - Forex Trading Reports

Need to Buy Euros,

Pounds to Euros at best exchange rates visit IMS Foreign Exchange or call 0207 183 2790

BHP Billiton wins right to Bid for Rio Tinto

Hi All,

For all of you that follow the Australian Dollar watch this story regarding BHP Billiton Ltd who last night won approval from Australia's competition regulator for its hostile $101 billion bid for Rio Tinto Group, boosting speculation that the world's largest mining takeover may succeed.

I would imagine this story would give the AUD exchange rate a boost as BHP would become a commodity - mining superpower which can only be seen as a positive for the Australian Economy.

Pounds to Australian Dollars exchange rate currently 2.2200

Buy for Now

IMS Foreign Exchange - Buy Australian Dollars at best exchange rates

UK House Prices continue to fall as Outlook looks Worse

UK Housing prices have further to fall and the sector continues to contract, according to Bank of England data today. The FT reports that the number of mortgages for new house purchases in August fell to a record low of 32,000 while re-mortgaging activity has also slowed sharply. The number of new house purchases is well below the 49,000 monthly average of the previous six months. The number of remortgages slowed to 64,000 in August, lower than the 69,000 rate in July and well below the six month average of 88,000 per month.

“The rate of growth in lending to the household sector also slowed in August, with a rise of £1.9bn, equal to a one month growth rate of 0.2 per cent. Over the past 12 months, lending to the household sector rose by 7.5 per cent, against a 12 month growth rate of 8.7 per cent in May. Loans to the private non-financial sector also declined. Loans fell by £1.8bn, a growth rate for August of -0.7 per cent. for the 12 months, lending to that sector declined by 2.8 per cent.”

This helped to drag the Pounds to Euros Exchange rate back below 1.2600 and the pound exchange rate outlook is sub 1.2400 just when we thought we were going to test the 1.3000 level.

Bye for Now

Forex Trading Reports

Recession is about to hit Europe and will be long-lasting

Euro Exchange Rate Technical Analysis

The euro may be gaining a bit this morning, but on our charts (that show only one price taken at 5-6 am ET), the US dollar exchange rate corrective move up has resumed. Evidently the perception that the US dollar should be punished because the US started this mess is not the main sentiment. Foreign Exchange Traders are not concerned (so far) about a giant increase in the budget deficit, either, or that the US is headed into a Great Depression. Instead, the perception is back that it will be worse elsewhere, specifically Europe.

This is a version of the FIFO argument.

UBS, for one, recommends the following foreign exchange trade; Sell Euros Buy US dollars, according to Bloomberg, because recession is about to hit Europe and will be long-lasting.

The sell point is 1.4655 with a stop at 1.4890 and a target of $1.4250.

Buy for Now

Barbara Rockefeller - Forex Trading Report

Pounds to Euros at best exchange rates visit http://www.imsfx.co.uk/

Technical Analysis - US Treasury Secretary demanding a blank check for $700 billion

Euro Exchange Rate Technical Analysis

The euro exchange rate is resuming the upmove after only a two-day dip. Normally we expect three days (or more) and indicators were supporting the idea of a bigger dip-but fundamentals trumped the chart. In this instance, the market was expecting Congress to fold faster and not put up such a fuss over a little thing like the US Treasury Secretary demanding a blank check for $700 billion with no oversight and no legal recourse. Congress balked and became the “fundamental." The sentiment persists, however, that once the deal gets done, we should get a relief rally in the equity markets and in the US dollar.

We have seldom seen sentiment in such a delicate state and so sensitive to political nuance.

It’s not going too far to say that the Bush speech, and Bush inviting the presidential candidates to a summit meeting today, was an injection of politics that the market didn’t like. We can’t recall an occasion in the past when something this tangential had such a decisive effect.

Buy for Now

Barbara Rockefeller - Forex Trading Report

Pounds to Euros at best exchange rates visit http://www.imsfx.co.uk/

Pound rallies against the US Dollar but still the whipping boy of the Euro

Hi All,

foreign exchange traders contiune to buy pounds against the US Dollar, Australian Dollar, South African Rand and New Zealand dollar but cant seam to beat the Euro with the Euros to Pound exchange rate stuck in the 0.7900 to 0.8000 zone.

Even the fact that the French EDF have announce their intention to buy British Energy for 12 billion pounds hasnt pushed the euro pounds exchange rate lower. So what is needed? Probably best not to remind anyone of high street bank mergers/failures at this point or housing sales being the lowest on record.

Personally i cant see why the euros to pound exchange rate cant breach the 0.7700 level which is still well above the 0.6580 low of last year. All i can suggest to those of you with a Spanish Mortgage is buckle up 0.8200+ cant be far away as foreign exchange traders live by the motto
if you cant sell it, you might as well buy it and if the Euro to US dollar exchange rate heads back above 1.5000 i cant see it dragging the pound with it.

Exchange rates never do what you want them to do but remeber you never go broke selling pounds

Bye For Now

IMS foreign Exchange

Buying Euros, Buying Australian Dollars visit www.imsfx.co.uk for a free currency quote

HBOS Share Price falls further as UK Inflation rockets

The British CPI was reported up to 4.7% in Aug from 4.4% in July, led by energy costs, the highest in 16 years. The BoE is required to write a letter to the Treasury when inflation exceeds its 2% target by more than 1% (you can read the letter at the FT.com website). This is the second letter Mr. King has had to write (they are due quarterly for as long as the discrepancy lasts). This time, of course, the BoE blames food, gas and crude oil prices. According to the FT, King says the BoE now thinks inflation will peak and soon at about 5% but is sticking to the scenario of sharply falling inflation in 2009.

“The governor again argued that the Committee was trying to strike a balance between the concern that people might get used to high inflation, so it would become embedded in the economy, and the worry that the economic picture was so bad that inflation would drop well below target in the medium term.” A period of “muted” growth is necessary to damp price pressure and kill of inflation expectations having their usual self-fulfilling effect. Market News reports that the market saw the letter (and CoE Darling’s comments about it) as “dovish.”

Overall the Pounds to Euros exchange rate has fallen a little on the news and is trading 1.2560 in afternoon currency trading. The Outlook for the pounds to Euros exchange rate is that it may re-test the lows as the UK continues to provide more bad news and especially if HBOS share price continues to come under fire due to the credit crisis.

Bye For Now

Barbara Rockefeller

ANZ will drop its fixed interest mortgage rates for new customers

What can only be seen as good news for those people that are Migrating to Australia ANZ will drop its fixed interest mortgage rates for new customers by up to 0.2 percentage points from Monday. "In light of market conditions continuing to ease over the past couple of weeks, ANZ will lower fixed rate mortgages for new customers from Monday, 15 September,'' a spokeswoman said.

Fixed interest home and residential investment loan rates will decline across all terms by between 0.1 per cent and 0.2 per cent, the bank said. Its one-year fixed mortgage rate will fall to 8.39 per cent, from 8.49 per cent.

This is the bank's third cut to its fixed rate mortgages since August 8, with interest rates falling by up to 1 per cent over the past five weeks, the bank said. Five weeks ago the one-year rate stood at 9.1 per cent. Fixed rates for Australian home loan and residential investment loan across all other terms will be reduced by 0.2 percentage points rom Monday.

ANZ's five year fixed rate mortgage is the most popular, the spokeswoman said. Interest rates applying to ANZ's credit cards are still under review, the spokeswoman said. ANZ's move follows comments made by Reserve Bank of Australia Governor Glenn Stevens on Monday relating to the decoupling of movements in mortgage interest rates from movements in the official cash rate.

"There isn't any law that says banks can only adjust interest rates when we (the RBA) do,'' he told a House of Representatives Economics Committee hearing in Melbourne.

Australia's five biggest banks have cut their fixed rate home loans over the past six weeks, with the most recent being St George Bank on September 1. Rates for one-year fixed home loans today stand at 8.49 per cent at ANZ, NAB and Westpac, 8.79 per cent at St George and 9.03 per cent at Commonwealth Bank.

Full story visit News.com.au

Best Exchange Rates when you need to Buy Australian Dollars visit IMS Foreign Exchange

Bank of England to consider rate cuts

Pound Sterling is not only the plaything of the euro and yen , but trades against the dollar on its own factors. This time it’s a favorable PPI report that shows inflation going down and thus allowing the Bank of England to consider rate cuts, perhaps before year-end. Some reports (Bloomberg) say the pound has fallen the most since 1992, when it left the ERM and Soros made a fortune, and to the lowest level since April ’06, but in fact it has not fallen under the low from last Thursday at 1.7533 on this latest move, and the low in April ’06 was 1.7066. To repeat the old refrain, we need a lower low to prove a trend is not going to correct. This is not to say the pound is not still mightily overvalued and will not drop to that old level or beyond, but it is to say be careful what you read. We may think the Bank of England could or should cut rates but we have no evidence yet that it will bite the bullet. Pound Sterling has fallen a massive 2619 points from 2.0157 the week of July 18 to 1.7538 last week.

We normally don’t expect a straight-line drop this big, and need to worry about a corrective bounce. The problem is figuring out what news would trigger such a bounce…

Bye for Now

Barbara Rockefeller

for the Best Euros to Pounds exchange rates contact IMS Foreign Exchange