Daily Reviews of major currencies from Globe Gain Forex Rebates

Discussion in 'Fundamental Analysis' started by Globe Gain, Feb 7, 2012.

  1. Globe Gain

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    6/03/2012 Euro’s holding at 1.32 despite the reduced risk demand

    EUR/USD

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    The euro gained almost no momentum yesterday. Some factors offset other ones and, as a result, EUR/USD remained at 1.32. Yesterday markets saw a batch of PMI figures. Interestingly enough, statistics have again confirmed the old observation that recovery of the U.S. real economy happens 3-6 months earlier than that of the European one. Thus February’s PMI for the euro area was unexpectedly revised down to 48.8 against the pre-estimate of 49.4. The most depressing thing about this is that a month earlier the service sector displayed growth and the index figure made 50.4. In other words, in January the service sector was intensifying its activity yet, but already in February the situation changed for the worse and the sector’s activity was swiftly fading away. In contrast, ISM’s PMI data for U.S. reflected the increase in the service sector growth. The indicator rose to 57.3 from the previous 56.8. Such strong data generally support the demand for risk in stock markets and risk-sensitive currencies. However, it was different this time. Markets didn’t manage to recover from the sales triggered by lowering of China’s targeted growth. We consider it to be an exaggerated reaction to the expectations. The facts themselves may prove completely different. But the market is still pretty heavy after 2 1/2 months of the persistent rally. On the other hand, heavy sales need a good reason, for instance, a weak report on labour markets this Friday. Until then the sideways trend is likely to dominate.

    GBP/USD

    The British pound had managed to recover by the end of the day and rose to 1.5850 during Asian session. As we mentioned earlier when commenting on the UK Services PMI data, the statistics are too good to let the sterling fall...Read full review
     
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    7/03/2012 Markets fall on ongoing concerns around Greece, but the euro doesn’t look worse than its counterparts

    EUR/USD

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    Tuesday proved to be a hard day for stock markets. Frankly speaking, it came as the worst one since the beginning of the year. Some commentators attribute such dynamics to the higher probability of Greece’s default on its debt. It’s no secret that international institutions are evaluating the expense at which this deadly scenario may unfold. Institute of International Finance yesterday mouthed its assessment of default in Greece, forecasting possible losses at $1 trillion. The Dutch right-wing party held its own research which showed that the bailout of the troubled countries may eventually cost 2.4 trillion. With stakes being so high, the market players’ desire to give up breaking even is quite natural at the moment. This is what Dutch Freedom Party leader advocates. With such talks around, markets keep rather skeptical about Greece’s deal to get a sufficient number of claims. For now we know only about the participation of large holders, accounting for 20%of the claims. It is still far from 66% required to successfully close the deal. Meanwhile, the market is kept in suspense and volatility is gaining momentum. In our case, the rising volatility, preceded by a continuous rally, marks the market’s tendency to decline. However, we will hardly see any shift in the currencies before facts come out. The end of this week may become really crucial for the further movement in the markets.

    GBP/USD

    The sterling reveals its dependence on the stock market sentiments. The day, which came for stock markets as the worst one since the beginning of the year, proved to be equally bad for GBP/USD and GBP/JPY...Read full review
     
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    8/03/2012 Big day for markets and, more so, for the euro

    EUR/USD

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    After Tuesday's fears and profit-taking in risky assets, the euro is gradually coming round. And though the day promises to be eventful, stock markets are trading positive. As a result, EUR/USD rose from the lows below 1.31 and is now trading at 1.3170. Today the ECB will hold a regular meeting on the monetary policy. However, the markets will want to pay more attention to Draghi’s press-conference, where he will probably lay his own assessment of the second LTRO auction and speak on the further plans and views of the Bank. For all its importance, the ECB’s meeting won’t probably come as the most risky event of the day. The fact is that later on Thursday or early on Friday markets will see data on private sector investor participation in the Greek debt swap. Remember that for the deal to close successfully the participation rate of all creditors have to be over 66%. However, even this won’t be enough. Even if the deal will be regarded as done, 90% of all money should be involved to reach the required level of "participation". It is rumored that 14% of the creditors are not obligated to participate, and if they take the opportunity, it may eventually ruin the whole deal. However, today’s agenda brings us good news as well. ADP Non-Farm Employment Change in February came in at 216K, which allows us to expect the Non-Farm Payrolls reach the 235K level. The figure is above the average market forecasts and may partly explain the moderate positive, currently dominating in the markets.

    GBP/USD

    Just like the euro, the sterling is gradually recovering from the weak start of the week. The Cable is now trading at 1.5760 against the 1.57 low, hit on Wednesday night. Today the Bank of England will announce its decision on Interest Rate...Read full review
     
  4. Globe Gain

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    9/03/2012 Greek deal is done and markets wait for payrolls

    EUR/USD

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    Thursday proved to be quite a favourable day for the markets. Tuesday’s losses in the stock markets were recouped, and the single currency climbed pretty much higher. EUR/USD is trading near 1.3250 now. Most likely, it will stick to this level until the release of data on the US employment. The results of the private investor participation in the debt swap were postponed to Friday morning. The good news is that the 66% threshold has been crossed, which, actually, was already evident from the leaks yesterday. With the collective action clauses applied, the level of participation in the swap amounted to 95.7%. Such relatively good news allows us to speak about the successful closing of the hardest and most nerve-racking deal, which took six months to be clinched. However, the market reaction to this long-awaited news was not very strong, having come just with a few sales of the single currency. The analogy with what we saw after the summits inevitably comes to mind. The euro is supported on expectations, and invariably depreciated on facts. Something of the kind may happen this time as well. Yet the main motion will most probably fall on the US publication of non-farm payrolls. Remember that the markets are expecting the employment growth of 209,000. After ADP’s data release (the 216K growth in the private sector) we assumed that the official figures would indicate the 235K increase or so. However, yesterday’s data on unemployment claims force to be more cautious. Let’s see. We're not going to change our expectations, suggesting strong data, growth in the stock markets and also higher demand for risk. But in the coming months the statistics may prove much weaker.

    GBP/USD

    As expected by most market participants, the Bank of England did not change anything in its policy, keeping the rate at 0.5% and the size of the QE programme at 325bln. However, that did not prevent the sterling bulls from taking GBP/USD above 1.58...Read full review
     
  5. Globe Gain

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    12/03/2012 Good news does not always excite the market growth

    EUR/USD

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    EUR/USD has been falling since Friday and has lost almost two big figures over this time. The single currency is now worth $1.3080, which is a four-week low. Against our expectations the market did not wait for the publication of statistics on the US employment to start selling risky assets, including the euro. As a result, at the time the non-farm payrolls were released, the euro was already trading as high as 1.3125. The labour market statistics has come in almost as good as expected, showing the 227K increase in the number of jobs (we predicted 235K, while the general market forecast was 206K). Moreover, it can’t but be noticed that almost all sectors can boast improvement now. Employment in manufacturing has been steadily growing for three consecutive months, having added 31K in February after 28K in December and 52K in January. Private sector employment has been averaging out at above 200K over the last six months and grew by 227K in February. The unemployment rate remains at 8.3%, however the disappointing data of January, when the index went down only due to the participation rate reduction, have been a little bit smoothed away. This figure made 63.9% in February against 63.7% in January and 64.2% a year ago. These positive data make the Fed’s extension of its QE programme less possible. But despite the obvious positive data context such expectations triggered the decline in stock markets and reduced the demand for risk. Turning to today, Europeans are expected to back another aid tranche for Greece, which will help the country to avoid a disorderly default. This is also good news, but over recently it’s been too often the case that the market has fallen on the positive news. Technical analysts assume that the common currency will shortly drop below 1.29 on the rising bearish sentiment. However, there is a feeling that the market will be allowed some rest after a strong movement on Friday.

    GBP/USD

    Friday was an eventful day not only for the U.S. and Europe. Britain also brought us a batch of important news. However, it didn’t boost any optimism in the market. Industrial production did not surpass the expectations, having lost 0.4% against the previous month and 3.8% against the previous year....Read full review
     
  6. Globe Gain

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    13/03/2012 Does Greece take a back seat, giving way to Spain?

    EUR/USD

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    The single currency didn’t continue last week’s downturn yesterday. It was good news, but at the same time the currency didn’t grow on the subsiding fears around Greece. And this is already the signal to give a closer look to the issues currently disturbing the markets. As always there are two directions: Europe and the USA. However, while concerns about America seem to be the whims of a spoilt child, European issues look like life-and-death ones. Tonight we’ll see the Fed’s decision on the monetary policy. No factual action is expected: everybody looks forward to learning the committee’s evaluation of the economic health and their sentiment concerning the economic prospects. After the release of strong employment data market participants expect the mid-year QE to be carried out on a smaller scale than before. The markets behave as if they were given ordinary porridge instead of a delicious apple pie. This is unlikely to last for long. Money is still very, very cheap; inflation will likely speed up because of the rise in energy prices; economic activity is following the right path. Hardly had Europe breathed a sigh of relief concerning Greece, when similar issues started to pop up in other troubled countries. Spain claims that it won’t be able to meet its agreed budget deficit targets, especially under the circumstances of a severe economic recession expected this year. Assuming that the markets will treat Spain in the way they treated Greece, the size of bailout / debt write-off may amount not to hundreds of billions, but to trillions. However, at this stage markets see a great deal of good news and key central banks mainly stick to the expansionary policy. It means that the single currency may get some support and find buyers on the dips.

    GBP/USD

    The British housing market is gradually stabilizing. According to RICS, house price balance is at 13% (i.e. the number of those who expect the further decline in prices is 13% larger than that of those who await their growth)...Read full review
     
  7. Globe Gain

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    14/03/2012 Rare occurrence: both markets and dollar grow

    EUR/USD

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    Generally, when markets grow the dollar falls. However, there can be rare exceptions to this correlation. And now it seems to be the case. Last night the Federal Committee published its monetary policy statement. On the one hand, the markets got the expected commentary. The data on the labour market finally convinced most analysts that the economy is on the mend, although the recovery is rather slow. Such sentiments are supported by the increase in the consumer sentiment (and consequently in spending) and by the production growth. So, the markets wanted to hear this from Bernanke and Co. and they did. As a result, the dollar as well as the stock exchanges rallied. Since concerns around Greece have subsided, the markets have a chance to give a closer consideration to the economic outlook. And here, as is often the case, the U.S. economy is the first to decline and recover. While Europe is suffering from fiscal austerity and prolonged recessions in the peripheral countries, the U.S. economy tends towards trend growth rates. And this means that the monetary policy toughening will first take place in the U.S. and only then in Europe. The ECB’s balance sheet already contains the sum equivalent to $ 3 trln., which is far beyond the Fed’s parameters. Overnight the euro fell down to 1.3030. Market participants less tend to expect the further QE from the Fed now, and the inflation rise, triggered by the surge of energy prices, boosts the yield growth of U.S. government bonds.

    GBP/USD

    The British pound was moving along quite a bumpy road yesterday. In spite of quite positive data on the trade balance (yesterday we mentioned that the statistics came in better than expected, but on the whole it doesn’t suggest any significant shift), at the beginning of trading in London the pound went through sales as a result of the capital outflow from the European currencies...Read full review
     
  8. Globe Gain

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    15/03/2012 The carry trade is dead - Long live the carry trade!

    USD

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    Yesterday the dollar managed to take some more gains against most of its rivals. In particular, the single currency fell to 1.3020 against 1.3060 a day before and overnight even closely approached 1.30. It should be mentioned that now interest in the dollar is triggered by a bit different factors than in the midst of the crisis. Now the U.S. currency is bought as an instrument for investment in the U.S. markets, which are currently showing a better growth than the European ones. At the same time the large emerging markets are either trying to limit the capital inflow to their countries (Korea, Brazil) or suffering a serious economic slowdown after the excessive boom (Russia, China, India). In addition, other traditional high-yielders have ceased to be that high-yielding, and investors are currently considering the chances of the further policy easing (Australia, New Zealand). So, the carry trade, we knew before the crisis, is not in that great demand any longer. Of course, we do not say that the currencies have ceased to fluctuate on the interest rate changes, but the range has definitely become narrower. This has been clearly observed since the 4th quarter of the last year until now. Despite the speedy growth of the global economy and a fairly impressive rally in the stock markets, the dollar index has been growing pretty well over the past three weeks and is now close to 80.65, just as at the end of 2008, in the first quarter of 2010 and at the beginning of 2011. Regarding this, can we say that the world has turned topsy-turvy? Of course not. Simply with regard for the recent data it seems to be very probable that the rate in the U.S. will be raised earlier than in Europe, Switzerland, Japan, and that because of the rise in the Asian labour cost the U.S. companies will be more concentrated on the development of domestic production, thus saving on transport costs and delivery time. Consider the facts: despite the high cost of energy (similar to that of mid 2008), over the last quarters the U.S. current account deficit has been reduced by 40% compared to what was before the Great Recession. At the same time, China's trade surplus has severely declined. This is that much talked-about rebalancing. However, it’s proved to be much longer and more painful than expected.

    GBP

    Our story about the carry trade can’t but be amplified by the description of the situation in Britain. This country is also in a dire need of rebalancing. And this need is even more desperate than in the U.S., as the British total debt is much higher due to the large debt of financial institutions and households (507% of GDP as against 279% of GDP in the U.S.)...Read full review
     
  9. Globe Gain

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    16/03/2012 When the good is not good

    EUR/USD

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    Improvement in macroeconomic indicators does not always imply the recovery of the whole economy. Sometimes other factors come into play and distort the picture. That was the case with yesterday’s labour costs data in the euro area. The indicator showed a rather unexpected acceleration of the annual growth rate up to 2.8% in the last quarter of the previous year (when the economy declined by 0.3%). Meanwhile the analysts had quite reasonably expected it to slow down to 2.3%. The data on the employment change didn’t point out any positive changes either. Over the last quarter of the previous year employment fell by 0.2% quarterly and annually. So, why do employers all of a sudden pay more in the time of the economic downturn and job cuts? The answer is simple - the governments are raising taxes, thus forcing companies to make bigger tax deductions. Thus, the recent figures hardly indicate any improvement or possibility of the further inflation speed-up. It’s also very important to note that such distortions are likely to persist in the coming quarters, as most European countries have just stepped into the process of austerity implementation. Yet, improvements in the US are also hard to discern. The number of continuing claims is rapidly decreasing. Yesterday’s weekly data indicated the drop of the figure down to 3.343 million, which is the lowest level since August 2008. But this progress is partly explained by the fact that the period, when people could claim unemployment benefits, has expired. Here it is also possible to include those who have lost hope to find a new job and abandoned their attempts. For comparison, with the similar number of unemployed claimants now and in summer 2008, the current unemployment rate in the US is at 8.3% against 6.1% then, and the economically active population totals 63.9% against 66.1%. Thus, the Fed looks more sensible than the markets, being careful and admitting the possibility of further measures to support the economy. To realize that too markets will probably need a month or two.

    GBP/USD
    Yesterday didn’t abound in statistics on the UK, but that vacuum in the agenda was filled with various interesting speeches. MPC’s Ben Broadbent noted in his speech that though the recovery from financial crises is usually slow, the household over-indebtedness in Britain shouldn’t be so much fussed over...Read full review
     
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    19/03/2012 Expensive oil: stimulus to spend or threat to growth?

    EUR/USD

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    Last Friday was a quiet day for European markets, but quite a busy one for the US exchanges. Actually, it doesn’t seem to be a surprise, considering loads of important statistics which came from the States on Friday. First, data on inflation were published. Due to the fuel price growth the consumer price index gained 0.4% in February and the annual growth rate remained at 2.9%, as was generally expected by economists. It’s quite reassuring to hear about easing of the core inflation. However, in the coming months it most likely will go up due to the effect of energy prices on the prices of other goods. The industrial production data failed to surprise with any significant growth, though on the whole statistics are still very strong. The annual output growth rate made 4.0% in February against 3.4% in January. Capacity utilization slightly dropped down to 78.7% instead of going up to 78.9% as expected. However, for the most part it can be explained by the increase in capacity itself, which is a good sign, indeed. The March preliminary UoM data on inflation expectations have leaped, showing that consumers are expecting the annual price growth to come in at 4.0% against 3.3% a month earlier. No doubt, it is the result of the pernicious impact of energy prices. So, we just need to see how Americans will react to it. Will they start buying goods at cheaper prices now or will they reduce consumption of other goods because of the increased spending on fuel and food? With Americans the answer to this question is not so obvious as with Europeans, who already now are extremely concerned about the rising oil prices and talking (in particular French-born IMF Chief Lagarde) the pernicious impact it may produce on the just-started recovery process. But leaving the statements of politicians aside, it may be noted that the expectations of higher inflation and the energy price surge play against the dollar, as it was observed on Friday, when traders preferred to take profits after a several-week growth in USD. The single currency shot up from 1.3040 to 1.3180 in a few hours.

    GBP/USD

    The British pound also took part in this high-demand-for-risk party. The sterling jumped to 1.5860 from 1.57 at the beginning of the day. That upswing was generally spurred by triggering of stop-losses on the break through the resistance around 1.5740...Read full review
     
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    20/03/2012 By fits and starts EUR’s moving up

    EUR/USD

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    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
     
  12. Globe Gain

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    21/03/2012 Another tiny little jump of EUR

    EUR/USD

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    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
     
  13. Globe Gain

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

    EUR/USD

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    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
     
  14. Globe Gain

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

    EUR/USD

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    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
     
  15. Globe Gain

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

    EUR/USD

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    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
     
  16. Globe Gain

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

    EUR/USD

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    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

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    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
     
  18. Globe Gain

    Globe Gain Active Trader

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    30/03/2012 European bears, American bulls

    EUR/USD

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    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
     
  19. Globe Gain

    Globe Gain Active Trader

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    02/04/2012 Forex got stuck in flat trading

    EUR/USD

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    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
     
  20. Globe Gain

    Globe Gain Active Trader

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

    EUR/USD

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    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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