Daily Reviews of major currencies from Globe Gain Forex Rebates

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20/03/2012 By fits and starts EUR’s moving up

EUR/USD



The single currency is moving by fits and starts. Apparently, big players prefer to hold back from systematical buying, and trading is now driven mainly by technical factors. Yesterday, just like on Friday, the euro/dollar spent the most part of the day in a narrow corridor. However, within the first two hours of the US session it leapt dramatically from 1.3150 to 1.3260 and then again resumed tracking sideways. The current Forex movement in EUR/USD can be compared to what we saw after the 1st LTRO auction. For a while the single currency was falling as a result of the interbank interest rate cuts, but soon the general improvement in the markets spilt over into buying of risky assets. Then the euro sagged from 1.3050 to 1.26. The current range of the currency’s decline makes 1.34 - 1.30. Thus, the shift ranges as well as the ECB auction sizes are almost the same. What happened next and what shall we expect now? Then, in mid-January, the single currency grew from 1.26 to 1.35. So, in our situation we may well expect that the single currency will reach the area of 1.40 in the coming 4-6 weeks. In addition, both the U.S. and European economic indicators more and more often point at improvement. It’s rather doubtful if these signals of improvement will keep coming in steadily in the coming months (it mainly concerns Europe), but within the next few weeks this very sentiment will most likely dominate the markets, in this way supporting the demand for the euro and triggering the dollar sales.

GBP/USD

Today is an eventful day for Britain. We’ll see data on the Consumer Price Index, CBI’s Industrial Order Expectations and Selling Prices. As for CPI, we don’t see any serious cause for concern. It is expected that the February inflation rate will go up by 0.4% monthly, but will come in at 3.4% against the previous 3.9% annually...Read full review

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21/03/2012 Another tiny little jump of EUR

EUR/USD



Tuesday turned out to be a fairly quiet day for most of the markets. The American exchanges were generally dominated by the correction sentiment, but the scope of correction didn’t give any particular cause for concern, as stocks recouped most of the losses to close out the day. It is noteworthy that the single currency managed to stay almost unaffected by the initial impetus for decline in the US. Regarding the results of the day, the EUR/USD rate remained almost unchanged, and now makes about 1.3260. Such dynamics supports our supposition that the euro has good chances to grow in the coming weeks. Formally, buying was triggered by the news that Greek legislators agreed on the acceptance of the troika’s aid package with the significant majority voting in its favour. Wednesday is unlikely to spring any unpleasant surprises either. Bernanke in his pre-published statement has pointed at conspicuous progress made by the European financial markets. However, he also mentioned that it is too early for the European policymakers to get relaxed on the path of reforms. Improvements in the US construction industry are also worth mentioning. We are no longer that ironic about the possible recovery in this sector, although with reservation that it’s highly probable that the figures similar to those of 2006 (over 2 million new homes yearly) won’t be recorded for another decade. Nevertheless, from the bottom of recession (about 500K) the volume of monthly building permits increased by 40%, having reached the annual growth rate of 698K (in February). As seen in other reports the Americans tend to buy cheaper and plainer homes now.

GBP/USD

The inflation rate in Britain formally proved higher than expected, but the gap between the factual and expected figures can hardly be called significant. Monthly consumer prices added 0.6% against the predicted 0.4%, while the annual growth rate coincided with the expected slowdown to 3.4% in February against 3.6% a month earlier...Read full review

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22/03/2012 Are Gold and Aussie out of favour?

EUR/USD



Yesterday the US market remained in the mode of slight correction, which actually failed to produce any significant impact on the EUR/USD rate. At some point the single currency rose to the two-week high of 1.3280, but didn’t manage to consolidate at this level. Apparently, the markets needed a larger batch of news to decide on the further action. The only interesting statistics came in on the existing home sales. According to the data published by the National Association of Realtors, home sales fell by 0.9% in February to the annual pace of 4.59 million. However, last month sales jumped by 5.7%, so there’s no cause for concern about the stability of recovery in this sector. As was mentioned yesterday, the Americans tend to purchase more homes when their prices go up. This report has shown the reverse side. The decline occurred on the rise in the average sale price from $154.6K to $156.6K. When compared with the minimum levels at the height of recession, the market volume have grown by 40%. Besides, as you remember, the new home sales have increased by about 50%. Thus, finally we get the picture of quite a healthy growth. Today’s data on the European flash PMI for March have come in surprisingly weak. The composite index has fallen to 47.7 against the expected 49.6 and 49.0 a month earlier. The services sector doesn’t feel better. Instead of going up to 49.3 the composite indicator has fallen to 48.7 from 48.8 a month earlier. This index is a creditable indicator, so its weak figures have served as a strong impetus for selling, nipping in the bud all attempts of the bulls to fight for the 1.33 point.

GBP/USD

The British government made every effort to smooth out the release of the new budget. And we should say, they have succeeded. As has been generally expected, the 50% income tax for the wealthy will be replaced by the 45% one starting next year...Read full review

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26/03/2012 USD prefers to close out the week on a declining note

EUR/USD



For two weeks in a row the dollar experienced heavy sales, which started on Thursday afternoon and reached their hottest point on Friday. As highlighted in the press, last week the dollar decline was caused by growing concerns about the US and Chinese economic growth. This explanation sounds a bit controversial though, as Friday’s data indicated a sudden 4.1% rise in the level of the Chinese coincident indicators in February. Of course, we shouldn’t forget that this happened after the 2% decline a month ago, but even with this fact considered the current pace is good. Technically, the markets were disappointed by the statistics on new homes sales. The annual sales rate totaled 313K in February, against 318K a month earlier and the expected growth of 326K. But here again we come across a familiar pattern: a small decline in sales occurs when prices rise. In our case the median home sale price leaped up from 215,700 to 233,700. Under such circumstances the 1.6% decline in sales m/m is more than a good result. In addition, compared to the figures reported the same month a year ago the sales have grown by 11.4%. The market actually doesn’t seem to have strong reasons to sell risky assets now. Even the ECB's head Draghi mentioned that the euro area is already over the worst. It can be true with the financial system, but it’s hardly so with the regional economies, which are still to face a long period of fiscal austerity and economic hardships.

GBP/USD

The British pound has been displaying an enviable steadiness over the last few days, holding tight to the bargaining mark of 1.5860, which coincides with the level of the annual moving average (200 days MA)...Read full review

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27/03/2012 Bernanke: more, more, more…

EUR/USD



Ben Bernanke’s speech stirred up the market yesterday, reviving hopes for the Fed’s further support of the economy through asset buying and other unconventional measures. The Fed’s chief emphasized that to reduce unemployment the country needs a higher growth rate. He also mentioned that in the near future unemployment might decline even at a slower pace than now. Unfortunately, markets preferred to ignore Bernanke’s doubts and interpreted them as hints at new bond purchases. This interpretation immediately spurred the across-the-board weakening of the dollar. The single currency fluctuated wildly. In the European session it fell below 1.32, but at the end of the day it was making advances already to 1.3370. The growth pattern of the pair – by fits and starts – is still preserved. The single currency grows on execution of sell orders at local highs. Such dynamics may hold for several more days or even weeks, while markets, on the one hand, feel confident about further economic stimulation and, on the other hand, see real improvement in economic indicators. All this will allow for further asset purchases on the overall positive and high risk appetite. But why should Bernanke be so enthusiastic to support the economy? He is not sure that economic indicators will keep indicating improvement in the future. Over the last few years he proved right, in fact. The economy and labour market suffer a stronger slowdown in summer, when there are more workers. In spring many still believe that sparse green shoots will grow into dense fields, and only then notice that soil has been sucked dry and can yield a good crop only when nourished.

GBP/USD

Technically, the British pound enjoyed even a more advantageous position than the euro at the time of Bernanke’s address. As has already been mentioned, the pound had been trading near the 200-day moving average for several days in a row, but to make a decisive breakthrough it needed some important news...Read full review

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28/03/2012 Markets climb extremely high to launch correction next

EUR/USD



Markets cracked under their own weight and after an impressive rally on Monday launched a deep correction. Formally, the sales were triggered by a dramatic deterioration of the consumer confidence, recorded by Conference Board. In March the figure made 70.2 against 71.6 a month earlier. Besides, the worsening was mainly caused by ongoing concerns of the Americans about the employment situation in the country. Remember that just a few days ago everyone saw only positive changes in this sector and drew the parallel with the figures at the start of recession? Of course, the labour market issue may pale into significance this week, but next week it will again fully absorb investors’ attention as new data on employment are scheduled to be released then. Meanwhile, current movements in the market impress by their diversity. The unison we observed earlier in the phase “risk on/off” is missing. EUR/USD has been hovering around 1,33 for three days in a row. Many of the coming signals are discrepant. WTI Oil hasn’t seen any significant motion and trend in March. The stock markets are climbing up, though it’s often the case that they stumble on their way. For all that, the US growth rate remains higher than in any other countries, which is actually not surprising. In this connection we really wonder if improvement in the USA necessarily leads to the higher demand for such risky assets as the euro, Aussie and commodities.

GBP/USD

The British pound reached the 1.60 level yesterday, but the cautiousness, dominating the markets at the time, didn’t allow for setting of positive sentiments. The sterling rolled back a bit and is now trading around 1,5950. The final GDP figures for 4Q, published today, have been unexpectedly revised down to -0.3%...Read full review

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29/03/2012 Has ECB's liguidity reversed the falling lending trend?

EUR/USD



As reported in the press, the European leaders are considering the possible extending of bailout funds. Released at the end of the day, this news managed to restore confidence in the markets and hold the euro back from falling. As a result, EUR/USD is trading evenly at the same level as a day ago, around 1,3310. Not very prominent, but quite alarming news came in yesterday from the ECB. As shown in the regular statistics, M3 Money Supply grew from 2,5% to 2,8% in February. It indicates the reversal from the terrible figures of December and accounts for the ECB’s liquidity infusions at the time. Anyway, we should bear in mind that the main target was to boost lending to the real sector and this is the point where we have problems. The annual growth rate of private loans, published in the same report, instead of the expected increase showed a significant decline in the sector – from 1,1% down to 0,7%. It points to the fact that the ECB’s money was not spent on lending, as Draghi wanted, but just helped the banks to exchange poor bonds for more liquid ones. Eventually, a considerable part of this liquidity is likely to shortly go into reserves, as many banks have to draw large capitals to meet the new demands of capital adequacy by June. Still at closer consideration, the single currency displays certain stability, gradually winning back figure by figure from the dollar. It will last until the Eurozone indicators enter the red zone as a result of fiscal policy tightening. How much time does Europe have at its disposal, we wonder?

GBP/USD

Yesterday luck failed the pound. As we know, it was one of the strongest rivals of the dollar for a while, but yesterday even before the release of the Final GDP data the currency came under a strong pressure...Read full review

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30/03/2012 European bears, American bulls

EUR/USD



It’s great when officials pay their attention to the same figures as analysts do. Like was mentioned yesterday, although filling of the European banks with liquidity has helped to save the regional financial system from complete collapse, it still hasn’t reached the ultimate goal that Draghi talked about. Namely, it hasn’t managed to increase lending to the business and household sectors. However, as the ECB’s vice-president quite unexpectedly put in his speech, the Bank didn’t pursue the goal of supporting lending in the region. It’s a bit surprising. At the same time, the situation in Spain is becoming tenser and tenser. Yesterday trade unions launched a 24-hour strike against the labour market reform. The Spanish have been suffering for too long. They have stoically endured unemployment exceeding 20% (such figures can be hardly found anywhere else in Europe now), haven’t worried about the 30% decline in housing prices, but all at once have taken to the streets when their lifestyle has come under threat. The strike and negative sentiment across Europe put pressure on the quotes of equity futures, which had been declining for 3 days in a row. However, by the end of the day the situation had changed. The end-of-quarter effect went off. The stocks, which were strong at the beginning of the year and then fell in price due to the correction in the markets, again have attracted investors’ interest. This turn of events in the stock markets managed to change the situation with EUR/USD. Having fallen down to 1,3250 by the start of trading in the USA, the pair then reversed and during trading in Asia completely recouped its Thursday’s losses and reached 1,3365. These days we see abrupt reverses in the pair, so it’s of interest what it will look like in the second quarter. Will we possibly see the same situation as a year ago, when the markets and the euro went into decline in May after the sharp upward movement in April? Everything seems to be heading for this.

GBP/USD

The British pound cannot decide which way to go. Almost for the whole March EUR/GBP has been trading sideways, having a day of growth after a day of decline. For all that, for GBP/USD the end of March can be called quite favourable...Read full review

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02/04/2012 Forex got stuck in flat trading

EUR/USD



This Monday stock exchanges are mainly growing, though it’s hard to single out any dominating sentiments. The euro started the week with a positive gap, which was closed in a few hours though. EUR/USD jumped up to 1,3375 at the opening (which coincided with Friday’s maximum) and then again fell down to 1,3330. And at the beginning of the European session the quotes started to gradually crawl up and now trading is held approximately in the middle of the above-mentioned corridor. Today markets have received data on PMI of different European countries. On the whole, the data point at the conspicuous decline of manufacturing activity in the region, even despite the fact that statistics for Germany and Italy have been revised up. The German PMI made 48.4 in March against the prior estimation at 48.1. Anyway, the Euro-Zone Composite PMI has remained at the same level of 47.7, as was estimated at the beginning of the month. In contrast, the USA and Switzerland are mainly increasing their activity. There is a suspicion though that, judging by the results of 1Q, Euro-Zone has fallen into the technical recession after the slowdown in 4Q of the previous year. However, if the US economy manages to maintain the current pace of growth, it may tell favourably on the figures, demonstrated by Europe. The current week abounds in important news releases, which may produce a considerable impact on the course of trading for the whole month. Traders will have to face a difficult choice. The equity market has already climbed very high on the hopes that the global economy growth will speed up. If there aren’t any obstacles on the way, the current levels will seem to be acceptable for buying. But there is also a grave risk that by summer the economic and business activity will again (for the third time) wind down and financial losers of Europe will again force its leaders to call countless meetings.

GBP/USD

After a short hitch on Wednesday the sterling now again feels in the saddle. On Friday the pair went above 1.60 and managed to close out the week, month and quarter above this mark. This promising start of the new quarter gives the sterling strength for growth today...Read full review

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03/04/2012 Does China’s slowdown play into the USA’s hands?

EUR/USD



The disappointment at yesterday’s PMI data lasted for a few hours and brought EUR/USD down to its daily low of 1.3278. However, later the euro gained support on the returning demand for risk. The first trading day of the new quarter was marked by dominance of the moderate positive across the markets. The analysts more and more often point out that China’s slowdown and simultaneous demand growth in the USA will make it possible to build a favourable environment for creation of new jobs. Can it really happen that the USA will turn from the world’s largest consumer into the biggest producer? Very likely, as at present the pace of labour cost in China is rising quicker than the labour efficiency. In addition, there has set up a new trend for locating of manufacture closer to the consumers. Still we shouldn’t think that all the models, which were in use earlier, will collapse in a moment. Anyway, there is a chance to see that China will stop building up its export at an unprecedented rate and switch over to serving its own needs. Europe meanwhile is likely to keep stagnating under such conditions, being suppressed by a heavy burden of tax toughening and high household and corporate debt load. Anyway, all these trends are long-term and it will take time for them to develop and become clearer. And for now the single currency has been hovering around 1.3350 for 7 days in a row. Probably, on the portfolio rebalancing and relatively high pace of the US economy growth the markets will tend to buy the common currency in the coming days.

GBP/USD

While Europe grieved over its poor PMI figures, Britain on the contrary was rejoicing at its own ones. The British PMI data proved quite strong, which was immediately exploited by the bulls. They drove the pair up to 1.6060, and though they didn’t manage to consolidate at the reached levels, the pair has progressed conspicuously against its rivals...Read full review

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