Markets
This week, the main focus will be on important fundamentals from the U.K. in addition to important events and data from the euro area.
Perhaps more attention will be given to BOE minutes as investors aim to know how this month’s monetary decision, which included a hold in both interest rate and asset purchases, was taken to try to forecasts an outlook for the bank’s coming monetary decisions.
Policymakers at the BOE decided to hold their monetary stance in May amid inflationary pressures threatening the economy and after the bank opted to extend its FLS scheme till 2015, instead of January 2014, with some adjustments to make it more effective.
Minutes of the meeting may continue to show split among the nine-panel members as King, Fisher and Miles last month resumed their call for ...
Last week, choppy and volatile market movements was the dominant sentiment, gold markets were rattled under heavy downside pressures over the worsening debt crisis in Europe and fears were heightened by the prevailing jitters over the slowing global recovery.
While Eurozone finance ministers have given the green light to the release of fresh rescue loans to Greece, while Cyprus received its first emergency loan from the European Stability Mechanism (ESM). Yet, ministers made little progress over the establishment of a proposed banking union as the split between euro area states over the legal framework for the single supervisory mechanism
The European continent has completed a hectic week, showing that the economy is still suffering in its recovery journey, where the Gross Domestic ...
U.S. Review
A Mixed Bag for Q2
- Economic data this week was rather mixed, with positive signs out of the consumer, but faltering signs out of the industrial sector and housing in April.
- Retail sales increased 0.1 percent in April; however, the headline number understates the strength in sales. Declining prices at the pump drove nominal retail sales lower. Excluding sales at gasoline stations, retail sales were up 0.7 percent.
- Weak global growth is weighing on the industrial sector. Manufacturing output fell for the second consecutive month in April.
A Mixed Bag for Q2
From the data released this week that covered a range of sectors, we had hoped to gain a clear idea of what lays ahead. However, we are left wondering just how these spring months will shape up.
The consumer is ...
HIGHLIGHTS OF THE WEEK
United States
Eurozone recession drags on for the sixth consecutive quarter as economic output declines 0.2% in 2013Q1. Growth in France and Italy declined by 0.2% and 0.5%, respectively, while the German economy grew ever so slightly, at a 0.1% pace.
First quarter growth accelerated in Japan as the Abenonomics-inspired yen depreciation fueled doubledigit export growth in the first three months of the year.
Fiscal retrenchment in the U.S., along with some transitory factors, has brightened the deficit outlook. Deficit for FY13 was revised down by $203bn, and looks $618bn lighter for the 2014-23 period.
Domestic data releases came in weak for externally-exposed sectors, but remained robust for the more domestically-oriented ones, with calls for exit from QE growing ...
Highlights
FX return analysis
Gold hurtling towards 2013 lows
Fundamental focus: UK and Europe
BOJ to stand pat
Clarity needed from the Fed
FX return analysis
The USD was the star performer last week, gaining against all of its G10 counterparts. The dollar index broke above 84.10 - a key resistance level - to the highest level since mid-2010. Interestingly, the dollar pushed higher even though there were some soft economic data points from the US last week including weaker inflation and initial jobless claims. The key driver of the stronger buck appears to have been some hawkish comments from Fed speakers. San Francisco Fed speaker John Williams and Charles Plosser both said that QE could end by 2014. Although Williams and Plosser are not voting members of the Fed this year, their ...
Recent rallies in Non-USD currencies resulting from poor US data have not lasted long. And those rallies resulting from strong US figures via the indirect effect of rallying equities (risk-on) have not lasted either. Broadening pro-USD sentiment may stay for longer than we had thought as the US dollar index has exited from another 9-year down cycle.
The greenback has primarily been boosted by traders' realization that the Federal Reserve is the central bank most likely to precede its global peers in reducing its asset purchases program, regardless of whether it ends up not maintaining or increasing the program altogether. What matters in currencies are relative expectations, and at the present juncture, the Fed is the most likely to signal a gradual tapering of asset purchases, than other ...
Title:
Strong Dollar … No Doubt!!
The green currency advanced against a basket of major currencies on Friday amid expectations the Fed may scale back stimulus at the end of the year after the recent improvement in U.S. data, thereby boosting demand on dollar as it will avoid future glut in markets.
The U.S. dollar continued its rally successfully after the strong rebounds last week where the dollar index is currently hovering around 10-month high of 84.30 after hitting a high of 84.34 from the session’s low of 83.88.
The six-currency gauge has recorded 1.25% rise last week while set for a second weekly advance of 1.2% this week.
The dollar took a breather yesterday after a report showing that initial jobless claims climbed to 360,000 in the week ended May 11 from both revised and predicted readings of 328,000 and ...
It seems that every time that Capital markets start to feel optimistic this so-called US recovery disappoints. Yesterday's disappointing US data (weekly claims, Philly Fed and housing starts) are renewing the debate whether tapering Fed bond buying in the second half of this year would be premature. An end to stimulus would probably see the Fed hiking the Fed Funds rate. A current concern is that with tapering the market seems to automatically link and end to QE with higher borrowing costs. In this scenario it would not necessarily mean the end of either the current risk rally or even US equities.
Bernanke and his fellow policy making cohorts will need to improve their communication skills and convince the market that "tapering" does not necessarily mean further tightening - it actually ...
Title:
Greenback Still in Demand
Forex News and Events:
The risk sentiment deteriorated after the disappointing US data released across the week. The US dollar remains bid, yet the fading speculations on the hawkish Fed moderated the recent USD-bull. Euro and Sterling retraced gains, while the selling pressure on Aussie gathered curiosity.
Released this morning, Euro gave little reaction to 7% drop in construction output over the last year, while the Turkey’s upgrade to investment grade by Moody’s triggered an impressive TRY unwind to our surprise.
Yen Switched to Aussie?
The markets talk on the macro funds’ USDJPY demand which would have shifted to broad based Aussie sales. As the JPY sell-off persists, the Aussie weakness gains further pace. The trend and momentum indicators on Aussie are solidly bearish, while the ...